Fraud still a problem in extended unemployment benefit programs

By M.D. Kittle | Wisconsin Reporter

MADISON, Wis. — As Congress debates extending long-term unemployment benefits for some 1.3 million Americans, lost in the heated rhetoric are some very important numbers for taxpayers.

The state and federal unemployment insurance system has helped a lot of people in need, but it’s also allowed some ineligible recipients to fraudulently help themselves to the pocketbooks of businesses and taxpayers. States recorded some $7.7 billion dollars in improper unemployment insurance payments in 2013, according to the U.S. Department of Labor.

Estimated improper payments run as high as 18.16 percent in Nebraska. Louisiana posted the highest estimated fraud rate in the nation last year, at more than 7 percent.

In Wisconsin:

• Estimated improper payments totaled $92,644,556, through June 30. The system had an estimated improper payment rate of 10.48 percent, according to the Labor Department. The rate is the sum of the overpayment rate and underpayment rate, subtracting overpayments recovered, for the unemployment insurance program for the reporting period. The data are required by the Improper Payments Information Act.
• The vast majority of improper payments involve work search issues — the inability to validate that an individual has met the state’s work search requirements — and benefit year earnings, in which an individual continues to claim and receive benefits after returning to work.
• The estimated unemployment insurance fraud rate during the period was 2.1 percent.
• The state determined nearly 5,600 claimants received fraudulent federal Emergency Unemployment Compensation overpayments totaling $10.5 million between Jan. 1, 2013 and Nov. 30, 2013. The determinations are subject to potential appeal, according to John Dipko, spokesman for the state Department of Workforce Development.

EUC, which expired on Jan. 1, is a 100 percent federally funded program. It provides benefits to individuals who have exhausted regular state benefits. During the recent recession, Congress expanded unemployment insurance payments, making benefits available for up to 99 weeks.

The debate in Washington, D.C., is over the Emergency Unemployment Compensation program. Some 1.3 million Americans, including 23,700 Wisconsinites, lost the long-term benefits with the turning of the calendar year.

On Tuesday, the Democrat-controlled U.S. Senate passed the Emergency Unemployment Compensation Extension Act on a mostly party-line vote of 60-37. The legislation faces higher hurdles in the Republican-led U.S. House of Representatives.

“Restoring economic assistance for Americans who have lost their jobs and are trying to find new ones is the right thing to do, and is good for the country’s economy,” said U.S. Sen. Tammy Baldwin, D-Wis., a co-sponsor of the bill. “This bipartisan legislation will provide a lifeline for Wisconsin families as they search for work in our recovering economy.”

Baldwin continued to criticize Wisconsin’s economic performance while insisting the rest of the nation was turning a corner, arguably an argument against extending the benefits.

In Wisconsin, EUC payments in 2013, through November, totaled $325.3 million, according to Workforce Development. About 312,325 claimants were paid out of all unemployment insurance programs, state and federal, in 2013, totaling about $1.28 billion in all state and federal benefit programs.

“Wisconsin acts aggressively to pursue UI fraud activity involving both state and federal UI programs in our state,” Dipko wrote in an email to Wisconsin Reporter. “Through our vigilance and collection methods, Wisconsin recovered $10.6 million in federal Emergency Unemployment Compensation fraud overpayments last year.”

Dipko said the agency has received additional tools to enhance its “strong system” to curtail fraud. This month, the state will conduct random unemployment insurance audits of claimant work-search activities. Also in effect is a prohibition on collecting unemployment benefits at the same time a claimant collects Social Security Disability Insurance, Dipko said.

“While Congress has not approved a UI benefits extension at this time, our employment and training system remains committed to helping any Wisconsinites who are out of work — including those who have been unemployed long-term – to reach the independence of finding new employment and supporting themselves and their families,” Dipko said.

State and federal lawmakers have expanded unemployment benefits substantially in the decades following President Franklin D. Roosevelt‘s New Deal and the Social Security Act of 1935.

What it hasn’t been able to fix is the fraud and incompetence inherent in the program.

A look at other Midwest states:

• Illinois: 12.2 percent estimated improper unemployment insurance payment rate, totaling an estimated $266.38 million. Estimated fraud rate was 1.8 percent
• Michigan: 6.5 percent improper unemployment insurance payment rate, totaling $75.69 million. Fraud rate of 2.25 percent
• Iowa: 10.3 percent improper unemployment insurance payment rate, totaling $44.98 million. Fraud rate, 1.6 percent.
• Minnesota: 4 percent improper unemployment insurance payment rate, totaling $34.96 million. Fraud rate, 1.9 percent.

Contact M.D. Kittle at mkittle@watchdog.org

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