In Ky. Unemployment Office, 400,000 Unread Emails And Payment Troubles Tuesday, Feb 9 2021 

A new state audit says the Kentucky Office of Unemployment Insurance violated federal law and left hundreds of thousands of emails from Kentuckians unread in its rush to pay unemployment insurance benefits in the early days of the coronavirus pandemic.

KyCIR first reported that the unemployment insurance program had violated federal rules in August, and Kentucky’s public auditor Mike Harmon released an earlier report in December that found the state didn’t know how much money the state still had to pay out in unemployment benefits.

This new report is part of his office’s statewide audit, produced every year. 

Harmon said the findings “should be deeply concerning to taxpayers and those who have filed for UI benefits.”

“The systemic failure of leadership on all levels not only violated federal law, but also let down many who needed relief. It also leaves others facing the prospect of repaying the government for miscalculated payments they received in good faith,” Harmon said in a statement.

The audit includes a response from the Office of Unemployment Insurance which states the audits findings “occurred in a short period of time during a once-in-a-century global pandemic.”

The office pointed to changes it said will help maintain control over the unemployment insurance payments in the future, such as moving the unemployment insurance program from the Education and Workforce Development Cabinet to the Labor Cabinet, and proactively seeking out guidance from the federal government and subject matter experts.

Labor Cabinet Chief Information Officer Holly Neal said in an emailed statement that most of the issues raised by the audit were addressed last year. “This pandemic and ensuing economic fallout have resulted in a flood of more than 1.6 million unemployment insurance claims filed in Kentucky in less than a year, with the state paying out more than $5.6 billion in benefits since March, but it is unacceptable that some Kentuckians who filed months ago have not been paid and that thousands of emails went unopened,” Neal said.

The statewide audit included 25 findings, over half of which related to the Office of Unemployment Insurance office. Harmon’s office found the Commonwealth Office of Technology lacked a comprehensive list of machines and several departments, including the Department of Revenue, office of technology and the Finance and Administration cabinet weren’t complying with certain system security controls. 

Chief among the problems at the unemployment insurance office was the decision by leadership to automatically pay benefits without requiring that claimants report weekly wage information that is typically used to determine eligibility.

As Harmon’s audit notes, the office was dealing with an unprecedented rush of claims when this decision was made. The “auto-pay” system got some benefits out the door faster, but caused problems down the line.

For example, Harmon’s office took a sample of 37 state employees who filed for and received UI benefits and found 16 of those employees were overpaid. They filed claims based on losing part-time work but were still employed full-time. If they had been required to report wages, they would have been ineligible for benefits. 

Harmon’s office said these 16 employees were overpaid a total of $116,000 and that the automatic payment process also contributed to the state’s inability to determine how much money it owes in unpaid unemployment insurance benefits.

The audit also detailed three security breaches that the unemployment office failed to report to state agencies as required under law

As unemployment claims skyrocketed and people reached out to the unemployment insurance office for help, the auditor’s report says the Office of Unemployment Insurance archived more than 400,000 emails sent to the unemployment insurance assistance email account without reading them.

UPDATE: This story has been updated to include a response from the Kentucky  Labor Cabinet.

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How Kentucky Missed Out On A $90 Million Unemployment Upgrade Monday, Nov 30 2020 

After the 2008 recession revealed the weaknesses of the nation’s unemployment insurance systems, most states got to work upgrading their technology.

The need for such an overhaul was obvious, and the reason the federal government set aside $7 billion in 2009 to modernize the nation’s unemployment systems.

Forty states took the free money. But Kentucky left it on the table. 

The commonwealth missed out on a cool $90 million back then. But experts say the failure to bring Kentucky’s unemployment insurance system into the 21st century is costing Kentucky to this day.

A task force appointed by then-Gov. Steve Beshear prioritized stabilizing the struggling unemployment insurance trust fund over improving the old infrastructure. It scheduled incremental tax increases on businesses, cut benefits and delayed major system upgrades until the state’s fiscal situation improved.

In January, Gov. Andy Beshear — Steve Beshear’s son — began taking steps to replace the technology. But the state was still using a program that predates the personal computer when the coronavirus ushered in a new employment crisis.

Delays were likely inevitable regardless of the technology as Kentucky dealt with unprecedented numbers of new claims, but those seeking help to get through the pandemic dealt with crashing websites, frustrating tech issues and outdated information in the application that the state conceded was difficult to bring up to date. Delayed claims mean a worker without income to support their family. It also means fewer federal unemployment dollars circulating in Kentucky’s economy.

