Fired Unemployment Director Testifies About Chaotic Pandemic Response Thursday, Jul 30 2020 

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The former executive director of the Kentucky Office of Unemployment Insurance told legislators Thursday the agency’s chaotic rush to deliver benefits in the early days of the coronavirus pandemic led to months-long delays — and may have violated federal unemployment regulations. 

Muncie McNamara testified before the Interim Joint Committee on Economic Development and Workforce Investment. The Kentucky Center for Investigative Reporting first reported the details of McNamara’s time at the Office of Unemployment Insurance earlier this month; he was hired personally by Lt. Gov. Jacqueline Coleman in January and fired in May, amid the chaos of the pandemic. 

McNamara spoke for almost half an hour about the issues he saw at the agency. After his testimony, Republican lawmakers questioned him about Gov. Andy Beshear’s response, the months-long delays and data security. Only one Democratic lawmaker was called on to ask questions. 


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Fired Unemployment Director Testifies About Chaotic Pandemic Response Thursday, Jul 30 2020 

The former executive director of the Kentucky Office of Unemployment Insurance told legislators Thursday the agency’s chaotic rush to deliver benefits in the early days of the coronavirus pandemic led to months-long delays — and may have violated federal unemployment regulations. 

Muncie McNamara testified before the Interim Joint Committee on Economic Development and Workforce Investment. The Kentucky Center for Investigative Reporting first reported the details of McNamara’s time at the Office of Unemployment Insurance earlier this month; he was hired personally by Lt. Gov. Jacqueline Coleman in January and fired in May, amid the chaos of the pandemic. 

McNamara spoke for almost half an hour about the issues he saw at the agency. After his testimony, Republican lawmakers questioned him about Gov. Andy Beshear’s response, the months-long delays and data security. Only one Democratic lawmaker was called on to ask questions. 

McNamara told legislators that neither he nor Josh Benton, the Deputy Secretary for the Cabinet for Education and Workforce Development, were consulted before Beshear announced a statewide shutdown of in-person business that led to a massive spike in unemployment. 

According to McNamara, Beshear and Benton wanted to quickly extend benefits to independent contractors and other workers who previously wouldn’t have qualified. 

“[Benton] stated he wanted to do this as soon as possible, and he did not want to wait for the feds, the U.S. Department of Labor, to act,” McNamara testified. “He wanted Kentucky to take the lead in this.”

McNamara said that decision to move quickly at the beginning has contributed to the months-long delays for benefits the state is now trying to untangle. The agency’s computer systems were set up to reject these claims, and McNamara said staffing shortages left the agency unable to respond quickly to the huge number of claimants. 

“Looking back on it, we should have taken a more reasonable, measured response,” McNamara said. “This didn’t mean waiting a long, long time…We needed to take a little bit more time to come up with a plan on how are we going to pay these people that otherwise aren’t covered, and how are we going to administer that portion of the program?”

Unemployment claims skyrocketed as businesses closed in March. The unemployment office processed 49,000 claims by the 21st of that month. The office processed another 113,000 claims the following week.

McNamara said Benton and Beshear seemed to want to ask for forgiveness from the federal government, rather than wait for permission. And it seems they may need to: McNamara said the federal Department of Labor intervened at some point and told Kentucky officials to stop clearing claims en masse. 

McNamara said, in order to get money to claimants as quickly as possible, the office began clearing the “stops” on unemployment claims that delay payments, without investigating the claims individually. McNamara said it was “probably an underestimate” to say thousands of stops were cleared this way.

Federal regulations require each claim be investigated and cleared individually. “So whether practically speaking that was a good idea to try and get people paid, legally speaking you can’t do that. You have to investigate each individual claim,” McNamara said.

Rep. Daniel Elliott, a Republican from Danville, asked McNamara if that practice was against the law. McNamara didn’t answer directly.

“I will say that the federal government, the Department of Labor, the United States administrator for the federal unemployment system got wind that we were doing that and told us that we had to stop,” McNamara said.

Data Breaches Discussed

McNamara also addressed a high-profile data breach at the unemployment agency, saying that the Beshear administration’s explanation for the incident is “partially true.” State officials have said they took swift action as soon as the breach was identified on April 23. 

But McNamara said he emailed Benton and the executive director of the Office of Technology Services on April 22 about a potential data breach; he received an email that showed a claimant’s application contained someone else’s driver’s license.

It wasn’t until the next day when another, similar data breach was found that cabinet officials took action and temporarily shut down the system, McNamara said.

