Unemployment Insurance
Enhancing Program Performance by Focusing on Improper Payments and Reemployment Services Gao ID: GAO-06-696T May 4, 2006Unemployment Insurance (UI) has been a key component in ensuring the financial security of America's workforce for over 70 years. In fiscal year 2004, UI covered about 129 million wage and salary workers and paid about $41 billion in benefits to nearly 9 million workers who lost their jobs. The Department of Labor (Labor) and states have a shared responsibility to enhance UI program performance by ensuring that only eligible individuals receive benefits while on the UI rolls and fostering reemployment. Labor's Office of Inspector General and others have found that aspects of UI may be vulnerable to fraud and improper payments, and despite the size and scope of UI, there has been little national information to fully assess states' efforts to foster reemployment. This testimony draws upon results of several GAO reports on (1) Labor's efforts to identify, estimate, and prevent improper benefit payments and (2) federal and state efforts to help speed UI claimants' return to work. We are not making new recommendations at this time. Labor generally agreed with the UI findings in our referenced reports, but took issue with our recommendation that the Secretary work with states to consider collecting more comprehensive information on UI claimants' services and outcomes. We continue to believe this information is needed.
Labor estimates that about $3.4 billion in UI benefits was overpaid nationwide in calendar year 2004, but is taking actions to help states improve their ability to detect and prevent overpayments. According to Labor's Benefit Accuracy Measurement program, in 2004 claimants were responsible for a majority of the overpayments. Claimants may fail to report their work as required, or may use Social Security numbers that did not exist or belonged to other individuals to fraudulently obtain UI benefits, resulting in overpayments. Actions by state agencies and employers may also contribute to overpayments. Labor has introduced a number of initiatives to help states improve their ability to detect and prevent overpayments, including new computer matches with federal databases, a new core performance measure intended to provide states with added incentives for detecting and preventing overpayments, and additional funding for states' overpayment detection efforts. Labor's budget request for fiscal year 2007 includes funding to continue some of these efforts. In our review of states' efforts to help UI claimants quickly return to work, we found that states most often made use of federal UI program requirements to help connect claimants with reemployment. All federally approved state UI programs must include able-to-work and available-for-work requirements that claimants must meet in order to receive benefits. In many states, these requirements also serve to link claimants to reemployment opportunities and services. In addition, states provide targeted reemployment services to particular groups of UI claimants, most often through federally required claimant profiling. However, despite states' efforts to design systems that link UI claimants to reemployment services, few data are available to gauge whether or not their efforts are having the intended result. Labor has some initiatives that may begin to shed light on claimant outcomes, but they fall short of providing a comprehensive understanding of services and outcomes for UI claimants. Labor's fiscal year 2007 budget request does not include funding for additional evaluations on federally required efforts to target reemployment services.
GAO-06-696T, Unemployment Insurance: Enhancing Program Performance by Focusing on Improper Payments and Reemployment Services
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United States Government Accountability Office:
GAO:
Testimony before the Subcommittee on Human Resources, Committee on Ways
and Means, House of Representatives:
Unemployment Insurance:
Enhancing Program Performance by Focusing on Improper Payments and
Reemployment Services:
Statement of Sigurd R. Nilsen:
Director:
Education, Workforce, and Income Security Issues:
GAO-06-696T:
GAO Highlights:
Highlights of GAO-06-696T, a testimony before the Subcommittee on Human
Resources, Committee on Ways and Means, House of Representatives.
Why GAO Did This Study:
Unemployment Insurance (UI) has been a key component in ensuring the
financial security of America‘s workforce for over 70 years. In fiscal
year 2004, UI covered about 129 million wage and salary workers and
paid about $41 billion in benefits to nearly 9 million workers who lost
their jobs. The Department of Labor (Labor) and states have a shared
responsibility to enhance UI program performance by ensuring that only
eligible individuals receive benefits while on the UI rolls and
fostering reemployment. Labor‘s Office of Inspector General and others
have found that aspects of UI may be vulnerable to fraud and improper
payments, and despite the size and scope of UI, there has been little
national information to fully assess states‘ efforts to foster
reemployment. This testimony draws upon results of several GAO reports
on (1) Labor‘s efforts to identify, estimate, and prevent improper
benefit payments and (2) federal and state efforts to help speed UI
claimants‘ return to work.
We are not making new recommendations at this time. Labor generally
agreed with the UI findings in our referenced reports, but took issue
with our recommendation that the Secretary work with states to
consider collecting more comprehensive information on UI claimants‘
services and outcomes. We continue to believe this information is
needed.
What GAO Found:
Labor estimates that about $3.4 billion in UI benefits was overpaid
nationwide in calendar year 2004, but is taking actions to help states
improve their ability to detect and prevent overpayments. According to
Labor‘s Benefit Accuracy Measurement program, in 2004 claimants were
responsible for a majority of the overpayments. Claimants may fail to
report their work as required, or may use Social Security numbers that
did not exist or belonged to other individuals to fraudulently obtain
UI benefits, resulting in overpayments. Actions by state agencies and
employers may also contribute to overpayments. Labor has introduced a
number of initiatives to help states improve their ability to detect
and prevent overpayments, including new computer matches with federal
databases, a new core performance measure intended to provide states
with added incentives for detecting and preventing overpayments, and
additional funding for states‘ overpayment detection efforts. Labor‘s
budget request for fiscal year 2007 includes funding to continue some
of these efforts.
