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State looks to up budget in fight against benefits fraud

State officials want to raise more money to fight unemployment benefits fraud and plan to do so without increasing employers’ taxes.

When Wisconsin’s unemployment fund went into the red during the recent recession, employers were saddled with so-called special assessments to cover federal loans that the state had taken out to ensure it could continue providing jobless benefits. Now, with the fund back on solid footing, the state has found that it raised $9.3 million more than was actually needed.

Current law allows the money to be transferred into a sort of reserve within the fund itself. Various state officials have other plans in mind, though; they would rather see the money funneled into the state’s unemployment program integrity fund, which is used to fight fraud.

Along the same lines, state officials are proposing to use a 0.01 percent employer tax to further support efforts to weed out abuse in the unemployment system. The tax — whose collection would vary from employer to employer — would be set either as a percentage of total payroll or of unemployment taxes that are already being paid, whichever of the two would generate the least amount of money.

The employer’s unemployment taxes would then be offset by an equal amount. The net effect of the new tax would thus be zero.

Neither the leftover $9.3 million nor the additional 0.01 percent tax could be used if the state’s employment fund were in poor shape. The surplus money could be transferred only if all federal loans had been paid off and future borrowing was unlikely.

As for the 0.01 tax, the state could not begin collecting it without first consulting the Unemployment Insurance Advisory Council, which recommends changes to the jobless-benefits policy. Also given a say would be the state’s Department of Workforce Development, which manages the unemployment fund.

For the new tax to be collected in a particular year, the DWD would have to issue a notice to employers no later than the previous Nov. 30.

A similar tax had once been used to pay for the renovation and updating of the unemployment-insurance division’s technology system. That tax, also capped at 0.01 percent, ended in 2009.

The advisory council gave its blessing to the proposals earlier this month, unanimously approving both at its December meeting. Yet for either bill to become law, it still must be sponsored by a state lawmaker, passed by both houses of the state Legislature and signed by Gov. Scott Walker.

Victor Forberger, a labor lawyer in Madison, said the changes would give the DWD more resources to charge unemployment claimants with a type of infraction known as concealment. Concealment occurs when claimants deliberately conceal material facts that are related to their ability to get benefits or to wages they have earned.

Lawmakers have recently introduced, and in some cases passed, bills meant to crack down on unemployment fraud. State Rep. Samantha Kerkman, R-Salem, put forward a bill this session that would force claimants who had defrauded the system to wait seven years before claiming benefits again. State Sen. Chris Kapenga, R-Delafield, has meanwhile introduced a proposal that would create criminal penalties for unemployment fraud.


About Erika Strebel,

Erika Strebel is the law beat reporter for the Wisconsin Law Journal and a law school student at UW-Madison. She can be reached at 414-225-1825.

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