Arizona paid hundreds of millions in improper unemployment benefits

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By Mike Gertzman By Mike Gertzman

PHOENIX -- Arizona doled out more than $434 million dollars in improper unemployment payments in the last three years, according to the Department of Labor.

The rate of improper payment of benefits was nearly 20 percent, and Arizona ranked fourth worst in the nation.

The Department of Economic Security is now trying to crack down and collect from people who took advantage of the system.

Mark Darmer, the Deputy Assistant Director of Employment and Rehabilitation Services at DES, estimates about 19,000 people a year wrongly claimed benefits over the course of three years.

One major reason he says that number is so high, is that the overall number of people claiming benefits skyrocketed as the economy faltered.

"The amount of overpayment exponentially increased because the number of claimants exponentially increased," Darmer said. "Is that an excuse for the improper payments? Absolutely not, but it is a factor."

According to the Labor Department's data, the bulk of improper payments were made because DES officials could not verify that claimants were actively looking for work while claiming benefits.

The state requires people to maintain an active work search log if they claim unemployment benefits.

The other two biggest categories of overpayment were to people who claimed benefits even after they found work, and to people who were terminated from their jobs for cause. People who were terminated because of misconduct or another cause are ineligible for unemployment benefits.

Darmer says the hundreds of millions of dollars in overpayment have not come out of any state programs, because unemployment money comes from a designated fund.

He does say however, that the overpayments caused the State to lean on the federal government.

"It has driven up our borrowing slightly," Darmer said.

Because of the state's poor standing the Labor Department required DES to come up with a plan of action.

Darmer says the state has already taken several steps to turn the problem around, one of them is aggressively pursuing prosecution of those who commit fraud.

"In October through December we had 25 prosecutions of folks filing fraudulent insurance claims," Darmer said.

The state can collect from people who improperly claimed payments by deducting directly from the offender's tax returns.

Darmer says in one week that tactic netted hundreds of thousands of dollars.

Officials say part of the problem lies with employers who fail to report their new hires and information about employee terminations in timely manners.