Tennessee Department of Labor and Workforce Development sent unemployment checks to the dead

10:50 AM, Apr 5, 2013   |    comments
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Written by Brian Haas, The Tennessean

People are dying to get unemployment benefits in Tennessee.

Since July 2011, for instance, at least seven people who had died were issued unemployment checks by the state of Tennessee, to the tune of about $12,000 in unemployment payments.

But it's not just the deceased that a state audit found were being paid benefits by the Tennessee Department of Labor and Workforce Development. It also found that 24 state employees were getting paid unemployment benefits - while still working for the state of Tennessee.

Those findings were among several alarming entries in a scathing audit detailing the overpayment of about $73 million in jobless benefits and other systemic problems with the state's unemployment system. For instance, administrative delays in the state Labor Department meant many employers were unable to challenge unemployment claims by former employees and wound up getting charged too much in unemployment premiums paid to the state. Three of the department's top officials, including former Commissioner Karla Davis, resigned shortly before the audit was released.

Those findings have legislators and government waste watchdogs reeling and demanding fixes.

"The fact that there were state employees that were receiving unemployment compensation is ridiculous. And the dead people?" said state Sen. Jack Johnson, a Franklin Republican. "Obviously, I was very disappointed with the findings of the audit, but I'm glad that we at least now know that we have those problems."

The department, for its part, has begun trying to recoup the money and has forwarded some of the cases on to federal authorities for possible prosecution for fraud. Officials there say they also have tightened their procedures to try to prevent these problems from happening again.

"In the short time the new interim commissioner, Burns Phillips, has been here, there has a tangible shift in the work environment, not only in addressing the audit findings, but also creating an atmosphere where employees can affect change," said Jeff Hentschel, spokesman for the department. "Employers, our clients and the general public will see positive results in the coming months."

Meanwhile, truly unemployed Tennesseans such as Charlie Price, 53, of Somerville, are left to battle to get unemployment benefits. Price filed for unemployment in May after losing his factory job.

What he ran into was a lot of red tape.

"Something is not being managed right. Somebody's not doing their job," Price said. "I didn't know whether I was going to get them or not."

Programming errors

Tennessee is one of the worst states in the country in terms of overpaying unemployment benefits. A U.S. Department of Labor report pegged Tennessee as one of 16 states that had 14 percent or more of its payouts going to people who should have been ineligible. The report noted that in the majority of Tennessee's overpayments, the state itself was at least partly to blame for the errors.

In July 2011 alone, auditors found that the state's unemployment program had paid $126,469 to 24 people who were actively working for the state. It determined that 18 of those had been getting benefits through fraud. The others had gotten paid because of a short overlap between being unemployed and getting hired.

Auditors found that the state paid $12,387 to dead people from July 1, 2011, through June 30, 2012. All of those cases were the result of fraud.

The Department of Labor and Workforce Development declined to release the names of those 31 people, citing state privacy laws.

The state has a system in place that was supposed to catch when its own employees also are drawing unemployment benefits. But the audit found that nobody reprogrammed that system when Congress extended unemployment benefits in 2008.

"As a result, any state employees receiving emergency and extended benefits were omitted from the match from 2008 through October 2012, when we brought this issue to the division's attention," auditors wrote.

The dead beneficiaries were given unemployment because yet another programming error, the audit found, that failed to check death records under certain circumstances. Government watchdogs say such mistakes are inexcusable.

"It's outrageous that taxpayer money has been so mishandled," said Justin Owen, president and CEO of the Beacon Center of Tennessee, a free market and government waste watchdog group. "Even worse in this instance, you have unemployed Tennesseans failing to receive benefits because it went to those that it shouldn't have and, in some cases, it went to those that were dead. It's really disheartening."

Changes on the way

The state says it has since fixed those programming errors. Hentschel said the agency also is trying to claw back the improper payments.

The state will often set up payment plans with people who have been overpaid. In extreme circumstances, the state can garnish wages or even intercept IRS tax refunds.

Hentschel said the state has recovered some $13 million of the overpayments since July.

Johnson, the state senator, said it is critical that Gov. Bill Haslam appoint effective, new leadership to the agency to begin to fix the problems.

"Every dollar that goes out inappropriately or illegally is one dollar out of the trust fund that we've got to maintain solvency with," he said. "It's a dollar that could go to a legitimately unemployed person."

A person such as Price.

Price eventually got his unemployment - three months after filing for it. And he's since gotten rehired.

But while waiting for the state - right around the time auditors were discovering unemployment benefits being paid to the dead - he was left worrying about a wife with cancer, a daughter in college and a shrinking checkbook.

"It was very frustrating," he said. "I went through a lot."

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