Fox Valley Technical College
1825 North Bluemound Drive
Room E114 C&D
Appleton, WI 54912-2277
Management: James Buchen, Earl Gustafson, Daniel Petersen, and Ed Lump
Labor: Dennis Penkalski, Robert Lyons, Red Platz, and Michael Bolton
Chair: Greg Frigo
Department staff present: Hal Bergan, Bob Whitaker, Tom Smith, Carol Laudenbach, Dick Tillema, Terese Wojick, Brian Bradley, Carla Breber, Jean Foust, and Johanna Wilbert
Others present: Steve Krieser of Sen. Reynolds’ office
Frigo started the meeting. Frigo noted that Buchen will be arriving later and that Oyler and Neuenfeldt were unable to attend. Frigo stated that Whitaker had been the acting administrator prior to Hal’s appointment while also serving as the director of one of our unemployment offices. He has since been appointed the Deputy administrator of the unemployment insurance division.
The minutes from the May 25th council meeting were reviewed and approved.
Frigo then discussed future agenda items for the advisory council, encouraging the council to let the department know about any topics that they would like research on, particularly those that may be more complicated and may require more research.
Frigo noted one new issue that will have to be added to the agenda. There is a new federal law change that just went into effect that relates to SUTA (State Unemployment Tax Dumping). It is designed primarily to prevent employers from creating new accounts or moving some of their employees to another account to reduce their taxes. It places restrictions on what states can do in making those types of changes to hopefully prevent employers from manipulating the system to get lower tax rates. The department has just begun to look at this law change to assess the impact on our program. The federal law does require states to conform to the new federal law. The act contained another change that likely will not require a law change. This change allows the department to access the national new hire directory of data, which will help with collection efforts and eligibility verification. The department will look at both changes, assess the impact and then report to the council exactly what must be done conform with the federal law change. Frigo noted his understanding was that the department had to do the law change within this bill cycle so that it would be effective by 2006.
Lump noted that a number of people who testified at the last hearing were told that the department would look into some of their cases and asked whether there was a way to determine the result of those inquiries. Frigo stated that the department could provide that information.
Frigo then discussed the suggested timetable for this bill cycle. He stated it was basically the typical timetable that had been used in the past and pointed out that the department must prepare the financial outlook report and present it to the governor and legislative leadership January 15, 2005 and then to the full legislature in February 2005. The department is currently working on that and hopefully will be able to update the council if a meeting is planned in the later part of this year. The department also prepares a report on the activities of the council that is part of that outlook report, which will be shared with the council. Frigo noted that the council should let the department know of anything they wanted changed or added in the report on the council’s activities. Frigo noted that the department will update Lump’s title.
Frigo discussed the current bill cycle, stating that the department has developed a tentative list of the law change proposals that we are going to present to the council. The department is working on specific proposals that will be presented as they are completed. He hoped the council would be able to present their proposals at a council meeting in April so the department could complete the process of developing analyses of those proposals by June 2005, and then get the bill drafted in July 2005. Once the council has reached agreement on the law changes and even prior to the bill being drafted or completed, we should plan to do briefings with legislators that are interested in the bill to make sure that they are aware of what is going on. Frigo stated that Sen. Reynolds and Rep. Nass should be kept informed of the bill progress so there are no big surprises at the end, and that Rep. Nass would like the bill at least 60 days before it is introduced to the full legislature.
Frigo next discussed UC eXpress. Bergan described the issue in more detail and discussed the developments since the last council meeting, stating that the department discussed possible strategies for dealing with the problems that have been arising and told the company that if they fail to meet the deadlines then the department will contact the employers to get the information from them directly. This was done in part on the basis of research showing that the company was failing to respond in a timely fashion about 44% of the time whereas most employers responding on there own behalf only failed to respond about 12% of the time. A letter was sent to the company citing this finding and informing them of our new policy. This letter also stated that if the situation did not improve, other steps would be taken. The company was given the individual decisions so they could go back and replicate the research and find out for themselves what had happened. The department has not heard back from them. Bergan noted he recently attended a national meeting, where various other states described experiencing problems with the company and discussed various strategies they have used to deal with the problem. It was agreed that the states should act collectively in addressing this problem and to invite UC eXpress to the next meeting of the UC directors in February. Bergan noted the department was going to conduct further research to see if the new policy had resulted in any improvement.
