In an earlier post, I analyzed the section of the USCIS ombudsman’s 2021 annual report covering USCIS’s 2018 notice to appear (NTA) policy. In that piece, I noted that the ombudsman correctly identified several preexisting challenges USCIS has with issuing NTAs, but I also showed that the report erred in laying blame for all of those issues on the NTA policy developed under the Trump administration. As a reminder, the ombudsman is an independent office within the Department of Homeland Security (DHS) “dedicated to improving the quality of citizenship and immigration services delivered to the public by providing individual case assistance, identifying systemic issues, and making recommendations to improve the administration of immigration benefits by U.S. Citizenship and Immigration Services (USCIS).”
In this piece, I will analyze a different section of the 2021 annual report that details how Covid-19 impacted USCIS operations, how the agency responded to these challenges, and the budgetary problems that were exposed once receipts for immigration benefits plummeted. Titled “U.S. Citizenship and Immigration Services in the Time of COVID-19: A Year Like No Other”, the section states:
Declining receipts and insufficient fees were already impacting the agency as the year  began. The COVID-19 pandemic created unprecedented challenges requiring closures of offices that normally depend on face-to-face interaction, increased backlogs in virtually all form types, and a reduction in fee revenue, which thrust the agency into a state of fiscal panic.”
While the primary focus of my piece is on USCIS’s fiscal issues, I want to briefly highlight the ombudsman’s view of how the agency handled the Covid-19 response. Like many U.S. businesses, in March 2020 USCIS shut down all in-person operations as part of the effort to stop the spread of Covid-19. Critics of the Trump administration unfairly claimed that it was shutting down legal immigration under the guise of a Covid-19 response. That was not true and the report confirms that “Employees typically conducting in-person interviews in field and asylum offices were quickly reassigned to non-interview work.” The report also lists the numerous flexibilities and accommodations USCIS put in place, where permitted under the law, to prevent aliens from falling out of status through no fault of their own. In less than three months, USCIS was able to reopen offices for interviews, though at reduced capacity. The ombudsman describes this as follows: “In a tremendous effort encompassing its 88 field offices, USCIS reconfigured public-facing activities for a pandemic.”
Facts can be tricky when they do not fit the preconceived narrative. With the exception of critiquing the agency for failing to allow certain additional flexibilities that USCIS lacks the legal authority to implement, the ombudsman’s report accurately captures the agency’s Covid-19 response, free of nefarious motives by the Trump political appointees who had to navigate the unprecedented situation.
Which brings me to the USCIS financial situation. Unlike most of the federal government, which operates through appropriated taxpayer dollars, USCIS is 96 percent fee-funded, meaning the agency derives its revenue from the fees paid by those who choose to engage in the immigration system. By FY 2019, USCIS had a carryover balance of $1.4 billion, which was often (incorrectly) interpreted as being a profit or excess cash. By FY 2020, the agency reduced the carryover balance to $845 million, of which $414 million was non-premium processing related and could be spent on anything, while $431 million was from premium processing funds and was restricted in how it could be utilized. When Covid-19 unexpectedly hit and the world shut down, receipts (and fees) for immigration benefits reduced dramatically and the agency lacked the revenue to meet its main expenditures of payroll, leases, and other contracts. The ombudsman calls the “carryover depletion  a significant problem”, but even if USCIS had $1.4 billion in carryover it would not have been enough to keep the agency solvent during calendar year 2020.
That’s because the relatively large carryover balance was hiding the critical fact that USCIS was not bringing in enough fee revenue to cover costs. As noted by the ombudsman, “One of the major reasons for USCIS’ fiscal pressures was disclosed in its proposed rule to raise fees published in November 2019: it was processing applications at what was essentially a loss.” By law, USCIS is supposed to update its fees every two years to levels that fully recoup the cost of adjudication. The agency has never met that congressional mandate and, as a result of the delay, essentially offers immigration benefits today at yesterday’s lower cost. Combined with the Obama administration’s generous use of fee waivers and exemptions, the agency was forgoing $1.5 billion a year in potential revenue.
Trump administration officials tried to correct this flawed business model by issuing a new fee schedule that actually covered the cost of adjudications. As I previously wrote, a federal district judge blocked that fee rule on dubious procedural grounds, permitting a continuous daily budgetary shortfall of $3 million. Instead of challenging this ruling, the Biden administration has abandoned the fee rule developed under the Trump administration and is developing its own.
The ombudsman’s report should cause the Biden political team to reconsider this approach. The regulatory process is time consuming and can take at least a year to turn a proposed rule into a regulation. As USCIS continues to bleed money, this is time the agency does not have to remain fiscally solvent. The Senate just confirmed Ur Jaddou as the director of USCIS and her top priority should be to get its fiscal house in order. Unfortunately, it appears unlikely that Jaddou’s leadership will take this approach. During the confirmation process, Jaddou indicated that she supports expansive application of fee waivers and charging more for certain immigration benefits in order to subsidize applications for other benefits by charging less than the true cost of adjudication. Letting policy preferences instead of fiscal considerations influence the fees charged leads to tricky math and an increased likelihood that USCIS will continue to operate at a loss for the foreseeable future.