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Unemployment insurance fraud is a multi-million dollar business in Michigan.

Despite reports of recent problems with the computer system the state uses to detect fraud, Michigan cannot afford to turn back the clock on the legislative reforms put into place in 2011 to more aggressively pursue and penalize it.

In 2015 alone, nearly $40 million in unemployment insurance benefits were paid to people who were later determined to have committed fraud. Regardless of whether these individuals were committing fraud by working full-time while collecting benefits, knowingly providing false information to the state about their work search activities, applying for benefits under stolen identities or otherwise, their actions affect us all.

Their actions not only drive up unemployment insurance taxes for businesses who fund 100 percent of the costs of the system, but also threaten the availability of benefits to employees who are temporarily unemployed due to no fault of their own.

After pushing money out the door with little to no questions asked during the most recent recession, the fund that pays benefits to the unemployed was nearly $4 billion in debt to the federal government. Employers are now repaying that debt to the state on top of their regular state and federal unemployment insurance taxes. This means only Pennsylvania and Rhode Island employers have a higher tax burden.

The Unemployment Insurance Agency may have gone a step too far by automating its fraud detection system, but we believe the UIA is on the right path to re-balancing its fraud detection system. Most importantly, the UIA no longer relies on the computer’s findings. Instead, it now requires staff to investigate, review and make determinations in all fraud cases.

Michigan has long had a serious problem with unemployment insurance fraud. At its peak in 2008, the U.S. Department of Labor reported Michigan had over $344 million of waste and fraud in its program, including $102.8 million paid to individuals who were working while fraudulently collecting benefits.

The state’s program still may not be perfect, but we hope lawmakers will not rush to turn back the clock.

Wendy Block, director

Health Policy & Human Resources

Michigan Chamber of Commerce

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