State sent financial aid to 1.1 million unemployed Texans. Now it wants that money back.

Texas is among several states being sued for overreacting in its efforts to rectify fraudulent unemployment claims during the pandemic.

By Paul FlahiveSeptember 27, 2022 11:00 am,

From Texas Public Radio:

Kathryn Tapia was laid off in March 2020 from her job at a daycare in Harlingen. So she applied for unemployment. She was one of the 2.5 million Texans who applied for unemployment in the first three months of the pandemic — or somewhere between 10 and 20 times the number in an average year.

“I started receiving payments — everything was going fine. And then, all of a sudden, I want to say maybe around September or so, I started receiving letters of overpayment,” she explained.

The Texas Workforce Commission said she wasn’t unemployed — that she had a job. She had a job in North Carolina … in South Carolina … and one in Delaware.

Tapia was not hopping on a plane from the Rio Grande Valley to Delaware, working a minimum wage job every morning, and then returning to her three kids the same night.

Several years ago, her identity was stolen. She said she filed paperwork with multiple state agencies, including her sheriff’s office and Texas Health and Human Services, but TWC failed to notice.

“I could never get in contact with anybody,” Tapia said. “I kept hearing, like, ‘the lines are super busy,’ because of COVID and all the stuff that’s going on.”

Tapia, like many others, was hit with bills from the agency that was supposed to help her at the moment she needed help in a vulnerable moment.

The Texas unemployment system sent notices to 1.1 million people that it overpaid them in 2021, and it asked for that money back. But people like Tapia argued the state made a mistake. Advocates have taken the state to court for being overaggressive.

The numbers, in some cases, were in the tens of thousands of dollars. In many cases, the state reassessed a person’s eligibility as much as a year later and then retroactively billed them.

Tapia’s was far less, but it was still adding up.

The state reduced Tapia’s check to start paying back the money she said she didn’t owe. And the bill kept rising. She stopped requesting unemployment assistance and instead asked for loans from friends and family.

“I stayed off not working until February 2021. I sent my kids back to school. And I got a job as quick as I could,” she said.

States across the country were struggling like Texas to keep up with claims, and a lot of fraudulent claims were getting through. The national estimate was more than $6 billion in fraudulent claims were paid out through 2021. Many overreacted.

David Mauch with Texas Rio Grande Legal Aid said the agency kicked people off unemployment without due process and sent invoices for overpayments without telling them why, in many cases. He said that broke the law.

“The law is very clear that the TWC — before it determines someone has been overpaid — needs to consult that person and get their response,” he said.

Texas tried to get money back from 1.5 million people between 2020 and 2021, according to state records. It sent 31,000 to the U.S. Treasury to seize their federal tax returns. Half a million Texans have appealed.

But the process is long and opaque. Tapia had to hire a lawyer to get an appeal, and more than a year later it isn’t settled. It takes an average of eight months, according to state data.

“The appeals process is fundamentally broken at this point,” Mauch said, “because if you’re initially denied benefits, and you appeal, then you end up waiting so long for your appeal that you’d have run out of benefits anyway.”

Mauch is suing on behalf of five people and the Texas Association for the Rights of the Unemployed in federal court for what he calls arbitrary and overreaching policies.

Texas isn’t the only one being sued for overreacting. In Michigan, Maryland and other states, class-action lawsuits are fighting unemployment systems for overpayments.

In Rhode Island, the state was flooded with fraudulent claims from organized crime rings at the beginning of the pandemic. The state — overwhelmed by ancient computer systems, poor fraud tracking — froze all benefits.

Lynnette Labinger sued for the ACLU. “The initial reaction of the state was, ‘well, we’re just going to stop,’ she said, “but when you’ve already granted people benefits, you can’t do that and comply with due process.”

The state is now under a federal consent decree, and the federal government is closely monitoring its actions.

States had been (historically) hyper focused on fraud detection and recovery, said Michele Evermore, deputy director for policy in the Office of Unemployment Insurance Modernization at the U.S. Labor Department.

For years, states were just geared to deny benefits. “Prior to the pandemic, it seems like states were actually over, over tuned to detect fraud rather than make initial payments,” she explained.

Improper denials of benefits had doubled in the 10 years before the pandemic, Evermore noted.

Then the federal government pumped billions of dollars in new programs with new rules that said, ‘get this money to people ASAP.’ The stresses to the systems dealing with historic highs of unemployment claims relying often on outdated fraud detection methods were pushed past the breaking point.

Evermore’s department is offering hundreds of millions of dollars in grants to states that update their systems. Her office has also offered guidance on when states can waive overpayments of pandemic unemployment dollars if they deal with systemic state problems.

“We’re trying to identify scenarios in which the state made a mistake, and people got overpaid,” she explained. “But it wasn’t their fault. The money is long gone. And we should really try to hold some of these people harmless when they’ve made innocent errors.”

It isn’t clear how much of that is the case in Texas. Mauch says the state isn’t really telling people whether or not they are eligible to have the payments waived. “And what we’re seeing on the ground,” she added, “is the TWC is not doing that when they determine that people have been overpaid.”

However, the state had been very stingy in waiving overpayments. Between March 2020 and June 2021, it rejected them 91% of the time.

TWC denied that it doesn’t offer due process in court documents. The agency declined TPR’s request for further comment, citing pending litigation.

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