By Mattias Gugel
Every public scandal is a parade of failures, not just a single misstep.
Minnesota’s Feeding Our Future case, the biggest COVID-era fraud prosecution in America, doesn’t just expose cracks in one emergency program. It spotlights a national pattern: Government prioritized speed over accountability. The unspoken rule was clear: Just get the money out.
Prosecutors say the scheme siphoned off $250 million meant to feed children during the pandemic. Fake meal sites, phony invoices, and imaginary recipients were the tools of the trade. Some fraudsters splurged on luxury cars and shipped cash overseas. Auditors and employees sounded the alarm, and federal partners raised concerns, but checks failed as politicians and bureaucrats grew terrified of slowing the money spigot during a crisis.
While Minnesota’s child-nutrition scandal grabbed headlines, the biggest financial disaster of the pandemic unfolded quietly in unemployment insurance. During COVID, unemployment insurance lost tens of billions. Experts peg fraudulent pandemic unemployment payouts at $100 to $135 billion, with total improper payments brushing up against $200 billion. Almost none of that money has come back, leaving state trust funds on life support.
Ohio alone has identified more than $1 billion in fraudulent pandemic unemployment overpayments. New York flagged hundreds of millions more, while Texas and Colorado each reported losses well into nine figures. According to the Government Accountability Office, states have recovered only a sliver of the fraud they’ve identified—often less than five percent—leaving taxpayers permanently on the hook.
In fact, “improper payments,” the government’s polite term for sending out taxpayer dollars that never should have gone out the door, plague state unemployment systems. According to the U.S. Department of Labor, Rhode Island, Florida, Virginia, Tennessee, Delaware, and New York all report unemployment-insurance improper payment rates above 25%. That means more than one out of every four unemployment dollars was paid incorrectly.
The cause? Good intentions gone bad. Federal guidance told states to pay benefits first, worry about details later. Outdated IT, flimsy identity checks, and self-reported benefits turned the system into a playground for fraudsters.
Criminal rings pounced, flooding the system with bogus claims and stolen identities. Basic safeguards collapsed. Taxpayers footed the bill for claims from the dead, the incarcerated, and serial applicants gaming the system across state lines. Emergency allotments, rubber-stamp verification, and overwhelmed agencies opened the door wide for fraud and error, with barely a glance back once the money left the building.
Minnesota’s scandals put that abuse in the spotlight and underscored the need for real change.
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Too often, fraud gets whitewashed with passive language, like "Funds were misdirected," "Controls failed." It’s a clever way to let government officials and politicians off the hook. When unemployment trust funds run dry, states don’t pick up the tab. Employers do. Payroll taxes climb, wage bases expand, and honest businesses, especially the small ones, are left to refill coffers that criminals looted by exploiting government blind spots.
SNAP fraud brings the same pain. Bad payments erode public trust, trigger federal penalties, and spark demands for deep benefit cuts that punish the people who need help. State lawmakers don’t have to choose between compassion and competence.
First, stop fraud before a single dollar leaves the vault. Identity checks need to be layered and ruthless: multi-factor authentication, document scans, device risk scoring, and cross-checks with fraud databases. It’s cheaper and fairer to keep the barn door shut than to chase the horse after it bolts.
Second, demand instant eligibility checks. Claims should be run against wage records, death rolls, prison lists, and other states’ registries before a dime goes out. SNAP applications need the same scrutiny: cross-checked with income and participation data.
Third, use risk-based triage. Most claims are honest, but some aren’t. Systems should sort the wheat from the chaff and reserve extra scrutiny for high-risk, self-reported claims.
Fourth, make transparency non-negotiable. Wrong payment rates and recovery numbers shouldn’t be buried in reports no one reads. Public dashboards put sunlight on the mess and help rebuild trust.
Finally, emergency waivers should come with an expiration date. No future crisis should be a free pass to skip verification forever. Emergency rules should die on schedule unless renewed with real safeguards.
Congress, if they choose to get involved, must empower states to enact these commonsense reforms that curb fraud and abuse, including allowing states to keep a portion of recovered funds, so good oversight is rewarded rather than punished.
Minnesota’s scandal is dramatic, but it’s just the tip of the iceberg. When oversight is treated as a nuisance, taxpayers get left behind. Unemployment Insurance and SNAP are still riddled with weak spots. Outdated systems linger. Verification gaps fester. Politicians still flinch at demanding real reform, afraid they’ll look heartless.
Integrity isn’t indifference. It’s stewardship: protecting the public’s trust and money. Minnesota fired the warning shot. The pandemic revealed the price tag. The next move belongs to the states.
Mattias Gugel is the Director of State External Affairs for the National Taxpayers Union.
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