Audit faults labor agency

Report says state must aggressively recover overpayment of jobless benefits


The state needs to more aggressively recover overpayments of unemployment benefits that add up to millions of dollars, state auditors said in a report released yesterday.

About $76 million had been overpaid by the Maryland Department of Labor, Licensing and Regulation and not reclaimed from workers as of June 30, said the state Office of Legislative Audits. That amount was a running total, and most of the cases were at least a year old.

In a small way, it can affect how much employers across the state pay into the unemployment insurance trust fund. The less money in the fund, the more businesses have to pitch in.

"We think they could do better," legislative auditor Bruce A. Myers said of the agency.

But the DLLR says the total has reached that level precisely because it doesn't give up trying to collect.

The department typically won't write off overpayments when permitted - for instance when the debtors are in prison - because staff members have found they can eventually collect if they wait, said Tom Wendel, the state's assistant secretary of unemployment insurance.

Maryland is one of the best in the nation at getting those overpayments back, he said.

"I could make us look good by waiving 90 percent of the overpayments, but we don't get the money back like that," Wendel said. "Every year I probably bring in an extra $2 million compared to another state because we've kept it in there."

The report had not been specially requested. Audits of the unemployment insurance program are required every three years.

Wendel said benefit overpayments are usually caused either by laid-off workers misrepresenting themselves - pretending they weren't fired for misbehavior, for instance, or continuing to collect when they take a new job - or by employers not contesting payments until after they have been made.

Every year the state detects overpayments of about $12 million to $13 million and collects an average of about $9.5 million, Wendel said. Taxes flowing into the trust fund average about $500 million annually.

The auditors suggested that the department more frequently garnish wages or get the Department of Budget and Management's Central Collection Unit to help. Wendel said they don't always garnish wages because there aren't always wages to garnish, and he argued that his staff has been significantly more successful than the collection unit.

The state ought to do all it can to reduce the problem, said Baltimore economist Anirban Basu, but he doesn't think the audit findings are cause for great concern. "Maryland's unemployment insurance program has a good reputation nationally," said Basu, chief executive of consulting firm Sage Policy Group Inc. "What we're talking about is tightening things up at the margin."

Ronald Adler, who follows unemployment insurance issues for the Maryland Chamber of Commerce, said the state should soon be in a better position to reduce overpayments because it expects to connect into a national new-hire registry this year. That would enable the state to quickly find out when someone collecting unemployment benefits here gets a job in another state.

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