North Carolina’s Division of Employment Services is digging out of $1.6 billion in debt.
They have had to borrow this money to pay for unemployment benefits.
Channel 9 has learned officials not only overpaid people, they've also paid people who pretended to be out of work.
This has been going on for years and has increased the need for taxes.
"This applies to school systems, counties, city governments, non-profits. Anytime we can get this debt paid down, all those taxes go down," Dale Folwell, assistant secretary for the Division of Employment Security, said.
Folwell said until now, the department's priority was sending out benefits quickly: "We would just pay the money out the door and then we would chase it down once we determined it was done incorrectly."
Folwell said during the fourth quarter of 2012, the U.S. Department of Labor found 88 percent of North Carolina’s unemployment cases were handled incorrectly.
This year, that number is down to 50 percent.
Channel 9 has learned the U.S. Department of Labor has now stepped in.
In a letter, the department wrote, "[We] will work closely with your state to identify impediments to reducing improper payments with a particular focus on prevention."
It goes on to say North Carolina "will remain subject to additional monitoring and technical assistance until significant progress is made.”
Channel 9 asked if this was the first letter the department received.
“These overpayments have been going on for years; these letters have been going on for years," Folwell said. "It's just that nobody ever started paying attention to them."
That lack of oversight has also led to thousands of cases of fraud.
State workers have even been caught stealing people's identities to get benefits.
Folwell says, “There was a contractor working in our building who was filing for unemployment at the same time.”
The department will now enforce a law requiring proof of identity in person. Folwell told Channel 9, people would have to do that within 15 days of filing a claim. A spokesman for the Division of Employment Services says Folwell misspoke. A person will be called in within four weeks of receiving his or her first payment of benefits.
Folwell is hoping this will help cut down on overpayments and fraudulent cases.
“It's embarrassing but more importantly, we realize we are working diligently to get this corrected," Folwell said.
Clint Darnell, who has been through the unemployment system, is skeptical anything will change.
“I personally don't feel like it's going to improve,” Darnell said.
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