“That was the second one. I had forwarded them the initial one a day earlier, so they knew about it a day before they acknowledged that there was an issue,” McNamara said.

Republicans, including Attorney General Daniel Cameron and Kentucky Auditor Mike Harmon, have criticized the Beshear administration for not reporting the data breach to the correct agencies within three days, as required by Kentucky’s data protection law. The breach didn’t become public knowledge until May 28, over a month after it occured.

Another data breach was reported Wednesday, according to a statement from the Labor Cabinet. 

Sen. Karen Berg, a Democrat from Louisville, criticized McNamara for not doing enough.  

“Apparently, you are the first person in the administration to have been notified of this data breach, and you left your office without closing down the systems,” Berg said. “I don’t understand how.”

Committee co-chair Rep. Russell Webber, a Republican from Shepherdsville, rebuked Berg, saying McNamara was not on trial or there to be cross-examined. 

Berg also criticized the previous administration’s handling of the unemployment office. Berg said that a reorganization under former Gov. Matt Bevin resulted in the loss of 95 trained unemployment specialists who would have been helpful in dealing with the current crisis. 

McNamara said he knew he was walking into a challenge when he took the executive director job. 

“When I walked in, the office was in bad shape,” McNamara said.

Beshear said at a press briefing later Thursday that McNamara’s firing was valid and that the concerns McNamara raised at the time have all been addressed. Beshear said McNamara was one of a number of state officials who did not handle the data breach properly.

“What I was shown is that they forwarded an email to people that are getting thousands of emails, and then went home,” Beshear said. “If you’re the head of something, you’ve got a bigger obligation than that. And I believe when the inspector general report comes in about that data breach it’s going to show a number of people in leadership positions should have done more, and we’re going to make sure that we correct that and we’re going to make sure that we’re transparent about it.”

(Read: Cabinet Officials Defend Hiring, Firing Of Unemployment Director)

Berg was the only Democrat who questioned McNamara. After the hearing, a group of Democratic lawmakers told reporters that Republicans are on a “witch hunt” and didn’t allow them to ask questions, according to a tweet from WKYT’s Phil Pendelton.

Note: This story was updated at 6 p.m. Thursday to include comments from Gov. Andy Beshear. Contact Eleanor Klibanoff at eklibanoff@kycir.org. Contact Jared Bennett at jbennett@kycir.org.

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Josh Benton To Leave Role At Education and Workforce Development Thursday, Jul 23 2020 

J. Tyler Franklin

Deputy Secretary for the Kentucky Education and Workforce Development Cabinet Josh Benton during a daily coronavirus briefing on 4/9/20.

Josh Benton, the deputy secretary of the Cabinet for Education and Workforce Development, is stepping down, a spokesperson said Thursday. 

Benton has been the face of the state’s unemployment office in recent months, often attending Gov. Andy Beshear’s daily press briefings to provide updates on the unprecedented jobless claims and months-long delays for benefits. He is leaving to pursue a career opportunity outside of state government, spokesperson J.T. Henderson said in an email. 

“He will be missed by everyone at the Education and Workforce Development Cabinet,” Henderson wrote. “We wish him and his family well in this new endeavor.”

Benton was appointed deputy secretary in July 2018 under former Gov. Matt Bevin. Before that, he worked for the Cabinet for Economic Development since 2005, according to his LinkedIn. 

Benton’s resignation is the latest in a series of senior-level departures at the Office of Unemployment Insurance since the pandemic hit. In May, the agency fired Muncie McNamara, the executive director of the Office of Unemployment Insurance, who had been hired in January.

McNamara was replaced by Stefanie Ebbens Kingsley, who subsequently stepped down. 

In late May, Beshear moved the Office of Unemployment Insurance from the Cabinet for Education and Workforce Development to the Labor Cabinet. But Benton remained the face of the office, continuing to speak at press conferences with Beshear. 

Benton’s departure hadn’t been announced by the state, but it became public knowledge after several senators thanked him for his service during Benton’s testimony before a legislative hearing Thursday.

“I know you’ve gone through some difficult days in recent months,” said Sen. Lynn Bechler, a Republican from Marion. “And we are very grateful for everything that you’ve done for this Commonwealth and we do wish you the very best in the future.”

 

The post Josh Benton To Leave Role At Education and Workforce Development appeared first on Kentucky Center for Investigative Reporting.

Cabinet Officials Defend Hiring, Firing Of Unemployment Director Thursday, Jul 23 2020 

Cabinet officials defended the hiring and downplayed the firing of the executive director of the Office of Unemployment Insurance at a legislative hearing Thursday. 

