Bilking Employers

Posted on January 24, 2005
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According to an audit of the state Department of Economic Security, the state has overpaid jobless benefits by $85 million. As the East Valley Tribune reports, "nearly one dollar of every five paid out in state jobless benefits was given in error."

In the Goldwater Institute report, Getting Back to Work: Reforming Unemployment Insurance to Increase Employment, economist Dr. William Conerly found a similar overpayment rate. He writes, "Large overpayments reflect the emphasis on benefits over reemployment . . . An audit published by the U.S. Department of Labor estimated that . . . $60 million, or 17 percent [of CY2002 UI payments], was in overpayments. This overpayment rate is far above the the national average of 9.1 percent."

According to auditor general Debbie Davenport, her department is unable to determine why such overpayments occur and how to reduce them. However, Dr. Conerly notes that changing the administrative funding procedure of the department, where benefits savings can be moved into administration, and the department is not paid out of federal funds based on the number of caseloads, would go a long way toward reducing this problematic rate of overpayments.

Both the article and the study note that unemployment insurance benefits are financed by employers, and overpayments manifest themselves as higher taxes on businesses.

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