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States Slow to Recoup Billions in Improper Unemployment Payments

Adam Gault/Thinkstock(NEW YORK) -- Billions in taxpayer dollars were improperly paid out in the form of unemployment insurance benefits last year and, as ABC News has learned, many states have been slow in trying to get that money back.

In 2011 alone, the government paid out $11 billion to people who either were intentionally cheating the system or accidentally violated the rules, according to the U.S. Department of Labor.  In other words, some people who no longer qualify for benefits are still collecting.

The Labor Department says there is a tool to help states recoup the funds but ABC News has learned that only a few state governments are actually using it.

So far only New York, Wisconsin, Pennsylvania and Michigan are actively working with the Treasury Department to collect improperly distributed payments, with more than 20 other states planning to join in the future.  That means that half of the country is not yet using this tool to help regain billions in wrongly disbursed unemployment funds.

The Labor Department says that over the last three years, Texas has paid out more than $1 billion improperly.  In California, unemployment recipients were paid more than $1.7 billion in error or under fraudulent circumstances.  What's more, the government agency says more than 40 percent of unemployment payments paid out in Louisiana and Indiana were improper funds.

Still, none of these states are utilizing programs and resources that would help directly collect improper payments, such as the Treasury Offset Program (TOP).

Under the TOP program, the IRS allows states to withhold the tax refunds of people who have received improper compensation to recoup the lost funds.

Assistant Secretary of Labor Jane Oates told ABC News that outdated computer software at the state level is a major reason why so few states have been taking part in the program since it was started in January 2011.

"Our states have really let their infrastructure systems become obsolete," Oates said.  "So therefore, when new programs become available, their systems aren't able to handle them.  So it does require an investment on the range of millions of dollars."

At a time when cash-strapped states are slashing budgets because of deficits, it's an investment few states have been willing to make.

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