Penkalski asked if any other state has imposed a penalty on the company yet. Bergan stated that he thought Colorado said that if the company’s agents do not appear at hearings or if they are not timely in the adjudication process they are not eligible for the appeal process. Bergan said he intended to talk with the UC directors in other states to get an idea about what their individual strategies have been.
Discussion ensued. Bergan stated employers will be informed of the company’s failure to timely provide information to the department on a case by case basis. He stated the next step the department intends to take is to simply ignore the company as an employer agent and go directly to employers for the needed information. Frigo stated he believes the company will say that it is not their fault because employers are failing to provide the company with the information it needs in order to respond to the department’s requests for information. In that case, it will be up to the find a way to resolve its communication problems with employers.
Bergan then updated the council on federal funding. The department received its administration grant notification, and once again the grant has been cut, losing $2.5 million, or 5%. Wisconsin was in the low group, in the stop loss category. Bergan is working on trying to get a better understanding of the federal formula and how it works. The over all federal grant was slightly smaller, but within the distribution to the states there were still winners and losers. Some states gained as much as 4.6% while others lost up to 5%. Bergan thought 13 or 14 other states received a similar 5% reduction. Bergan said the department needs to understand the formula used because part of it is about how we count things. He also stated we need to note any performance issues that are reflected in the grant and spend more time getting those performance issues in hand.
Frigo asked, Bergan stated that last year’s reduction was about $ 3 million, which also represented a 5% reduction.
Buchen asked if the formula was tied to how much activity we have. Bergan noted that the formula is driven in part by that. He stated that it is driven in part by performance on individual categories in terms of timeliness and so forth, some of which we do well and some of which we do not do as well. Bergan noted that the department has no idea what the grant amount will be each year until the notification is received, and that DOL generally could not shed any light on the way the process worked.
Frigo noted that part of the problem is that DOL only has limited funds to divide among the states. The new formula being used was designed to deal with this by determining the amount of funds each state needs. However, DOL often does not have sufficient funds to meet this need and essentially resorts to the old formula to determine each state’s grant. The new formula was supposed to convince Congress that states should get funded for what they needed but for a variety of reasons Congress hasn’t provided that funding.
Laudenbach updated the Council on EnAbles. The department is currently working on the first public release, some of which has already gone into production. This release is quite technology driven, involving imaging documents, scanning, some data capture, and electronic file and electronic workflow. This piece is being released first so that the department can start building the other pieces on top of it. The department started with the forms that are most used, the wage verification report and the separation report. The department has already started with the new wage verification reports so employers are getting the new reports, although the new reports are initially only being used to do the final testing on the scanner, imaging systems and workflow to make sure everything works. Implementation will likely occur in November, at which point those two forms will be scanned when return to create an image that will be electronically routed to who ever needs to take action on it.
Some important enhancements include wage changes, which will be done automatically instead of being manually keyed into the system when an error is found, and the system will process that correction to tender either an extra check or an overpayment and to collect that overpayment. The project is currently under budget, but it is also about a month behind. If the first release is not ready for implementation by mid November it will not be implemented until February because of the winter workload. A main cause of the delay is the diversion of state staff, state programmers have just not been able to spend the kind of time needed on this project. If it appears that the new system will be hard to learn, implementation will be delayed until February to avoid requiring staff to struggle with a new system during the winter rush.
Bergan provided an update on Suites. He stated that the project has experienced problems with meeting deadlines and has had some cost overruns. A handout was provided detailing some aspects of the project. Early on, the department had to decide whether to continue the services of Accenture, the vendor on this, or whether we had the resources to continue internally with our own IT staff. After consulting widely, it was decided to keep Accenture involved, which required some contract reconstruction. The bottom line result was an overall number that’s about $5 million dollars more than what was initially planned. Virtually all of this can be funded through existing revenues, mostly from revenues carried over from fiscal 04 to fiscal 05, and will not cause any particular additional pressure on the trust fund. About $2.1 million of that goes to Accenture and we have reduced the size of the Accenture staff so that we have only the people that are most crucial to the project on the project manager side and the more heavily technical people. We have added to the resources that are available from BITS.