In our review of states‘ efforts to help UI claimants quickly return to
work, we found that states most often made use of federal UI program
requirements to help connect claimants with reemployment. All federally
approved state UI programs must include able-to-work and available-for-
work requirements that claimants must meet in order to receive
benefits. In many states, these requirements also serve to link
claimants to reemployment opportunities and services. In addition,
states provide targeted reemployment services to particular groups of
UI claimants, most often through federally required claimant profiling.
However, despite states‘ efforts to design systems that link UI
claimants to reemployment services, few data are available to gauge
whether or not their efforts are having the intended result. Labor has
some initiatives that may begin to shed light on claimant outcomes, but
they fall short of providing a comprehensive understanding of services
and outcomes for UI claimants. Labor‘s fiscal year 2007 budget request
does not include funding for additional evaluations on federally
required efforts to target reemployment services.
Figure: Responsibility for UI Overpayments(Calendar Year 2004)
[See PDF for Image]
Source: Labor.
[End of figure]
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-696T].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Sigurd Nilsen at (202)
512-7215or nilsens@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to assist you in your deliberations on
Unemployment Insurance (UI) program performance issues as they relate
to the Department of Labor's (Labor) $2.7 billion fiscal year 2007
budget request for the UI program. My testimony will focus primarily on
the results of our past work in UI benefit overpayment and reemployment
services. The UI program has been a key component in ensuring the
financial security of America's workforce for over 70 years. The UI
program is a federal-state partnership designed to partially replace
lost earnings of individuals who become unemployed through no fault of
their own and, which in turn, helps to stabilize the economy in times
of economic downturn. In fiscal year 2004, the UI program covered about
129 million wage and salary workers and paid about $41 billion in
benefits to nearly 9 million workers who had lost their jobs. Labor and
states have a shared responsibility to enhance UI program performance
by ensuring that only eligible individuals receive benefits while on
the UI rolls and to foster reemployment. However, Labor's Office of
Inspector General (OIG) and others have found that numerous aspects of
the UI program may be vulnerable to fraud and to improper payments to
claimants, and, despite the size and scope of this program, there has
been little information at the national level to fully assess states'
efforts to foster reemployment.
Today, I will draw upon results of recent reports we have completed
that provide information on UI program performance issues. In
particular, I will discuss in relation to Labor's budget request (1)
Labor's efforts to identify, estimate, and prevent improper benefit
payments, and (2) what is being done at the state and federal levels to
help speed UI claimants' return to work. To address the first question,
we drew upon two of our recent studies. In the first study, we reviewed
Labor guidance, data, and reports and interviewed Labor officials and
groups involved in unemployment insurance.[Footnote 1] In the second
study, which reviewed states' efforts to estimate improper payments on
state-administered federal programs, including UI, Food Stamps,
Medicaid, and other programs, we primarily conducted surveys of state
officials, interviewed federal and state officials, and reviewed
performance and accountability reports and our prior reports.[Footnote
2] To address the second question, we drew upon the results of another
of our previous study, where we had conducted telephone interviews with
UI and workforce development officials in 50 states; sent a follow-up
questionnaire to gather information on the strategies states use to
collect data on UI claimants who receive reemployment services;
interviewed state and local program officials during site visits in
Georgia, Maryland, Michigan, and Washington; and interviewed Labor
officials and other experts in the area of UI and reemployment
services.[Footnote 3]
In summary, Labor estimates that about $3.4 billion in UI benefits was
overpaid nationwide in calendar year 2004, but is taking actions to
help states improve their ability to detect and prevent overpayments.
Labor attributes a majority of overpayments to improper actions taken
by claimants, although states and employers can also contribute to
overpayments. Labor has introduced a number of initiatives to help
states improve their ability to detect and prevent overpayments,
including new computer matches with federal databases, a new core
performance measure intended to provide states with added incentives
for detecting and preventing overpayments, and additional funding for
states' overpayment detection efforts. Labor's budget request for
fiscal year 2007 includes funding to continue some of these efforts. As
annual overpayments reach the billions, it will be important for
federal and state stakeholders to take the necessary action to address
the overpayment issue. Avoiding improper payments may do more to
enhance program performance in the long term than detecting and
collecting overpayments after they have occurred. To help UI claimants
return to work quickly, states most often make use of federal UI
program requirements to connect claimants with available services at
various points in their claims. In addition, states provide targeted
reemployment services to particular groups of UI claimants. The federal
requirement of claimant profiling is typically the primary mechanism
for targeting reemployment services to specific claimants. However,
despite states' efforts to design systems that link UI claimants to
reemployment services, few data are available to gauge the extent to
which their efforts are having the intended result. Labor's current and
planned initiatives may help fill the information gap, but they fall
short of providing a comprehensive understanding of services and
outcomes for UI claimants.
