Statement of Miles Paris, Deputy Director, Program Support, 
Illinois Department of Employment Security, Chicago, Illinois

Testimony Before the Subcommittee on Human Resources
of the House Committee on Ways and Means

Hearing on Unemployment Fraud and Abuse

June 11, 2002

Thank you, Mr. Chairman and members of the Subcommittee, for the opportunity to appear before you today. I am here to discuss the Illinois Department of Employment Security’s experience in using our State’s New Hire Directory to detect cases in which individuals continue to claim unemployment benefits after returning to work. The Directory has enabled us to reduce the amount of overpayments in many such cases and, we believe, has also helped in the recovery of those overpayments.

As you know, the 1996 welfare reform law required each state to have a  new hire directory to strengthen child support enforcement.  Illinois enacted legislation establishing its Directory in 1997 and assigned the Department the responsibility for maintaining the Directory.  From the outset, the legislation authorized the Department to use the Directory for unemployment insurance purposes. Accordingly, in designing the Directory, the Department incorporated an automatic cross match with its benefit information system - the data base of individuals with unemployment benefit claims. The cross match looks for each individual who has 1) been reported as a new hire, 2) continued to receive benefits after having been reported as a new hire and 3) failed to report any earnings when certifying as to his or her eligibility for the week in which the hire was reported.

When the cross match identifies an individual who meets all three criteria, the Department’s benefit system automatically notifies the individual that an issue has arisen with respect to his or her claim and issues a questionnaire to the individual and the employer, to establish the individual’s precise return-to-work date. The claimant has the option of responding to the questionnaire in person, by mail or over the telephone.

The local office in which the individual filed the claim is expected to adjudicate the matter within 14 days,  to determine whether there has been an overpayment. The Department’s emphasis is on minimizing and recovering overpayments, as opposed to penalizing the claimant. Nevertheless, the local offices will refer egregious cases - e.g., repeat offenders - to the agency’s Benefit Payment Control Unit, for the possible institution of administrative fraud proceedings. Where the Department adjudicates an overpayment as a fraud, the law effectively disqualifies the claimant from receiving benefits for up to 26 weeks, in addition to requiring repayment of the wrongfully claimed amounts. The Department will also refer serious cases of fraud to the Attorney General’s Office, for criminal prosecution.

Prior to the institution of the New Hire cross match, the Department relied primarily on cross matches between its benefit system and its wage record system, which is derived from employers’ quarterly wage reports. Wage record cross matches are certainly still useful.  However, employer wage reports are first due in the month following the close of the quarter and can take up to another month to be posted on the agency’s wage record system. Consequently, a claimant could have been receiving overpayments for up to five months before the agency would even have a chance of discovering the situation.  In contrast, the New Hire reports are due within 20 days of the date of hire and posted to the system within days after receipt, at which point the cross match occurs.

By permitting early detection, the New Hire cross match actually prevents overpayments from occurring.  Data for the last completed state fiscal year illustrate the point. The average overpayment detected through the wage record cross match was $1,800. The average overpayment detected through the New Hire cross match, which identified over two-thirds again as many overpayments as the wage record cross match, was $296.

We believe that earlier detection also fosters the recovery process by enabling the Department to begin the process sooner, when it is easier to find the claimant, frequently while he or she is still employed and earning wages.  The Department has recovered nearly 60 percent of the overpayments identified through the New Hire cross match since state fiscal year 1999 - the first full year in which Illinois’ New Hire Directory was operational.

While the  New Hire cross match has been a substantial help in reducing and recovering overpayments, there are some holes.  For example, multi-state employers may not necessarily choose to report their new hires to Illinois. Also, the Illinois directory will not reveal a claimant who finds work in one of Illinois’ neighboring states, since those new hires would be reported to the other state.  In addition, newly hired Federal workers are not reported to any state.

Granting state unemployment insurance agencies access to the National Directory of New Hires would enable us to build upon the success we have had with the State Directory and greatly assist other states.  The National Association of State Workforce Agencies strongly supports access to the National Directory, as well. As a whole, the Subcommittee’s recent TANF reauthorization package is outside the Department’s purview.  However, we greatly appreciate the fact that the package would grant us access to the National Directory and look forward to working together toward that end.

Thank you for your time and attention. I would be happy to try to answer any questions.