The U.S. Department of Labor issued a stern warning to all 50 states Wednesday, demanding they take swift steps to address fraud, waste, and abuse within their unemployment insurance programs — and threatening to cut off administrative funding for those that refuse to act.
Letters were sent directly to the governor of every state, marking the latest move by President Donald Trump’s administration to target fraud and misuse in state-managed programs that receive federal dollars. As has been the pattern with similar announcements, the administration drew attention to states where Democrats hold power.
Acting Labor Secretary Keith Sonderling made the administration’s position clear in a statement Wednesday. “We are officially putting governors on notice,” he said. “The American people will no longer tolerate the blatant waste, fraud, and abuse of their hard-earned tax dollars — no state should allow it either. If states allow it, they will suffer the consequences.”
The Labor Department pointed to a combination of poor oversight, aging technology, weak identity verification, and loose controls as factors that have “allowed unprecedented fraud to flourish.”
The department specifically highlighted California, Illinois, and New York — all states with Democratic-controlled governments — as examples of where problems have occurred.
California’s governor’s office pushed back hard against the announcement, pointing the finger at “lax regulations and rushed distribution” of unemployment benefits during the COVID-19 pandemic under the first Trump administration. A spokesperson for the California governor said in a statement, “Meanwhile California outperforms other states in addressing fraud.”
The Associated Press reached out to the federal Labor Department for more details about the specific fraud allegations, but did not receive an immediate response.
According to an estimate from the nonpartisan Government Accountability Office, fraud made up between 11% and 15% of all unemployment insurance payments distributed from April 2020 through May 2023, the period when the country was operating under a public health emergency due to the pandemic.
That window covered the final months of Trump’s first term in office as well as more than half of former President Joe Biden’s presidency. During that time, eligibility rules were loosened to get money out quickly, and the government identified problems as the funds were being distributed.
The new letter to states noted that the fallout from pandemic-era fraud “are still playing out.”
The Labor Department added that states should expect additional directives in the weeks ahead.
Vice President JD Vance is heading up an anti-fraud task force examining potential misuse of social programs across the country.
This effort is part of a broader pattern of federal pressure on states. The Department of Health and Human Services attempted to withhold funding for child care subsidies and other social services from five Democratic-led states, though a court has blocked that move. That department has also announced it is deploying artificial intelligence to monitor how states and other federal funding recipients are conducting program audits.
Separately, the Department of Agriculture has threatened to pull administrative funds from states that do not share data on participants in the Supplemental Nutrition Assistance Program, including information about their immigration status.