Background:
The UI program was established by Title III of the Social Security Act
in 1935 and is a key component in ensuring the financial security of
America's workforce. The program serves two primary objectives: (1) to
temporarily replace a portion of earnings for workers who become
unemployed through no fault of their own and (2) to help stabilize the
economy during recessions by providing an infusion of consumer dollars
into the economy. UI is made up of 53 state-administered programs that
are subject to broad federal guidelines and oversight. In fiscal year
2004, these programs covered about 129 million wage and salary workers
and paid benefits totaling $41.3 billion to about 8.8 million workers.
Federal law provides minimum guidelines for state programs and
authorizes grants to states for program administration. States design
their own programs, within the guidelines of federal law, and determine
key elements of these programs, including who is eligible to receive
state UI benefits, how much they receive, and the amount of taxes that
employers must pay to help provide these benefits.[Footnote 4] State
unemployment tax revenues are held in trust by the federal government
and are used by the states to pay for regular weekly UI benefits, which
typically can be received for up to 26 weeks.
To receive UI benefits, an unemployed worker must file a claim and
satisfy the eligibility requirements of the state in which the worker's
wages were paid. Generally, states require that workers must have a
minimum amount of wages and employment over a defined base period,
typically about a year before becoming unemployed, and have not already
exhausted the maximum amount of benefits or benefit weeks to which they
would be entitled because of other recent unemployment. In addition
workers must have become unemployed for reasons other than quitting a
job or being fired for work-related misconduct, and be able and
available to work. In order to demonstrate that they are able to work
and available for work and are still unemployed, claimants must submit
a certification of continuing eligibility--by mail, telephone, or
Internet, depending on the state--throughout the benefit period. This
practice is usually done weekly or biweekly. States may continue to
monitor claimant eligibility through an eligibility review program, in
which certain claimants are periodically contacted to review their
eligibility for benefits, work search activities, and reemployment
needs.
UI Performance Measurement:
Labor has the responsibility under Title III of the Social Security Act
for ensuring that states operate effective and efficient UI programs.
Various provisions of federal law require that certain UI activities be
performed promptly and accurately. Section 303(a)(1) of the Social
Security Act requires, as a condition of a state's receiving UI
administrative grants, "such methods of administration . . . as are
found by the Secretary of Labor to be reasonably calculated to insure
full payment of unemployment compensation when due." Labor uses various
administrative data to provide information on the functioning of all UI
program activities. Labor divides the measures into two categories:
core measures, which entail oversight on key performance areas
representative of the UI program, and management information measures,
which facilitate the analysis of performance and to assist in planning
corrective activities when necessary.
One of Labor's performance measurement efforts is the Benefit Accuracy
Measurement (BAM) program, which is designed to determine the accuracy
of paid and denied claims in the UI program. It does this by
reconstructing the UI claims process from samples of weekly payments
and denied claims using data verified by trained investigators. For
claims that were overpaid, underpaid, or improperly denied, the BAM
program determines the cause of and the party responsible for the
error, the point in the UI claims process at which the error was
detected, and actions taken by the agency and employers prior to the
error. For erroneously paid claims, the BAM program determines the
amount of benefits the claimants should have received, which becomes
the basis for subsequent recovery efforts. BAM provides two rates of
improper payments. The first, the Annual Report Overpayment Rate,
includes estimates of nearly every divergence from what state law and
policy dictate the payment should have been. The second rate, the
Operational Overpayment Rate, includes only recoverable overpayments
states are most likely to detect through ordinary overpayment detection
and recovery procedures. Operational overpayments are the most likely
to be detected and established for eventual recovery and return to the
UI Trust Fund.
Reemployment Services:
Since UI was established, there have been two major changes in the
nation's workforce development system that have directly affected
states' UI programs. Specifically, in November 1993, Congress enacted
legislation amending the Social Security Act to require that each state
establish a Worker Profiling and Reemployment Services (WPRS) system
and implement a process typically referred to as claimant profiling.
The claimant profiling process uses a statistical model or
characteristics screen to identify claimants who are likely to exhaust
their UI benefits before finding work. Claimants identified through
this process are then referred to reemployment services while they are
still early in their claim. For profiled claimants, participation in
designated reemployment services becomes an additional requirement for
continuing eligibility for UI benefits. The second major change was the
enactment of the Workforce Investment Act of 1998, which requires
states and localities to bring together about 17 federally funded
employment and training services into a single system--the one-stop
system. State UI programs are mandatory partners in the one-stop
system. Another mandatory partner is the federal Employment Service,
established by the Wagner-Peyser Act in 1933 to link job seekers with
job opportunities. The Employment Service (ES) has historically been
collocated with state UI offices to facilitate UI claimants' access to
federally funded labor exchanges, job search assistance, job referral,
placement assistance, assessment, counseling, and testing.
Labor's 2007 Budget Request:
For UI, Labor's fiscal year 2007 budget includes a request for $2.7
billion. This amount is about $101 million higher than the fiscal year
2006 enacted level. This request, according to Labor's budget overview,
funds projected workloads and includes several UI program increases.
