The Case of the Insolvent Federal Agency: A Forensic Analysis of Public Data on U.S. Citizenship & Immigration Services
By Doug Rand and Lindsay Milliken
June 15, 2020
On May 15, 2020, U.S. Citizenship and Immigration Services (USCIS) suddenly announced that without a $1.2 billion bailout from Congress, it will soon need to furlough over 10,000 of its employees because of projected budget shortfalls due to the COVID-19 pandemic. USCIS, which is part of the U.S. Department of Homeland Security (DHS), is in charge of managing much of the legal immigration system, including applications for permanent residency (“green cards”), U.S. citizenship, asylum, work permits, and various temporary immigration statuses. The agency, which is almost entirely funded by user fees, claims that it will see a decrease in application volume of more than 60 percent from the time it was forced to close its field offices in late March through the end of September 2020.
USCIS claims that in order to stay solvent, Congress must immediately make a supplemental appropriation of $1.2 billion in taxpayer dollars, which would eventually be paid back to the Treasury through a new 10 percent surcharge on all existing user fees. This surcharge would come on top of a dramatic 21 percent fee hike that USCIS is close to finalizing via regulation.
According to USCIS, the culprit is entirely COVID-19, not internal mismanagement, but publicly available data tell a different story.
Based solely on the data that USCIS publishes—however incomplete and difficult to synthesize—it is clear that its financial troubles long pre-date the COVID-19 crisis. The agency has made several questionable policy decisions over the past three and a half years, including failing to implement a timely and moderate fee increase, as well as initiating a surge of red tape and staff hiring that likely led USCIS from surplus to insolvency.
Starting with a Surplus
Just last year, USCIS experienced a record year for both revenue overall and revenue per user. The agency pulled in almost $3.9 billion in standard user fees, an increase of about $1 billion since Fiscal Year (FY) 2014. The agency’s revenue per user hit a six-year high of $509 from a low of $392 per user only three years prior (see Table 1). This additional revenue comes in large part from an average 21 percent fee increase implemented toward the end of the Obama administration (not to be confused with the additional average 21 percent fee increase that the Trump administration proposed just three years later).
Table 1: USCIS Key Performance Indicators (FY 2014–FY 2019)
|Total Volume||Total Revenue||Revenue/User||Notes|
|FY 2016||8,070,917||$3,167,729,000||$392||Includes typical election-year naturalization surge|
|FY 2017||8,530,722||$3,424,521,000||$401||Includes atypical post-election naturalization surge|
|FY 2018||7,527,851||$3,625,593,000||$482||First full year that Obama-era fee increase kicks in|
|FY 2019||7,650,127||$3,876,847,000||$507||Six-year high in revenue per user|
Although USCIS has only released recent data for its primary employment-related form types, it is clear that in the six months before the pandemic dramatically affected the United States (Oct. 2019 – Mar. 2020), this subset of USCIS’ user volume was up over 17 percent compared with the same period a year earlier (see Table 2). This suggests that when USCIS was forced to close its field offices on March 18, 2020, it had more money in its coffers than it expected to at that moment.
Table 2: Nonimmigrant Worker Petitions Received by USCIS
|Q1 FY 2019||Q2 FY 2019||Q1 FY 2020||Q2 FY 2020||Change (YTD)||Change (Q2 only)|
(Information sourced from USCIS I-129 data. “YTD” change compares Oct. 2019–Mar. 2020 with Oct. 2018–Mar. 2019. “Q2 only” compares Jan.–Mar. 2020 with Jan.–Mar. 2019.)
Beyond revenue, another metric to assess the financial situation of USCIS is its “carryover balance,” defined as the agency’s “unobligated/unexpended fee revenue accumulated from prior fiscal years,” as of the final date of the current fiscal year. This carryover balance is divided between “Premium Processing” fees (assessed only on certain business users, which are routed to a separate information technology infrastructure account) and “Non-Premium” fees (nearly all other user fees, which go toward agency operations).
According to the agency’s past two publicly available fee reviews for 2016/2017 and 2019/2020, its average end-of-year Non-Premium carryover balance was just over $700 million between FY 2012–FY 2018. This balance dropped to its lowest level in FY 2016, just before the Obama-era fee rule kicked in, and rose to over $800 million by the end of FY 2018. What happened next is difficult to nail down based on publicly available sources, but according to the budget documents sent by USCIS to Congress each February, the agency had a total (Premium plus Non-Premium) carryover balance of over $1.26 billion at the end of FY 2019.
