Week In Review

State Capitol Week in Review

LITTLE ROCK –Legislative leaders have asked for an audit of questionable unemployment checks being sent from the state Workforce Services Department.

According to a federal report issued by the U.S. Labor Department, the state agency has mistakenly paid out more than $161 million in unemployment insurance since July of 2008.

The problem of overpayments took center stage at the most recent meeting of the Arkansas Legislative Council, when state lawmakers called for tighter controls within the Workforce Services Department to ensure that the problem gets fixed as soon as possible. Some lawmakers said they would introduce legislation to increase penalties for fraudulently filing an unemployment claim.

About 40,000 Arkansans are now receiving unemployment benefits. The federal report was based on a sample of fewer than a thousand cases in each of the past three years, randomly selected out of all claims paid in Arkansas. A spokesman for the U.S. Labor Department defended the validity of the report, saying its quality control methods had been proven over time.

However, the state Workforces Services Department disputed the numbers and said that last year the amount overpaid was $11 million, much less than the $50 million in overpayments reported by the federal agency for last year.

Whatever the amount in overpayments, legislative leaders called the federal report "disturbing" in a letter requesting a detailed audit of unemployment benefits paid in Arkansas.

It is especially frustrating for legislators because they passed difficult bills during the past two sessions to restore the financial health of the state Unemployment Insurance Trust Fund.

Act 861 of 2011 froze benefits for unemployed workers and Act 802 of 2009 raised the basic wage on which employers pay unemployment taxes, from $10,000 to $12,000. Those measures have reduced the deficit of the state Unemployment Trust Fund and will restore it to a positive balance by 2015, according to recent estimates.

The news about overpayments is also particularly frustrating to the business community, which pays taxes to maintain the Unemployment Trust Fund.

The federal Labor Department lists reasons for the improper unemployment payments. The largest category of improper payments, 63 percent, were to people who had found work again but continued to claim unemployment benefits.

The second most common reason for improper payments was "separation issues," which means that new information came to light that would have disqualified the recipient had it been reported in a timely manner. The fault could be on the part of the employer or the employee, or the information may not have become available until a ruling is made on appeal.

Separation issues were the cause for 17 percent of the improper payments, according to the Labor Department report.

Being unable or unavailable to work accounted for seven percent of improper payments. That happens when the recipient turns out to be disqualified from receiving benefits because they were in the hospital or in prison, for example. Another three percent of improper payments were made to recipients who failed to look for work, as required in order to be eligible for benefits.

The improper payments represent 9.88 percent of all unemployment amounts paid in Arkansas in the three year period from July 2007 through June 2010.

In August the unemployment rate in Arkansas was 8.3 percent in August.