The state Division of Employment Security is wrestling with a larger backlog of unemployment claims, and a higher percentage of workers are waiting more than three weeks to receive their first unemployment check.
Agency officials say the delays stem from an increased effort to crack down on paying benefits to workers who actually aren’t entitled to receive them and changes in the state unemployment benefits system that went into effect in July.
Rep. Paul Tine, a Democrat from Kitty Hawk, told agency head Dale Folwell at a legislative committee meeting Wednesday that he’s been hearing from constituents who have been waiting for checks for 12-to-16 weeks.
“These are folks who don’t make a lot of money and are living paycheck to paycheck,” Tine said.
Folwell said the agency is working aggressively to whittle down its adjudication backlog and hopes to have it cleared by the end of March. The backlog was about 12,000 in January, up from 7,296 in July, according to Employment Security.
But Folwell also stressed the importance of avoiding issuing checks that workers aren’t entitled to.
“We have been overpaying (unemployment claims) in North Carolina for many, many years,” Folwell said. “We have to do it correctly, not just quickly.”
He also told Tine that the constituents he’s hearing from may not be telling the whole story. “There’s a bigger wart on their claim, maybe, than they are willing to tell you about,” Folwell said.
Avoiding claims overpayments is especially important under the new state unemployment benefits system that went into effect in July, Folwell told legislators.
“We are now compelled to go after people who we have incorrectly paid out, even if there is an administrative reversal” months afterward, he said. “To simply pay somebody and then chase it down is a ridiculous use of our energy.”
Steps the agency can take to recoup overpayments include garnishing wages after an employee finds a job or tapping state and federal income tax refunds.
Employer paperwork needed
When Folwell became head of the division last year, he ended the agency’s practice of paying claims even before receiving paperwork from the employer that shows whether the worker actually is entitled to the benefits.
Forty percent of employers don’t report the circumstances of an employee’s departure “on a timely basis,” Folwell said.
Under a U.S. Supreme Court decision, once the state starts paying unemployment benefits, it can’t stop until the claim has been adjudicated.
Folwell said the state is sending out benefits checks within 21 days of a claim being filed in nearly 100 percent of the cases if “what the claimant says and what the employer says matches up.”
The delays come into play, he said, when there’s a discrepancy between the accounts by the two parties.
“We have to adjudicate that,” he said.
“Last year we paid out 80 percent of the claims in the first 21 days,” Folwell said. “What we are talking about is the toughest of the tough.”
Problems in reaching both workers and employers for the information needed to adjudicate the claim contribute to delays, he said.
Feds put N.C. on notice
North Carolina’s unemployment rate fell precipitously in the second half of last year – from 8.8 percent in June to 6.9 percent in December. Likewise, 44,734 workers filed new uninsurance claims in June versus 33,157 in December.
According to state data, North Carolina was issuing initial unemployment checks within 21 days of a claim in 85 percent of its cases in June, but those payments slipped in the following months and hit a low of 71 percent in September. In December, 79 percent of claims were paid within 21 days.
The federal standard calls for paying 87 percent of claims within 21 days.
Also clogging up the claims system, Folwell said, is that under the new unemployment system each employee who is furloughed must file their own unemployment claim for the weeks they’re not being paid. Previously, employers could file the paperwork for the employees.
Bill Rowe, the director of advocacy for the N.C. Justice Center, said he understands the need to avoid overpayments but worries that delaying unemployment checks for people who may have no other resources “can be catastrophic for folks.”
Sen. Bob Rucho, R-Mecklenburg and co-chair of the Joint Legislative Oversight Committee on Unemployment Insurance, commended Folwell for “doing a yeoman’s job of rectifying what appears to have been a sinking ship.”
The federal government also is pressuring the state to handle claims correctly.
The U.S. Department of Labor recently notified the state that it was among a group of states that had a “persistently high” rate of overpaying benefits.
That notification lists the state’s overpayment rate for the 12-month period ending June 30 at 18.7 percent. That’s a slightly higher number than the 17.5 percent of overpayments – or $225.3 million – listed for North Carolina on the U.S. Department of Labor’s website. A Labor Department spokesperson couldn’t immediately explain the discrepancy.
The Labor Department estimates about 4 percent of North Carolina’s overpayments are due to fraud. Forty-five percent were traced to an inability to validate that the jobless worker has met the state’s job-search requirements.