‘Fraud’ takes center stage at Kansas unemployment bill hearing

Capitol Bureau

TOPEKA, Kan. (KSNT)— Lawmakers heard from the Kansas Department of Labor in their final day of hearings on a bill to revamp the state’s unemployment system on Wednesday.  

The state’s unemployment department testified as a neutral opponent, sharing its thoughts on the bill, which would help update the department’s antiquated computer system, and help employers who are expecting increasing tax rates from jobless and fraudulent claims. 

But amid the hearing, concerns of fraudulent activity in the state’s unemployment system took center stage. 

“I think for everybody, except the [state’s] department of labor, we don’t understand how the mistake could have gotten that big,”  said Representative Kristey Williams, R-Augusta.

Lawmakers pushed for answers related to fraud and identity theft, which are concerns lawmakers said states are experiencing nationwide and here in Kansas. 

The state’s unemployment office has been dealing with paying out fraudulent claims, and delays in unemployment payments.

“Every time there is a sharp increase in unemployment claims, there is a sharp increase in fraud,” said KDOL Deputy Secretary Brett Flaschbarth, explaining the department took several measures to mitigate the impact of fraud from the start of the pandemic.

Flaschbarth provided several examples of preventative measures the department took, like increasing staffing, having discussions on best practices and looking to block internet banks.

“There was agency efforts, literally every single day, from the start of the pandemic, in addition with trying to pay out benefits, with concerns on fraud and what the steps are that we can take,” he said.

However, Rep. Williams said certain measures the department’s said to have taken, and statistics they’ve received don’t add up.

Williams noted in a report the department sent before the hearing, it indicated 67,000 Kansans reported fraud on the website, or by calling. However, she said during prior testimony from the business community, lawmakers were told between 21-51% had employees’ identities taken.

“Somehow there’s a big difference between that 300,000 number and that [67,000] that was reported,” Williams said.

Williams also questioned the department’s methods used to cross-check people’s identities, arguing whether proper vetting measures were being taken.

The department has taken recent steps to fight against fraudulent activity, like deploying a new security system for their website, which requires two-factor authentication.

However, the department would need to use new tools to get an accurate number on fraud reports.

“We’re aware of the numbers that were reported to us, and the new tools will help give us a better estimate,” Flaschbarth said.

Committee Chair, Representative Sean Tarwater, R-Stilwell, questioned the department’s reporting as well, asking if any claimants impacted by a recent investigation had been notified.

“There’s been news reports with visual evidence of being able to type in social security numbers, and download self-populated information,” Rep. Tarwater said. “Have you looked at getting the word out, or getting warning out?” 

A spokesperson for the department said their I.T. department investigated and spoke with the claimant who was able to come across the private information through their website. The spokesperson told Kansas’ Capitol Bureau what the claimant experienced was an anomaly with the original PUA system build-out, and is not an issue going forward after investigation.

“The preliminary information we have from all of our security officials is that there was not an actual breach, such that would trigger broad reporting requirements,” Flaschbarth responded.

However, Tarwater said he fears for those who may have had their information accessed.

“I think it’s our duty that we need to notify those individuals,” he said.

Cracking down on fraud is one of the focal points for lawmakers as they work the bill. 

But the fiscal note has been a concern, with some lawmakers receiving quotes from consultants of $700 million in estimates for how many fraudulent claims have been paid out. 

The department shot down these numbers during the hearing but was unable to provide its own estimate. Leaders of the committee are giving the department until next week to bring forward an estimate that lawmakers can use.

“We are taking our time with the bill, we are involving all stakeholders, and I’m sure we will have a more solid fiscal note when it comes to that,” said Representative Stephanie Clayton, D-Overland Park.

Lawmakers say this bill is a long-term fix to issues the department’s been experiencing. One issue Clayton pointed out is the troubles people have had getting in contact with the call center. The department said it would need more than 1,000 call center employees to answer calls, but right now, it has about 450.

In the meantime, they’re asking for Kansans to reach out to their legislators for help to get in contact with the department. 

“There are people that I have helped, that have come back and told me that their situations are resolved, and that they are starting to get their unemployment benefits,” Clayton said.

Lawmakers plan to work the bill in committee next week. 

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