The delay in Suites has been partially responsible for the staff shortages that have lead to the Enables project falling behind schedule. There were some earlier amendments that added perhaps $100 to $125,000 to the contract. This change is amendment 4. It has not been finalized yet, although we are very close in our conversations with Accenture to having this in its final version. The Accenture staff will be reduced to 13 and Accenture will phase out of the project from December to February. The project will be divided into three releases, two large deployments. The wage part of the system will be deployed September 18th. Tax will be deployed in June 2005. The main reasons for the problems encountered were the unanticipated complexity of this project and the fact that there were a variety of transitions within both the Accenture staff and within the BITS staff and within the leadership of Unemployment Insurance. We have now hired a project manager. The amendment also expands the project control board to review and approve all change requests that require more than nine hours of work by the computer experts. This board will meet frequently to ensure the project is successful. The Suites staff have been moved back to GEF 1 in part because there is space available there and in part because we wanted to reintegrate the BITS participants in this project along with the Accenture participants and that saved us some money.
Buchen commented on the use of special Reed Act funds for this project and asked if we had to repay the funds. Frigo stated that Buchen was recalling a discussion related to Enables. Buchen then mentioned the establishment of a special assessment to help fund Suites and asked if that assessment would be extended. Frigo stated that it had been extended to help fund Enables. Buchen asked if the added cost would be covered by Reed Act or special assessment funds, Bergan noted carryover funds from the previous fiscal year would be used to cover the added cost.
Petersen asked who owns the intellectual property rights on this project. Bergan stated the state owned it, but that Accenture had a large stake in the project.
Buchen asked if the archaic nature of the previous platform contributed to the problems with the project. Bergan stated that factor contributed to the difficulties, but also noted that a lot of new technology was used that have never been used before, so there was a learning curve to deal with.
Tillema discussed the DOL proposal that the FUTA tax be reduced and states fund their own administrative expenses. The proposal had been introduced previously, but the council had questions which Tillema would address. Tillema stated there are 3 accounts in the federal trust fund, a loan account, an extended benefits account, and an administration account. Tillema introduced a pie chart showing that a small amount of federal funds is held in reserve for administration. The majority of the funds is set aside for the loan account and benefit extensions, up to $18 billion in each fund.
Buchen asked if once the maximum was reached, the funds came back to the state. Tillema stated that if the maximum is reached, then a Reed Act distribution occurs.
Tillema then introduced a bar chart showing the current levels of federal funding, stating that there is about $1.6 billion dollars in the administration account, which is full. The loan account is essentially 61% full and the benefit extension account at this point in time is about a third full. So substantial amounts have been paid out in benefit extensions that would be TEUC and extended benefits over the past couple years so that there is less money in that fund.
Tillema then introduced a table that summarized the amount currently coming into the fund and the amount that would come in under the proposed law. In the five-year period shown, about $33.7 billion would come in under current law while $42.8 billion would flow out. Under the proposed law, $8.5 billion would come in and $23.9 would flow out. States would be paying for their own administration.
Tillema stated he looked at data from the 22 year period from 1981 to 2002 to determine whether states get back from the fund what employers pay in FUTA tax. Because there is a reserve fund, Tillema explained that it would be expected that some of the funds paid in would be retained in the reserve fund and not paid back to the states. Tillema mentioned other facts that must be taken into consideration. Tillema’s calculations showed that 20 states received more in FUTA tax than what was paid in. He noted that the basic principle underlying FUTA is that the amount that comes back to the state is proportional to the taxable wages of the state. So if Wisconsin has 2% of the taxable wages they get 2% of the fund back. If that distribution were to take place then there would be only 15 states what would not get back what they had put in, even if the fund were distributed and sent back according to the FUTA Reed Act principal. Frigo asked if Wisconsin contributes more than it receives. Tillema states it does, but if the fund is distributed then we will get back more than we have paid in.