First, Labor is proposing a $30 million increase in fiscal year 2007
for the amount available to states to conduct reemployment and
eligibility reviews. Labor notes that the reviews--which entail in-
person interviews with claimants at one-stop centers--can reduce
overpayments as well as speed reemployment. Second, Labor is proposing
a $10 million UI program increase to prevent and detect fraudulent
claims due to identify theft. Labor proposes to use the new funding for
staff to investigate and reconcile potential identity theft identified
through data cross-matching.
More than $3.4 Billion in Overpayments Estimated in 2004, but Labor is
Taking Some Actions to Enhance Program Integrity:
Labor estimates that about $3.4 billion in UI benefits was overpaid
nationwide in calendar year 2004, but is taking actions to help states
improve their ability to detect and prevent overpayments. According to
Labor's Benefit Accuracy Measurement program, in 2004 (the most recent
year for which we could obtain specific data) claimants were
responsible for a majority of the overpayments. Claimants may fail to
report their work as required, or may use Social Security numbers (SSN)
that did not exist or that belonged to other individuals to
fraudulently obtain UI benefits, resulting in overpayments. State
agencies may also contribute to overpayments if they fail to properly
record eligibility information. In addition, employers may contribute
to UI overpayments if they fail to report required information to
states in a timely manner. Labor has introduced a number of initiatives
to help states improve their ability to detect and prevent
overpayments, including new computer matches with federal databases, a
new core performance measure intended to provide states with added
incentives for detecting and preventing overpayments, and additional
funding for states' overpayment detection efforts. Labor's budget
request for fiscal year 2007 includes funding to continue some of these
efforts.
The Majority of Overpayments Are Attributable to Claimants:
Of the $3.4 billion in overpayments identified nationwide by the BAM
program in calendar year 2004,[Footnote 5] almost $2 billion (58
percent) was attributable to UI claimants alone, while state agency
errors and employers were responsible for overpayments by others (see
fig. 1). With respect to claimants, overpayments may occur because
individuals work while receiving benefits, fail to register with
employment services (as required in most states), fail to look for a
new job, or misrepresent their identity. In calendar year 2004, the
most common cause of overpayments was unreported or erroneously
reported earnings and income, accounting for almost 28 percent of
overpayments in that year. The second-leading cause of overpayments--
constituting 21 percent of all overpayments--was payments to
individuals who are not entitled to UI benefits because of the
circumstances under which they became unemployed (separation issues).
Other sources of overpayments were attributable to individuals who
failed to look for work (16 percent) and individuals who did not
register for employment services (10 percent). Federal and state
officials have reported that some types of overpayments are more
difficult to detect than others. For example, in a prior report, some
officials told us that it could be difficult for states to accurately
determine, in a cost-effective manner, if a claimant was actively
searching for work (an eligibility requirement in some states).
Figure 1: Responsibility for UI Overpayments (Calendar Year 2004):
[See PDF for image]
Source: Labor.
Note: Percentages do not add to 100 percent because of rounding.
[End of figure]
Other sources of overpayments include state agency errors and
inaccurate or untimely information provided by employers. Labor's BAM
program shows that state agency errors, such as failing to properly
record important eligibility information such as wages, accounted for
about 15 percent of all estimated overpayments in 2004. Employers
accounted for about 6 percent of the total estimated overpayments in
2004. Employers and their agents do not always comply in a timely
manner with state requests for information needed to determine a
claimant's eligibility for benefits. For example, one Labor OIG audit
found that $17 million in overpayments occurred in four states because
employers did not respond to the states' request for wage information.
Our work suggests that employers may resist requests to fill out
paperwork from states because they view the process as time-consuming
and cumbersome. In addition, because employers are unlikely to
experience an immediate increase in the UI taxes they pay to the state
as a direct result of overpayments, they do not see the benefit in
complying with states' requests for wage data in a timely manner.
Our prior work and work by Labor's OIG also shows that some UI
overpayments result from identity-related violations. For example, our
prior work shows that in 2001, Labor identified about $1.4 million in
UI overpayments resulting from Social Security violations. [Footnote 6]
Labor determined these overpayments to be the result of fraud. More
recently, in its fiscal year 2007 budget justification, Labor estimated
that approximately $313 million in overpayments results from identity
theft each year. Labor's OIG has documented identity theft schemes as a
major management challenge. For example, in its semiannual report to
Congress, the OIG reported on a case in which individuals used more
than 200 stolen identities to file 222 UI claims and obtain more than
$693,000 in UI benefits from February 2001 through February
2005.[Footnote 7]
Labor is Taking Actions to Help States Detect and Prevent Overpayments:
Labor has introduced several initiatives to help states improve their
ability to detect and prevent overpayments in the UI program. First,
Labor has initiated a pilot using the National Directory of New Hires
(NDNH) to further assist in identifying and preventing improper
payments, including overpayments. The NDNH is a database, maintained by
the Department of Health and Human Services' Office of Child Support
Enforcement, that contains information on all newly hired employees,
quarterly wage reports for all employees, and UI claims nationwide. The
NDNH enhances states' ability to detect unreported work violations by
UI claimants working in other states or for certain employers that
operate in multiple states. In addition, the NDNH can help improve the
accuracy of Labor's error estimates. Information from the NDNH cross-
match can be readily integrated into Labor's BAM program by cross-
matching the SSNs of the claimants against the NDNH. In fiscal year
2005, three states (Texas, Utah, and Virginia) participated in the
pilot. According to Labor, initial results of the pilot show that
overpayment detections increased 114 percent in Texas, 41 percent in
Utah, and 73 percent in Virginia. The Texas Workforce Commission also
reported that using the national cross-match in combination with the
existing statewide cross-match helped detect 50 percent more cases of
potential fraud in one quarter than it would have detected otherwise.