As KyCIR first reported Monday, the executive director, Muncie McNamara, was quietly fired in early May amid a mounting unemployment crisis caused by the coronavirus

McNamara was a campaign donor and friend of Lt. Gov. Jacqueline Coleman; she personally called to offer him the job running the Office of Unemployment Insurance in January. 

Josh Benton, the deputy secretary for the Cabinet for Education and Workforce Development, defended that hire to the legislative Program Review and Investigations Committee Thursday. 

“We felt that he met the qualifications for the job, there’s no doubt about that,” he said.

Sen. Danny Carroll, a Republican from Paducah, asked whether any of the delays in providing jobless benefits can be traced to McNamara’s inexperience on the job. 

“Every state has had complications. Every state has had frustrations,” Benton said. “So to fully lay that at any one person’s feet would be unfair.”

Benton described an agency thrown into chaos as unemployment claims skyrocketed amid the pandemic-related shutdowns. The agency went from processing a few thousand claims a week to hundreds of thousands, and the size of the agency’s staff ballooned as employees from other parts of state government came to help out.  

Legislators also questioned Benton — as well as Labor Secretary Larry Roberts and general counsel Amy Cubbage — about the contract the state gave Ernst and Young to help process claims. The $7.6 million no-bid contract is set to expire in three days, though Cubbage said they are considering extending it because the workers are already trained in the system. 

Benton and Cubbage also addressed a data breach that was first identified at the unemployment office in late April, which was not reported to the proper authorities until nearly a month later. Gov. Andy Beshear called for the Office of the Inspector General at the Transportation Cabinet to look into the incident, and Cubbage said that report is expected any day, but that it seemed likely the failure to report the breach came from within the legal department.  

Benton said the issues facing the Office of Unemployment Insurance were much larger than any one person. 

“It was going to take our agency, or any agency, a significant amount of time to stabilize operations to meet the demand,” Benton said. 

He did not offer further explanation about why McNamara was suddenly fired on May 5, citing an ongoing Personnel Board action. 

McNamara filed an appeal with the personnel board claiming he was fired after raising a number of concerns about the cabinet’s handling of the unemployment program. Those concerns include issues of data security, conflicts of interest, a lack of clear guidelines and standards, compliance with federal regulations and concerns about the management of the unemployment trust fund.

Records show he was fired “without cause” and the Cabinet for Education and Workforce Development told KyCIR those allegations did not factor in his firing.

Benton’s recounting of events was more neutral than that of his boss, Gov. Andy Beshear. In a press conference Monday, Beshear described a much more fraught situation, calling McNamara’s departure “emotional” and “messy.”

“Certainly with it being messy in the end, I think everybody wishes the situation either hadn’t happened or turned out how it did,” Beshear said.

Contact Eleanor Klibanoff at eleanor@kycir.org. Contact Jared Bennett at jbennett@kycir.org.

The post Cabinet Officials Defend Hiring, Firing Of Unemployment Director appeared first on Kentucky Center for Investigative Reporting.

Well-Connected Kentucky Unemployment Director Quietly Fired Amid Crisis Monday, Jul 20 2020 

'<p><span style="font-weight: 400;">Like thousands of other Kentuckians over the last few months, Travis Powell just wanted a simple answer from the state Office of Unemployment Insurance.</span></p><p><span style="font-weight: 400;">Powell is not an unemployed worker; he’s vice president of the Council on Postsecondary Education, and he wanted to know what to tell state universities about how to handle unemployment claims from work-study students. On April 20, he was put in touch with Muncie McNamara, the executive director of the Office of Unemployment Insurance.</span></p><p><span style="font-weight: 400;">According to emails obtained through an open records request, McNamara said he’d look into it. After a week went by with no answer, Powell followed up again. McNamara never responded, and after another week, Powell learned why: McNamara was no longer working for the state.</span></p>'

Well-Connected Unemployment Director Quietly Fired Amid Crisis Monday, Jul 20 2020 

Like thousands of other Kentuckians over the last few months, Travis Powell just wanted a simple answer from the state Office of Unemployment Insurance.

Powell is not an unemployed worker; he’s vice president of the Council on Postsecondary Education, and he wanted to know what to tell state universities about how to handle unemployment claims from work-study students. On April 20, he was put in touch with Muncie McNamara, the executive director of the Office of Unemployment Insurance.

According to emails obtained through an open records request, McNamara said he’d look into it. After a week went by with no answer, Powell followed up again. McNamara never responded, and after another week, Powell learned why: McNamara was no longer working for the state.

