Maine would have some of the nation's toughest penalties and sanctions for unemployment fraud under a legislative proposal made by the Department of Labor. But opponents questioned the need for the bill, given a fraud rate in Maine of less than 1% of all unemployment claims.
"With the increased claim volumes and durations, we're also seeing an increase in overpayments and, unfortunately, unemployment fraud," said Laura Boyette, director of the Bureau of Unemployment at DOL. "This has triggered a renewed focus on program integrity to reduce overpayments."
Boyette said from July 2010 to June 2011, fraud was found to have been committed by 773 individuals out of the tens of thousands of Mainers getting benefits during that period.
"I acknowledge that we do not have a high rate of fraud," Boyette told lawmakers under questioning, "but if anyone is in a situation where they might consider it, we want ... a clear statute that deters them."
Boyette said the bigger problem is in overpayments and underpayments, which during that same period were $5,186,120 in errors and $1,333,511 in fraud. She said there has been confusion among recipients and staff because of multiple law changes made by Congress.
Currently, fraud is prosecuted under the theft-by-deception statute; if the proposal is approved, it will be prosecuted as the new crime of unemployment fraud. Penalties would range from less than a year in jail to 10 years in prison, if the fraud is in excess of $10,000.
Several lawmakers questioned whether a new law is needed when fraud already carries jail time as well as restitution and there are so few cases. But Peter Gore, vice president of the Maine State Chamber of Commerce, said his organization believes reducing fraud and errors is important to employers, because they pay the entire cost of the system through a tax.
"In 2010 Maine employers experienced a 68% increase in unemployment insurance taxes that amounted to $54 million," he said. "In 2011, we experienced another 10% increase that amounted to another $15 million."
Alysia Melnick of the American Civil Liberties Union of Maine said tougher penalties simply are not needed.
"Maine has sufficient laws on the books to deal with individuals who commit unemployment fraud," she said.
Three members of the Legislature's Veterans and Legal Affairs Committee attended a meeting of the National Council of Legislators from Gambling States last month and agreed Maine needs to move swiftly to update its gambling laws in the wake of a recent federal ruling. The committee agreed to set up a subcommittee to draft legislation this month.
Sen. Debra Plowman, R-Hampden, said a U.S. Justice Department ruling in December reversed its interpretation of the 1961 Wire Act, which banned online gambling, and said state lotteries are not prohibited from offering online wagering within their states.
"That means we could sell lottery tickets online, people could buy their tickets from home and never visit a retailer, and that also has an impact," Plowman said. "What would that mean to a mom and pop store that depends on the traffic they get from selling lottery tickets? We have to answer a lot of questions."
Rep. Douglas Damon, R-Bangor, said he was impressed by the council's expertise and agreed Maine needs to move quickly.
"We've got two facilities in this state that could be impacted by an increase in Internet gambling," he said.
Rep. Linda Valentino, D-Saco, said the state is playing catch-up when it comes to technology.
"It's all going to change," she said. "We are going to see tablets like iPads that are handed to someone when they go into a casino with all the games loaded on it. No more big slot machines; it will all be on one device."
All three lawmakers had their expenses paid by the national council, which is seeking to have Maine join the group.
If Congress cannot reach agreement to extend the payroll tax cut, fix Medicare payments to doctors and extend unemployment benefits, Mainers will be hurt, say the state's members of Congress. All four say it will take a combination of spending cuts and new revenues to reach an agreement this month.
"It was ludicrous from the outset that both sides did not move forward on a one-year package and find a way to pay for it," said Sen. Olympia Snowe. "We need to look at all the alternatives and come up with a plan that works."
Extending the three items for the rest of the calendar year would cost $160 billion. Snowe said one way to pay for part of the extension would be to exempt millionaires from the payroll tax cut. She is baffled as to why that was not part of the original package. She said there are many other elements that could go into paying for the package, such as savings from unfilled federal jobs and repeal of tax breaks such as those for energy companies.
Snowe said while there is broad support for passing all three, negotiating a way to pay for all of the items will be difficult. Rep. Mike Michaud agreed, saying he would have trouble supporting the package if the funds were not found to put in the Social Security trust fund to replace the lost payroll tax revenue.
If Congress fails to reach agreement on the three items, it will have a significant impact on the state. Ten months of a 2% payroll tax reduction saves Mainers over $300 million. Maine doctors, who already get one of the lowest reimbursement rates from Medicare in the country, would have rates cut by 27%. Failure to extend unemployment benefits would mean over 4,000 Mainers who now get benefits would lose them, and another 17,000 would exhaust them by the end of the year.
Sen. Susan Collins said she will push negotiators to consider the jobs bill that she is co-sponsoring with Sen. Claire McCaskill of Missouri.
"We have fully funded our bill by eliminating the tax breaks for our five largest energy companies … and [imposing] a surtax on those making more than $1 million a year, but with a carve-out for small businesses," she said.
Rep. Chellie Pingree said she supports raising taxes on those who make more than $1 million a year, but doubts it could pass. She expects a compromise because of the consequences of the alternative.
"What we face is a Congress that does not want to compromise and waits until the last minute to act," she said. "As we get more into the presidential election year, I think it will become more difficult to compromise even though we have to."