AUGUSTA, Maine — Earlier this month, Gov. Paul LePage announced that his administration was undertaking a new effort to tackle improper unemployment payments and fraud, a problem that cost state employers about $6.5 million last year.
The governor’s initiative came on the heels of President Barack Obama’s mandate that all states adopt mitigation overpayment strategies by Sept. 30. Obama said $17 billion in improper payments had been made nationwide.
Those staggering figures conjured images of widespread abuse of the system. However, the problem — in Maine and nationally — is more complex than that.
According to data from the Maine Department of Labor, $1.3 million of last year’s improper payments was attributed to fraud — that is, people who intentionally ripped off the system.
That’s about 20 percent of the total overpayment problem.
Included in the 20 percent are 450 cases discovered by the state Labor Department last year in which people continued to collect unemployment benefits after taking new jobs.
State officials say that number may include cases in which recipients didn’t realize their benefit eligibility ended once they took full-time jobs, not upon receipt of their first paychecks. In some instances, recipients took part-time jobs and continued to collect full unemployment when the benefits should have been less.
State Labor Department spokesman Adam Fisher said Maine has strict standards to protect against fraud. He said figures recently released by the Obama administration made it appear that Maine was lax in enforcement when it wasn’t.
To some extent, the federal government agrees with that assessment. The U.S. Department of Labor notes on its website that “states with stringent or complex provisions tend to have higher improper payment rates than those with simpler, more straightforward provisions.”
Maine’s improper payment rate is 13.09 percent, the 14th-highest in the country.
Outright fraud may not be the primary driver in Maine’s improper payments, which the federal government estimated totaled $82.2 million over a three-year period. Maine’s biggest issue is determining whether benefit recipients are actively seeking work.
According to the federal Department of Labor, work-search issues accounted for 44 percent of Maine’s improper payments over the three-year period.
There’s a story behind that number, too.
Each state has different standards to determine whether a person is actively seeking employment. Some have no requirement.
During the recession, some states waived their work-search requirements. They did so at a time when the federal government was supplementing the employer-funded insurance program with taxpayer money.
Maine didn’t waive its reporting requirement. The state doesn’t have a employer-visit quota like Indiana, which requires claimants to visit three employers a week (Indiana, coincidentally, has an improper payment rate of more than 46 percent). Rather, it requires recipients to submit a log of its employer contacts every five weeks. The Labor Department then reviews the logs to determine whether the recipient is aggressively seeking a new job.
LePage has highlighted work search as a major area of reform.
“Claimants who aren’t doing the proper work search or who turn down suitable job offers can and will lose their unemployment benefits from this point forward,” LePage said during a recent radio address. “Additionally, they will likely have to return benefits already received.”
Fisher said recipients “should be engaging in your job search as much as you were working in your last job.”
The state is also urging employers to immediately notify the state when they hire new workers. While employers are lawfully required to do this, Fisher said many aren’t, a problem that factors into the state’s improper payments.
Fisher said the state is exploring new ways to educate employers about the requirement.
Maine, like other states, tracks unemployment through a computer system, the core of which has been in use for quite some time. Fisher said updating the system is a priority for the administration, but it’s also expensive.
Earlier this year, the Labor Department received a $1.9 million grant for fraud enforcement and to update the state’s automated system to upgrade checks on claimants and employer new-hire filings.
It also will allow the state to intercept federal income tax refunds when improper payments are identified.
Unemployment fraud penalties are significant. First offenders must pay back all of the benefits fraudulently collected, plus a 50 percent penalty, plus interest.
The unemployment program is federally funded. Administrative costs, computers and work spaces are all federally funded, but the benefits themselves are mostly paid by employers.
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