By:  Fraser                                            S.B. No. 444
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to a study of fraud in the unemployment insurance system.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Subchapter A, Chapter 213, Labor Code, is amended
 1-5     by adding Section 213.010 to read as follows:
 1-6           Sec. 213.010.  STUDY OF BENEFIT OVERPAYMENTS AND FRAUD.
 1-7     (a)  The state auditor shall conduct a study to determine, to the
 1-8     fullest extent possible, the number of fraudulent claims filed and
 1-9     paid under this subtitle and the number and dollar amount of
1-10     fraudulent premium underpayments by employers.  The commission
1-11     shall use the study to establish the most effective fraud detection
1-12     system.
1-13           (b)  If the state auditor determines that the study should be
1-14     conducted, in whole or in part, by another entity, the state
1-15     auditor may contract with one or more independent, nongovernmental
1-16     entities to conduct all or part of the study.  Notwithstanding the
1-17     degree to which the state auditor participates in the study, the
1-18     state auditor is responsible for supervising the study and for
1-19     reporting the results of the study as provided by Subsection (e).
1-20           (c)  The fraud detection system established as a result of
1-21     the study conducted under this section shall incorporate the
1-22     commission's automated system for filing and paying claims.
1-23           (d)  In developing the study required under this section, the
1-24     state auditor shall use as a model analogous studies performed by
1-25     other governmental entities that administer benefit programs,
 2-1     including  the medical assistance program under Chapter 32, Human
 2-2     Resources Code.  In developing the study required by this section,
 2-3     the state auditor shall consider studies performed by the United
 2-4     States Department of Labor and other state employment security
 2-5     agencies concerning the misclassification of workers and resulting
 2-6     underpayments to the unemployment insurance trust fund, and shall
 2-7     evaluate the use of targeted audits to reduce misclassification.
 2-8     The study must include thorough research on fraudulent schemes and
 2-9     methods of fraud detection used in other states and an analysis of
2-10     businesses and industries most affected by fraud under this
2-11     subtitle.
2-12           (e)  The state auditor shall report the results of the study
2-13     to the presiding officer of each house of the legislature not later
2-14     than January 1, 2003.
2-15           SECTION 2.  This Act takes effect immediately if it receives
2-16     a vote of two-thirds of all the members elected to each house, as
2-17     provided by Section 39, Article III, Texas Constitution.  If this
2-18     Act does not receive the vote necessary for immediate effect, this
2-19     Act takes effect September 1, 2001.