Michigan and 13 other states are suing the U.S. Department of Labor for clawing back several million dollars in funding for improvements to state unemployment insurance systems.
The grants were created as a part of the American Rescue Plan Act, a stimulus package passed by Congress in 2021 to aid economic recovery from the COVID-19 pandemic. The grants were meant to help modernize the technology used to administer states’ unemployment programs to better prevent fraud, pay out benefits, and promote equitable access.
In total, the DOL awarded more than $780 million to the various states to address these issues. According to the lawsuit, in the first year of the Trump administration, the department sent letters to each state canceling the agreements, which it said “no longer effectuate (the DOL’s) priorities for its grant funding.” More than $45 million has been clawed back in the 14 plaintiff states.
“The Biden administration was given a historic opportunity by Congress to fix (unemployment), but instead squandered it on bureaucratic and wasteful projects that focused on equitable access rather than advancing access for all Americans in need,” DOL spokesperson Courtney Parella said.
The coalition of states argues that the DOL has committed a breach of contract. The grant agreements, which are enforceable as contracts between the federal government and the states, did not allow the DOL to terminate funding simply due to a change in priorities at the federal level, the lawsuit says.
Michigan was awarded $6.78 million in Equity grants, which were meant to help eliminate barriers to access, improve timeliness of payments, and ensure equity in fraud prevention. Of this, $2.83 million was clawed back by the DOL. It was also awarded $4.47 million in Tiger Team grants to implement recommendations from multi-disciplinary experts in those areas. Of this, $1.41 million was clawed back.
“Our Unemployment Insurance Agency plays a vital role in supporting Michiganders when they need it most,” Michigan Attorney General Dana Nessel said in a statement. “The Trump administration’s attempt to unilaterally cancel these grants midcycle strips crucial funding meant to modernize technology, block fraud, and protect our state’s system. Cutting off these resources only serves to harm our workforce and disrupt the essential services Michigan residents rely on every day.”
Nessel was joined by the attorneys general of California, Colorado, Delaware, Illinois, Maine, Maryland, New Jersey, New Mexico, New York, Oregon, and Wisconsin, as well as the governors of Kentucky and Pennsylvania.
