Davis Opening Statement at Worker and Family Support Subcommittee Hearing on Reclaiming Fraudulent Pandemic Unemployment Funds

(As prepared for delivery) 

Mr. Chairman, unemployment insurance helps American workers and our economy bounce back after hard times. The Department of Labor should certainly continue working collaboratively with states to recover past fraudulent payments. But our Committee’s primary focus should be ensuring that the unemployment insurance system can pay earned benefits accurately and prevent fraud in the future. 

A year ago, our economy was on a solid path. In part due to the bipartisan pandemic unemployment benefits provided by the CARES Act, we had the fastest post-recession jobs recovery in modern history. Both jobs and worker wages were growing, outpacing our peer countries. 

Over the past year, the economic chaos caused by the President’s tariffs and failed economic policies has led to almost no job creation, few job openings, the retreat of manufacturing, and, last quarter, lower GDP growth than in any quarter during the last administration.  The economic turmoil means that our unemployment insurance system might be needed sooner than we had hoped.

It is the responsibility of this Subcommittee to ask what should we do to prepare - to make sure workers get the benefits they earned on time and to prevent the kind of organized criminal attacks that happened during the pandemic?

States have made a good start, working together and with the federal government. We now have better tools to verify identity, to prevent bank fraud, and to monitor and defend against the ever-changing attacks perpetuated by fraud rings. Some states have better technology or easier to understand applications.  Many new tools were developed using the grants and “Tiger teams” that the Ways and Means Committee fought to fund in the American Rescue Plan Act.   

But states need more help from Congress. Part of the reason fraud exploded during the pandemic was that federal funding to administer unemployment insurance was at a 50-year low, which meant that computer systems were antiquated and there was a severe shortage of the experienced, well-trained staff who are our first line of defense against fraud.  Unfortunately, the Trump Administration and the current Majority have returned to that bad policy of underfunding the staff and systems we depend on to prevent fraud in the states, at the Department of Labor, and in the Office of the Inspector General. Many states also had to cancel contracts for innovative fraud prevention strategies when the Administration abruptly ended the ARPA grants last spring.  This Subcommittee should build on that ARPA model of investment collaboration to ensure states are prepared for the next recession.

Our Subcommittee has had five hearings on past pandemic fraud.  I hope that we soon will have a hearing focused on how to strengthen state unemployment systems, which we know is one of the most effective ways to prevent fraud.  Even with all our new tools and systems, the best way to protect unemployment insurance and prevent fraud is having enough well-trained staff to use the tools and spot the new challenges. We should fix access and benefits now so that the US is ready to help workers and prevent fraud.   I look forward to talking to our witnesses about the best way for us to collaborate with states and the Inspector General to accomplish that.

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