Buchen asked if Wisconsin would be responsible for paying benefit extensions under the new system. Tillema stated that the DOL proposal does not address that question, but there is an insufficient amount set aside for benefit extension and so either there would have to be federal general revenue put in or it would be left to states.
Buchen asked about a FUTA tax increase that occurred in the 1970’s, and what those funds were designed to pay for. Tillema noted the increase was started because federal general revenue was being put into the extended benefit program due to the recessions of 72 and 76 in particular. There was an insufficient amount in the Trust fund even considering all of the accounts. That increase has never been repealed and is now used to support the various programs that are out there, the administration benefit extensions and the loan fund although once the loan account reaches a certain size it is self funding in the sense that states will be paying back the borrowed amounts plus interest.
Buchen asked about the deadline for submitting comments on the proposal to DOL. Tillema stated there is no deadline and that it appears there is no immediacy surrounding the proposal.
Bergan noted that there did not appear to be much enthusiasm for the proposal at the national meeting he attended. Many felt a national program provided consistency for the state programs. Discussion ensued. Penkalski noted that it did not appear mandatory for states to make this change even if this proposal eventually became law.
Lump noted that many employers generally would like the idea of paying less taxes due to no federal tax, especially since many do not know what the tax is used for. He suggested employers be educated as to the benefits and pitfalls of the proposal so that they could come to an informed conclusion about the proposal. Discussion ensured regarding educating employers and selling them on the idea that the state tax would likely have to increase to cover the administrative costs formerly paid by federal funds. It was noted that the federal government was making the states look bad by cutting federal taxes but forcing states to raise taxes.
Penkalski asked what it would cost to for the state to administer the UI program itself. Frigo noted the cost would be about the same as the additional revenues earned from the state tax increase, but noted there are many unknowns. Tillema noted the outcome would depend on extended benefits, which is a big unknown. Frigo stated the department would do more work on the issues raised
Laudenbach presented a report on the DOL demonstration grant. Noted that most
states have moved from having local UI offices to having telephone initial
claims, which has in a sense detached UI from the employment services. DOL has
noticed this and believes that there may be not only a physical disconnection
but perhaps a disconnect between the claimant who is out of work and the agency
that is suppose to help them get back to work. That is where this grant starts.
DOL wants to investigate ways of putting a connection back together or
reinforcing that connection. About one year ago DOL put out a call for states
that were interested in a grant of $600,000 in order to study a way, or ways, of
strengthening that connection between the UI remote claim and the employment
service or one stop centers. Wisconsin was awarded that $600,000 in order to do
a demonstration project. What we came up with was a notion of demonstrating how
providing intensive job seeking services would indeed get people back to work
faster. We have picked 3 different sites, with 2 of them in Milwaukee. Milwaukee
is the center of most of our unemployment so it needed to be addressed. We also
wanted to not just look at an urban site, so we chose the Oshkosh area. The
program looks at those individuals who, based upon the statistical model, are
most likely to exhaust their benefits without returning to work. The first thing
we did was to set up an automated system that would automatically share the
information that unemployment gets on the initial claim with the employment
service so that they could begin a process of collecting that information they
need to help get a person back to work, what we call a work registration. They
then contact all of those people. One hundred percent of these claimants now
come in whereas without out the grant there were only enough resources to serve
about 20% of that pool. All of claimants will come in for an orientation and
will be seen by an employment service specialist. They are then going to be
divided into two other groups. One group they are calling light service. They
are going to talk to them a little bit about barriers to employment. What kinds
of things they might want to do. Maybe, hopefully give them a job referral. Give
them some idea of where they might look for work. The second group, which is,
called group B. They actually come in for three weeks of an advanced job
Unemployment comes back in too so that one of our adjudicators, one of the employment specialists who has been working with these folks meets with each person individually and talk about their plan.
