Tennessee paying unemployment benefits to felons behind bars

Dead people and state employees are still getting jobless benefits. But a new group is reaping the rewards of Tennessee's broken unemployment system — felons behind bars.

For the second year in a row, state auditors found numerous problems with the state's unemployment system. An audit last year found that at least $73 million in jobless benefits were improperly paid out. But this year's version found that the amount had ballooned to $181 million. And it found new problems with ineligible people — dead and alive — drawing benefits.

People with legitimate claims to unemployment, meanwhile, continue to struggle with a phone system nearly impossible to get through, the new audit found. Those lucky enough to have their calls answered — about 15 percent of callers according to June 2013 statistics — endured nearly an hour of waiting, on average.

"I just sit and I redial, redial, redial, I try all hours of the day," said Karen Lacey, a Nashville resident who has been trying to get unemployment benefits since March 3. "It's been a big problem."

The state audit looked at the Tennessee Department Of Labor and Workforce Development and its handling of federal tax dollars during the 2013 fiscal year, which ended June 30, 2013. Just two months before that, then-Commissioner Karla Davis and two of her top administrators resigned.

The new audit found that the state still wasn't ensuring that everyone receiving unemployment qualified for that benefit. A sample size of 200 accounts found that more than 10 percent didn't have proper documentation.

Simple cross-matches comparing unemployment beneficiaries to other databases found that the state had been giving unemployment benefits to at least 19 people employed by the state of Tennessee. Auditors also found that three dead people had been paid unemployment.

The findings echo an audit last year, which found 24 state employees and seven dead people receiving benefits.

But in a new twist, this year's audit found that 84 felons behind bars had also been cut unemployment checks. Part of the problem, auditors found, was that the labor department didn't know how to check for convicted felons in county jails. But six of those 84 were in state prisons — a fact the Labor Department didn't explain.

In all, the auditors found at least $150,795 paid out to people ineligible for unemployment. More than $100,000 of that went to felons.

Officials with the Labor Department disputed several of the audits' findings, saying the rise to $181 million in overpayments was due to accounting rule changes. They blamed other issues on technological problems stemming from a 43-year-old computer system.

"We do appreciate the intent of the audit, which is to help us identify and correct issues that we need to address," said Commissioner Burns Phillips. "Some findings we simply didn't agree with, some have already been corrected, and with others we're bringing about the right corrective actions, real solutions that will take our system where it needs to be."

Department spokesman Jeff Hentschel said, for example, that the state is already working to correct the cross-matching problems and plans to have new software in place by July to help prevent fraud. The department hopes to have a new computer system in two years.

State Sen. Jack Johnson groaned when told of the new findings. The Franklin Republican is chairman of the Senate Commerce and Labor Committee and was critical of the department last year.

"This is something that we've just got to get right and I know Commissioner Phillips is really trying to make some structural changes in how the department operates," he said. "It's just completely unacceptable."

Until then, people like Lacey are left frustrated and broke.

"I could use that money right now," she said.

Johnson said Phillips hasn't had much time to right the ship and is making progress. But he said taxpayers deserve better.

"It's like the Titanic. It's got tremendous inertia and getting it turned around is going to take tremendous effort and tremendous energy," he said.

Then, realizing his analogy meant a sunken ship, he said, "Maybe a bad reference there."

Reach Brian Haas at 615-726-8968 and on Twitter @brianhaas.

Overpayments

Here are some results of an audit of unemployment records from July 1, 2012, through June 30, 2013:

» $181 million: Estimated payments to ineligible people

» $22.5 million: Amount collected from ineligible payments

Source: Tennessee comptroller

Figures

Here are some results of an audit of unemployment records from July 1, 2012 through June 30, 2013:

» 3: Number of dead who were paid unemployment

» 19: Number of people working for the state paid unemployment

» 84: Number of felons behind bars paid unemployment

Source: Tennessee Comptroller of the Treasury