Colorado labor department readying new ID check as fraud shakes up unemployment claims numbers

As the Colorado Department of Labor and Employment works to stand up extended federal unemployment programs on its new unemployment system, it’s also adjusting unemployment figures to account for rampant fraud.

CDLE reported Thursday that 14,123 people filed initial claims for state benefits last week. That’s a smaller number than the initial claims the department actually received during the week — a filing period cut short by the state’s former system being shut down on Jan. 5 to make way for its modern replacement.

State officials adjusted down unemployment numbers for the last four weeks because of concerns over fraud, shaving thousands off the totals for those weeks. State records now show 25,178 unemployment claims were filed during the week ending Jan. 2. That figure was originally reported at 41,439 claims.

“The department identified fraud as a key driver in the recent rise in regular (unemployment insurance) initial claims,” state labor economist Ryan Gedney said during a news call Thursday.

Gedney linked the spike in phony claims for state unemployment to funding running out for federal unemployment programs — Pandemic Unemployment Assitance and Pandemic Emergency Unemployment Compensation — in late December. The programs have since been extended but aren’t yet accepting new applicants in Colorado.

Personal finance website WalletHub on Thursday ranked Colorado as having the ninth-largest increase in new unemployment claims week over week. WalletHub’s research indicated Colorado has seen unemployment claims shoot up more than 550% compared to the first week in 2020.

But Gedney cautioned against putting too much stock in numbers likely to be changed even more in weeks ahead.

“I’ll say right now we are taking an ad hoc approach to estimating fraud and it is very likely that these numbers will be subject to further revision,” he said. “Unfortunately, fraudulent activity can distort economic meaning and significance so the department recommends caution when analyzing and interpreting recent trends in UI initial claims.”

The spike in fraud comes at a time when the labor department is dedicated extra resources to standing up its modernized claims system, MyUI+. Activated on Sunday after a nearly week-long transition period, the system had accepted 14,186 new claims as of Thursday morning and processed more than 79,000 requests for payment, paying out $18 million, according to Joe Barela, the labor department’s executive director.

Federal unemployment programs were extended as part of December’s $900 billion stimulus bill but Colorado is still not ready to process payments for the thousands of Coloradans who qualify. Fraud is at play there, too.

The U.S. Department of Labor has mandated that states enact additional identity verification for those programs. Colorado is contracting with to provide that service. technology will allow for online, virtual and in-person identify verification. The roughly 950,000 claims already subject to fraud holds will be the first subjected to go through that, state officials said Thursday. All new claims will have to go through it moving forward.

Federal guidance mandates state have an ID solution before Jan. 27. Cher Haavind, the labor department’s deputy executive director, expects Colorado will have in place before that and the relaunch of federal unemployment programs will follow shortly after.

“We could not move forward with PUA and PECU until we had an ID verification solution in place,” Haavind said.

New unemployment claims were elevated across the country last week with 965,000 people filing claims, according to the Associated Press. More than one millions unemployment claims have been filed in Colorado since the onset of the pandemic in mid March.

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