by Scott McClallen
A bill Gov. Gretchen Whitmer said she will sign into law aims to spend $140 million to improve the embattled Unemployment Insurance Agency (UIA).
When Michigan’s unemployment rate spiked to 22.7% in April 2020 after COVID-19 and an economic shutdown, the UIA often failed to provide timely benefits to eligible Michiganders.
Two years later, the embattled agency is still in the spotlight for bureaucratic waste.
Since March 15, 2020, the UIA has paid $39 billion in benefits to more than 3.3 million workers.
In a saga of screwups, the agency also:
- Paid at least $8.5 billion in fraudulent claims, including to a self-proclaimed “Kimberly Kardashian” from Traverse City and “Kylie Jenner.” A separate fraud expert group estimates identity fraud closer to $11 billion.
- Despite being warned twice, the UIA fumbled disbursing federal pandemic unemployment benefits, forcing it to ask 700,000 Michiganders to recertify for benefits.
- Then-UIA Director Steve Gray was paid $85,872 in a severance deal after he resigned on Nov. 5, 2020, after months of record jobless claims.
- Hired people convicted of armed robbery and identity theft to disburse benefits. In total, the agency didn’t screen 5,508 workers.
An audit explains part of the fraud. Of 139 departed workers, 63, or 45.3%, continued to have access to Michigan’s Integrated Data Automated System (MiDAS) to view and make unauthorized claims for an average of 32.6 days post-departure. That mistake alone cost taxpayers $3.8 million in fraud committed by a former worker. Had the scheme been completely successful, more than $12 million would have been netted.
House Bill 5525 aims to spend a total of $140 million on the UIA, including:
- $100 million of federal stimulus money into the Unemployment Compensation Fund.
- $20 million of state general fund money to improve UIA customer service.
- $8.9 million from the restricted Contingent Fund – Penalty and Interest Account to hire 52 limited-term employees to assist with enhanced fraud enforcement efforts.
- $6.8 million in federal funds for unemployment insurance equity grants.
- $4.1 million general fund money to the Attorney General to support limited-term staff to solve claimant fraud, employer fraud, and identity theft.
Whitmer has pledged to sign the bill into law. The governor’s proposed $74.2 billion budget aims to spend another $88 million on the UIA.
The agency’s new director, Julie Dale, has promised increased transparency, and the UIA has fired or penalized at least 18 employees for criminal activity.
Whitmer’s office hasn’t responded to a request for comment about UIA reform.
House Oversight Chair Rep. Steve Johnson, R-Wayland, previously told The Center Square that lawmakers will hold hearings to explore options to reform the UIA.
It’s unclear how to reform an agency that doesn’t follow the current rules enacted, Johnson said in a phone interview last week.
“Finding out that the Unemployment Agency failed once again is turning out to be just a day that ends in “Y,” Johnson said. “We’ve seen this over and over and over again. There continue to be failures.”
The legislatures’ job is to pass laws, but “at this point, I don’t believe there are any laws that we can pass to fix this,” Johnson said.
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Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on Forbes.com and FEE.org. Previously, he worked as a financial analyst at Pepsi.
Photo “Gretchen Whitmer” by Governor Gretchen Whitmer.
