DENVER The state government says it overpaid $305 million to people who get unemployment benefits the last three years, and now it wants the money back.
Overpayments totaled an estimated $169 million last year alone. Between 2008 and 2010, the state overpaid by about 13 percent, according to numbers provided by the Department of Labor and Employment.
Gov. John Hickenlooper issued an executive order Wednesday that directs the labor department to get its errors down below 10 percent, which is the federally accepted standard.
The labor department discovered the errors during a spot check of its work. The reported overpayments are based on an extrapolation from the random audit, not a hard count of all unemployment claims, said Jeff Fitzgerald, director of the states Unemployment Insurance Division.
To reclaim the money, the state can garnish peoples future unemployment benefits, tax returns or gambling winnings, Fitzgerald said.
He said his office will try to be understanding with people who might not have known they were getting paid too much.
In most instances, its not fraud. Rather, its administrative or communication issues. We try to take that into account, Fitzgerald said.
Fraud makes up less than 5 percent of the problem, he said.
Rep. Sal Pace, D-Pueblo, asked the Legislative Audit Committee to get to the bottom of the problem.
Given the state of Colorados budget in general and its unemployment trust fund specifically, these types of payments cannot happen. We have an obligation to make sure we fully understand the extent of the problem, Pace wrote in a letter to the committee.
About 180,000 Coloradans received unemployment insurance checks in 2010.
The labor departments staff and its unemployment insurance trust fund both were put under great strain by the recession and an unemployment rate that still hovers at 8.5 percent.
The trust fund went broke and was $500 million in the hole this year, requiring Colorado to borrow money from the federal government.
The Legislature passed a bill this spring to increase unemployment taxes on certain businesses as a way to restore the trust fund to health.
Even though the $305 million in overpayments make up a substantial part of the trust funds deficit, Fitzgerald said the new law is still necessary because the old system had structural flaws.
The new system is designed to sock away more money during economic booms to make it easier to deal with recessions.
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