Effort To Modernize State’s Unemployment Technology Comes Too Late For Pandemic

Apr 14, 2020

Credit Courtesy Bytemarks via Creative Commons

After Elise McCulloch lost work as a government contractor, she was relieved the state expanded unemployment to self-employed workers like herself. But that relief turned to frustration when she started the application process, loaded with dead ends and errors.

McCulloch tried to apply using four different web browsers on four different devices. The system would crash nearly every time.

It took about six hours of trying before McCulloch made it to the end of the application. But when McCulloch tried to submit it by clicking the final button, she was greeted by a popup and a spinning wheel that never loaded.

McCulloch is grateful to Gov. Andy Beshear and the state government for expanding unemployment coverage for people like her. She received her approval letter late last week. But the sheer frustration of the application process got to her. 

“I was angry, I was disappointed. And at the same time, the (unemployment) numbers kept rising, and it’s scary,” McCulloch said. 

Over 279,000 people have applied for unemployment insurance in Kentucky since the outbreak began. That kind of unprecedented demand would challenge even the most modern unemployment systems. But Kentucky’s technology is decades old, and it’s added another hurdle for both the state government and newly unemployed during an unprecedented disaster.

Kentucky’s Education and Workforce Development Cabinet has endeavored to keep up with the new demand, but has had to make do with a system deputy secretary for the Education and Workforce Development Cabinet Josh Benton described in an interview as “dated.”

“Any IT system is hard to change and make modifications to,” Benton said. “When it’s older, you have to prioritize what you are going to change first and move through and modify.” 

Benton said a newer system would have made some adjustments easier, but Kentucky has retained staff who are familiar with the system and was able to keep processing claims while adjusting to new policies and demand.

Old Tech, Record Need

Kentucky’s public facing system is known as Kentucky’s Electronic Workplace for Employment Services or KEWES. It was implemented in 2000 and runs on a proprietary programming language. But the backend system that processes all the claims and issues all the payments is much older: it was created and implemented in the early 1970’s and runs on the COBOL programming language.

Several other states run on COBOL, putting the few programmers who can code in this language at high demand right now.

It didn’t have to be this way. 

Modernizing the unemployment insurance systems has been on the radar of state governments since the last recession began in 2008. Kentucky is hardly alone in putting off the upgrade. Sixteen states have completed IT modernization projects for the systems underlying tax collection and benefit distribution, according to the National Association of State Workforce Agencies. Twelve states are in the process of such an upgrade. 

Kentucky is one of 17 states still in the planning phase as of September 2019.

But Kentucky has taken recent steps to upgrade the system. A fund to upgrade the unemployment software was created nearly two years ago, and legislation created a funding mechanism, but these upgrades can cost tens of millions of dollars. An upgraded IT system reportedly cost Florida $79 million in 2013, for example. 

The state began working to upgrade the system in January, Education and Workforce Development spokesperson JT Henderson said. A request for proposals soliciting plans to modernize Kentucky’s unemployment system was posted on March 6 — the same day the governor declared a state of emergency.

While the upgrade is needed, it’s too late to make changes that would improve response to the current pandemic, according to Michele Evermore, a senior researcher and policy analyst at the National Employment Law Project. 

Kentucky received $500,000 in federal grant money in 2016 to modernize its unemployment program, but Evermore says upgrading the unemployment IT systems is an expensive, daunting project for states. It’s a costly undertaking that doesn’t get a lot of attention during good times. 

“[Unemployment insurance] administration, including IT, is never a hot subject until it’s too late,” Evermore said. “Nobody cares about these systems until all the sudden everybody needs it.”

Federal funding for administering unemployment programs is based on each state’s unemployment rates in the previous year. Those rates were at historic lows last year, so Evermore says states have been caught unprepared for such a sudden influx of claims. 

In Kentucky, the state’s resources for handling unemployment claims were already stretched. Twelve employees handled unemployment claims before the outbreak.

Benton said the cabinet trained 300 new employees on Monday and will train another 200 on Tuesday, bringing the total number of employees close to 1,000.

“These things never happen as fast as you want them to,” Benton said. “We want to be very cautious that we don’t just have bodies, but we want to have people that understand the questions they need to be answering.”

