1-1     By:  Fraser                                            S.B. No. 444
 1-2           (In the Senate - Filed January 29, 2001; January 30 2001,
 1-3     read first time and referred to Committee on Business and Commerce;
 1-4     May 11, 2001, reported adversely, with favorable Committee
 1-5     Substitute by the following vote:  Yeas 6, Nays 0; May 11, 2001,
 1-6     sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 444                   By:  Fraser
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to a study of fraud in the unemployment insurance system.
1-11           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12           SECTION 1.  Subchapter A, Chapter 213, Labor Code, is amended
1-13     by adding Section 213.010 to read as follows:
1-14           Sec. 213.010.  STUDY OF BENEFIT OVERPAYMENTS AND FRAUD.
1-15     (a)  The state auditor shall conduct a study to determine, to the
1-16     fullest extent possible, the number of fraudulent claims filed and
1-17     paid under this subtitle and the number and dollar amount of
1-18     fraudulent premium underpayments by employers.  The commission
1-19     shall use the study to establish the most effective fraud detection
1-20     system.
1-21           (b)  If the state auditor determines that the study should be
1-22     conducted, in whole or in part, by another entity, the state
1-23     auditor may contract with one or more independent, nongovernmental
1-24     entities to conduct all or part of the study.  Notwithstanding the
1-25     degree to which the state auditor participates in the study, the
1-26     state auditor is responsible for supervising the study and for
1-27     reporting the results of the study as provided by Subsection (e).
1-28           (c)  The fraud detection system established as a result of
1-29     the study conducted under this section shall incorporate the
1-30     commission's automated system for filing and paying claims.
1-31           (d)  In developing the study required under this section, the
1-32     state auditor shall use as a model analogous studies performed by
1-33     other governmental entities that administer benefit programs,
1-34     including  the medical assistance program under Chapter 32, Human
1-35     Resources Code.  In developing the study required by this section,
1-36     the state auditor shall consider studies performed by the United
1-37     States Department of Labor and other state employment security
1-38     agencies concerning the misclassification of workers and resulting
1-39     underpayments to the unemployment insurance trust fund, and shall
1-40     evaluate the use of targeted audits to reduce misclassification.
1-41     The study must include thorough research on fraudulent schemes and
1-42     methods of fraud detection used in other states and an analysis of
1-43     businesses and industries most affected by fraud under this
1-44     subtitle.
1-45           (e)  The state auditor shall report the results of the study
1-46     to the presiding officer of each house of the legislature not later
1-47     than January 1, 2003.
1-48           SECTION 2.  This Act takes effect immediately if it receives
1-49     a vote of two-thirds of all the members elected to each house, as
1-50     provided by Section 39, Article III, Texas Constitution.  If this
1-51     Act does not receive the vote necessary for immediate effect, this
1-52     Act takes effect September 1, 2001.
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