2. News Room

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FOR IMMEDIATE RELEASE
Wednesday, December 16, 2020
CONTACT: DWD Communications, 608-266-2722
On the Web: http://dwd.wisconsin.gov/news/
On Facebook: http://www.facebook.com/WIWorkforce
On Twitter: @WIWorkforce

Joint Legislative Audit Committee

Wednesday, December 16, 2020
10:00 AM
State Capitol, 412 East

Testimony of Department of Workforce Development's Transition Director Amy Pechacek, Division of Unemployment Insurance Interim Deputy Administrator Jason Schunk, and Director of the Bureau of Tax and Accounting Tom McHugh. Chief Information Officer Neeraj Kulkarni also appearing.

Transition Director Pechacek

Good morning and thank you for inviting me to speak with you today about the three audits that the Legislative Audit Bureau performed in recent months on our state's unemployment insurance (UI) program.

I am Amy Pechacek, the Transition Director for DWD until a new Workforce Development Secretary is named. I am also the Deputy Secretary of the Department of Corrections. With me today is Jason Schunk, UI's Interim Deputy Administrator, Neeraj Kulkarni, DWD's Chief Information Officer, and Tom McHugh, the Director of the Bureau of Tax and Accounting.

Most of my background is in crisis management, risk mitigation, and administering complex public operations, including benefit programs. As has been true with most of the organizations that I have been brought in to help lead through crises, it is clear to me that the operational challenges at UI have grown over time. While the dedicated staff were able to work around these issues during times of stability, the impact of the COVID-19 pandemic on our state has exposed long-standing challenges that proved too much to overcome in the timeframe needed to best serve the people of Wisconsin.

Despite the support of Governor Evers, our sister agencies, administrative rule waivers, legislative assistance through Act 185, and expedited contracted support, dealing with complex eligibility laws and outdated IT systems has led to substantial challenges over the past nine months, including the issues that we are here to discuss today. My top priorities over the last few months with the Department have been to clear the claims backlog and to implement short-term, cost-effective technological solutions that will improve operational efficiencies until a full update and modernization of UI's benefits and tax systems is in place.

Of course, I'm not doing this alone. UI staff are incredibly dedicated to the program's mission. They understand the importance of these benefits to individual families and to the economic stability of our state. They, along with the nearly 1,300 others who have been hired by, reassigned to, or contracted with DWD over the past nine months have steadfastly worked to make accurate and timely determinations, despite all the obstacles they have faced. And while they know their work is not done, they have made significant progress. Between March 15 and December 12, 2020, UI has paid 576,650 individuals over $4.55 billion and has resolved 95.68 percent of the 8.7 million weekly claims filed.

While much has been accomplished, getting there has not been easy. There have been significant challenges, as have been reviewed and reported to all of you by the Legislative Audit Bureau.

Audit Report 20-5: Overpayment of Certain Unemployment Insurance Program Benefits, Department of Workforce Development

The first report, Audit Report 20-5, analyzed an incident in April that resulted in an overpayment of Federal Pandemic Unemployment Compensation benefits (FPUC). LAB had made three recommendations, which the Department has completed, to help ensure there are not similar issues in the future.

Director McHugh will discuss this further.

Director McHugh

Hi, my name is Tom McHugh. I'm the Director of the Bureau of Tax and Accounting, which is responsible for overseeing the UI Trust Fund, issuing benefit payments to eligible claimants, and recovering any overpayments, among other activities. As you may know, UI benefits are paid out to claimants by either direct deposit or by loading the benefits onto a debit card.

Every night, our system creates an electronic payment file that says how much is scheduled to pay which claimants. We then send that file to U.S. Bank, which is who we contract with to disburse program benefits. U.S. Bank then distributes the benefits accordingly. The last ACH window for the day is at 10:30 p.m. If the payment files are received by 10:30 p.m., then all claimants will receive their UI payment the following day. If we miss the 10:30 p.m. window, claimants who have their benefits direct deposited into a U.S. Bank account or on a U.S. Bank debit card receive payments that first day, while those who use other financial institutions receive their benefits the following day.

