NCPA - National Center for Policy Analysis


July 1, 2005

The Oregon Employment Department paid out $76.3 million of taxpayers' money to fraudulent enrollees in 2003; this means that 9.5 percent of all of the state's unemployment insurance (UI) benefits were paid out unnecessarily, says the Cascade Policy Institute's William Conerly.

The overpayment problem has reached an all-time high with an increase of $30.8 million from 2002 to 2003. According to the U.S. Department of Labor, there are multiple causes:

  • The single greatest cause of overpayment nationally is that enrollees fail to report any earnings while still receiving benefits.
  • Another cause is "under the counter" earnings, in which people do not report income; since the state?s formal audits have no way of determining the rate of overpayment, Oregon's estimated rate of 9.5 percent is an understatement.
  • Additionally, an unknown number of beneficiaries do not look for work, which they are required to do as a condition of receiving unemployment assistance.

Recently, Oregon's legislature passed a bill authorizing an employment tax for supplemental funding of the Employment Department administration, throwing the overpayment issue into the forefront of taxpayer issues, says Conerly. Last year, Oregon's supplemental funding was the second highest of any state, behind only New York.

"Given this relatively large employer tax . . . curing our overpayment problem should be a top priority for the state" since employers have to bear the cost of this system, says Conerly. If businesses remain in Oregon, they pass the expense to employees through lower wages and reduced benefits; if they choose to move to a more company-friendly environment, the state loses money and jobs. Either way the tax is a drain on the Oregon economy, adds Conerly.

Source: William B. Conerly, "Oregon Unemployment Insurance Overpayments," Cascade Commentary, May 2005.


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