Unemployment insurance overpayments
Washington overpaid $134 million in benefits in 2001

The purpose of the unemployment insurance (UI) program is to give displaced workers a helping hand while they transition into a new job. It assumes they will be actively seeking a new job, but the program does not have adequate checks to hold recipients accountable.

Testifying before the U.S. Congress on unemployment fraud and abuse on June 11, 2002, Siguard Nilsen of the U.S. General Accounting Office (GAO) made the following statement:

The health of each state's UI program depends, in part, on the ability of the state to control its benefit payments by accurately determining individuals' eligibility for UI benefits in a timely manner. Inaccurate or untimely eligibility information may contribute to overpayments and fraud. . . . At the state level, many states place a higher priority on quickly processing and paying UI claims than on taking the necessary steps to adequately verify claimants' initial and continued eligibility for UI benefits.

Among the major problems leading to UI overpayments, the GAO highlighted:

• Not verifying claimants' receipt of other program (workers' comp, etc.) benefits

• Failing to adequately verify claimants' identity and whether they are legal residents

• Not receiving timely information from employers

While the national overpayment rate hovers around 8%, Washington's overpayment rate for 2001 was 10.9% (down from 16.5% in 2000). This means our state overpaid UI claims by $134 million last year. Taking into account the $4 million in documented underpayments, our UI program handed out $130 million more than it should have. These invalid payments are, in essence, an unfair tax on all other employees.

Among neighboring states, only Idaho (with an overpayment rate of 15.6%) does a worse job verifying UI benefit eligibility. With UI tax rates based on benefits paid, Washington's overpayment means an inflated tax on businesses and workers, who bear the burden through decreased salaries or less job availability.

2001 Unemployment Insurance Payments
($ amounts in millions)

Source: U.S. Dept. of Labor

Prepared Jason Mercier, Budget Research Analyst, (360) 956-3482 or jmercier@effwa.org

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org