Opening Statement of the Hon. Wally Herger, 
a Representative in Congress from the Sate of California, and Chairman

Hearing on Unemployment Fraud and Abuse

June 11, 2002

Good afternoon and welcome to today’s hearing on fraud and abuse in the nation’s unemployment compensation program. 

As we all know, unemployment benefits provide a much needed safety net to millions of hardworking Americans, especially in tough economic times like we’ve seen in the past year.  This year alone, nearly 12 million laid off workers will receive an estimated $44 billion in unemployment benefits.  That’s twice what we spend on cash welfare every year, and with far less fanfare.

Recently, we expanded the unemployment benefits safety net by providing up to 13 additional weeks of unemployment benefits nationwide.  In a number of States with particularly high unemployment, we made benefits available even longer to help families that were hardest hit.  Already an estimated 1.4 million workers are receiving these extended benefits.

Providing this extra help in tough times is part of our job, and Congress and the Administration have certainly answered the call this year.  But we also have a responsibility to make sure these funds are well spent, and are going to intended recipients who worked to earn their displaced worker benefits.

Unfortunately, that doesn’t always happen. 

The General Accounting Office, citing Department of Labor statistics, will describe how last year $2.4 billion in unemployment benefit overpayments occurred.  Over the past ten years, overpayments averaged $1.8 billion per year or a whopping $18 billion in misspent funds over that period.  And these staggering numbers reflect just the overpayments we know about.  We can be sure more are out there waiting to be uncovered through better oversight.

Specific examples of abuses already uncovered are troubling.  For example, GAO notes in their testimony that in just 4 States, almost 3,000 fraudulent unemployment benefit claims totaling about $3.2 million were paid to individuals using Social Security numbers that did not exist or belonged to deceased individuals. 

Further investigation by GAO identified nine Social Security numbers being used by approximately 700 individuals as proof of eligibility for employment.  Seven of the Social Security numbers belonged to deceased individuals and apparently the individuals involved are illegal aliens.

Misused unemployment program funds represent taxes paid by employers, and constitute lost wages for all employees. Everyone loses when unemployment benefits are the subject of fraud and abuse. 

In the law extending unemployment benefits this year, we also provided States with tremendous new resources – a total of $8 billion.  These surplus Federal unemployment funds can pay for new benefits or be used to improve anti-fraud and other program integrity efforts.  While many States are still deciding how to use these new resources, we will highlight that strengthening program integrity is one smart use that benefits taxpayers, workers, and beneficiaries alike.

We thank all of our witnesses for joining us today to review current anti-fraud efforts and how we can improve the system so that it best serves American workers.