By:  Solomons                                                     H.B. No. 1496


A BILL TO BE ENTITLED
AN ACT
relating to reduction in benefit fraud and claim overpayments in unemployment compensation. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Chapter 213, Labor Code, is amended by adding Subchapter F to read as follows:
SUBCHAPTER F. INITIATIVE FOR REDUCTION IN BENEFIT
FRAUD AND OVERPAYMENTS
Sec. 213.091. STATE AUDITOR REVIEW. (a) The state auditor shall conduct a review to identify: (1) trends in benefit fraud and claim overpayments in the state unemployment compensation insurance program; and (2) the possible causes of those trends, including: (A) ineffective state policies; (B) management and operational practices; (C) weaknesses in existing computer cross-matching systems applicable to benefit recipients; and (D) other factors considered appropriate by the state auditor. (b) To the extent possible, the state auditor shall model the review on analogous fraud reviews conducted regarding other government benefit programs, such as the Medicaid program, and shall target those industries identified as most affected by fraud. (c) In developing the review required under this section, the Office of the State Auditor shall consider studies performed by the U.S. Department of Labor and other state employment security agencies concerning the misclassification of workers resulting in underpayments to the UI Trust Fund, and shall specifically evaluate the use of targeted audits to reduce misclassification. (d) The review must: (1) research fraudulent schemes identified by other states and how those schemes were detected; (2) identify cost-effective strategies designed to reduce fraud, reduce claim overpayments, and increase collections of claim overpayments and leading to outcomes that the commission can measure, track, and report; and (3) include recommendations to the commission regarding improvements to unemployment compensation claimant job search and placement strategies designed to reduce the percentage of claimants who exhaust their unemployment compensation benefits. (e) The state auditor shall complete the review not later than August 31, 2004. (f) The commission shall cooperate with the state auditor in the performance of the review and pay the reasonable and necessary costs of the review with available resources from the workforce commission federal account. Sec. 213.092. IMPLEMENTATION BY COMMISSION. (a) The commission shall implement the unemployment compensation insurance overpayment collection and fraud detection strategies recommended by the state auditor that the commission is able to perform with existing staff and within its existing budget. (b) If feasible with existing staff and within its existing budget, the commission shall implement the state auditor recommendations as they are developed. The commission shall complete implementation of the recommendations not later than August 31, 2005. (c) Any strategies that the commission is unable to implement during the 2004-2005 state fiscal biennium due to fiscal constraints shall be implemented on receipt by the commission of necessary funds and staff resources. Sec. 213.093. PROPOSED LEGISLATION REGARDING USE OF PRIVATE COLLECTION AGENCIES BY COMMISSION. (a) In cooperation with the state auditor, the commission shall develop proposed legislation under which the commission is authorized to enter into reasonable and prudent contingency fee contracts with private collection agencies to assist the commission in implementing the recommended strategies identified by the state auditor under Section 213.091 and pursuing uncollected overpayments of unemployment compensation benefits. (b) The proposed legislation must: (1) establish a penalty for claimants whose overpayments remain delinquent; and (2) authorize the commission to use the amounts received as penalties to pay the fees charged by the private collection agencies. Sec. 213.094. JOINT REPORT. (a) Not later than March 1, 2005, the state auditor and the commission shall submit a joint report to the 79th Legislature that includes: (1) all recommendations made to the commission in the review conducted under Section 213.091; (2) a description of the actions taken by the commission as of the date of the joint report to implement those recommendations and the impact of those actions on overpayment rates and fraud identification; (3) a description of all recommendations made to the commission in the review conducted under Section 213.091 that the commission has been unable to implement as of the date of the joint report due to fiscal constraints; (4) a description of actions taken by the commission to reduce the rate of exhaustion of benefits by claimants to ensure that claimants achieve employment more quickly; and (5) any legislation proposed to improve the ongoing future integrity of the unemployment compensation trust fund. (b) The commission shall include in the joint report: (1) a description of all activities that result in measurable improvements to the unemployment compensation insurance overpayment collection and fraud detection processes at the commission; and (2) the proposed legislation developed under Section 213.093. Sec. 213.095. EXPIRATION. This subchapter expires September 1, 2007. SECTION 2. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2003.