Inmates’ Receipt of Unemployment Bennies Costing State Big Bucks

MacIver News Service | September 14, 2011

[Madison, Wisconsin] Hundreds of individuals in Wisconsin’s county jails and prison system are illegally receiving unemployment benefits, the MacIver News Service has learned.

In March, the Department of Workforce Development (DWD), started to cross match their data with the Department of Health Services to combat inmate fraud in unemployment insurance claims. As of September 2, the number of over-payments to 236 inmates was $325,416.

According to an official in the Department of Workforce Development about 75-135 jailed individuals receive unemployment insurance on a monthly basis.

DWD Deputy Administrator Andrea Reid deemed about half of these claims to be fraudulent. The other half would be people who are booked over-night or jailed on a short-term basis who therefore are still eligible to file and receive payment for unemployment claims.

“The typical scenario for inmate fraud is the spouse, the girlfriend, the mom, actually reporting for that claimant,” said Reid.

The MacIver News Service recently reported on the Governor’s Commission on Waste, Fraud and Abuse, where a new system to combat UIf fraud was discussed.

Unemployment benefit fraud in Wisconsin has skyrocketed over the past few years.  Between 2008 and 2010, the amount of fraudulent payments shot up from $21 million to $78 million. The number of cases increased 130 percent. The amount of overpayments over $1000 that were intentionally concealed went from $9.25 million in 2007 to $40.5 million in 2010, a 338 percent increase.

Even with the cases of fraud increasing, few people have been successfully prosecuted for it.  In order to face punitive action, a person must have fraudulently received more than $5,000 in benefits and committed 5 acts of concealment. In 2010, 2,169 people met those requirements, yet only 31 of them were prosecuted. That resulted in 11 convictions.

Recently, the Wisconsin legislature passed a one-week waiting period before would-be recipients can receive UI benefits. This move, criticized my many legislative Democrats as cruel, is expected to save the state up to $50 million a year as the extra time will allow the state to investigate the validity of claims.

“The one week waiting period was a 55 million dollar highway robbery of workers without any recommendation from the advisory council,” said Senator Bob Jauch (D-Poplar) during legislative debate on the waiting period.

Jauch and many of his fellow Democrats were upset that the legislature was acting upon an unemployment-related policy item without the direction of the Unemployment Insurance Advisory Council. But Republicans, including DWD brass, argued the move was an integral component of their plan to root out fraud.

“[The waiting period] actually ends up saving us about $50 million a year, because if you look at the first week when a termination or a resignation occurs, it gives the department the opportunity to evaluate what is that particular employee owed, if anything,” DWD Secretary Scott Baumbach to the MacIver News Service this summer. “It cuts down on over payments.  It cuts down on fraud.”

The DWD says it plans on soon running cross matches with with the Department of Justice (DOJ) as well as Department of Health Services.  According the Reid, the cross match with DOJ, “will be much more timely and should reduce over-payment amounts.”

Because of the surge in unemployment claims made by its residents in 2009 and 2010, Wisconsin owes the federal government more than $1.3 billion. Plus interest.

If the amounts in Wisconsin’s Unemployment Reserve account in the U.S. Treasury are not sufficient to cover anticipated unemployment payments, the state can borrow funds from the federal government. In February 2009, it went insolvent. At the end of the first quarter of the year, the balance of the loan was at its peak ($1.6 Billion). At that time Wisconsin had the 11th highest loan of any state, and the 4th highest in the nation as a percent of total wages.