“Especially what we’ve seen now during this pandemic is that states with terrible systems that couldn’t get people through, they lost out on a lot of federal money,” said Michele Evermore, a policy expert at the National Employment Law Project and a member of President-elect Joe Biden’s transition team. “All for the sake of pinching pennies between recessions.”

Already, signs point towards another cost-cutting approach. Kentucky’s largely Republican legislature wants to insulate businesses from tax increases, and Beshear has already committed spending upwards of $300 million of federal CARES Act funding to pay down the $865 million federal loan Kentucky required in June.

Kevin Kinnaird, a spokesperson for the Kentucky Labor Cabinet, said the Office of Unemployment Insurance’s legislative priorities include investing in the current “archaic” system “to be more efficient and responsive to unemployed Kentuckians” as well as increasing the number of staff.

“The problem is we keep prioritizing keeping business taxes low at the expense of dislocated workers and our economy when we hit hard times,” said Jason Bailey, executive director of the Kentucky Center for Economic Policy. 

Policymakers often keep unemployment insurance systems out of sight, out of mind during good times, when fewer people are exposed to its flaws, he said. Recessions put unemployment insurance in the spotlight and provide the best opportunity for policymakers to invest in improvements. 

“My fear,” Bailey said, “is that they are going to go the other direction.”

The Recession

The Great Recession put so many Kentuckians out of work by 2009 that the state needed a $972 million loan from the federal government to keep paying unemployment claims.

Nearly every state required such a loan. They had until 2012 to pay it off, or the federal government would automatically increase business wage taxes.

In Kentucky, this meant taxes would increase on businesses by .3% every year after 2012.

At the same time, states were running unemployment systems on technology that predated the personal computer. Old policies left many workers without unemployment benefits, should they lose their job.

So the American Recovery and Reinvestment Act provided states with $90 million each if they adopted reforms to cover more part-time, seasonal workers and anyone leaving a job for a compelling personal reason, such as domestic violence or a family move.

The incentives could be used to pay benefits or to cover administrative costs — such as modernizing the technology powering the unemployment program.

Then-governor Steve Beshear put the decision to a task force chaired by Helen Mountjoy, who was Secretary of the Kentucky Secretary of Education and Workforce Development, the cabinet that housed the unemployment office until this year. Other members included Sen. David Givens, (R-Greensburg); David Meyer, a vice president of UPS; representatives from the Kentucky Chamber of Commerce and labor unions; and Larry Roberts, who was director of the Kentucky State Building and Construction Trades Council.

Roberts would become Kentucky’s Labor Cabinet Secretary in 2013 under the elder Beshear. Andy Beshear named him to the post again this year — and the Labor Cabinet took reins of the unemployment office during the pandemic.

Roberts declined to be interviewed through a spokesperson, who said the secretary was “dedicated to ensuring Kentucky’s Office of Unemployment Insurance is being responsive to Kentuckians in need during this pandemic.”

The task force met 11 times before its final opinion was turned into legislation, passed by the general assembly and signed by Steve Beshear.

The task force made 17 recommendations, including reducing benefits from 68% of lost wages to 62% and establishing a week-long delay between approval and the first payment. The waiting week is supposed to save money by avoiding paying benefits too soon, allowing time for documents to be mailed and staff to manually calculate benefits.

As for the federal incentives, the task force concluded even though the money would more than cover the technology upgrade, the long-term costs of policies expanding coverage outweighed the immediate $90 million reward.

Sen. Givens said focusing on steps the task force didn’t make, such as the modernization efforts, was “inappropriate.” The goal, he said, was bringing the unemployment insurance trust fund to solvency through a plan that businesses, conservative politicians and labor activists could agree to.

“It was a very very lengthy, educational process, followed by a very thorough and rigorous negotiation between competing interests,” Givens said.

What’s Happening Now

This year’s pandemic in 2020 found Kentucky’s unemployment insurance system still lagging behind other states in both technology and unemployment funding.

Kentucky’s Office of Unemployment Insurance reports over 75,000 claims are outstanding. More than 600 claims are from people who have been trying to collect unemployment insurance benefits since March.

And the state covered far fewer unemployed people than the national average: Only 19% of unemployed people in Kentucky were covered by unemployment insurance because the rest had exhausted their benefits, left the workforce or worked a part time or contract job that didn’t qualify.