In addition, on the basis of its NDNH pilot results, Labor reported in
its fiscal year 2005 performance and accountability report that a
substantial amount of additional overpayments could be detected using
the database. Labor reported that it is moving ahead with full
implementation of the NDNH cross-match with 5 states (Connecticut,
Texas, Utah, Virginia, and Washington), and expects 29 states to use
the NDNH by the end of fiscal year 2006.
In addition to its NDNH pilot, Labor is also pursuing the use of other
data sources to improve UI program integrity. In particular, Labor
continues to promote states' data sharing with other agencies, such as
the Social Security Administration (SSA), to identify and prevent
overpayments. According to Labor's fiscal year 2005 performance and
accountability report, the department has funded states to exchange
data with SSA on a real-time basis, giving states the ability to verify
claimants' identity and prevent most overpayments due to fraudulent or
mistaken use of SSNs. Labor's fiscal year 2007 budget request includes
$10 million in funding to detect and prevent fraudulent UI benefit
claims that use personal information stolen from workers. Labor
estimates that the requested funds could generate savings of at least
$77 million to the UI Trust Fund by preventing erroneous payments
caused by the use of stolen identities.
Along with efforts to enhance states' use of data sharing to detect and
prevent overpayments, Labor has taken other steps to enhance UI program
integrity, including the development of a new core performance measure
for overpayment detection at the state level. More specifically, Labor
has announced that states will be given an additional incentive to
prevent and detect overpayments by implementing core measures in
states' performance budget plans based on the level of overpayments the
states have detected. While Labor has established overpayment detection
as one of its core measures, it has not yet specified the level of
performance that states will be required to meet under this measure. In
addition, Labor's fiscal year 2006 budget request contained a
legislative proposal designed to give states the means to obtain
funding for program integrity activities, including additional staff to
enhance recoveries and prevent overpayments. Moreover, to reduce
overpayments, Labor awarded Reemployment and Eligibility Assessments
grants to 21 states during fiscal year 2005. The grants have been used
to conduct in-person claimant interviews to assess claimants' continued
eligibility for benefits and to ensure that individuals understand that
they must stop claiming benefits upon their return to work.[Footnote 8]
Labor's fiscal year 2007 budget request includes $30 million in
additional funding to continue this effort. Labor estimates that these
funds could be used to conduct an additional 539,000 interviews and
could save the UI Trust Fund as much as $151 million by reducing the
average duration of UI benefits for claimants who are interviewed.
In addition to the initiatives contained in its budget request, Labor
plans to submit a legislative proposal in the near future that includes
several initiatives to further help states detect and recover
overpayments.[Footnote 9] Among other things, this proposal may include
suggestions to allow the Department of the Treasury to garnish federal
income tax refunds to recover UI overpayments as a means of improving
overpayment recoveries. The proposal may also allow states to use a
small percentage of recovered overpayments to fund their benefit
payment control and program integrity activities as an incentive to
focus their efforts on those activities. In addition, the proposal may
seek to provide employers with a stronger incentive to inform the state
when inappropriate UI claims are made. More specifically, the proposal
could require states to charge employers a higher UI tax rate when
claimants are overpaid, if it is determined that the overpayment was
the employer's fault (such as when an employer fails to provide wage
information to the state in a timely manner). Such additional charges
could lead to an increase in the UI tax rate for affected employers.
States Make Use of Federal Requirements to Help Speed Reemployment of
UI Claimants, but Knowing More about Outcomes Could Enhance Program
Performance:
In our review of states' efforts to help UI claimants quickly return to
work, we found that states most often make use of federal UI program
requirements to help connect claimants with reemployment services at
various points in their claims, usually beginning at the time their
initial claim is filed. All federally approved state UI programs must
include able-to-work and available-for-work requirements that claimants
must meet in order to receive benefits. In many states, these
requirements also serve to link claimants to reemployment opportunities
and services. In addition, states provide targeted reemployment
services to particular groups of UI claimants. The federal requirement
of claimant profiling is typically the primary mechanism for targeting
reemployment services to specific claimants. Despite states' efforts to
design systems that link UI claimants to reemployment services, few
data are available to gauge the extent to which their efforts are
having the intended result. Moreover, Labor's fiscal year 2007 budget
request does not include funding specifically designated for conducting
evaluations of federally required efforts to target reemployment
services.
