By the time he got his first unemployment check this week, Jesse Whitten had gone seven weeks without pay.
He filed for unemployment insurance on March 18 after losing his job with a painting contractor, and like potentially hundreds of thousands of Pennsylvanians, got complete radio silence from the state labor department. Phone lines were always busy, emails and online submissions went unreturned.
But he doesn’t blame the folks on the other end of the line.
“It’s just confusing and I don’t know what to do,” said Whitten, who lives in Delaware County. “But nobody could’ve predicted this. I’m sure they’re in my same shoes.”
Since the COVID-19 pandemic hit Pennsylvania in full force in mid-March, the discussion around the commonwealth’s struggle to keep up with unemployment claims has largely centered around its computer system, which is over 40 years old and suffers from technological limitations that were phased out decades ago elsewhere.
But on Tuesday, legislative officials seemed to finally acknowledge another root of the problem: when desperate workers like Whitten call there simply aren’t enough case workers on the other end of the line. No amount of computer upgrades can fix that.
The pandemic has generated nearly 1.8 million new unemployment claims in Pennsylvania, but the delays in processing them aren’t caused by the virus.
The system has been short-staffed for decades, according to officials, as the state has placed nearly all of its bets on technology as a means to reduce personnel and overall costs — despite clear indications from legislative staff and the PA Auditor General that this isn’t how it works.
During a state senate hearing Tuesday, Jerry Oleksiak, Secretary of the Pennsylvania Department of Labor and Industry, said the department had 1,410 unemployment staffers in 2011; by 2015, that had been cut to 977; and by 2020 that went down to 679.
Put another way, Oleksiak said, the department went into the current economic crisis — whose unemployment spike has been a full order of magnitude steeper than the last downturn — with less than half the unemployment staff it had during the Great Recession.
Oleksiak has said that about 70 retired unemployment claims workers have been called back, and the department is in the process of adding 250 new hires. But this will, once the full complement is brought on, return the unemployment division to its circa-2015 capacity, despite the department handling seven times the number of claims now as it was five years ago, according to federal data.
In late 2016, a funding cliff caused the DLI to lay off 521 unemployment staff and close three of its eight state service centers. I 2017, a funding extension allowed them to re-open only one and hire back 211 of those lost claims workers.
“If we had been able to keep them open and keep the employees there, we would have a significant amount of employees that could’ve been on the phones and answering unemployment compensation cases,” DLI Deputy Secretary Bob O’Brien testified.
“We staffed up to the max amount of people we could afford under that legislation,” O’Brien said. But if the DLI was back at its pre-2016 capacity, or its 2011 capacity, “the situation would’ve been significantly better.”
The state’s shortcomings in providing for its unemployment system revolve around a difference in understanding between some officials regarding what exactly technology can do.
Legislators have opined that the technological upgrades the state has funded in recent years should have reduced the DLI’s need for unemployment personnel.
“We were reducing the human cost for the advantage of technology,” Republican Senator Bob Mensch said during Tuesday’s hearing.
“The hope is as they get the technology in place they will need fewer individuals and rely more on the technology of the new system,” Democratic Senator Christine Tartaglione explained following the hearing.
But some legislators were not as optimistic. As Democratic Senator Tim Kearney said at the outset of the hearing, “we can’t approach technology as a panacea for appropriate staffing.”
Man vs. machine
The fixation of technology, as opposed to personnel, isn’t necessarily unwarranted given that, by all accounts, the DLI has bungled a years-long planned upgrade of its main unemployment processing system, needed to keep up with current computer hardware and make the interface more user-friendly for claimants and for case workers.
A 2005 contract with IBM for a $110 million upgrade had, as of 2013, ran $60 million over budget and 45 months behind schedule, according to a lawsuit the state eventually leveled against the computer technology company.
In 2013, with federal operating assistance for unemployment compensation declining, the state legislature agreed to divert a small amount of Pennsylvania workers’ per-paycheck unemployment insurance premiums — which would otherwise go into the Unemployment Trust Fund — into a new fund called the Service and Infrastructure Improvement Fund (SIIF).
SIIF funding, under a four-year appropriation, would help pay for call center staffing and technology upgrades. But when SIIF expired in late 2016, the DLI was still in the early stages of finding a new vendor to create the system upgrade that IBM couldn’t. The expiration created the aforementioned shortfall that led to layoffs.
In April of 2017, PA Auditor General Eugene DePasquale issued a report on the situation, finding that the DLI “did not use proper accounting methods to record SIIF expenditures that totaled more than $178.4 million.”
While improvements to claims processing had clearly been made between 2013 and 2016, DePasquale wrote, there was no way to account for how SIIF funding had contributed to those outcomes. At that time, the new unemployment system still wasn’t expected to go online until the summer of 2019 — and it still isn’t as of this writing, with Oleksiak saying in recent weeks that it’s now on track for October of 2020.
DePasquale’s audit also found another major problem. DLI would need $64 million from 2017-2020 in order to complete its technology modernization and software upgrades for the unemployment system; but it would also need another $90 million just to keep up with its basic operating and personnel budget, due largely to a pullback of the federal funding that had been provided during the Great Recession. This figure didn’t include the cost of bringing back any of the employees furloughed in 2016.