Table 3: End-of-Year Immigration Examinations Fee Account (IEFA) Carryover Balance
|Purple = inferred||Yellow = projected by USCIS in fee rule||Red = projected by USCIS in budget|
(Note: “Non-Premium” and “Premium” user fees from USCIS’ proposed fee rule supporting documentation in 2016 and 2019. “Total” user fees from the agency’s Congressional Justifications (budget documents) for FY18, FY19, FY20, and FY21.)
This suggests that on Oct. 1, 2019, six months before the COVID-19 crisis hit home, USCIS was sitting on a cash cushion of about $787 million in user fees it could use to sustain operations (assuming the historical average 62 percent of total carryover balance going to its Non-Premium account).
The Road to Ruin
How could an agency with this much excess cash become insolvent in mere months? Although USCIS is quick to place exclusive blame on the pandemic, it appears that COVID-19 was merely an accelerant, not the culprit. All available evidence suggests that we are witnessing a self-imposed insolvency, borne of the agency’s own poor management and policy decisions.
The smoking gun is USCIS’ prediction of its own financial troubles well before the appearance of COVID-19. Table 3 above shows that at the time USCIS was reporting to Congress an actual total carryover balance of over $1.26 billion (in Feb. 2020), the agency had only recently (in Nov. 2019) predicted a Non-Premium carryover deficit of nearly $250 million for FY 2019, growing to over $1.5 billion in FY 2020.
Of course, USCIS had an incentive to forecast a giant deficit in its fee schedule proposal, the better to justify higher user fees. But even if this forecast was overblown, it was pointing in the right direction.
Since the beginning of the Trump administration, USCIS has increased its staffing needs by nearly 20 percent, from over 15,000 in 2016 to over 18,000 in 2020. Table 4 below shows how the total number of positions, the number of full-time equivalent (FTE) positions, and the budget required to support these additional workers increased over time. Using the official budget justifications sent by USCIS to Congress each year, we can determine which parts of the agency hosted most of these increases, such as Service Center Operations, District Operations (including Field Offices and Fraud Detection), and Asylum, Refugee, and International Operations.
Table 4: Costs and Staffing for All of USCIS (from the Non-Premium Immigration Examinations Fee Account (IEFA))
|Fiscal Year||Number of Positions||Number of Full-Time Equivalents (FTE)||Budget|
Why would USCIS need to increase its staff and its payroll expenses so dramatically when the volume of applications has actually gone down since FY 2017 (see Table 1)?
There appear to be two primary drivers of this staff surge. First, the administration has prioritized anti-fraud measures—in the absence of any publicly-disclosed evidence of the need for such measures. As then-acting director Ken Cuccinelli asserted in 2019, “We are not a benefit agency, we are a vetting agency.” Although USCIS provides the public with insufficient data to know how many of its additional 3,000 positions work in its Fraud Detection and National Security (FDNS) Directorate, we know that its ambition was to more than double the size of this unit with nearly 1,000 additional hires (see Figure 1).
Figure 1: Authorized IEFA Positions by USCIS Office
(Figure copied from the USCIS Immigration Examinations Fee Account Fee Review Supporting Documentation, April 2019.)
Second, under the Trump Administration, USCIS has issued a flurry of policies that make its case adjudications more complicated, which reduces the agency’s efficiency and requires more staff to complete fewer cases. There are dozens if not hundreds of such policies; four of the most consequential are the institution of mandatory interviews for employment-based green card applicants (some 122,000 per year), family members of refugees and asylees applying for a green card (some 46,000 per year), and recently married couples who have already obtained a green card (over 166,000 per year)—plus the elimination of the “prior deference” policy that now requires USCIS officers to scrutinize hundreds of thousands of skilled worker renewal applications each year, even if nothing material has changed since the initial adjudication.
This buildup of red tape and government employees has led to the worst of both worlds: burgeoning payroll expenses are crippling the financial sustainability of the agency, even as backlogs and processing times have reached crisis levels.
Once again, there are warning signs buried in the agency’s publicly available data. In its latest fee hike proposal, USCIS tallied up its own internal average cost to process each form type, revealing an astonishing increase over the course of just three years. The total additional cost of these increased expenses, summed over just five of the agency’s most common forms, is over $500 million per year.
Table 5: Cost Increases per USCIS Form Type
Scroll to see full table
|Immigration Benefit Request||Actual Volume (FY 2018)||Activity-Based Cost (2016)||Activity-Based Cost (2019)||Change ($)||Change (%)||Extra Cost to USCIS||% of total|
|I-129 Petition for a Nonimmigrant worker||551,021||$327||$593||$266||82%||$146,571,586||26.4%|
|I-130 Petition for Alien Relative||835,972||$381||$464||$83||22%||$69,385,676||12.5%|
|I-485 Application to Register Permanent Residence or Adjust Status||655,416||$652||$761||$109||17%||$71,440,344||12.9%|
|I-751 Petition to Remove Conditions on Residence||177,674||$400||$610||$210||52%||$37,311,540||6.7%|
|N-400 Application for Naturalization||837,423||$662||$875||$213||32%||$178,371,099||32.2%|
(Data sourced from USCIS’ November 14, 2019 proposal in the Federal Register to increase user fees.)
