Unclaimed $5 Billion: Labor Department Holding Unspent Taxpayer Funds

The Labor Department’s pandemic-era “first week” unemployment benefit program has been shut down for two years, but the department is still hoarding nearly $5 billion in cash that never got spent.

Now an inspector general says it’s time to return the money to the Treasury Department, warning that leaving that kind of money sitting in a government account makes it a “risk for waste, fraud and abuse.”

“These funds could have been put to better use,” the inspector general said.

The forgotten $5 billion is left over from $12.5 billion that Congress set aside to help states speed up payment of unemployment insurance benefits during the pandemic by waiving the usual one-week waiting period. The point was to help states get money into Americans’ hands faster.

But Congress dramatically overspent. Not a single state used up all of its allotment, and seven states never drew down a single dollar, leaving a massive pile of cash unused.

Unfortunately, inside the federal government it probably happens with troubling frequency, said Tom Schatz, president of Citizens Against Government Waste.

He pointed to earmarks, the pork spending that lawmakers direct to pet projects back home, as examples where money can sit, untouched, for a decade or longer.

It all amounts to broken government, he said.

“A normal organization or operation would take the money back and spend it elsewhere,” Mr. Schatz said. “It could be a dollar or it could be $5 billion. But any entity other than the federal government would get that money back as soon as possible.”

But not Congress, where he said lawmakers measure success by how much money they spend.

That was particularly true for the pandemic, where lawmakers dipped deep into their children’s and grandchildren’s pockets and ran up the debt in order to pump money into the economy.

A lot of that money remains unspent.

Of $195.3 billion shipped directly to states by Democrats’ rescue plan in 2021, less than half has been spent. Localities got another $130.2 billion, and 60% of that has yet to be disbursed, the Government Accountability Office said in a new report Wednesday.

Oklahoma and South Carolina have spent less than 2% of the money they were allocated, GAO said.

The states and localities have until the end of next year to allocate their money and through the end of 2026 to spend it.

The first-week unemployment program audited by the inspector general was part of a March 2020 aide package Congress approved in the early days of shutdowns. It was renewed in December 2020 and again in Democrats’ 2021 rescue plan.

Officially known as Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States with No Waiting Week, or TFFF for short, the program was supposed to entice states to waive their one-week waiting period by covering that first week’s full payments.

The program ran through Sept. 6, 2021, and applied to all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The Labor Department came up with a formula to allocate the $12.5 billion among the 53 states and territories.

No state used all of its allocation, the inspector general said.

Seven states didn’t draw down any money at all.

The $5 billion may not sound like much in a federal budget that topped $6 trillion in spending over the last year.

But it would be enough to pay for about 200 more miles of border wall system, or to fund the Environmental Protection Agency’s entire Clean School Bus program for five years, or Project NextGen, the federal government’s latest effort to speed up coronavirus vaccines and treatments.

The Labor Department, in its official response to the audit, discounted the risk that the money, left sitting, is at risk of fraud or waste, saying the money can be used for only first-week unemployment benefits.

“They cannot be used for anything else, and to infer that these funds could be used elsewhere is incorrect,” said Principal Deputy Assistant Secretary Brent Parton.

He said the department plans to come up with “guidance” to states for how to return unused funds.

But he said clawing it back now is premature because states may still come looking for money and the TFFF has to have the funds to cover it.

“Although the CARES Act programs and provision eligibility period expired September 6, 2021, this does not mean that the TFFF provisions or reconciliation activities have concluded,” he said.

The inspector general dismissed that reasoning, pointing out that save for one $5,000 drawdown by Oregon in July, no state had accessed the money since June 2022.

“Viewed collectively, the minimal dollar amount of drawdowns across 53 states and the time lapse since the last drawdowns for five of the six in-depth states allows us to conclude that most of the remaining almost $5 billion will not be drawn down for eligible benefit reimbursement,” the inspector general said.

Seven states, allotted a total of $1.1 billion, never accessed any of the money at all.

The state that drew down money in June 2022 was Delaware, which the audit accused of taking $5.5 million for claims made outside of TFFF’s eligibility window.

Delaware blamed “confusion” about when the pandemic began and ended.

The state’s drawdowns ended only after the auditors asked about the unusual activities.

“While we did not identify fraud, waste or abuse in Delaware’s drawdowns, the ability for states to access ineligible funds without ETA’s knowledge is a risk for fraud, waste and abuse,” the inspector general said.

Mr. Schatz said Congress may have to get involved.

“It takes an act of Congress to get back money that Congress appropriated,” he said.

He said one lesson is for Congress to include in the original legislation a way to reclaim unspent money after a set time.

For more information, visit The Washington Times COVID-19 resource page.