Layoffs hitting the fraud-fighting community

headlineArizona’s insurance fraud bureau is the latest victim of state budget cutbacks, losing nine of 14 staff positions. Across-the-board cuts in state government also are reducing the numbers of prosecutors and other law enforcement, according to our contacts in the state. Fraud in Arizona has been increasing of late — just like everywhere else — from rising claims involving fake auto thefts to suspect homeowners claims and scams by organized crime.

It’s a dilemma many states and cities are facing: more crime spurred by a deepening recession, but fewer dollars available to fight crime. The citizens of Arizona will pay for the cutbacks and then some in the form of increased insurance premiums in the future.

Part of the problem here is the awkward way the fraud bureau is funded. A bill was introduced in the state legislature to change the funding mechanism and shield the fraud unit from arbitrary cutbacks, but it appears that legislation is dead for this year.

Contrast Arizona with California, which is in even more dire straits. California government also is shedding jobs and recently required all state employees to take a two-day unpaid leave. However, the fraud bureau in the Golden State keeps chugging along, thanks to dedicated funding. As a specially funded agency, the fraud bureau is exempt from state furloughs.

Many, but not all, state fraud bureaus were set up to be shielded from the ups and downs of budget cycles as well as the political whims of governors and others in state government. But even these agencies may face cutbacks if economic conditions get much worse.

Our sympathies go out to the investigators in Arizona who have lost their jobs. Let’s hope it’s only temporary — and that it doesn’t spread to other states or to insurers.

Are you aware of other layoffs by fraud bureaus or by insurers? We’d like to hear from you.