SD officials seek penalty for unemployment fraud

PIERRE, S.D. (AP) — The South Dakota Labor Department has proposed changing state law to impose an additional penalty on people who file fraudulent claims for unemployment benefits.

People are already required to repay any unemployment benefits they receive as a result of fraud, but the proposal would make them pay an additional penalty equal to at least 50 percent of the benefits received.

Roberts told an advisory council Monday that the proposal is designed to comply with a law passed last year by Congress. That federal law requires states to impose a penalty equal to at least 15 percent of the improper payments, but a penalty of 50 percent seems fair, she said, because state officials have to spend much time and money investigating such cases.

The Unemployment Insurance Advisory Council, which advises the Labor Department on the unemployment benefit system, will vote on the proposal at its next meeting in late August or early September. The council's recommendations will be presented to Gov. Dennis Daugaard and the 2013 session of the South Dakota Legislature.

Council member Shawn Lyons, director of the South Dakota Retailers Association, said he doesn't know if 50 percent is the right amount, but that some penalty is necessary to indicate fraud will not be tolerated.

Unemployment insurance provides temporary financial assistance to people who have lost their jobs through no fault of their own. It is financed by payroll taxes paid by businesses.

State Unemployment Insurance Director Pauline Heier said fraudulent claims last year amounted to only about $750,000, a small part of the $38.5 million in benefits paid to South Dakota's jobless. Fraudulent claims involve people who say they were laid off when they were actually fired and people who continue to claim unemployment benefits after they have got another job, officials said.

"There's really no excuse for fraud. These aren't mistakes," Roberts said.

The department also currently imposes a delay in providing benefits if someone who fraudulently claims benefits eventually has a valid claim — for every week of benefits received as the result of fraud, a person must wait four weeks.

Also Monday, the advisory council agreed to keep a provision that triggers a surcharge on employers if the state's unemployment insurance trust fund ends any quarter with a balance of less than $11 million. A surcharge was imposed in 2009 when high unemployment drained the fund, but it was removed about a year later.

Because of declining unemployment, the trust fund is expected to end this year with a balance of $52 million.