Fraudulent claims account for $227 million, U.S. Dept. of Labor says
More Pennsylvanians are out of work today than at any time in the last twenty years, but some people struggling with unemployment have received more in benefits than they should.
In 2009, Pennsylvania paid out more in unemployment benefits than all but two other states and had one of the ten highest unemployment insurance fraud rates in the nation, according to statistics released by the federal Department of Labor this month. The report was produced by the Labor Department’s Benefit Accuracy Measurement (BAM) program, which determines the accuracy of paid and denied claims in the state-provided Unemployment Insurance (UI) programs.
Pennsylvania residents collected more than $4.8 billion in unemployment compensation during 2009, but 7.71 percent of those payments – totaling more than $374 million – were either fraudulent or nonrecoverable overpayments, according to the federal Labor Department report.
The state’s unemployment fraud rate was 4.68 percent for 2009, the ninth highest rate in the nation and considerably higher than the fraud rate of 3.85 percent in 2008. But the true value of that one percent increase only becomes visible when considered alongside a massive increase in unemployment claims in 2009.
According to the BAM report, unemployment Insurance payouts in Pennsylvania climbed 75 percent between 2008 and 2009. At the same time, unemployment in the state rose from 6.8 percent in January 2008 to 8.8 percent at the end of 2009.
As a result, the state paid out $106 million for fraudulent claims in 2008 but lost more than $227 million through fraudulent claims in 2009.
Despite having the 30th ranked overpayment rate, Pennsylvania paid out more than all but two of the 10 states with the highest rates.
The increase in unemployment payouts has added more stress to a system that is already bordering on insolvency despite $3 billion in borrowing from the federal government, said Samuel Denisco, director of government affairs for the Pennsylvania Chamber of Business and Industry.
Mr. Denisco said the chamber believes the state needs to implement a law requiring individuals collecting unemployment compensation to actively look for work.
“We have to be cognizant of the claims that are coming in, and those who have been separated from employment truly need to get back to work,” said Mr. Denisco. “The premise of the [unemployment compensation] system is to transition people from unemployment back to employment.
A spokesperson for the state Department of Labor and Industry, which operates Pennsylvania’s unemployment compensation program, confirmed that the state does not have a work search requirement.
The federal Labor Department classified 61 percent of all fraudulent payments in Pennsylvania during 2009 as being due to “separation issues,” when a recipient of unemployment compensation is working and being paid but fails to report their income in order to continue to receive unemployment. Another 30 percent of fraudulent payments were due to inaccurate reporting of income during the year before the individual became unemployed, which establishes the individual’s benefit level.