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Feds question state’s tracking of $432 million in unemployment payments

WASHINGTON – Arizona did not adequately track as much as $432 million in unemployment payments from 2008 to 2011, the U.S. Department of Labor said Wednesday.

The state’s “improper payment” rate of 19.85 percent – almost one in every five unemployment dollars distributed in Arizona for those years – is the fourth-worst in the nation, after Louisiana, Indiana and New Mexico.

Arizona is one of six high-priority states that will have heightened federal scrutiny and will get help with plans to lower their improper payment rates. It will soon be paired with a high-performing state to offer guidance on developing and implementing rate reductions.

“States bear the responsibility of operating an efficient and effective benefits program,” said Labor Secretary Hilda Solis in a statement. “But as partners, the federal government must be able to hold them accountable for doing so.”

Officials with the Arizona Department of Economic Security did not challenge the numbers when presented with them Wednesday, but said they present a distorted picture of the actual situation in the state.

One reason Arizona fared poorly when compared to the rest of the nation is that different states have different methodologies for calculating the numbers. Arizona’s methodology was more stringent than other states, the officials said.

The state plans to adjust its methodology to be more consistent with other states, a move that Arizona officials expect will bring the state’s rate down.

“We’re pretty confident it will result in a comparable rate you’ll find in other states,” said Steve Meissner, a Department of Economic Security spokesman.

Meissner also said the department’s aging computer system allowed for duplication of records, a problem that should be cleared up with a system update that will be paid for with part of a $72 million federal technology grant. That grant was announced Wednesday with the release of the Labor Department report.

The report came as part of a White House initiative to cut waste, fraud and abuse in government, which was kicked off Wednesday by Vice President Joe Biden.

The report covered a period when the number of Arizonans getting unemployment benefits soared from about 30,000 in 2008 to 170,000 in 2009, before dropping back to the current levels of around 110,000.

The Labor Department said that 44 percent of the questioned unemployment dollars in Arizona went to people who the state could not validate were actually eligible for the benefits.

The other most common reasons for improper payment were delayed notification by an employer that a former worker might not be eligible for benefits, 22 percent; continued payment of benefits to someone who returned to work, 20 percent; and payment to people who were unable or ineligible to work, such as prison inmates or hospital patients, 10 percent.

High-priority states like Arizona have “persistently high improper payment rates and … have shown limited progress towards addressing their rates,” said Dave Roberts, a Labor Department spokesman.

Arizona’s improper payment rate rose from 17.63 percent in 2008 to 20.14 percent in 2010, as unemployment benefits paid by the state grew from $689 million to $892 million. Of the growth in unemployment benefits during that period, nearly 30 percent was improperly spent, according to Labor estimates.

Though overall spending for unemployment benefits in the state declined to $612 million in 2011, the improper payment rate rose again to 21.9 percent that year, the report said.

The estimates of improper payments are based on a federal statistical survey of 1,418 Arizonans who received unemployment benefits between July 2008 and June 2011. It was part of a national effort by the Labor Department — almost 69,000 benefits recipients across the country were surveyed — to identify and correct errors in the unemployment insurance system.

The federal government said it will monitor Arizona’s management of unemployment insurance until the state reduces its improper payment rate below 10 percent and keeps it there for at least six months.

Meissner said the department looks forward to working with the federal government to help bring the state’s rate down.

Tracking unemployment dollars

The federal government said “improper payment” of unemployment benefits by Arizona from 2008-2001 was due to the following reasons:

• Work Search Issues: 44 percent, $189.4 million
• Separation Issues: 22 percent, $96.2 million
• Benefit Year Earnings: 20 percent, $87.5 million
• Able and Available: 10 percent, $42.5 million
• Other: 4 percent, $16.6 million

For explanation of terms, see: http://www.dol.gov/dol/maps/causes.htm

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