The head of the Office of Unemployment Insurance was quietly fired on May 5, amid an unprecedented number of jobless claims, a race to overhaul an archaic computer system and a belatedly-reported data breach.

McNamara had been on the job only four months. The 38-year-old lawyer from Nelson County had no experience with unemployment systems or state government before taking the job.

But what he did have was connections.

He volunteered for and donated to Gov. Andy Beshear’s campaign last year. His wife, a recent chair of the Nelson County Democratic Party, considers Lt. Gov. Jacqueline Coleman “a good friend,” according to an interview she gave to the Kentucky Standard. Coleman called McNamara to offer him the job personally, he said.

He was paid $15,000 more than his predecessor, a career unemployment official who the cabinet kept on staff as a special assistant.

But by early May, he was gone, fired “without cause,” according to his personnel file.

McNamara alleges he was fired for raising serious concerns about corners the office was cutting amid the rush to fulfill record-high unemployment claims.

In an emailed statement, the Cabinet for Education and Workforce Development disputed that claim, saying the concerns he raised were not a factor in his firing.

Travis Powell is still waiting for an answer to the question he asked McNamara on behalf of the state’s universities back in April. He said he’s happy to be patient. But for the over 68,000 Kentuckians whose claims have gone unresolved since the pandemic began including over 5,000 who filed claims back in March patience doesn’t pay the bills.

Donor, Volunteer And Friend Of Campaign

McNamara moved to Kentucky in 2011, after he and his wife, Audrey Haydon, met in Washington, D.C. The two settled in Bardstown, her hometown, and began practicing law with Haydon’s father at the firm McNamara and Haydon, handling mostly social security and workers compensation cases. They also became involved in Democratic politics.

Haydon was in the 2012 class of Emerge Kentucky, a training program for Democratic women who want to run for office. In 2014, she ran for the state House of Representatives, but lost to incumbent Republican David Floyd.

Another Emerge Kentucky alumnae also ran for office that year: Lt. Gov. Jacqueline Coleman, who lost her House race in the district adjacent to Haydon’s. An MSNBC story from the time paired Coleman and Haydon, as well as other Emerge Kentucky alumnae, as Democratic women to watch.

Before becoming Lieutenant Governor, Coleman was a high school basketball coach and assistant principal at Nelson County High School. She founded a non-profit for college-age women, Lead Kentucky, that’s modeled after Emerge Kentucky.

Haydon went on to chair the Nelson County Democratic Party, and when Coleman was named Beshear’s running mate, Haydon heaped praises on her friend. She told the Kentucky Standard that Coleman was “incredibly smart, a hard worker and excellent campaigner.”

“I think she’s a great pick for Andy,” Haydon told the newspaper. “She brings a lot of experience to the ticket that he doesn’t have.”

McNamara donated $2,000, the maximum allowed under state law, to the Beshear/Coleman campaign during the primary and another $2,000 during the general election. He declined to comment on any personal relationship with Coleman.

“I did knock on a lot of doors for the campaign and help raise money for the campaign, which, you know, a lot of people did,” he told KyCIR. “We weren’t, obviously, the only ones.”

He applied to work for the administration generally; his application says his preference was to work in legal services for either the Cabinet for Health and Family Services or the Public Protection Cabinet. 

But when Beshear named Coleman secretary of the Education and Workforce Development Cabinet, she called McNamara personally to offer him the job of executive director of the state’s unemployment office.

J.T. Henderson, executive director for communications at the cabinet, confirmed that Coleman and Haydon have been friends for several years, and that he supported the campaign.

“That support did not factor in Mr. McNamara’s hiring,” he said. “He had previous public service in Maryland and had practiced in Social Security disability, workers’ compensation and personal injury.”

Back in January, McNamara told the Kentucky Standard that he was excited for the change of pace the new job would bring.

“I’m looking forward to having some time off from the actual practice of law, doing something different for a little bit,” he said.

McNamara was hired at $85,000 a year, with a 5% raise promised after six months. His predecessor, Katie Houghlin, made $70,000 in the same job.

Houghlin became executive director in 2018 after 16 years in the cabinet. She was moved to a special assistant role within the cabinet when the Beshear administration came in. McNamara characterized it as a promotion, though Houghlin didn’t get a pay increase. She declined to comment.

McNamara told KyCIR he had no direct experience with unemployment systems before taking this job. When he came on in January, the agency was handling 3,000 claims a week. But then, coronavirus came to Kentucky, and both McNamara and the office he was leading were thrown into the deep end.

