Assembly Committee On Public Benefit Reform Clashes Over Need To Stop Fraud

Intentional unemployment fraud cost Wisconsin taxpayers $86 million over 3 years

MacIver News Service | August 19, 2015

[Madison, Wisc…] Reducing government fraud and abuse was the theme of the day in one Capitol Building hearing room on Tuesday, as the Assembly Committee on Public Benefit Reform met to discuss a pair of bills that seek to reduce the amount of taxpayer money defrauded from the Unemployment Insurance (UI) and FoodShare programs.

If passed, AB 212 would render individuals ineligible for UI benefits for seven years if they were found to have intentionally concealed or misrepresented information when applying for benefits. Rep. Samantha Kerkman (R-Salem) introduced the bill after a December 2014 audit found that $86.3 million in overpayment dollars were due to individuals filing fraudulent claims.

Under current law, individuals who are found to intentionally file fraudulent claims can be subject to criminal charges, but can still reapply for UI benefits in the future.

According to Kerkman, the audit discovered that 67,000 fraudulent payments were made to 44,488 unique social security numbers – including 14,543 social security numbers involved in two or more instances or fraud during the three-year audit period.

Despite those shocking numbers, only three individuals have been charged with fraud in the last year.

Kerkman Text Box UI Fraud.pngDuring a lengthy public hearing that saw several ideological clashes between legislators, Kerkman asserted that she would have felt comfortable creating a lifetime ban on those caught intentionally defrauding the public benefits system, but settled on seven years as a reasonable yet strong deterrent. However, she insisted that she was not attempting to stop the poor from getting the benefits they need.

“I want people to remember: fraud is theft,” Kerkman said. “We need to give the department tools and to make the system stronger for those who really need it. That is my whole goal.”

Unemployment Fraud by the Numbers:

  • $86.3 Million in intentional unemployment fraud during a three-year audit period
  • 67,000 fraudulent payments made to 44,488 unique social security numbers
  • 14,453 social security numbers involved in two or more instances of fraud

Those in opposition focused on arguments that the forms for UI benefits are lengthy and confusing. Rep. Andy Jorgensen (D-Milton) argued that the application process should be made simpler and less confusing before the government adds penalties for filling it out improperly.

“85% of unemployment overpayments are due to unintentional mistakes. That’s the fact,” Jorgensen said. “That’s a problem with the system, not the people. We need simpler questions.”

The second bill on the docket, AB222, would attempt to issue electronic benefit transfer (EBT) cards with the added security of photo IDs. Since the food stamp program is overseen and paid for at the federal level, Wisconsin’s Department of Health Services (DHS) would have to submit an implementation plan and waiver request to allow the DHS to allow FoodShare recipients to show an EBT card with a photograph in order to make purchases using these benefits.

The author of the bill, Rep. Jesse Kremer (R-Kewaskum), argued the bill aims to significantly reduce recipient FoodShare fraud in Wisconsin, which currently amounts to approximately $14.5 million annually. The QUEST Cards use a personal identification number as their measure of security, and Kremer asserted that the photo would add an additional layer.

Those who would be adversely affected, such as minors, individuals over 60, or victims of domestic violence, would be exempted from the requirements. Instead, their EBT card would include the words “valid without photo.”

Opposition members raised concerns over the feasibility of having hundreds of thousands of individuals switch to this system, wondering who would be left to pay the costs. DHS estimates that the bill would cost $7.4 million to start, plus an additional $2 million to maintain annually.

Federal guidelines dictate that food share participants are not discriminated against by grocers, so if they are required to show photo identification during the transaction, all debit and credit card users must also show photo identification.

A representative of Legal Action of Wisconsin – who registered in opposition to the bill – argued that conflicting federal requirements deem the bill impossible to move forward.

According to federal law, different members of the family must be able to use the card. Another federal law says that cards must be usable in all 50 states – so if an individual from out-of-state, without a photo EBT card, tries to use his or her card here in Wisconsin and is denied, federal law would be broken.

Kremer was open in addressing the hurdles his bill faces against federal law.

“I’ll be honest,” Kremer said. “I don’t see [the federal government] approving my plan. Because it is saying that they need to show photo ID, and they’re going to call it discriminating. But that doesn’t mean that I don’t want to make an attempt to get it done. Maybe we’ll be the first state to get it approved.”

Throughout the day’s proceedings, Republicans argued they were not trying to cut benefits or hurt the poor. They came out on the defensive, and were ready to fend off attacks about their motivations.

Democrats did not hold back in their lengthy questions. Much of the two-hour debate on the UI benefits bill was spent on the line between intentional and unintentional fraud. According to the drafters of the bill, a bright line exists between the two – but Democrats were not so sure.

“I agree if there’s intentional fraud that it should be prosecuted,” Rep. Lisa Subeck (D-Madison) said. “Why not work for more prosecution so that people have the right to a trial, to recourse, to representation through our criminal justice system? If there are criminal acts, they should be prosecuted criminally. I’m always bothered by something that bans someone from participating in a program or bans somebody from getting their basic needs met without criminal prosecution. In my mind, that takes away somebody’s rights.”

Kerkman and Kremer alike defended their bills against concerns that they would be heavy-handed or discriminatory towards certain members of society. Rep. Deb Kolste (D-Janesville) asserted that much larger levels of fraud and waste occur at the industrial and business levels, which should therefore be the focus of reform rather than individual workers.

Rep Born Text Box UI Fraud.png“We are heavy-handed on all the workers. This is a very small amount of money,” Kolste said. “We’re not giving them due process. But yet for the industries which we have also on the audit report, I don’t see any legislation before us.”

The committee’s chair, Rep. Mark Born (R-Beaver Dam), argued it was not a small amount of money, however.

“This is a smaller group that has been identified of overpayment, that’s correct,” Born said. “But I hope that I’m never here long enough that $86 million in one biennium becomes small. Because it’s not small to me, it’s not small to the taxpayers I represent. And that’s really, to me, why this committee was formed – when we have that level of fraud, theft in the system, we should be finding ways to solve that.”

Legislators did not vote on Tuesday, though Born tentatively scheduled the next public hearing for them on September 1. This will give legislators a bit of time to communicate with departments and look at possibilities for amendments.