Governor overhauls strained labor department

Jun. 12—SANTA FE — In an attempt to stabilize a beleaguered New Mexico state government agency, Gov. Michelle Lujan Grisham on Friday announced changes aimed at helping the Department of Workforce Solutions better handle a barrage of pandemic-related unemployment benefit claims.

The overhauls include a partnership with Attorney General Hector Balderas' office to crack down on rampant fraudulent jobless claims estimated to be as high as $133 million over the last year, as well as hiring an additional 110 employees to staff the labor department's unemployment operations center that has struggled to keep up with a spike in phone calls from those seeking benefits.

During a news conference at the Governor's Office, Lujan Grisham described unemployment benefit fraud as a national problem and said the state's jobless system was not built to withstand a huge increase in claims.

But the first-term Democratic governor, who recently officially launched her reelection campaign, also acknowledged the frustration and anger many New Mexicans have felt while trying to obtain unemployment benefits, saying state residents deserve a state government that recognizes its weaknesses.

"There is an issue with overpayments and fraud — that's fact," Lujan Grisham said.

New Mexico's unemployment fund was largely depleted last year by the explosion of jobless claims, prompting the state to borrow $278 million from the federal government to continue paying benefits to unemployed workers.

While the governor used her line-item veto authority in April to axe a proposed $600 million legislative earmark to benefit the unemployment fund, she said recently-released federal guidelines appear to allow states to spend federal stimulus dollars for such a purpose.

"The second that we have exactly what we need, New Mexicans should expect that we will replenish the trust fund," Lujan Grisham said.

She also said it was important that businesses around the state that pay into the unemployment fund not face higher rates in the coming year due to the spike in jobless claims.

"I have zero interest in making it harder for businesses that are working diligently right now," the governor said.

In all, the state has paid out roughly $3.8 billion in jobless benefits during the pandemic — a figure that includes funds made available under federal stimulus plans.

But frustration with the department's ability to process unemployment claims has persisted, and former agency secretary Bill McCamley left the job in April out of concern for his safety following a flood of threats targeting him and others in the department.

In addition, a recent legislative report found the Department of Workforce Solutions might have overpaid unemployment benefits by $250 million during the COVID-19 pandemic due to a mix of fraud and human error.

The report also cited outside audits that found jobless benefit determination errors, likely caused by low staffing levels and training issues, and incorrect interpretation of both federal guidance and a state law aimed at holding employers harmless from layoffs that occurred during the pandemic.

DWS call center review

The overhauls Lujan Grisham announced Friday are aimed in part at ensuring the Department of Workforce Solutions can answer phone calls from 100% of unemployed New Mexicans.

The agency has fallen short of that goal in recent months, as it only answered 66,096 of the 1,505,973 calls it received in March — or 4.4% — according to DWS Acting Secretary Ricky Serna.

However, Serna said that of the total calls for March there were 169,358 unique phone numbers that called the center, meaning the department connected with about 40% of the people who attempted to reach it.

Meanwhile, Lujan Grisham also announced state Sen. Michael Padilla, D-Albuquerque, who runs an Albuquerque-based call center, has agreed to review the agency's call center — in his personal capacity and on a volunteer basis — and recommend possible policy changes.

"We have added staff, and we will add and train more," the governor said. "But I want our approach to be strategic — I want us to ask why these systems didn't always work the way they needed to in an emergency and get to the bottom of how they're going to work better."

In addition, the state is finalizing a contract with Abba Technologies, an Albuquerque-based firm, to do an outside review of the Department of Workforce Solutions' operations and systems to identify possible shortcomings. That review is expected to take up to six months to complete, according to the Governor's Office.

But the proposed steps left some critics unsatisfied.

House Minority Leader James Townsend, R-Artesia, raised concerns Friday over reports of New Mexicans receiving prepaid debit cards from the Department of Workforce Solutions despite not having applied for unemployment benefits.

And state GOP chairman Steve Pearce blasted the governor for her handling of a department that he described as being in "shambles."

"Lujan Grisham's promises today are too little too late as more and more New Mexicans suffer," Pearce said in a statement.

$300 federal benefit to stay

New Mexico's unemployment rate has been among the nation's highest in recent months — it was at 8.3% as of April — and the state recently reimposed job search requirements for those receiving jobless benefits that had been suspended at the onset of the pandemic.

But Lujan Grisham said Friday she does not plan to reject expanded $300 per week federal unemployment benefits, as many Republican governors have done out of concern the expanded benefits are discouraging employees from returning to work.

Specifically, she pointed out the expanded benefits are set to expire in September and said national studies have shown little benefit in terms of job growth by ending them prematurely.

"I am not so inclined to have a negligible impact that seems awfully punitive," the governor said in response to a question, while adding her administration was studying child care subsidies or other back-to-work incentives.

Statewide, there were roughly 78,000 unemployed workers in New Mexico as of April, down from more than 118,000 in July 2020, according to DWS data.

35% of claims fraudulent

As for the rampant unemployment benefit fraud, Lujan Grisham said the state would take a more aggressive approach to the issue and utilize fraud specialists from several different state agencies.

"We're going to find you and we're going to hold you accountable," the governor said in a message to fraudsters.

But prosecuting those unlawfully accessing jobless benefits might prove to be a difficult task, in part because much of the national unemployment benefit fraud is believed to originate in other countries, according to experts.

Haywood Talcove, CEO of LexisNexis Risk Solutions Government, said transnational criminal groups may have stolen up to $250 billion in fraudulent payments nationwide during the pandemic.

Talcove described it as the single largest fraud effort in our nation's history, one that states like New Mexico were ill-equipped to handle.

"They never had any defenses in place against unemployment insurance imposter fraud," Talcove said.

Based on information pulled by LexisNexis, Talcove estimated that roughly 35% of unemployment claims in New Mexico are fraudulent, roughly in line with the national average.

"You're still losing massive amounts of money to the fraudsters," he said.

Prior to Lujan Grisham's news conference, Talcove encouraged states to invest in technology used by banks and other private-sector operators to prevent identity fraud, and to bring in a third party to take an honest look at their unemployment systems.

"There hasn't been a state that's ... looked into it with a third party that got good news," he said.

Journal staff writer Stephen Hamway contributed to this report.