“What I had to learn, I learned very quickly,” he said. “There was a learning curve at the beginning, but I feel like I got up to speed very, very quickly.”

Unemployment Meltdown

On March 26, per an executive order from Beshear, all non-life sustaining businesses closed their doors to slow the spread of coronavirus. Almost immediately, unemployment claims spiked. 

The state expanded unemployment benefits to independent contractors and the self-employed. As a result, they had to reprogram a flawed, decades-old computer system to accept applications it was designed to reject. By the end of March, the office was processing more than 113,000 claims a week.

Applicants had trouble reaching a live person as phone lines jammed up. In April, the agency hired a thousand new employees to answer phones; by June, they’d let most of them go, saying they weren’t able to train them to properly help claimants. 

“The job I accepted and the job I ended up doing were totally different,” McNamara said. “No one saw COVID-19 coming.”

Deputy Secretary Josh Benton started attending Beshear’s daily press conferences to answer questions about the unemployment delays. Benton is senior to McNamara and his boss, the Commissioner of Workforce Investment Marty Hammons, neither of whom ever made an appearance or were mentioned at the daily briefings.

On April 23, a data breach occurred, and some claimants saw personal documents for other applicants. The cabinet did not report the breach as required by law, according to the state auditor and Attorney General.

The breach became a political flashpoint when it eventually was reported, more than a month later. Both Auditor Mike Harmon and Attorney General Daniel Cameron have publicly condemned the Beshear administration for failing to prevent or disclose the breach, and have called for more transparency.

“We are deeply troubled by the Beshear Administration’s failure to disclose the security breach in a timely manner, as required by law,” Cameron’s spokesperson Elizabeth Kuhn said in an emailed statement. “This unexplained delay and astonishing lack of transparency increased the risk of potential identity theft and further compromised the personal and financial information of thousands of Kentuckians.”

McNamara declined to comment on the data breach, but said he had started raising flags within the agency about similar concerns before he was fired.

“I’m sure that I made people unhappy while I was there, by pointing out issues and concerns I had,” he said. “However, when I saw problems or potential problems, I felt obligated to point them out.”

He said he raised concerns about many issues: data security, conflicts of interest, a lack of clear guidelines and standards, compliance with federal regulations and concerns about the management of the unemployment trust fund.

On April 23, he sent a letter to cabinet officials as a “formal protest of agency action.” In the four-page letter, he raised concerns about data security in regards to allowing third-party claims workers access to unemployment databases.  Though his initial letter was sent on the same day the data breach was identified, his concerns appear to be unrelated to that incident.

The Cabinet for Education and Workforce Development responded on April 28.

The response from the cabinet strongly disputes many of his concerns and criticizes him for not raising the issue earlier or in a different venue.

He was fired a week later, without cause, according to the termination letter in his personnel file. He has hired an attorney and filed an appeal with the Personnel Board.

In the appeal, McNamara alleges he was fired for raising these data security concerns, as well as ethics concerns about appointments to the Unemployment Insurance Commission. The appeal also says he may have been discriminated against for a medical condition: his cardiologist ordered him to stay home from work for three days due to a health condition. When he returned, he was terminated.

He was replaced temporarily by Stefanie Ebbens Kingsley, an unemployment lawyer from Whitley County. She had been hired in mid-March as executive advisor to the Office of Educational Programs, and she became interim executive director on May 16.

Like Coleman and Haydon, Ebbens Kingsley is an Emerge Kentucky alumnae; she now serves on the organization’s board. She also ran unsuccessfully for a House seat, losing to Republican incumbent Regina Bunch Huff in 2018.

In late June, she returned to her old job as executive advisor, records show.

Beshear then appointed Labor Secretary Larry Roberts to run the Office of Unemployment Insurance, according to Marjorie Arnold, Chief of Staff of the Kentucky Labor Cabinet in an emailed response to questions.

In an email, Beshear’s office said he was not involved in the hiring or firing of McNamara.

Many Republicans have called for continued accountability for both Beshear and Coleman for how this crisis has been handled. The legislature has held several hearings about the continued delays and some of the measures the cabinet has undertaken to try to catch up.

“Andy Beshear puts politics first every chance he gets – even as Kentuckians suffer,” Republican Party of Kentucky spokesman Mike Lonergan said in an emailed statement. “As the (unemployment) backlog piled up, Beshear blamed everyone but himself … Meanwhile, one Beshear political appointee after another left Kentucky’s unemployment office in complete disarray while Kentuckians suffered.”