One of the five new federal benefit programs that the Department has programed and deployed this year was the Federal Pandemic Unemployment Compensation (FPUC). FPUC was a new temporary supplemental benefit program created by the CARES Act that offered claimants an additional $600 per week in UI benefits between the weeks ending April 4 and July 25.

DWD began disbursing FPUC benefits on April 28. The night of April 29, DWD issued a payment file to U.S. Bank for $79 million in UI and FPUC direct deposit payments to 39,181 claimants, including, for the first time, some retroactive FPUC benefits dating back to the week ending April 4.

The next morning, April 30, around 8 a.m., a claimant reported receiving duplicate FPUC payments. In reviewing the situation, we realized there was a programming error that resulted in duplicate payments in the file, which was not discovered during testing. We contacted U.S. Bank to reverse all direct deposits that they had made that day.

We ultimately determined that 20,135 duplicate payments were included in the file, which totaled $19,556,881.25. However, only payments to claimants with U.S. Bank accounts had been deposited before we learned of the error. Claimants who do not bank at U.S. Bank were scheduled to receive their direct deposit the next day, May 1. Therefore, the April 30th reversal of the erroneous payment file canceled the UI and FPUC payments to those claimants and there were no deposits for those claimants. Deposits at U.S. Bank totaled $4,848,127 for 2,340 claimants. When the U.S. Bank deposits were reversed, all but $115,387 was recouped.

The Department understands how much people depend on their benefits, and how, even one day can make a difference, so we worked with U.S. Bank to redistribute retroactive FPUC benefits so that all claimants received benefits the morning of May 1. Unfortunately, after redistributing those benefits, additional issues were revealed in the payment file that day.

Since then, May 1, DWD has implemented a reconciliation process to compare payments on the database to the payment file before and after transmitting the payment file to make sure this issue does not happen again. In addition to this practice, DWD adopted the Unemployment Insurance Benefit Payment Processing Integrity Policy, which sets expectations and procedures for all staff responsible for managing, supporting, and reviewing daily payment processing tasks. As recommended by the LAB, the Policy was updated to require that payment files include all designated benefit payments for each day.

It did take several weeks of analysis to determine the full impact of the issues related to those payment files and to implement the appropriate corrective solutions. As we reported on August 14 in response to Recommendations 1 and 2, we ultimately determined that, between April 28-30, $2,428,956 was overpaid to 3,980 claimants and $986,592 was underpaid to 3,354 claimants. (That averages to be about $610 in overpayments and $294 in underpayments per person.)

We have issued payments to all those who were underpaid and have issued overpayment notices to all who were overpaid.

Audit Report 20-13: Unemployment Insurance Call Centers, Department of Workforce Development

Transition Director Pechacek

The next report we are here to discuss was released in September about UI call center operations. The report focused on call center data through July and how the Department dealt with the incredible call volume in the early weeks of the pandemic hitting Wisconsin. LAB issued three recommendations, aimed at improving administration of the program and reporting performance metrics.

Since July, the Department has continued to see very high call volumes when compared with recent years. Last week we made and received nearly 60,000 calls as compared with 8,400 the same week in 2019. Though we have seen a recent spike in calls due to seasonal layoffs, last week the Alorica call center still experienced wait times of under one minute and Beyond Vision was answering in slightly less than 5 minutes.

While we are still averaging over 50,000 calls a week, obviously the highest call volume came this spring. Between March 15 and March 21, the Department received a 982% increase in initial claims filed over the previous week. Compare that with what happened during the Great Recession. The highest numbers of Initial Claims and Weekly Claims filed during the Great Recession, 36,000 and 194,000 respectively, occurred in January 2010, more than two years after the Recession began in December 2007. In contrast, DWD saw this year's peak of 111,000 initial claims filed within the first week and the peak of 321,000 weekly claims within six weeks of the pandemic hitting Wisconsin employers.