There are several goals of this program – the biggest is for the claimant and the public to see that unemployment insurance is concerned about getting you back to work too. The way we are going to see if this model is successful is to compare the re-employment rate of the people at the demonstration sites with that of a similar population that is still being identified in the rest of the state. We are hoping that these folks are not going to real low paying jobs, transitory jobs, temporary jobs, those kinds of things where they are likely to end up back with us on unemployment. But rather that they are going to the better jobs in the economy. That they are going to be employed longer and on unemployment less in the future as well. So that is what it talks about in goal number 4 the growth in industry. We have some soft goals. We hope that their satisfaction rate with our services is better. We are hoping that they have a better understanding of what is available for them at the one stops. We are really hoping we can spread the word about what kind of assistance is available at the one stops to help people become re-employed faster.
The department is just getting started with this project, so there are not a lot of results to report yet. The DOL has completed a site visit and will provide some hints for what we might be able to do better. A third party, Berkley Policy, does the evaluation, and they make sure that the data coming out of the project is such that it can really tell us not only whether this is better, but how much better.
Frigo asked if claimants were required to participate. Laudenbach said they were. Frigo asked what happened if they did not participate. Laudenbach stated they will lose their benefits if they do not have good cause for failing to participate and noted that the department is trying to get people to take an active, willing role in reemployment services.
Foust stated the results have been as expected, the A group would like to do more things at the one stop center and the B group doesn’t want to come back.
Penkalski asked if the claimants were still required to perform a weekly work search. Laudenbach said they were, but that the one stop center activities satisfied this requirement.
Platz asked how many participants there are, Foust responded that the first group was larger than had been anticipated, with about eighty people. Laudenbach noted the department had been hoping to have about 20 claimants for intense services and then the rest with some light service.
Platz asked about the criteria used to determine if someone is going to exhaust benefits. Laudenbach stated 5 or 6 criteria are used, including the county of residence and the unemployment rate there, educational level, and the industry from which the claimant has been separated.
Platz stated that participation was not really voluntary since claimants were required to attend. Foust noted that the focus is on providing a helpful service to these claimants.
Buchen asked how long the program runs. Laudenbach stated the entire project is 30 months, with up to an 18 month implementation. The grant of $600,000 will last about 15 months, after which there will be an evaluation period. To maximize the grant funds, all administration and planning costs are being paid from state funds.
Wojick provided background for some of the letters pending before the council. The first letter came from Geoffrey Liban, the CEO of Heresite Protective Coating. He expressed concern over benefit charges to his account where a claimant lost his fulltime job at another employer due to foreign competition and was eligible for dislocated worker training and potential assistance. The individual enrolled in a course of approved training. The claimant was not required to actively search for employment or be able and available for employment on the general labor market because he was in approved training. He also would not be required to perform all the work available from a current employer or to accept any offer of work made to him. The employer asked if the claimant could be expected to accept an offer of work while in approved training. Wojick explained at the time the letter was written, the claimant was free to reject offers of work. Under the current law, if an offer is rejected because of school, benefits are allowed but the employer’s account is not charged. Wojick discussed the claim history of the claimant involved. The claimant qualified for a second benefit year, and the employer was liable for a share of the benefits in both benefit years. The employer was frustrated because he had work available for the claimant, but the claimant was not required to accept that work and could still get benefits. Discussion ensued regarding how this law worked and how the claimant was able to qualify for a second benefit year.
The second letter came from Mary Kay Hall, president of Nelson Brothers and Strom Co. She was concerned about how a claimant can qualify for back – to – back benefits years and the same employer is charged for both benefit periods. She wanted to know how the claimant qualified for consecutive benefits years at the maximum benefit rate. The second benefit year was not the result of extended benefits, but resulted because the employer first reduced hours, allowing the claimant to collect partial benefits. After the claimant exhausted, he qualified for TEUC. He then qualified for another year of benefits based on the wages earned while he was working reduced hours and claiming partial unemployment. The employer was charged for both benefit years because it had employed the claimant after the start of the first benefit year. It was noted that this might serve as a disincentive for employers to re-employ a claimant after the start of a benefit year. The council felt this issue should be pursued further.