‘We’re about to be on the street’

In the months since McNamara’s firing, the Office of Unemployment Insurance has continued to struggle to pay claims in a timely manner. 

Arnold, of the Labor Cabinet, said Kentucky has processed over 90% of its unemployment claims amounting to over $3 billion in relief. “But no one in state government will be satisfied until all Kentuckians have received the unemployment benefits for which they qualify,” Arnold said.

Jess Clark

Kentuckians wait in line in Frankfort to get help with unemployment claims.

On June 16, thousands of people descended upon Frankfort to protest the delays. The cabinet set up impromptu offices to handle the protesters’ claims one-on-one, and the lines stretched across government parking lots in the 81-degree heat. People came from across the state over the next several days hoping to see their claims similarly resolved.

The agency has now set up these one-on-one meetings across the state, but appointments are already booked through September.

The state recently announced a $7.6 million contract with consulting firm Ernst and Young to provide manpower to help resolve outstanding claims.

A week after the protests, the state applied for a $865 million loan from the federal government in order to keep paying out unemployment claims.

Records reviewed by KyCIR show people waiting for their money — some who had filed claims way back in March — have emailed officials from across state government directly with desperate pleas for assistance.

One person from Paducah wrote Ebbens Kingsley to try and get their claim resolved two months after it was submitted.

“I haven’t been paid anything. I have a two year old and three week old, we’re about to be on the streets if I don’t get paid by the end of next week,” the email said. “I know you get thousands upon thousands of emails daily and I also know I’m not special when it comes to this, but please fix my unemployment as soon as you can.”

But among those unemployed workers who have managed to get their benefits? Muncie McNamara, who once headed the agency that is now signing his checks. He said he’ll “readily admit” that he applied for benefits. 

McNamara said that’s why he took the job in the first place — he believes government should be there for people when they hit hard times.

Contact Eleanor Klibanoff at eleanor@kycir.org. Contact Jared Bennett at jbennett@kycir.org.

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Kentucky Still Struggling With Unemployment Backlog Wednesday, Jul 1 2020 

Unemployment Delay

Frustrated with the slow-moving bureaucracy of the state’s unemployment system, Titus McClung was one of thousands of protesters who went to the state capitol to try and get his unemployment check.

He drove in from Lexington.

“I’m behind on my electric bill. Hopefully I can get some money so I can catch up on my car payment,” said McClung, who goes on dialysis three times a week and has been living off of his disability check and with the help of his daughter.

McClung works part time at the Red Cross’ Wheels program but was temporarily laid off on March 14, along with several coworkers, who he said had all gotten their unemployment benefits.

But three months later, McClung was still waiting for a check.

“It’s been hard,” McClung said on June 18. “I’m sure there are other people worse off than I am. I’m not in the best of shape, but there’s always someone that’s worse off.”

McClung’s is one of more than 6,700 unemployment benefit claims from March that still haven’t been resolved. There are also more than 25,000 unresolved claims from April and 17,000 from May, according to state officials last week.

In all, there have been more than 900,000 requests for unemployment benefits filed by Kentuckians since early March amid the coronavirus pandemic, overwhelming the state’s unemployment system.

The spectacle of thousands of people descending on Frankfort to try and get their unemployment claims resolved two weeks ago prompted Gov. Andy Beshear to provide more in-person assistance to those seeking benefits — the state opened up regional offices in Owensboro and Grayson to review claims this week.

And on Tuesday, Beshear announced a $7.4 million contract to partner with a private firm to process unemployment claims, with the hopes of clearing the more than 50,000-claim backlog from March, April and May by the end of the month.

But the backlog continues to draw outrage from both those who haven’t received their checks yet and Republican politicians.

During a legislative committee meeting about the issue on Friday, Paducah Republican state Sen. Danny Carroll said the Beshear administration should have thought more about the unemployment system before ordering businesses to close during the pandemic.

“We have people now that are greater risk of not being able to feed their kids and losing everything they have than they are of the COVID and we did not even bother to consider that when all of these decisions were made,” Carroll said.

Beshear has blamed the backlog on antiquated software and policies that encourage the system to deny or delay applications.

He’s also blamed his predecessor, Gov. Matt Bevin. In 2017, Bevin eliminated 95 positions that handled unemployment claims and removed workers that dealt with the claims from 31 of the state’s 51 employment centers.

“I believe at that time, face-to-face interactions were removed. And what they had as of 2017 was twelve people who would answer a phone in a call center,” Beshear said.

But Kentucky’s problem is not unique. State governments across the country have struggled to deal with a record number of unemployment applications filed in those initial months of the pandemic.