Since 2017, USCIS has burdened its users—and its employees—with time-consuming new hurdles, based more on ideological conviction than evidence of need. Thus, the whole organization became less able to handle backlogs or to process applications in a reasonable amount of time, which led to hiring more people just to tread water. This hefty payroll burden is the prime suspect in the case of the agency’s disappearing budget surplus.
The Road Not Taken
Even setting aside the prudence of the policy and staffing changes described above, USCIS could have been better prepared for the financial strain caused by the COVID-19 pandemic, simply by raising its user fees within reason and on schedule.
Every two years, USCIS conducts an internal fee review, and if it determines that expenses are on track to outpace revenues, it can increase its fees via regulation. Since the creation of the agency after 9/11, it has significantly raised fees twice, in 2007 and 2016. If the agency knew that it needed to raise fees again as a result of its 2018 fee review, it has not rushed to get the job done.
Instead, the administration fell far behind schedule on implementing these new fees, which did not appear even in draft form until November 2019. This proposed rule would increase the cost of a naturalization application by 60 percent, eliminate fee waivers for low-income users, impose fees on asylum-seekers for the first time, and transfer some $100 million of USCIS user fees to Immigration and Customs Enforcement (ICE), among other ideological measures that have generated a widespread outcry.
USCIS also botched the rulemaking process, so that its comment period had to be extended until February 2020. Despite receiving well over 40,000 comments, overwhelmingly in opposition to the fee hike, USCIS appears to be preparing a final rule for publication very soon, now that it has a fiscal gun to its own head.
Spare the Rod, Spoil the Agency
The Trump Administration has no one but itself to blame for the looming insolvency of an essential U.S. government agency. If USCIS had only increased its fees moderately and on time, or if it had refrained from staffing up to fulfill an ideological mandate in the first place, the agency would not have burned through its budget surplus. While the COVID-19 pandemic certainly made things worse, USCIS was already in a financial hole of its own making.
For nearly two decades, USCIS has been relatively under-scrutinized by appropriations and oversight committees in Congress, because it always had its own source of funding. Now that the well is running dry, there is a moral hazard in letting the agency hold most of its employees and the entire legal immigration system hostage because of its own shortsighted decisions. USCIS has a duty to manage its finances such that it can function properly even in times of hardship.
Before Congress even considers bailing out USCIS, the agency must be fully transparent with all of its financial and operational data, so that the public can understand precisely how this debacle happened and how to fix it fairly.
Doug Rand is a Senior Fellow and Director of the Technology and Innovation Initiative at the Federation of American Scientists, focusing on the intersection of immigration policy and artificial intelligence (AI) in advancing the nation’s national security and economic growth. Doug is the co-founder of Boundless, a technology company that empowers families to navigate the immigration system more confidently, rapidly, and affordably. Doug served in the Obama White House for over six years as Assistant Director for Entrepreneurship in the Office of Science and Technology Policy, with a portfolio spanning inclusive high-growth entrepreneurship, access to capital, clean energy innovation, commercialization of federally funded research, and high-skill immigration. Doug was co-founder and CEO of the innovative publishing company Playscripts, Inc., as well as a co-founder of the theater review aggregator StageGrade. He is a graduate of Yale Law School and the Yale School of Management, and received Master’s and undergraduate degrees from Harvard, where he studied evolutionary biology. As a writer, Doug’s plays have been performed thousands of times worldwide.
Lindsay Milliken is a Research Assistant for Science, Technology, and Information Policy at the Federation of American Scientists. She supports both the Congressional Science Policy Initiative and the Technology and Innovation Initiative. Previously, she worked as a Legislative Research Assistant at Lewis-Burke Associates, a government relations firm specializing in science policy and higher education.
Lindsay received her BA in Political Science with a minor in Physics from American University in Washington, DC. During her time at AU, she worked at the National Association of Biomedical Research, which supports the humane use of animal models in medical research.
Her research interests include artificial intelligence, high skill immigration policy, and finding creative ways to support evidence-based policymaking on Capitol Hill.
Suggested Citation: Doug Rand & Lindsay Milliken, The Case of the Insolvent Federal Agency: A Forensic Analysis of Public Data on U.S. Citizenship & Immigration Services, N.Y.U. J. Legis. & Pub. Pol’y Quorum (2020).