While DWD had in place both a "surge plan" to respond to seasonal spikes in claims and a "recession plan" to respond to large yet typically gradual increases in claims (similar to that seen in the Great Recession), neither were sufficient nor predictive to deal with the unprecedented number of UI claims being filed in such an extraordinarily short period of time.

As a reminder, on top of the demand, UI also had to respond to many state and federal law changes and deploy five new federal benefit programs that offer much-needed support to Wisconsin residents. With so many people filing and so many program changes, DWD was inundated with callers in the early weeks. Interim Deputy Administrator Schunk will provide more information about this situation.

Interim Deputy Administrator Schunk

Hi, I'm Jason Schunk. For some background, when I started with the Department and through 2013, most UI applications had to be filed over the phone. The Department continued to expand online filing options over the next several years.

In 2017, the Department adopted a policy that required online filing. Typically, the only exceptions we allow to file by phone is if a person is unable to read, is unable to access the internet due to a legal obligation, has a disability that they believe prevents them from filing online, and/or if the individual is a non-English speaker. Claimants who do not have access to the internet or lack computer skills are directed to their local job center or library to file online. However, due to the many local access points closed due to COVID-19 and the lack of reliable residential internet connectivity across all regions of the state, DWD has been granting exceptions to those with limited access to the internet or who have poor computer skills.

Besides calling to file a claim, individuals also call with questions about how to file, ask clarifying questions about the application, find out about the status of their claim, or to provide us information we requested to determine their eligibility.

Many claimants impacted by COVID-19 have never applied for UI before so, understandably, had many questions about the program and the application process. Even people who had filed before had many questions about the new programs and changes passed by the federal and state governments. This spring, UI received over 5.7 million calls in one week, which is about a 20,000% increase over 2019's busiest week.

The DWD Telecom team, with the help of DOA, spent the last two weeks of March enhancing our telephony systems to minimize the disruption in our ability to serve claimants on the telephone. Within 10 days, they increased the call capacity of the DWD Call Center by more than 200% and made it possible to accept 690 simultaneous calls.

Along with increased system capacity, we needed a lot of people to answer the phones and process claims. While the high number of calls was probably the most visible issue at the start of the pandemic, we knew that we would have to bring on a lot of staff in all areas of the division to investigate eligibility issues, process documents, issue payments, etc.

By March 30, DWD had temporarily reassigned 62 non-UI DWD employees to assist. By the beginning of June, DWD had more than doubled its total UI staffing, including DWD staff, contracted vendors, and temporary reassignments, from just over 500 on March 15 to more than 1,100 on June 1. By the end of June and since then, UI's total staffing has increased to over 1,800 people. This required considerable effort and coordination to achieve, especially given the added challenges faced by the Department with its workforce transitioning to work remotely.

UI staff are subject to strict data security compliance requirements under many state and federal agencies so DWD had to offer the same level of protection to the public in staff's home networks as is available in the highly regulated state network. Safely and successfully onboarding so many new staff also required creative training programs and approaches.

UI contracted with two call center vendors: Alorica for regular UI benefit questions and claims processing and Beyond Vision to handle Pandemic Unemployment Assistance (PUA). We onboarded call center staff in waves to more efficiently train and coach them early on. For the first several months, DWD staff members were focused on training and taking the more challenging calls; however, as more vendor staff came on board and became more experienced and familiar with the issues, we were able to transition our staff to other areas of UI operations.

We have continued to work with Alorica and Beyond Vision to improve the quality of the caller experience. As LAB reported and as indicated in the Statements of Work for the Alorica and Beyond Vision contracts, DWD initially intended to collect information regarding the "number of first call resolution[s]." However, we discovered that this metric did not provide us with useful quantitative and qualitative data for various reasons: First, we were not tracking whether calls and issues were unique. We knew that claimants were calling multiple times regarding the same issue. We also found that it was difficult to define when an issue was resolved due to the variability in issues and the perceptions of the claimants. Finally, it was difficult to validate whether the definition was being applied uniformly, as the number of first call resolutions would need to be reported based on subjective judgements of the call agent following each call.