Across the country, more than 43 million applications for benefits were submitted over the course of a 12-week period during the pandemic, over four times the previous record for claims filed nationwide.

Gary Burtless is a senior fellow at the Brookings Institution.

“That’s a lot to put on state unemployment insurance agencies, which remember, at the very same time, were themselves facing the same health risks as all the other employer the country,” Burtless said.

Michele Evermore with the National Employment Law Project says states simply didn’t have a global pandemic and recession on their radar.

“The idea of basically 20% of the workforce applying for initial claims in a matter of months is nothing we’ve ever seen before,” Evermore said.

Evermore says that states need to pay more attention to their unemployment systems, especially when they aren’t going through a crisis.

“The time to fix this problem was two years ago. Nobody was paying attention then,” Evermore said.

Back in Frankfort, Titus McClung got his meeting with state officials. They said they could straighten out his application, but needed more information from him.

“Oh Lord, oh my God you have no idea, it’s been so hard,” McClung said. “Boy it’s been a long road.”

But the road wasn’t quite over yet.

This week, McClung said he still hasn’t received his benefits. Though, he did say he got some more paperwork in the mail for it.

“They told me I was supposed to go on the computer, I went in there and did what I was supposed to did, then they send me another paper to upload some off the wall stuff. And I’m still waiting,” McClung said.

And so are a few thousand other Kentuckians. McClung says he got his part-time job back with the Red Cross last week, but he still missing lost wages dating back to March.

State officials say they are prioritizing claims that were made in March.

WFPL reporter Jess Clark contributed to this story.

As Ky. Payday Lenders See Business Dropping, Industry Seeks Forgiveable Loans Tuesday, Apr 28 2020 

As members of Congress push for allowing payday lenders to access federal loans, data show that their business in Kentucky dropped precipitously when the pandemic struck.

The industry processed about 20% fewer loans in March than it did the previous March, according to a monthly report provided to the Kentucky Department of Financial Institutions by the loan processing firm Veritec Solutions. That represents a drop in lending of $8.3 million in the short-term, typically high-interest loans.

The database shows loan volume ranged from 129,000 in March 2019 to as high as 168,000 loans the following August. But only 104,000 loans were processed this March, the lowest by far in the last year. 

More than 282,000 Kentuckians filed for unemployment insurance in March.

Payday, or deferred deposit, loan products offer small-dollar loans to borrowers, typically those with poor credit or without access to a traditional bank account. Data show the average payday loan in the last year in Kentucky was $348. Borrowers usually need to pay back the amount borrowed, plus interest and loan fees, within two weeks time. 

Critics of the industry say the loans are designed to trap borrowers into a cycle of debt, and research from the Consumer Financial Protection Bureau shows that more than 75% of payday loan fees come from people who borrow more than 10 times in a year.

The industry turned to Congress for help to manage the downturn, and a group of lawmakers asked Treasury Secretary Steven Mnuchin and Small Business Administration head Jovita Carranza last week to allow short-term, high-interest lenders to access funding from the Paycheck Protection Program.

No decline in business was mentioned in the letter; Kentucky Rep. Andy Barr, a Republican from Lexington, was among those who signed it.

If granted, the lawmakers’ request would allow payday lenders offering annual interest rates as high as 469% to tap into forgivable loans with a 1% interest rate.

Alexandra Kanik | wfpl.org

Ben Carter of the Kentucky Equal Justice Center says it’s too soon to tell why loan volume has decreased in Kentucky. 

Expanded unemployment benefits may be reaching more people and helping the newly unemployed cover living expenses; Kentucky’s halt on evictions may mean people are less desperate for immediate cash even after a job loss. 

The real impact of the coronavirus and subsequent policy changes won’t be clear until months down the road, Carter said, and people may still turn to these products as the crisis lingers.

The reality is that payday loans are incredibly expensive,” Carter said.

Payday Loans Already On Decline

Interest rates are capped at 36 percent or lower in 16 states and the District of Columbia. But lenders in Kentucky are not subject to a rate cap, though borrowers can only have two outstanding loans from a lender at a time.

Consumers have been shifting away from payday or deferred deposit loans, according to Whitney Barkley-Denney, senior policy counsel at the Center for Responsible Lending, a nonprofit research and policy group affiliated with the Self Help Credit Union. 

Instead, borrowers have been turning more and more to installment and online lenders, some of which offer longer repayment plans with more forgiving interest rates than payday lenders.

