Office of House Bill AnalysisS.B. 444
By: Fraser
Economic Development


According to the comptroller of public accounts, in 1996 Texas paid out
more in unemployment insurance (UI) benefits than all but five other
states. However, the state's percentage of fraudulent overpayments, at 0.62
percent of total benefits, was well below the national average of 1.08
percent. While this could be because of a strong fraud deterrence system, a
more likely reason is the inadequate detection of fraud. Texas is a leader
in the automation of its UI system, but the state could do a better job of
identifying and recovering fraudulent benefit overpayments by adopting a
more efficient fraud detection system and specific overpayment recovery
strategies proven successful in other states, such as garnishing
overpayments from workers' wages or from workers' compensation benefits.
Senate Bill 444 requires the state auditor to conduct a study to determine
the number of fraudulent UI claims filed and paid and requires the Texas
Workforce Commission to use the results of the study to develop and
establish the most effective fraud detection system possible.  


It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 


Senate Bill 444 amends the Labor Code to require the state auditor to
conduct a study to determine to the fullest extent possible the number of
fraudulent claims filed and paid under the Texas Unemployment Compensation
Act and the number and dollar amount of fraudulent premium underpayments by
employers. The Texas Workforce Commission (commission) is required to use
the study to establish the most effective fraud detection system. If the
state auditor determines that the study should be conducted in whole or in
part by another entity, the state auditor is authorized to contract with
one or more independent, nongovernmental entities to conduct all or part of
the study. The bill requires the fraud detection system established as a
result of the study conducted to incorporate the commission's automated
system for filing and paying claims.  In developing the required study, the
state auditor is required to use as a model analogous studies performed by
other governmental entities that administer benefit programs and to
evaluate the use of targeted audits to reduce misclassification.  The study
must include thorough research on fraudulent schemes and methods of fraud
detection used in other states and an analysis of businesses and industries
most affected by fraud under the Texas Unemployment Compensation Act.  The
bill requires the state auditor to report the results of the study to the
presiding officer of each house of the legislature not later than January
1, 2003.  


On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001.