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Illegal Benefits Cost RI $53 Million Over Three Years

Tuesday, October 04, 2011


Rhode Island issued more than $53 million in improper unemployment insurance benefit payments between July 2008 and June 2011, according to data released by the Department of Labor earlier this month.

During the 2011 fiscal year which ended June 30, $14,269,906 of the $289,317,413 paid in jobless benefits by the state was made in error, a rate of just under five percent. The three-year improper benefit rate for Rhode Island was 6.07 percent.

The new data , which accounts only for the 26 week benefits covered by the state, comes on the heels of the Labor Department’s “immediate call to action” to every state this summer to make unemployment insurance integrity a top priority and to create systems that will curb the amount of illegal payments made each year.

We’re Proactive

Only Maine (13.09 percent) had a higher payment error rate over the last three years among New England states, but when compared with the rest of the country, Rhode Island actually has one of the lowest error rates in the country. By comparison, nearly half of the unemployment benefits paid in Louisiana (43.6 percent) were made in error.

The top reason for illegal payments is that a person claiming unemployment continues to collect after returning to work full-time (in Rhode Island, a claimant can continue to collect while working part-time). But Raymond Filippone, the state DLT’s assistant director of income support, said the state does a good job making information available to people going back to work.

“We’re proactive on what we do and the message we send out to people,” Filippone said.

Lack Of Leadership

But Dr. Edward Mazze, Distinguished University Professor of Business Administration at the University of Rhode Island, said the state still isn’t doing enough. He said the DLT lacks the appropriate staffing and systems to eliminate illegal payments.

“The department should have had better controls in place to reduce and eliminate improper payments, program error, waste, fraud and abuse as well as having performance measurements to target improper payments," Mazze said.

Mazze said the payments made in error will hurt the state as it attempts to rebuild its unemployment fund.

“Too many improper payments are the result of too few staff, poor training of staff responsible for payments, inadequate systems to record information and little or no communication with claimants,” he said. “According to the U.S. Department of Labor, the state is now on track to remedy these issues by using a better strategic planning process and working in partnership with the federal government. The improper payments will cost the state extra dollars to rebuild the unemployment fund as well as increase the cost of unemployment insurance to companies. Improper payments cost all of us more in taxes.”

State Is Aggressive In Recouping Losses

Filippone acknowledged that the state could still do a better job when it comes to the improper payments, but noted that it has taken an aggressive approach when it comes to recouping some of the losses.

Last week, the Rhode Island State Police arrested 13 people on charges of Obtaining Money Under False Pretenses Over $500.00. The 13 people arrested are collectively accused of fraudulently obtaining benefits totaling approximately $130,847.00. Col. Steven O’Donnell, Superintendent of the Rhode Island State Police, said the state has no tolerance for people attempting to take advantage of the system.

"The State Police will continue its vigilance in pursuing those who take advantage of a system that is designed to assist them, especially during these difficult economic times,” he said.

Filippone said the state also has the right to pursue payments made in error through an individual’s state income tax or their lottery winnings. He said the state has recouped more than $1 million in 2011.

States Have A Responsibility

But the state still has a long way to go. In November 2009, President Obama signed an executive order creating a set of policies that was expected to reduce the amount of improper payments by intensifying efforts to eliminate errors, waste, fraud and abuse in major federal programs. But the states have struggled to comply.

According to the Labor Department’s report, nearly $19 billion in illegal payments were made nationwide over the last three years. Now the states are expected to use new funds to create more effective systems. Rhode Island was recently awarded $1.15 million to strengthen its programs, according to Filippone.

Labor Secretary Hilda Solis said the government must hold states accountable.

“States bear the responsibility of operating an efficient and effective benefits program, but as partners the federal government must be able to hold them accountable for doing so,” she said. “These new measures demonstrate our commitment to working closely with states to ensure the integrity of the system, turnaround underperforming programs and save taxpayer dollars.”


Editor's Note: A previous version of this story included a quote that provided inaccurate statistic about the DLT.


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