Kansas enforces nation’s most draconian penalty for unemployment ‘fraud’

By: - July 21, 2020 6:47 am
Spirit AeroSystems employee Michelle Tran discovered after furloughed during the COVID-19 pandemic that she had inadvertently accepted years ago unemployment benefits she wasn't entitled to receive. She paid back the money with interest, but is banned from getting jobless assistance for five years under Kansas law. (Submitted by Michelle Tran to Kansas Reflector)

Spirit AeroSystems employee Michelle Tran discovered after furloughed during the COVID-19 pandemic that she had inadvertently accepted years ago unemployment benefits she wasn’t entitled to receive. She paid back the money with interest, but is banned from getting jobless assistance for five years under Kansas law. (Submitted by Michelle Tran to Kansas Reflector)

TOPEKA — Spirit AeroSystems production worker Michelle Tran was a victim of mass layoffs in March as aircraft manufacturing shuddered under a coronavirus-induced meltdown.

This single parent of three children ranging in ages from 10 to 22, including a son with autism, was cast into the social safety net along with more than 200,000 other Kansans deemed nonessential features of the workforce. She sought jobless benefits along with her peers, but her application was red-flagged by the Kansas Department of Labor. The agency concluded she accepted a week of excessive state assistance three years ago when she was last out of work.

Tran said she hadn’t received prior notice of that allegation but pulled money from savings to pay nearly $1,000 in principal and interest. Once the labor department had the money, she said, she was banned from the Kansas program for five years to comply with the nation’s toughest state law penalizing people accused of defrauding the unemployment system. It left her broke and sleeping on a friend’s couch.

“I lost my apartment. I lost my car. No job,” Tran said. “What they’ve done is wrong. How the hell, at a time like this, can you take what little we have?”

The state’s labor department says Tran is among 7,000 people carrying the burden of a five-year fraud ban, and at least 400 of those individuals have filed claims for unemployment assistance amid the pandemic.

Nation’s toughest

From left, House Speaker Ron Ryckman and House Majority Leader Dan Hawkins say they are willing to consider a less severe sanction for unintended errors. (Nick Krug for Kansas Reflector)
From left, House Speaker Ron Ryckman and House Majority Leader Dan Hawkins say they are willing to consider a less severe sanction for unintended errors. (Nick Krug for Kansas Reflector)

Based on a 50-state analysis of unemployment law, the sanction in Kansas is out of step with most states in terms of the duration of penalties for providing false information or failing to disclose part-time income or returning to full-time work while still cashing unemployment checks. More than 40 states punish misconduct with prohibitions of one year or less, although the type of exceptions vary widely depending on repayment of the money or status as a repeat offender.

Kansas House Majority Leader Dan Hawkins, a Republican from Wichita, said he would be loathe to diminish the penalty for anyone perpetrating criminal fraud against the state. He said he would be interested in studying options for creating wiggle room in the statute to deal with nuanced cases in which a person had no intent to defraud the unemployment trust fund.

“There are cases like that,” Hawkins said. 

Colorado imposes a four-week ban for every week a person accepted ill-gotten aid, placing that state in a category of 20 other states with penalties of less than one year. Across the United States, the sanction amounts to one week in South Dakota and Arizona and two weeks in Connecticut and Massachusetts. There’s a seven-week ban in Illinois that includes a two-week moratorium for each subsequent instance of misconduct. Arkansas’ system blocks cheaters for 13 weeks, plus three weeks for every week of bogus benefits claimed.

Oklahoma, Iowa and Montana disqualify false applicants for 52 weeks, which reflects the law in two-dozen states.

Hawaii applies a two-year moratorium on people who try to take advantage of jobless benefits. No state exacts a first offense penalty of three or four years. Kansas stands alone in terms of the price paid by folks categorized as welfare cheaters.

5-year hammer

The 2013 Kansas Legislature expanded the penalty for unemployment fraud from one year to five years. The measure, House Bill 2105, was signed by Republican Gov. Sam Brownback during a period in which the Kansas Chamber, other business lobbying organizations and major employers worked with legislative and executive branches of state government eager to tighten welfare assistance.

The bill sent to Brownback was opposed primarily by Democrats dramatically outnumbered by Republicans in the House and Senate. The statute cleared the House 89-31 and the Senate 27-12. The package saved the state $50 million annually in payments to the unemployed by unilaterally removing the equivalent of 18% of people eligible for unemployment insurance benefits at that time.The maximum jobless benefit period was slashed from 26 weeks to 16 weeks — a law temporarily reverted to the 26-week model this spring by state lawmakers to take advantage of supplemental federal funding for the unemployed.

The 2013 legislation also raised taxes on businesses by $90 million to strengthen the unemployment trust fund that was saved from insolvency during the recession by borrowing hundreds of millions of dollars from the federal government.

“We want to make sure that fund is healthy. Unfortunately, everybody has to pay,” Sen. Julia Lynn, a Republican from Olathe and chairwoman of the Senate Commerce Committee, said at the time.

Ramifications of the bill’s major structural reforms were the focus of news coverage, which infrequently noted the new five-year penalty for falsely taking unemployment benefits.