“There were concerns about the staffing levels. We certainly had concerns,” DePasquale said this week. “Clearly the federal money that was used to deal with the unemployment issue had a positive effect, but that was not replaced, which certainly creates some financial challenges.”
Further, DePasquale wrote that projected savings to the administrative budget due to technology implementation were in the range of 5-10 percent of a $182 million annual expense. All together — assuming personnel savings would kick in when the new software went online in mid-2019 — DePasquale still calculated unemployment operations coming up $143 million short through the end of 2020, just to maintain a status quo that was considered “not acceptable.”
In mid-2017, Senate Bill 250 was passed and signed by Gov. Wolf as Act 1, providing interim funding of $15 million. Later that year, House Bill 1915 was passed as Act 60, providing an extension of SIIF funding through 2020, but with a price tag of only $115 million.
The DLI had projected it would need $185 million, according to a fiscal note on the bill by senate staff — this would have allowed it to complete its system upgrades and bring back 175 caseworkers, as opposed to the 75 projected to come back under the more limited funded in HB1915.
The legislative agreement was an “exit ramp” that was “intended to wean the UC system off the SIIF, with the belief that tech upgrades will negate the need for such monies when completed,” senate staff wrote.
But the plan was just as described — a belief by the legislature that was not supported by the DLI, which “does not believe [technological upgrades] will negate the need for SIIF or other additional funds beyond 2021,” senate staff wrote in 2017.
The ability to deal with this discrepancy was couched in aspirational terms; in signing Act 60, Wolf wrote that the DLI “through the governor’s GO-TIME initiative, is using Lean practices pioneered in the private sector to eliminate waste and improve efficiencies of operations.”
The funding extension garnered some opposition, but largely from those who thought it was too generous. On Tuesday, GOP Sen. John DiSanto railed against Oleksiak for a “botched” system upgrade, but noted that he voted against Act 60 because the funding should have been more “short-term.”
DiSanto also voted against the short-term funding in Act 1, leaving it unclear if any alternative proposals ever existed other than simply allowing unemployment claims to go unanswered.
In an email to The Sentinel, House Bill 1915’s author, Republican Rep. Rob Kauffman, described the SIIF funding — which is paid by workers to secure their own insurance system — as “unreasonable subsidies” and that the legislation as passed should “provide the department with the resources needed to turn the system around and operate within their means, like most other states.”
Most other states do not, in fact, look at it that way. Senate staff noted in 2017 that 41 states provide supplemental funding for the operation of their unemployment systems; Pennsylvania appears to be in a minority in believing that technology will somehow allow it to survive on limited federal dollars alone.
On Tuesday, the Senate panel heard from number of experts as to exactly why technological upgrades aren’t a magic bullet for the cost of running an unemployment system. The critical issue is that unemployment eligibility isn’t black-and-white; work histories have to be verified, pensions and severances have to be taken into account, etc., which requires human workers.
The legal terms of receiving the benefit have a certain amount of room for interpretation, said Alex Halper with the PA Chamber of Business and Industry — those vagaries “require a more laborious process to go through.”
“When you’re talking about 1.7 million claims for a claims reviewer to go through, where there’s so much latitude and subjectivity, that slows things down,” Halper said.
The legal precedent surrounding the eligibility is fairly tight, said Julia Simon-Mishel, an unemployment benefits attorney with Philadelphia Legal Assistance, but it still requires an “individualized assessment.”
This has and will continue to become more of an issue due to the pandemic. Normally, workers must take jobs they are offered and cannot continue to collect unemployment if an employer reports that they declined work. But many workers may be reluctant to return to their jobs because they or a loved one has medical concerns.
This can mean that the worker could continue to collect unemployment, as they have not found “suitable work” under the existing legal standards, Simon-Mishel said, but it has to be taken on a case-by-case basis.
Oleksiak and his staff have said the same during recent press calls.
“It all depends on if there is a necessitous and compelling reason for that person not to return to work,” said Susan Dickinson, DLI’s Director of Unemployment Compensation Benefits Policy, earlier this week. “It really is a case-by-case analysis. There’s no blanket yes or no, it depends on that person’s situation.”
The department has been able to process roughly 70 percent of the claims it gets in a given week, Oleksiak and Dickinson have said. The department has also fully caught up on mailing out PINs for workers to file their biweekly claim; anyone who hasn’t received one likely has a specific complicating matter with their case that will need to be examined, Dickinson said.
“Prior to the pandemic any type of issue could take four to six weeks to address,” Dickinson said. “It certainly hasn’t gotten any shorter since the pandemic.”
For the 30 percent of jobless Pennsylvanians who are waiting on human eyes to look at their claim — eyes that were likely furloughed nearly a decade ago — it’s not much solace.
“Seven weeks of unemployment, that’s a lot of money, and I’m just sitting at home frustrated,” Whitten said last week, adding somewhat presciently “I just have a feeling I’m going to get paid when this is all over. Sure I’ll use it, but I need it now.”
The coronavirus has dealt a financial blow to millions of Americans and now April’s bills are coming due.
Email Zack at email@example.com.
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