Instead of tracking whether an issue is resolved after the initial telephone call with an individual, DWD has been tracking whether claimants receive accurate information in response to each issue identified by claimants. We are tracking the quality of the agents under the service level agreement for contractor performance that we incorporated into each contract. We measure agent quality by using a quality assurance process that includes agent monitoring and coaching for various call types.

Beyond ensuring the quality of the calls, since August, UI has been able to accept nearly all calls into UI call centers, which have held fairly steady at around 50,000 calls per week. As reported to the co-chairs last week, out of the 57,977 call to the help centers, only 261 calls received a busy signal and 20 received a message saying that the queue is full. That is about .005 percent. While obviously rare, it happens when we receive an influx of calls all at the same time – typically first thing in the morning. As was recommended by LAB, we did update the way we report call metrics to you beginning September 8, so you can more specifically see how many calls receive a busy signal versus a message that says the queue is full.

The Department has also developed a records disposition authorization (RDA) for data associated with telephone calls to the UI call center. We submitted it to the Public Records Board for consideration last week.

Audit Report 20-28: Processing Certain Unemployment Insurance Claims, Department of Workforce Development

Transition Director Pechacek

Finally, earlier this week, LAB released its latest audit, Report 20-28, which focuses on the time that it has taken to resolve claims throughout the pandemic. As we shared in our response letter, we will update our PUA manual to comply with Recommendation 2 and we are also working to contact additional individuals who may be eligible for PUA to comply with Recommendation 3.

We have compiled a list of every claimant who was denied regular UI benefits between January 27 and April 27, 2020, who have not already filed for PUA. (The first payable week of PUA is the week of February 2 and the Department had begun notifying everyone who was denied regular UI about their potential eligibility for PUA on April 27.) The list consists of 270 people. We intend to mail them all letters this week.

We very much understand that every single day matters to folks waiting to hear whether they are eligible for benefits and when they actually get paid so we will certainly use the report's analysis to help make more timely decisions. DWD is steadfastly working to resolve all eligibility determinations so that we can resume our timely administration of claims while also implementing long-term changes to prevent and prepare for any similar crises in the future.

We have now met the standard for timely processing of PUA Claims, as we are effectively working on all issues as of the week submitted. Any completed claims that are not worked on are due to reasons such as pending appeals for regular UI, identity issues and potential fraud, or other reasons that do not allow for the immediate processing.

We continue to improve our timeliness of resolving regular UI claims as well. There are currently about 35,000 individuals who have had to wait more than 21 days to have their claim resolved. Eight weeks ago, that was 68,000. While we have cut that backlog down by nearly half, we are going to keep working through these remaining claims until we are caught up.

In the short-term, we have partnered with Google Cloud to provide expedited review of UI and Pandemic Unemployment Assistance (PUA) claims to assist in processing claim payment determinations. Google’s service uses predictive analytics based on historical data to shorten adjudication decision-making, which is allowing DWD to release payments to eligible claimants faster. Our intention is to have all claims that are older than 21 days fully resolved or actively in process by the end of the year so that we can resume our seasonal level of timeliness.

To help maintain and improve operations in the future, we are also working with Google to implement systems that allow claimants to send and receive secure electronic communications, upload documents rather than relying on mail and fax, and automate backend manual processes to improve workflow efficiencies in the current system.

We are also in the process of thoroughly reviewing all questions on our UI initial application and weekly claims to ensure that they are written in plain language so that we reduce the number of mistakes that create unnecessary issue holds. While we have provided some guidance and popup prompts on the application, our review of claims data and anecdotal feedback from claimants tells us that more work must be done to make the process more understandable.

We have certainly appreciated all the feedback and analysis by the Legislative Audit Bureau, and we hope the updated information we have provided today is helpful to you. We look forward to providing further details and updates on our progress and answering any questions you may have. Thank you.