The Brownback administration was lauded by the right and denounced by the left for riding this wave of welfare reform bills. Brownback, who now works in the administration of President Donald Trump as an international ambassador of religious freedom, was keen to advance his view that President Lyndon Johnson’s “Great Society” programs were a failure. He blamed welfare programs for exacerbating the breakdown of family structure and for perpetuating generational poverty.

The GOP governor relied on executive orders and legislative action from 2011 to 2018 to shape public policy to his belief that Kansans could lift themselves out of poverty. In addition to the unemployment benefits overhaul, he was responsible for blocking Medicaid expansion, raising the state’s sales tax on food and cutting Temporary Assistance for Needy Families from the federal five-year maximum to 24 months.

‘Bad precedent’

Ahead of the COVID-19 pandemic, the Kansas Department of Labor, on behalf of Democratic Gov. Laura Kelly, introduced a House bill that would have modified the 2013 law. The idea of the agency’s bill was for the state to roll back the punishment of people found to have made false statements to obtain or increase unemployment benefits — if those individuals repaid the state for excess benefits plus penalty and interest.

Kelly said intentional criminal acts must be punished, but people shouldn’t pay such a heavy price for mistakes.

“There is fraud that goes on. In fact, we’re seeing an uptick in identity theft right now within our unemployment system, where people are applying for benefits under someone else’s name,” Kelly said. “For people who, you know, it’s just a sinister move on their part, not only should they be denied benefits for five years, they probably ought to be paying other consequences. When you talk about people for whom it was an honest mistake. … I think we really need to be dealing with that on a case-by-case basis and not do blanket punishment.”

The bill introduced by the Kelly administration in February was shelved by the GOP-led House commerce committee, and it was killed off in May.

The 2020 Kansas Legislature rebuffed an attempt in the House to revise a state law blocking anyone from receiving unemployment benefits for five years if accused of intentional or inadvertent fraud of the system. (Nick Krug for Kansas Reflector)
The 2020 Kansas Legislature rebuffed an attempt in the House to revise a state law blocking anyone from receiving unemployment benefits for five years if accused of intentional or inadvertent fraud of the system. (Nick Krug for Kansas Reflector)

During the final hours of the 2020 special session in June, which was called by the governor to deal with COVID-19 oversight issues, House Democrats took a different tact. Rep. Jarrod Ousley, D-Merriam, proposed an amendment that would have removed the lockout if improper benefits were repaid. His amendment also sought to waive all repayment penalties throughout the pandemic.

“In this time of crisis,” Ousley said, “households are getting broken and we’ve got an anticipated second wave coming. Folks are still getting locked out for five years.”

The GOP majority in the House rejected his proposal on a voice vote, action taken after the amendment was denounced by the House commerce committee chairman.

Rep. Sean Tarwater, the Stilwell Republican who chairs the House Commerce, Labor and Economic Development Committee, said Ousley’s amendment was a misguided attempt to reward Kansans who “mysteriously accepted money for several weeks after they got their jobs and just forgot to let the state know.”

“On the surface this amendment seems OK,” Tarwater said. “This is a bad precedent to reduce it or waive it just because of a disease. These people still committed a crime, and they know what the penalty was, and it’s now time to pay the price.”

The fraud label

Rep. Stephanie Yeager, D-Wichita, said Tarwater lacked a necessary understanding of how easy it was for a person to assume unemployment checks sent to them by the labor department had been accurately calculated.

For proof, she said, look no further than her husband, James, who works in the notoriously cyclical Wichita aviation manufacturing. He was laid off during 2014 and took unemployment benefits for several months before returning to work. He followed KDOL advice on handling the transition back to a job, Yeager said. 

“He wasn’t aware there was an issue until he got a letter in the mail about attending a hearing,” she said. “They slapped a label on him: Fraud. Do you know what his sin was? He got paid an extra week. We paid it back and he was still banned for five years. It’s insulting for somebody like my husband.”

Sen. David Haley, a Democrat from Kansas City, Kansas, said Kansas statute failed to differentiate between cases of blatant criminal fraud and instances in which lack of communication by the state or beneficiaries led to an overpayment subsequently corrected. The state should abandon the five-year experiment and return to a penalty more in line with comparable states, he said.

“It should never have been implemented,” Haley said. “It takes us, Kansas, to the very bottom of the swamp to protect special interests against people who disproportionately need help.”

Kansas House Speaker Ron Ryckman, R-Olathe, said he wouldn’t welcome mercy to a hardened criminal but would be open to considering a less-severe sanction for mistakes attributed to out-of-work Kansans.

“We do not want somebody banned for unintended error,” Ryckman said. “If you falsify documents and get caught, I still think you should be subject to the ban.”

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Tim Carpenter
Tim Carpenter

Tim Carpenter has reported on Kansas for 35 years. He covered the Capitol for 16 years at the Topeka Capital-Journal and previously worked for the Lawrence Journal-World and United Press International. He has been recognized for investigative reporting on Kansas government and politics. He won the Kansas Press Association's Victor Murdock Award six times. The William Allen White Foundation honored him four times with its Burton Marvin News Enterprise Award. The Kansas City Press Club twice presented him its Journalist of the Year Award and more recently its Lifetime Achievement Award. He earned an agriculture degree at Kansas State University and grew up on a small dairy and beef cattle farm in Missouri. He is an amateur woodworker and drives Studebaker cars.

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