Coverage increased when the pandemic hit, as Kentucky adopted many of the changes recommended by the federal government.

Gov. Andy Beshear waived the waiting week nearly immediately to get money to claimants as quickly as possible. And some of the same changes first proposed in 2009 were included in emergency legislation Kentucky passed in March in order to unlock federal unemployment funding in the CARES Act.

The unemployment office has not followed through on all those upgrades, however.

For example, the 2009 task force passed on incentives that required adopting the “alternative base period,” which uses earnings from a worker’s most recent economic quarter to determine eligibility. Currently, a worker’s most recent earnings often aren’t counted.

Lawmakers gave the unemployment office the option to use this alternative base period when it passed Senate Bill 150, but Kinnaird, the Labor Cabinet spokesperson, said the unemployment office has not implemented the policy.

The emergency legislation also gave the unemployment office permission to establish a program to cover reduced hours with unemployment benefits, another recession-era reform that would allow employees to keep more people on the payroll. The CARES Act committed the federal government to fund up to half the costs of creating this program.

The office drew up regulations under the Education and Workforce Development Cabinet, but the plans were scrapped once the Labor Cabinet took over.

Kinnaird said “the statutory scheme is not in place to provide the framework or authorization for this program” because the federal government required a permanent program rather than a temporary one set up by emergency legislation.

Givens, who is now in Republican leadership, said he would not support making major changes to the unemployment program right now, though he agreed the system is “obviously antiquated.”

The legislature recognized this in 2018 when it created a separate fund to divert a portion of unemployment taxes into and save up for an eventual technology upgrade. The fund has five years to raise $60 million, according to the statute. By the end of 2019, the state had saved $16 million.

Givens said one of his priorities is to protect people who were approved for unemployment insurance only to be deemed retroactively ineligible and sent an overpayment bill. As the Kentucky Center for Investigative Reporting found, many in Kentucky applied for unemployment benefits after Beshear said those who “self-quarantined” for fear of the coronavirus would be eligible. The state later backtracked, sticking those who had self-quarantined with overpayment debt, and blamed shifting guidance from the federal government for the mistaken payments.

The state has already requested a waiver from the federal government to forgive this debt, and Kinnaird from the Labor Cabinet said they have not received a response to the request. Givens said he is waiting to see if the waiver is approved before pursuing a legislative fix.

“We have a lot of needs right now and one of those most important needs is to keep people employed,” Givens said.

Dan Borsch, who owns the Old Louisville Tavern and Burger Boy Diner, said he’s concerned about future tax increases when uncertainty is at an all-time high.

“I want to say it’s not make or break but who knows exactly how much business is going to come back and how fixed costs are going to be six months from now,” Borscht said. “It all adds up.”

Borsch said the unemployment system is clearly outdated and needlessly adversarial, pitting employers against their employees. And since Kentucky made contract and gig-economy workers eligible for unemployment benefits, Borsch said businesses like his with traditional employees foot the bill for companies like Uber that don’t pay unemployment taxes.

“I’m concerned that it is going to be a large expense going forward,” Borsch said, “and it’s just frustrating that we don’t have a better system.”

Bailey of the Kentucky Center for Economy Policy says the unemployment taxes paid by Kentucky businesses are already historically low, but he worries the current recession will usher in another round of benefit cuts without addressing the holes in the unemployment system.

“What we should be doing in this next legislative session is learning the lessons from this and putting in the improvements that are needed for next time,” Bailey said. “This is not our last pandemic, and it’s not our last recession. One way or the other, more problems are coming.”

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Legislators To File Bill Preventing Unemployment ‘Overpayment Debt’ Tuesday, Oct 27 2020 

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Senate leadership

Kentucky Senate Republicans intend to file a bill that would prevent the unemployment office from “clawing back” money mistakenly paid to people who self-quarantined.

Republican leadership announced the plan at a press conference last week, where they discussed concerns with Gov. Andy Beshear’s response to the coronavirus pandemic.

Among those concerns were missteps in the unemployment insurance program that led the state to pay, then seek to recoup, benefits for people who felt they had a reasonable fear of catching the virus at work. Beshear said during a March briefing that they would be eligible, and the unemployment office has since backtracked on that offer, blaming the confusion on shifting guidance from the federal government. 

Sen. Mike Nemes, a Republican from Shepherdsville, said that billing people for unemployment benefits they had already received based on the word of the governor is unfair.