States Use Compliance with Work Requirements and Target Services to
Particular Groups of Claimants to Help Speed Reemployment:
Although all UI claimants can access the range of reemployment services
through the one-stop system at any time, UI program requirements often
provide the context for states' efforts to link claimants to
reemployment services. Specifically, all federally approved state UI
programs require that claimants be able and available to work. To meet
these conditions, 44 states require that UI claimants register with the
state's labor exchange--that is, job-matching services provided through
the Wagner-Peyser-funded Employment Service--in order to be eligible
for UI benefits. In addition, 49 states impose a work search
requirement as a condition for continuing UI eligibility, and claimants
must document that they are meeting their state's work search
requirement in a number of ways. Most commonly, claimants are required
to keep a log of work search activities that may be subject to review,
or they must certify that they are able and available to work through
the process of filing for a continuing claim.
These work registration and work search requirements often serve to
link claimants to reemployment services. The process of registering for
work with the state's labor exchange, for example, may bring claimants
into an Employment Service office or one-stop center where reemployment
services are delivered.
Some states also use their processes for monitoring compliance with the
work search requirement to direct claimants to reemployment services.
Officials in 39 of the 49 states that require claimants to actively
seek employment told us that telephone or in-person interviews with
claimants may be used to monitor compliance with this requirement. In
over two-thirds of these states, officials told us that some
information on job search strategies or reemployment services is
provided during the interview.
States also engage some claimants in reemployment services directly
through programs that identify certain groups for more targeted
assistance. States primarily target reemployment services to claimants
identified through federally required claimant-profiling systems--a
process that uses a statistical model or characteristics screen to
identify claimants who are most likely to exhaust their UI benefits
before finding work. While claimants identified and referred to
services through profiling can access the services available to all job
seekers through the one-stop system, participation in the services they
are referred to--most often orientation and assessment services--is
mandatory for profiled claimants. In addition, many officials told us
that the services profiled claimants received depended on their
individual needs following an assessment, the development of an
individual plan, or the guidance of staff at a one-stop center. While
failure to report to required reemployment services can result in
benefits being denied, states vary in the conditions that prompt
denying benefits.
Maryland, for example, targets reemployment services to profiled
claimants through its Early Intervention program. This program, which
began in 1994, offers an interactive, 2-day workshop, addressing self-
assessment, job search resources, resume writing and interviewing
skills, and other community resources available to job seekers.
Profiled claimants selected for the workshop who fail to attend are
given one opportunity to reschedule; after that, their failure to
participate is reported to the UI program and their benefits may be
suspended. When claimants complete the workshop, they are registered
with the Maryland Job Service, they receive an individual employment
plan, and the workshop facilitator may refer them to additional
services. Officials told us that although they currently do not have
data to show the impact of this program, they have received very
positive feedback about the quality and effectiveness of the workshops.
Some states have developed additional methods to target reemployment
services to particular groups of UI claimants. For example, one-stop
staff in Washington have the ability to identify various subgroups of
claimants using a tracking device called the Claimant Progress Tool.
Officials told us that one-stop staff typically use this tool to
identify claimants who are about 100 days into their claim, and then
contact them for targeted job search assistance and job referrals. This
process was developed to help the state achieve a goal of reducing the
portion of its UI benefits that unemployed workers claim. Georgia's
state-funded Claimant Assistance Program identifies claimants who are
seen to be ready for employment and requires them to participate in the
same services required of profiled claimants. This program is designed
to help the state achieve its goal of generating savings for the UI
Trust Fund.
During fiscal years 2001 through 2005, states often made use of Labor's
Reemployment Services Grants--totaling $35 million per year--to fund
some of the targeted services. Officials in the majority of the states
we interviewed told us their states had used the Reemployment Services
Grant funds to hire staff to provide reemployment services to UI
claimants. For example, Maryland state officials said they used their
funds to hire staff for the Early Intervention program, enabling them
to run more workshops in areas that needed them and to make further
improvements in the program. Some states also used these grants to
direct reemployment services to claimants beyond those who have been
profiled and to support other enhancements in the provision of
reemployment services to claimants. For example, Washington state
officials told us they used funds from these grants to support the
development of the Claimant Progress Tool. Beginning in fiscal year
2005, Labor began shifting its focus away from these grants that funded
direct reemployment services for UI claimants toward the Reemployment
and Eligibility Assessment Grants. These new grants focus states'
efforts on providing face-to-face eligibility interviews with claimants
as a way to ensure compliance with work search requirements. As part of
these interviews, eligibility workers may refer claimants to
reemployment services funded by Employment Services, the Workforce
Investment Act (WIA), or the Trade Adjustment Assistance (TAA) program.
Little Information Exists to Assess whether States' Efforts Are
Achieving the Intended Outcomes:
Despite states' efforts to design systems that link UI claimants to
reemployment services, little is known about the extent to which
claimants receive reemployment services or about the outcomes they
achieve. Although states must meet a number of federal reporting
requirements for their UI and employment and training programs,
including reporting on the outcomes of profiled claimants, none of
these reports provide a complete picture of the services received or
the outcomes obtained by UI claimants. Labor only recently began to
require that states provide information on the reemployment outcomes of
UI claimants, and the ongoing evaluations of claimant profiling are
limited.
