Whitmer: Replace Michigan’s unemployment system. Critics: What took so long?

LANSING — The faulty computer system that Michigan uses to pay benefits to unemployed residents could get replaced, according to Gov. Gretchen Whitmer’s latest budget proposal.

On Tuesday, Budget Director Christopher Harkins outlined Michigan’s $74 billion budget, which includes $88 million in spending to address issues with the state’s unemployment insurance system.

According to a news release issued by Whitmer’s office, that money would “strengthen Michigan’s Unemployment Insurance System.”

Related:

• Feds relax rules for workers ordered to repay Michigan unemployment benefits
• Michigan unemployment fraud now at $8.5B. Legislators have more questions.
• Michigan doled out $3.9 billion in improper unemployment payments, audit says

Whitmer, a Democrat running for reelection, wants $75 million to upgrade the Michigan Integrated Data Automated System, or MiDAS, a computer system used to collect unemployment taxes from employers and pay unemployment insurance benefits to those who have lost their jobs.

But the controversial system also uses an algorithm to either delay, or invalidate claims, as well as flag fraud. The state has acknowledged the system flagged as many as 40,000 residents were falsely accused of unemployment fraud from 2013 to 2015, prompting several lawsuits.

According to previous reporting from Bridge Michigan, the algorithm could falsely adjudicate fraud if a group of applicants have similar birthdays, or for choosing from a multiple choice menu the “I need the money” option when asking for unemployment benefits. 

Tony Paris, the lead attorney at the Detroit-based Maurice and Jane Sugar Law Center for Economic and Social Justice who have represented those falsely accused of fraud, called the MiDAS system a “nightmare” and a “colossal failure.”

“This experiment with automated decisions of a public benefit has failed,” Paris said. “Government and public benefits and rights cannot be ‘automated’ with an algorithm.”

He said the system has had problems for decades, and that the only way to improve it is with a total overhaul.

The state’s Unemployment Insurance Agency has been an embattled agency for years, but the COVID-19 pandemic exacerbated long standing problems.

According to an audit by the Michigan Auditor General, the state paid $38.9 billion in unemployment insurance from 5.4 million claims from March 2020 through September 2021.

A separate report by the accounting firm Deloitte and Touche found that “in total, for claims filed for the duration of March 1, 2020, to September 30, 2021, the State avoided an estimated $43.7 billion in fraud while paying an estimated $8.4-$8.5 billion to potentially fraudulent claims.”

Whitmer is proposing $13 million for unemployment insurance fraud enforcement.

According to her proposed budget, this money will support the Attorney General’s Office and the Department of Labor and Economic Opportunity in prosecuting illegal unemployment insurance claims, as well as expanding the investigations staff.

Rep. Steve Johnson, a Republican from Wayland who as chair of the House Oversight Committee has pushed for changes at the Unemployment Insurance Agency, questioned Whitmer’s proposal.

“They waited until they lost $10 billion in fraud to do this?” Johnson asked in a text message to Bridge Michigan. “It’s a little late now.”

Paris disagreed, saying focusing on prosecuting claimants, who could also be innocent, is wrong.

“How can we say that there was an overpayment when none of these people have had their day in court? None of these people have even talked to a human claims examiner that understands unemployment law with a brain, let alone a neutral judge,” Paris said.

“Once all these cases are adjudicated, and it goes to the appeal process, then we'll get a rough estimate and what we believe is overpaid.”