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WKYT Investigates | Kentucky’s antiquated unemployment system

Thousands of Kentuckians have had problems with the state’s unemployment system. Was it avoidable?
Published: Feb. 22, 2021 at 4:00 PM EST
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FRANKFORT, Ky. (WKYT) - A state audit report released earlier this month identified a dozen problems within Kentucky’s Office of Unemployment Insurance and the UI fund. Over the past year, hundreds of viewers have reached out to WKYT detailing their own problems they have experienced with it, and asking for help.

Several new bills filed in Frankfort hope to help modernize Kentucky unemployment and to try to fix some of the problems that thousands of Kentuckians have faced. But for many, it is already too late, as they find themselves in dire situations.

So how did we get here?

Part of the story is one of missed opportunities, festering problems and a system that analysts say was neglected for decades.

“We’ve let that system get cut back to the bone and beyond,” said Jason Bailey, executive director of the Kentucky Center for Economic Policy, “and that made it completely unprepared for the tsunami of claims that came.”

Kentucky’s unemployment system runs on a 1970s programming language, state leaders have said. Other states across the country have unemployment systems based on the same technology that have also struggled to deal with the changing criteria and high volume of claims throughout the coronavirus pandemic.

“Our system is so old, you’ve got to code it just to get the number of claims you’ve processed in a day,” Gov. Andy Beshear, D-Kentucky, said at a news briefing last month. “It’s unacceptable that we have a system like this for something so important.”

But Kentucky has had opportunities to fix some of the issues well before the pandemic.

Coming out of the Great Recession, the state passed up $90 million in federal incentive money to update its antiquated UI system. To get that money, Kentucky would have had to make some reforms, including expanding eligibility.

A task force appointed by then-Governor Steve Beshear to look at solvency and sustainability made 17 recommendations, including increasing the taxable wage base and reducing the percentage of pay that UI benefits replace. But regarding reforms to receive the incentive money, the task force’s final report concluded: “It is appropriate to address program expansion only after the structural imbalance issues are addressed.”

In a 2010 special session legislators accepted the task force’s recommendations and passed them into law. They did not make the changes needed to qualify for the $90 million to modernize the state’s UI system. By the time the deadline for that incentive money passed in 2011, Kentucky was one of only 12 states to pass up all funding, according to the National Employment Law Project.

In 2018 Kentucky lawmakers created a fund to raise up to $60 million to upgrade the state’s unemployment technology. Businesses’ unemployment taxes pay into the fund. The state had saved up $16 million by the end of 2019, according to the state’s most recent published report.

That same report showed projections that the state would be halfway to the $60 million goal by the end of 2020, but is unclear what if anything the pandemic might have done to change that math in the time since the estimates were made.

Right now the National Association of State Workforce Agencies IT Support Center shows Kentucky in the ‘acquisition’ phase of upgrading its systems. The Kentucky Center for Investigative Reporting says that a request for proposal was posted a year ago.

By all indications, though, the problems are not just with the technology but also with staffing. In 2017 the state closed unemployment offices and cut employees. By the time the pandemic hit, state leaders say the Frankfort unemployment office was down to 12 employees.

“The system’s been around since 1938, and it plays a tremendously important role in recessions,” Bailey said. “When we let it atrophy, through neglect and through lack of funding, we create the crisis like we’ve seen over the last year.”

Still, some officials say it was not just the infrastructure. The state auditor’s report shows what he calls a systemic failure of leadership, pointing to 400,000 unread emails and cut corners (such as turning on an “autopay” feature) that he says proved catastrophic.

“Everybody’s just frustrated. I know they’re trying to do the best they can, but this just really is not acceptable,” Auditor Mike Harmon, a Republican, said. “We’ve got a dated computer system, I know that we needed more individuals in place, but you could have the best computer system, you could have enough staff, but if you turn off those key controls, those key controls, you’re still going to have problems, you’re still going to have a heightened opportunity for fraud. So those decisions created additional problems that they’re still digging out of.”

During the pandemic, as in the Great Recession, Kentucky was forced to borrow money from the federal government to pay out unemployment claims. Kentucky took out an $865 million federal loan last summer. During the Great Recession, the state borrowed $972 million.

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