The Labor Department Seeks $3.4B for Unemployment Insurance Programs, Including IT Modernization

The Biden administration is looking for $3.4 billion to "modernize, protect and strengthen" the unemployment insurance system in its budget request for fiscal year 2023 as part of the 18% increase for the Labor Department overall from the 2021 enacted level. 

Overall the agency is seeking $14.6 billion in discretionary funding for fiscal year 2023.

The unemployment program, primarily delivered by states and territories, has faced technology challenges and a spike in fraudulent claims since the start of the pandemic when floods of workers rushed to seek help. 

If enacted, the $3.4 billion request for unemployment efforts would be an increase of $769 million over 2021 levels, and slightly above the Biden administration's request for fiscal year 2022.

Of the money being requested, some would go to efforts to tamp down fraud in the program, including $150 million covering program integrity efforts including IT modernization and "investing in identity verification services for states," which could include subscription costs as well as the "development of a central identity verification tool/service," according to the department.

Already, the department has offered states money for identity verification tools, including the ID.me identity verification service that the IRS planned to discontinue using after the current tax filing season. 

The remaining money for IT efforts could include "funding demonstration projects to seed promising state work."

The department has a new office dedicated to modernizing unemployment insurance, where it's piloting new systems via pilots with states and is sending out "tiger teams" to help states with short-term problems. 

The budget would also update the formula for how states are funded for unemployment administration, something that the White House says would be the first update in decades. 

Other funds will go towards the Labor Department's watchdog so that it can increase investigations into fraud. So far, it's still unclear exactly how much has been doled out to fraudulent claims since the start of the pandemic, although the department's watchdog told lawmakers this month that as of the end of last year, at least $163 billion in pandemic unemployment benefits could've been paid out improperly, with much of that attributable to fraud.

The department's Office of the Inspector General would see a funding increase of over $12 million under the proposed budget, with $10 million going towards unemployment fraud investigations. 

"The volume of UI investigative matters currently under review is unprecedented in the OIG's history," the department's request states. 

Correction: This article incorrectly stated that the IRS had discontinued use of the ID.me identity management service. The IRS announced plans to discontinue use of the service after the close of the current tax filing season.