Economy

Overpayment of Unemployment Benefits Is Soaring

Nearly 10 million Americans are still seeking work, months after the April crash in employment, when more than 23 million people were jobless. As people lost their jobs, applications for unemployment benefits soared, and the federal government responded with an enhanced benefit program that added $600 per week to regular unemployment benefits for four months and other programs.

While Congress continues to debate a second relief package for workers, the states are beginning to send letters to Americans who received unemployment benefits this year notifying them that they had been inadvertently overpaid and that they must now repay the overpayment amount. In many states, recipients are given a choice of making a lump sum repayment or having a portion deducted from future payments if any are forthcoming.

In Texas, state officials estimate that 231,000 people have been overpaid some $261 million this year. That’s an average overpayment of around $1,130. While that amount is relatively modest, in the three-year period from July 2016 through June 2019, the state’s benefits overpayment totaled just $79.7 million.

Officials in New Hampshire have discovered overpayments of $25 million made to nearly 10,000 workers for an average overpayment of around $2,500. In the three-year period between 2016 and 2019, New Hampshire overpaid unemployment benefits by less than $3.2 million.

It’s likely that many of the overpayments have been fraudulent. Some fraudulent claims may have been individuals, but the majority is likely due to hacking groups like Nigeria-based “Scattered Canary.” In June, the state of Washington said it had recovered some $300 million from the group, but officials don’t know how much had been fraudulently claimed. As of June 1, the state had paid out some $3.8 billion in unemployment benefits.

In September, Colorado said it had stopped some $750 million to $1 billion in improper payments, largely through the Pandemic Unemployment Assistance program established under the CARES Act to provide relief to self-employed workers and independent contractors.

While the overpayments to unemployed workers reached unprecedented levels as federal and state governments sought to soften the financial blow to many households, states make payment mistakes all the time. Until the COVID-19 pandemic is controlled, it is likely that the full extent of improper payments won’t be accurately known. All indications are, however, that the total will be massive given the $260 billion the CARES Act poured into expanded and extended unemployment benefits.

Detailed state-level data for this year is not available, but the U.S. Department of Labor has compiled data for the period between July 1, 2016, and June 30, 2019, that shows how much each state (plus the District of Columbia and Puerto Rico) have improperly paid out in unemployment benefits. The following chart shows Labor Department data for the percentage of improper payments (either too little or too much) based on a state’s three-year total, the percentage of overpayments based on the three-year total and the dollar amount of overpayments by state.

About 11.6% of all unemployment benefits paid in the three-year period were made for improper amounts, and nearly 97% of those improper payments were overpayments. Unemployment benefits paid in the period totaled nearly $24 billion.

State Improper Payment Rate Overpayment Rate Improper Payment Estimate
Alabama 8.96% 8.89% $10,331,587
Alaska 9.27% 8.65% $10,956,325
Arizona 12.02% 11.96% $26,003,769
Arkansas 9.16% 8.69% $9,131,706
California 8.02% 7.79% $434,992,802
Colorado 12.41% 11.79% $39,163,931
Connecticut 16.63% 16.39% $71,509,152
Delaware 6.79% 6.35% $4,955,795
District of Columbia 11.69% 10.80% $11,085,780
Florida 10.84% 10.72% $29,962,886
Georgia 3.92% 3.90% $9,683,205
Hawaii 3.61% 3.16% $7,586,641
Idaho 12.76% 12.24% $11,230,126
Illinois 11.27% 10.52% $165,276,511
Indiana 8.88% 8.67% $13,150,194
Iowa 9.52% 9.08% $33,919,345
Kansas 19.04% 18.78% $20,707,717
Kentucky 17.43% 17.23% $25,936,535
Louisiana 10.70% 10.47% $9,789,818
Maine 8.27% 8.00% $4,055,199
Maryland 20.34% 20.24% $96,526,778
Massachusetts 21.44% 20.78% $249,271,989
Michigan 41.27% 41.01% $189,940,328
Minnesota 7.55% 7.34% $55,086,536
Mississippi 9.34% 9.24% $4,788,673
Missouri 7.32% 7.18% $17,308,202
Montana 8.86% 8.54% $11,357,136
Nebraska 13.10% 12.91% $8,074,446
Nevada 11.72% 11.40% $30,660,353
New Hampshire 10.31% 9.87% $3,151,543
New Jersey 13.06% 11.62% $203,406,561
New Mexico 5.55% 5.16% $7,627,817
New York 13.80% 13.28% $270,438,298
North Carolina 22.23% 21.84% $17,050,493
North Dakota 11.20% 11.06% $7,456,901
Ohio 13.11% 12.80% $80,858,629
Oklahoma 5.70% 5.41% $12,924,836
Oregon 12.61% 12.11% $50,482,713
Pennsylvania 9.10% 8.92% $142,397,709
Puerto Rico 7.05% 6.33% $4,912,325
Rhode Island 18.13% 17.82% $21,104,519
South Carolina 11.01% 10.88% $16,184,246
South Dakota 7.85% 7.66% $2,030,182
Tennessee 17.05% 16.78% $27,168,938
Texas 7.96% 7.80% $79,718,089
Utah 5.23% 5.14% $5,858,665
Vermont 5.36% 5.06% $1,685,945
Virginia 12.01% 11.73% $27,885,336
Washington 13.78% 13.55% $115,071,325
West Virginia 4.81% 4.54% $9,583,405
Wisconsin 15.01% 14.58% $55,372,907
Wyoming 9.69% 9.28% $5,446,797