States must track and report annually on several performance measures
considered key indicators of UI program performance, but these measures
largely focus on benefit and tax accuracy, quality, and timeliness. In
addition, states must also report to Labor on their claimant-profiling
process, but information in these reports represent only a portion of
all UI claimants the state has served, a proportion that can vary from
place to place and from month to month depending on available resources.
UI claimants may access other federally funded reemployment assistance
through the Wagner-Peyser Employment Service, WIA Adult or Dislocated
Worker programs, and, if they are laid off because of trade, the Trade
Adjustment Assistance program. To monitor the performance of these
programs, Labor requires states to meet a number of reporting
requirements, but these reports are submitted on a program-by-program
basis, and none provide a complete picture of the services received or
the outcomes obtained by all UI claimants.
Having data that show the degree to which reemployment services are
reaching UI claimants is key to good program management and provides a
first step toward understanding the impact of these programs. However,
knowing how many claimants may be accessing reemployment services and
the type of outcomes they may be achieving has proven difficult for
state and local officials. We found that only 14 states go beyond the
federal reporting requirements to routinely track the extent to which
UI claimants receive services from the broad array of federally funded
programs that are designed to assist them, and only 6 states routinely
monitor outcomes for UI claimants who receive reemployment services.
States most often told us that tracking claimant services across
multiple programs was made difficult by the fact that reemployment
services and UI claimant data were maintained in separate data systems-
-systems that were either incompatible or difficult to link.
Labor has some initiatives that may begin to shed light on claimant
outcomes, but these efforts may not go far enough. Labor recently
modified its UI performance measures to require states to track a
reemployment rate for their UI claimants--defined as the percentage of
UI claimants who are reemployed within the quarter following their
first UI payment. This change will help focus efforts on speeding
reemployment and will improve the understanding of how many UI
claimants are quickly reemployed nationwide, but it will not allow for
an assessment of the outcomes of claimants who access reemployment
services compared to those who do not. Furthermore, states must meet
federal requirements to target reemployment services using the claimant-
profiling process, but little is known about the effectiveness of their
efforts. Labor funded an evaluation of the claimant profiling system in
8 states beginning in 1996, including an assessment of UI benefit
duration, employment, and earnings. The current evaluation of the
profiling process focuses exclusively on how well the models are able
to predict whether a claimant will exhaust UI benefits, not on whether
the process results in shorter benefit duration or better employment
outcomes for claimants. Budget authority to conduct the current
evaluation expires at the end of fiscal year 2006, and no additional
funds have been requested in the fiscal year 2007 budget specifically
to conduct further evaluations on profiling.
Labor is also developing a system to consolidate performance reporting
for Labor's Employment and Training Administration (ETA) programs. This
system--ETA's Management Information and Longitudinal Evaluation
(EMILE) system--would consolidate reporting across a range of Labor
programs including WIA, Employment Service, and TAA. Current plans do
not include incorporating UI reporting into EMILE. Last year, we
recommended that Labor work with states to explore the feasibility of
collecting more comprehensive information on UI claimants' services and
outcomes. Although Labor generally agreed with our findings, Labor
commented that current and planned data collection efforts would
provide sufficient information to policy makers. While Labor's new
initiatives, in combination with current reporting requirements, will
provide valuable information on the reemployment activities of some UI
claimants, these efforts will not allow for a comprehensive, nationwide
understanding of claimants' participation in the broad range of
reemployment services designed to assist them. Furthermore, these
efforts will not move states in the direction of having the data they
need to better manage their systems.
Concluding Observations:
UI's size and importance make it critical that the program is
performing at a peak level. With annual overpayments reaching the
billions, it will be important for federal and state stakeholders to
take the necessary action to address this issue. Labor's current
initiatives and its proposed action contained in the fiscal year 2007
budget request could help, but work remains. In the long run, program
performance can be enhanced by avoiding improper payments rather than
trying to detect and collect them. Labor's initiatives to help states
detect and prevent overpayments represent a positive step toward
improving UI program integrity. In particular, Labor's initiative to
promote states' use of the NDNH database and its continued effort to
encourage states' use of SSA's data for verifying the identity of
claimants appear promising. However, to maximize the effectiveness of
these initiatives, it is important for as many states as possible to
participate. In addition, while Labor's development of a new core
performance measure on payment accuracy has the potential to facilitate
states' focus on detecting and preventing overpayments, it is premature
to evaluate the effectiveness of this effort. Moreover, although Labor
continues to fund grants for states to conduct in-person reemployment
and eligibility assessments, more time is needed to fully assess how
effective these initiatives will ultimately be. Finally, while Labor's
June 2005 legislative proposal to charge employers for UI payments to
ineligible individuals could result in UI tax rate increases for those
employers, such a change merits further consideration.
