Rampant fraud shows why Minnesotans should be wary of big government
It has not been a good couple of months for the Minnesota state government.
First, on June 11, the Office of the Legislative Auditor (OLA) published a report estimating that only 60 percent of people who received front-line worker bonus payments during COVID-19 were eligible. This was followed by another scathing report on June 13 detailing how the Minnesota Department of Education (MDE) failed to provide adequate oversight to the ‘Feeding Our Future’ program, creating opportunities for fraud. An estimated $500 million has been lost in the Feeding Our Future Fraud.
The fraud and mismanagement do not stop there, however. On July 10, OLA released another report showing that some departments issued incorrect retroactive payments to workers or did not resolve incorrect retroactive payments. The agencies involved include the Department of Public Safety, the Department of Corrections, and the Department of Natural Resources.
And just recently, another report by the US Department of Labor estimated that Minnesota overpaid $430 million in unemployment insurance during COVID-19. On a slightly positive note, this was one of the lowest improper payment rates in the country.
Why government is prone to waste and fraud
Sure some of these programs were created quickly to hand out money during COVID-19. The front-line worker program, for example, was created solely for that purpose.
That, however, does not take away from an important lesson. Even without a pandemic, big government is a recipe for waste and fraud. This is all just proof of that fact.
Why is government so susceptible to fraud and waste? As Milton Friedman explained, there are four types of spending.
- You can spend your own money on yourself
- You can spend your own money on someone else
- You can spend someone else’s money on yourself
- You can spend someone else’s money on someone else
Government employees spend taxpayers’ money on other people, so they are the fourth type of spending. This means that they have little, if any, vested interest in how that money is spent, creating opportunities for waste and fraud. This gets worse as the government expands and creates more opportunities for waste and fraud.
In their report, for instance, OLA asserted that signs of fraud were there with Feeding Our Future before COVID-19. However, the Minnesota Department of Education did not act on the warnings.
MDE failed to act on warning signs known to the department prior to the onset of the COVID-19 pandemic and prior to the start of the alleged fraud, did not effectively exercise its authority to hold Feeding Our Future accountable to program requirements, and was ill-prepared to respond to the issues it encountered with Feeding Our Future.
And while the issue with retroactive payments happened in 2022, it was not connected to COVID-19 in any way.
Minnesotans should be wary of a growing state government
A quick look at the pre-pandemic period proves that taxpayers lose hundreds of millions to fraud and mismanagement in Minnesota even during normal times.
In 2019, for example, the Minnesota Attorney General announced charges for Medicaid fraud totaling nearly $1 million. The same year, the US Department of Health and Human Services Officer of Inspector General identified $3.7 million in Medicaid payments made on behalf of dead people. Additionally, the Federal government ordered the Minnesota DHS to pay back $48 million due to erroneous Medicaid payments. This was after the state had overpaid $25 million to two Native Indian Tribes.
And then there was the infamous childcare fraud debacle totaling some millions — the exact number not yet documented.
COVID-19 or not, the recent succession of reports detailing fraud and mismanagement should tell Minnesotans one thing — the government is wasteful.
The Minnesota state government was already too big and susceptible to fraud and waste even before the pandemic. Unfortunately, last year’s expansion created even more opportunities for fraud and waste. That should be troubling.