By Travis Perry │ Kansas Watchdog
OSAWATOMIE — Kansas Department of Labor officials say the state last year made nearly $37 million in overpayments for unemployment insurance claims, a figure they say has steadily risen since the national economy tanked in 2008.
The Great Recession took countless private-sector jobs, so many Americans turned to their respective states for help. Five years ago, according to state figures, KDOL processed 5,396 overpayments. That number has since skyrocketed 438 percent, to an astonishing 29,017 overpayments last year through Dec. 7, 2012.
Cynics sneer at state benefit programs such as unemployment insurance, claiming the initiatives are rife with fraud and abuse.
But KDOL numbers back them up. Fraudulent claims last year accounted for 20 percent of all overpayments, about $10 million. By far, the most popular way people defraud the state is by continuing to collect unemployment insurance after landing a new job, followed by people lying about their search for new work, or just not reporting back at all.
Brett Flachsbarth, KDOL Director of Unemployment Insurance, said such fraudulent claims are difficult to track because relevant information is often spread across multiple databases.
“That’s a big portion of the pie, unreported wages,” he noted. “There’s no silver bullet there.”
But perhaps even more frustrating than weeding out fraud is the sheer number of overpayments made because of non-fraudulent errors by employers, individuals and the KDOL. Eighty percent of all overpayments last year were attributed to reasons other than fraud, totaling more than $27 million. Of those, 3,697 overpayments are simply listed as “unknown computer record error.”
Flachsbarth said KDOL has renewed its efforts to combat fraud and abuse under the guidance of interim Secretary Lana Gordon, a former legislator. Gov. Sam Brownback appointed Gordon after dismissing former secretary Karin Brownlee in September.
“I’d say our efforts are adequate, but there’s room for improvement, and we’re aggressively pursuing that improvement,” Flachsbarth said.
The state has hired of an attorney with specific experience in collections and fraud.
“I don’t think other administrations have ignored it, but it’s something that Secretary Gordon highlighted initially,” Flachsbarth said.
Justin McFarland, deputy chief counsel for KDOL, said the agency has a variety of tools it can use to recover money once it has been dispersed, including the negotiation of voluntary repayment plants, intercepting future unemployment payments or tax return refunds and civil enforcement through the courts. But when it comes to measuring the success of various collections methods, Flachsbarth said it can be hit-or-miss.
“Sometimes it’s easy, the claimant or individual is aware of the overpayment … others you have to pursue through court action,” he said, noting that even then the person in question may not have enough money to repay the debt.
Compared to other states, Flachsbarth said, Kansas is in relatively good condition. Overpayments made up about 10 percent of all unemployment payments last year, while states such Pennsylvania lead the pack with hundreds of millions in errors. But no matter how far their efforts go, Flachsbarth said, some degree of fraud or abuse in the system will always exist.
“You can never get it to zero,” he said. “What you can do is get as close to that mark as you can through prevention, through legal interpretation; there’s a lot of good practices we’re implementing to get that rate reduced even further.”
Dave Trabert, head of the Wichita-based Kansas Policy Institute, said it’s unacceptable to call such a problem insurmountable.
“Just kind of wiping it off or shrugging it off — and I’m not saying they’re doing that — there’s always going to be some, but I wouldn’t accept that,” Trabert said.
“The simple fact is that there’s millions and millions of taxpayer dollars spent unnecessarily every year,” he added. “I would imagine that there will certainly be some people that are trying to game the system. I don’t know that you can ever wring honest human error out of the system. The response, really, is we need to do a much better job of implementing controls to catch these things.”