To help claimants get the reemployment services they need, states have
often designed their processes to make use of federal UI program
requirements in linking claimants with services. However, knowing
whether their efforts are actually resulting in better employment
outcomes and reduced UI benefit payments has proven difficult for
federal, state, and local officials. Findings from evaluations are
limited, and most states lack much of this information, arguably
critical for good program management--often because data reside in
separate systems that cannot be easily linked. In the new environment
created under the Workforce Investment Act, where claimants may be
served by a range of programs that go beyond UI and ES, it becomes
increasingly important to find new ways to link program data across a
broader range of programs. Doing so is an essential step in
understanding what's working and what's not. Labor's current and
planned initiatives may help fill the information gap, but they fall
short of providing a comprehensive understanding of services and
outcomes for UI claimants.
Mr. Chairman, this completes my prepared statement. I would be happy to
respond to any questions you or other members of the subcommittee may
have at this time.
GAO Contacts and Staff Acknowledgments:
For information regarding this testimony, please contact Sigurd R.
Nilsen, Director, Education, Workforce, and Income Security Issues, at
(202) 512-7215. Individuals who made key contributions to this
testimony include Dianne Blank, Jeremy Cox, Brett Fallavollita, Michael
Hartnett, Margaret A. Holmes, and Carla Lewis.
(130576):
[End of section]
Related GAO Products:
Improper Payments: Federal and State Coordination Needed to Report
National Improper Payment Estimates on Federal Programs. GAO-06-347.
Washington, D.C.: April 14, 2006.
Financial Management: Challenges Continue in Meeting Requirements of
the Improper Payments Information Act. GAO-06-581T. Washington, D.C.:
April 5, 2006.
Unemployment Insurance: Factors Associated with Benefit Receipt. GAO-
06-341. Washington, D.C.: March 7, 2006.
Trade Adjustment Assistance: Most Workers in Five Layoffs Received
Services, but Better Outreach Needed on New Benefits. GAO-06-43.
Washington, D.C.: January 31, 2006.
Workforce Investment Act: Labor and States Have Taken Actions to
Improve Data Quality, but Additional Steps Are Needed. GAO-06-82.
Washington, D.C.: November 14, 2005.
Unemployment Insurance: Better Data Needed to Assess Reemployment
Services to Claimants. GAO-05-413. Washington, D.C.: June 24, 2005.
Unemployment Insurance: Information on Benefit Receipt. GAO-05-291.
Washington, D.C.: March 17, 2005.
Trade Adjustment Assistance: Reforms Have Accelerated Training
Enrollment, but Implementation Challenges Remain. GAO-04-1012.
Washington, D.C.: September 22, 2004.
Workforce Investment Act: States and Local Areas Have Developed
Strategies to Assess Performance, but Labor Could Do More to Help. GAO-
04-657. Washington, D.C.: June 1, 2004.
Financial Management: Fiscal Year 2003 Performance and Accountability
Reports Provide Limited Information on Governmentwide Improper
Payments. GAO-04-631T. Washington, D.C.: April 15, 2004.
Workforce Training: Almost Half of States Fund Employment Placement and
Training through Employer Taxes and Most Coordinate with Federally
Funded Programs. GAO-04-282. Washington, D.C.: February 13, 2004.
Workforce Investment Act: One-Stop Centers Implemented Strategies to
Strengthen Services and Partnerships, but More Research and Information
Sharing Is Needed. GAO-03-725. Washington D.C.: June 18, 2003.
Multiple Employment and Training Programs: Funding and Performance
Measures for Major Programs. GAO-03-589. Washington, D.C.: April 18,
2003.
Unemployment Insurance: Increased Focus on Program Integrity Could
Reduce Billions in Overpayments, GAO-02-697 Washington, D.C.: July 12,
2002.
Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is
Limited. GAO-01-181. Washington, D.C.: December 29, 2000.
FOOTNOTES
[1] GAO, Unemployment Insurance: Increased Focus on Program Integrity
Could Reduce Billions in Overpayments, GAO-02-697 (Washington, D.C.:
July 12, 2002).
[2] GAO, Improper Payments: Federal and State Coordination Needed to
Report National Improper Payment Estimates on Federal Programs, GAO-06-
347 (Washington, D.C.: Apr. 14, 2006).
[3] GAO, Unemployment Insurance: Better Data Needed to Assess
Reemployment Services to Claimants, GAO-05-413 (Washington, D.C.: June
24, 2005).
[4] In accordance with federal law, all state UI systems are experience
rated so that employers' contribution rates vary on the basis of their
experience with unemployment. In practice, this typically means that an
employer who lays off many workers that claim unemployment insurance
benefits will pay more in taxes than an employer that lays off fewer
workers.
[5] Of this amount, Labor officials told us that the states could have
potentially detected and recovered $1.8 billion, or about 53 percent of
the total overpayments it estimated occurred, using current procedures.
[6] GAO, Unemployment Insurance: Increased Focus on Program Integrity
Could Reduce Billions in Overpayments, GAO-02-697 (Washington, D.C.:
July 12, 2002).
[7] Department of Labor, Office of Inspector General, Semiannual Report
to the Congress, April 1, 2005--September 30, 2005, Vol. 54.
[8] These interviews would also promote use of reemployment services
available in One-Stop Career Centers to assist claimants to become
reemployed more quickly.
[9] According to Labor, this proposal will be similar to the 2005
legislative proposal (the Unemployment Compensation Program Integrity
Act of 2005).
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