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Reichert Opening Statement: Hearing on No Cash for Convicts and Other Efforts to Improve UI Program Integrity

September 11, 2013

Today’s hearing is on ending benefits for incarcerated individuals and other ways to improve the integrity of the Unemployment Insurance (UI) program.  

As a former Sheriff, I was shocked to read headlines about individuals in jails collecting unemployment benefits, which you might call “cash for cons.”  In New Jersey, there were 20,000 inmates who collected over $24 million.  In Illinois another $2 million was misspent this way.  Millions more were wasted in South Carolina, Tennessee, Texas, and Wisconsin.  It is an injustice that the tax dollars of law-abiding citizens are paying for these benefit checks for people who have broken the law and simply should not qualify for these benefits.  

That’s why I introduced H.R. 2826, the Permanently Ending Receipt by Prisoners Act, also known as the “PERP Act.”  This bill does two things.  First, it makes it clear that inmates are not allowed to collect UI benefits, in case there is any doubt.  Second, it instructs States to use currently-available prison data to ensure they are not paying benefit checks to inmates.  I appreciate the support of my colleagues who have already cosponsored this legislation, and welcome the support of anyone who agrees we should address this issue.  This issue is only one small aspect of UI improper payments, but it reflects an obvious area where we can and should make progress.  I look forward to receiving valuable feedback on this bill from our panel today.  

Today’s hearing is about a lot more than just ending cash for cons.  We also want to identify other ways we can improve the integrity of the UI program so it can be there for those who are deserving of help.

That’s a billion-dollar question, or actually a 58 billion-dollar question. That’s the total amount of UI improper payments over the last five years.  That 58 billion dollars in improper payments is more than the total amount of State and Federal taxes collected last year to support all the unemployment benefits paid across the country.  That’s a huge number and one that deserves serious attention.

Some of the problem involves fundamental mistakes, like paying UI checks to prison inmates, because UI places so much emphasis on getting checks out the door before verifying they are going to the right person.  Data systems exist that can prevent these sorts of improper payments from being made in the first place, for example involving prison inmates, deceased people, people who have returned to work, and even people illegally applying from overseas.  

Another part of the problem involves States trying to recover improper UI payments after they occur.  This “pay and chase” approach is costly, time consuming, and wasteful, since according to a recent report, only about half of annual improper payments are expected to ever be recovered.  So the far better approach is to prevent improper payments before they go out the door, and ensure we have systems in place to do just that.

There are many reasons to prevent improper payments, starting with how they are paid for.  State UI benefits are supported directly by payroll taxes on jobs, which have already risen over 60% in the last five years due to the recent recession.  In many States, UI payroll taxes are expected to continue to rise into the future.  These rising taxes fall directly on jobs, further reducing new job creation and hiring.  That makes it especially important to prevent improper payments whenever possible and recover as much of those that are made.  

Joining us today to discuss all of these issues is a seasoned panel of experts representing the views of States, businesses, and program experts.  I look forward to hearing from our witnesses today about how we can improve the integrity of the UI program so it is there to serve those who need it to get back on their feet.