The state Department of Labor continues to modernize its computer and security systems to crack down on unemployment insurance fraud after at least $4 billion in improper payments during the COVID-19 pandemic.
The department paid more $105 billion in unemployment benefits to support 5 million New Yorkers throughout the height of the pandemic, with fraud making up for 3.8%, state Department of Labor Commissioner Roberta Reardon said.
"In that first year, we had over $300 million a month going out the door in fraud," Reardon said. "...There's always fraud. It's always a problem, but we are on top of it."
Reardon on Wednesday testified to lawmakers at their final of 13 budget hearings about the multi-year upgrades the department is completing to make sure this never happens again.
The department implemented multi-factor personal identification for someone to access information about their benefits, including the service ID.me to protect against identity theft.
About 2 million New Yorkers lost their jobs in the pandemic's first 60 days, creating an avalanche of need for unemployment insurance.
That led to international cyber rings hitting the state unemployment system hard with identity fraud — using stolen Social Security numbers and personal information to file fake claims.
Reardon said it was a different kind of cybersecurity threat than state officials had experienced before.
"We quickly realized we needed technology, so we worked with Google and other places to figure out ways that we could do better geofencing and matching and the kinds of things that we did," Reardon explained. "...One of the hard lessons we learned during the pandemic is you can't staff your way out of a crisis. You need a lot of help, and that help is tech."
The false claims skyrocketed after the federal government reduced criteria that made a person eligible for unemployment insurance, accepting applications for the benefit without its usual proof-of-work requirements.
"We had no employer to talk to — we had no wage records to pull," Reardon said. "This is how we usually verified claims."
Reardon said the upgrades are already having an impact. In 2022, the state paid out $2.5 billion in unemployment benefits and lost about $388,000 to fraud, she said.
The next state budget is expected to tie minimum wage increases to inflation, but progressive lawmakers want the rate to be increased before the annual hike takes effect.
Reardon and Senate Labor Committee chair Jessica Ramos, a Democrat from Queens, clashed about how increases would look under Gov. Kathy Hochul's proposal, which includes a 3% cap, and wouldn't increase under times of high unemployment. Ramos argued Washington D.C.'s minimum wage rate will soon hit $19 per hour, and more than $20 per hour in San Francisco and $21 in Seattle.
Reardon says the Labor Department supports tying the minimum wage to inflation, but wouldn't comment on other details.
"Obviously, it's something that the governor and the legislature will have to work out together," the commissioner said. "And whatever you decide is the law, I will happily enforce."
The state's civil service system is also being modernized to help rebuild the state workforce and the Department of Labor to hire full-time workers more quickly and efficiently to further crack down on issues like wage theft.