The Kentucky Department of Financial Institutions issued guidance on March 24 for non-bank lenders to “work with customers affected by the coronavirus to meet their financial needs.” The department recommended lenders restructure existing loans, extend repayment terms or waive fees.

So far, small, non-bank financial institutions have not been eligible for Paycheck Protection Program loans. That includes federally certified Community Development Financial Institutions, which provide financing options with interest rates comparable to banks to underserved communities under strict guidelines. The lawmakers specifically sought in their letter to include those institutions.

Not mentioned in the letter are payday lenders. But Rep. Blaine Luetkemeyer, a Republican from Missouri and one of the letter’s principal authors, confirmed to POLITICO that it was meant to cover payday lenders. Luetkeymeyer is a member of the House Financial Services Committee and one of the payday loan industry’s favorite lawmakers, having received $164,900 from the industry over his career, according to OpenSecrets.

Payday lenders have contributed more than $50,000 to Barr’s congressional campaigns, according to Open Secrets. Barr’s electoral opponents in the 6th District representing central and northeast Kentucky have previously criticized his relationship to payday lenders.

Barr’s office did not respond to a request for comment.

“Keeping individuals who work at non-PPP financing providers employed during these difficult times will facilitate restoring America’s productivity as soon as the health crisis dissipates,” the letter reads.

The Community Financial Services Association of America, a trade group representing payday lenders that are active in Kentucky such as Advance America and CheckSmart Financial, says that its members are essential businesses providing access to credit.

“Including these businesses in the Paycheck Protection Program would ensure lenders, many of which are small businesses, are able to keep credit flowing, serving their customers and communities without interruption,” a spokesperson for the Community Financial Services Association of America said in an emailed statement.

Critics Say Payday Loans Don’t Match PPP Goals

Barkley-Denney of the Center for Responsible Lending, however, says that most payday lenders are not small businesses, and that allowing them access to taxpayer funds through the Paycheck Protection Program “would be the opposite of what the PPP is supposed to do.”

“The PPP is about building wealth in communities,” Barkley-Denney said. “Payday lenders are the opposite of that; they strip wealth from communities, they make people less financially secure. So the idea that we’d want to spend taxpayer dollars propping them up is just absurd.”

Sarah Crozier, the Senior Communications Manager at the Main Street Alliance, a network of small business owners, says gaps in the Paycheck Protection Program prevent it from truly helping many small businesses. Main Street Alliance has heard from members that the program’s timeline for aid is too short and too limited in the expenses it covers. Many small businesses have had trouble getting approval from lenders while larger companies have received loans before the initial funds ran out.

But opening up the program to high-interest lenders, including to companies that provide predatory loans to small businesses, would be a step in the wrong direction, says Crozier.

The lawmakers’ letter also sought to cover companies offering factoring services or merchant cash advances, which tap into a business’s future income to secure funds. Recent research from the Opportunity Fund, a nonprofit small business lender, found such products carry an average annual interest rate of 94 percent but can climb as high as 358 percent.

“To open up the small business funding to payday lenders who go and turnaround and abuse small businesses, is absolutely the wrong way to go about supporting the small businesses during the crisis,” Crozier said.

This Week In Conversation: Lt. Gov. Jacqueline Coleman Talks COVID-19 Response Tuesday, Apr 21 2020 

Governor Andy Beshear has announced that there will be no in-person classes in Kentucky schools for the rest of the academic year because of the coronavirus pandemic.  Students will continue their online classes through their districts’ non-traditional instruction programs.

Beshear says Kentucky needs to show a steady decline in new COVID-19 cases and meet other benchmarks before he will ease business closures and other restrictions.

Those closures have led to soaring jobless claims, which have overwhelmed Kentucky’s unemployment processing system.

This week on WFPL’s In Conversation, we spoke with Lt. Governor Jacqueline Coleman about the state’s response to the pandemic.  Coleman is also secretary of the Kentucky Education and Workforce Development Cabinet.

WFPL’s Amina Elahi joined us to give us an update on the budget address Mayor Greg Fischer gave to the Metro Council on Thursday evening, and to tell us how the council has responded so far.

And we heard from Jennie Cole, Director of Collection Access at the Filson Historical Society. The Filson is collecting stories and artifacts to help document the current coronavirus pandemic, through the experiences of the citizens of Louisville. Click here and answer some questions to participate.

Listen to the show:


 

Follow our ongoing coverage about the coronavirus through our live blog here.

 

Effort To Modernize State’s Unemployment Technology Comes Too Late For Pandemic Tuesday, Apr 14 2020 

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.

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