An Upgrade, But Not Soon Enough

The flaws in the system behind Kentucky’s unemployment insurance administration have been known since at least 2018. The unemployment program was under scrutiny that year when then-Rep. Jim DeCesare, a Republican from Bowling Green, introduced legislation to slash the number of weeks people out of work could claim unemployment for and freezing the maximum benefit levels. The legislation met with intense backlash. Democratic Rep. Mary Lou Marzian of Louisville even issued an amendment offering an alternative title: “the Charles Dickens bill,” a nod to Dickens’ famously stingy character Ebenezer Scrooge. 

Ultimately, legislators left the benefit structure unchanged. But the final version created a fund to upgrade the technology administering Kentucky’s unemployment system.

During testimony in March of 2018, bill sponsor DeCesare said that the outdated system was causing problems in the administration of benefits, including a four-day delay in processing claims that previous winter due to problems with the software.

A portion of the tax employers pay into the unemployment trust fund is now directed towards the fund, authorizing up to $60 million to pay for the service upgrades.

The legislation calls for the Education and Workforce Development Cabinet to provide an annual report to lawmakers about the receipts and expenditures of the upgrade fund, but the Legislature Research Commission was unable to locate such a report.

Benton said the fund has been accumulating resources and the cabinet started putting together a request for proposal once the fund contained enough money to start the overhaul. “It’s enough to get the ball rolling, so once we select a vendor we can start development on the new system.” Benton said.

Bill Londrigan, Kentucky State AFL-CIO president, fought against the reductions in unemployment benefits contained in the original legislation. Londrigan said it’s no surprise that Kentucky’s unemployment system is dated, given such attacks on the unemployment system when former Gov. Matt Bevin was in office.

“The previous administration had their priorities in a completely different direction as far as the cares of people that work for a living,” Londrigan said. “And we’ve seen the result of it, a backlog and a need to hire massive amounts of people to make up for the shortfall.”

Londrigan says that unemployment insurance is a necessary safety net, and the expansion of unemployment eligibility and the governor’s daily encouragement to Kentuckians to make use of these benefits shows just how vital it is.

“People that are living paycheck to paycheck, which is the majority of our working folks right now, need unemployment insurance like never before,” he said.

Automatic Rejections a Problem

During the current pandemic, when over 11 percent of Kentucky’s civilian workforce has applied for unemployment benefits according to the conservative-leaning Tax Foundation, the problems with the unemployment system are even more visible.

Beshear said during a briefing last week that Kentucky has paid 87 percent of its unemployment claims on time since March 16. But the inflexibility of the underlying system has added uncertainty to an already uncertain times.

When the state extended unemployment benefits to groups not previously eligible, such as independent contractors like McCulloch, the Education and Workforce Development Cabinet was unable to quickly make changes to the system that would allow applications from the newly eligible workers to be automatically approved, Benton said.

So applicants who were previously ineligible were greeted with an automatic rejection notice. In some cases, the system even mailed rejection letters. At the same time, Benton said, state workers were processing the claims manually, behind the scenes. Benton and the governor kept urging people to ignore the rejection and promised: money is coming.

Benton said the dated system makes it difficult to make changes to the application process all at once, so the state prioritized gathering applicant’s information and processing those claims manually.

The system has now been updated, Benton said. It will still inform independent contractors and self employed workers that they were deemed ineligible for traditional unemployment insurance, but now it will also inform applicants that they are being considered for expanded pandemic unemployment insurance.

Calls to the unemployment office also skyrocketed along with claims to an average of 83,000 calls per day since March 16. Kentuckians looking for clarification struggled to get a hold of someone at the office who could help. 

While McCulloch was in limbo, waiting to learn if she would be receiving benefits, McCulloch called at 7:30 a.m., several days in a row before reaching a live person.

“Normally I’m a fighter. I would go into an office and say, ‘Listen, this is the issue. We need to remedy this,’” McCulloch said. 

But with offices closed due to social distancing, that wasn’t an option. 

“That was also hard for me, to be patient and know that I can’t control this outcome.”

Contact Jared Bennett at jbennett@kycir.org.