“These people don’t have that money. They paid for groceries, they used the money,” Nemes said. “That’s what unemployment is for. When you are unemployed you get your unemployment insurance and you pay your bills so you can get back to work.”

(Related: Gov. Beshear: Save Unemployment Money In Case Of Overpayment Senate)

President Pro Temore David Givens, a Republican from Greensburg, said he is working with staff to write legislation to protect individuals in this situation.

Givens and the Senate Republican spokesperson did not respond to questions about the proposed legislation.

At the press conference, Givens said the governor “got over his skis” by telling people they would be eligible for unemployment benefits based on criteria that was rolled back retroactively.

The legislators also expressed concern for what turmoil in the unemployment office will mean for Kentucky’s business community. The unemployment insurance trust fund required an $865 million loan from the federal government in June as Kentucky was paying out a record number of unemployment claims.

Businesses in Kentucky may face a higher tax rate to refill the trust fund and an extra fee to pay back that federal loan. 

Givens called on the governor to use CARES Act funds to keep the trust fund solvent without pushing the burden onto the business community.

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

The post Legislators To File Bill Preventing Unemployment ‘Overpayment Debt’ appeared first on Kentucky Center for Investigative Reporting.

Gov. Beshear: Save Unemployment Money In Case Of Overpayment Debt Monday, Oct 19 2020 

At the daily coronavirus briefing on Monday, Gov. Andy Beshear acknowledged that Kentucky mistakenly overpaid people who requested unemployment benefits — and advised recipients to save that money if they’re notified of an investigation because the state may eventually ask for it back.

“We ask people, obviously, to save that money,” Beshear said while under quarantine at the Governor’s mansion.

As the pandemic stretches on, many Kentuckians who received unemployment insurance payments are learning the unemployment office deemed them, retroactively, ineligible. As KyCIR reported last week, many filed their unemployment claims after Beshear said his administration was expanding coverage to people who were afraid of catching the virus at work — only to be disqualified months later because the state said they took a “voluntary leave of absence.” 

[READ: Gov. Beshear Offered ‘Self-Quarantine’ Unemployment. Now State Is Backtracking — And Billing]

People who owe overpayment debts to state and federal unemployment agencies may be forced into a payment plan, face civil action or have future benefits docked to pay down the debt.

Beshear said the state will handle the overpayments issue eventually, but that the state’s top priority right now is to resolve the over 90,000 unemployment claims that were filed but haven’t been processed.

In the meantime, Beshear said people who think they may have been overpaid should watch their emails for an overpayment notice and save the money they’ve received. 

Beshear said the state will get to the overpayments issue eventually. 

“People who believe they are overpaid should wait for an overpayment determination before repaying,” Beshear said. “Claimants should watch their email for overpayment notices because the appeal period is limited.” Claimants have 15 days to file an appeal one they are notified of an overpayment.

Other states are also clawing back unemployment overpayments, as Beshear noted on Monday, but Kentucky’s unemployment office has been especially harried in its response to the pandemic. In May, the state fired its newly installed director of unemployment insurance at a time when no state had a larger share of its workforce on unemployment than Kentucky. The system required a $865 million loan from the federal government in June to bolster the unemployment insurance trust fund.

KyCIR reported in August that Kentucky’s unemployment office had violated federal rules by automatically approving self employed or independent contractors who applied for unemployment, likely creating overpayments like the ones addressed by Beshear on Monday. Kentucky entered into a corrective action plan with the federal Department of Labor that includes pursuing overpayment debts that stem from the state’s mishandling of unemployment claims.

Beshear’s office previously told KyCIR the overpayments for people who self-quarantined over a reasonable fear of catching COVID-19 at work were the result of shifting policies from the federal government.

A spokesperson for the Department of Labor, however, said in a statement that guidance alluded to by the governor’s office “did not change any policies, but clarified operating guidance based on state questions.”

Kevin Kinnaird, an information specialist at the Kentucky Labor Cabinet, said that the federal government’s guidance did in fact change. 

“Whether you call it changing or clarifying, the Department of Labor’s position shifted,” Kinnaird said in an emailed response to the federal government’s assertion.

“The state disagrees with the tightening of eligibility in the midst of a pandemic and global recession, when millions are struggling, and Kentucky will join other states to request flexibility to waive overpayments for Kentuckians who are self-quarantining during this pandemic to protect their health or reduce exposure for a loved one at higher risk,” Kinniard said.

Most states allow their respective unemployment agencies to waive overpayment debts when the claimant is not at fault. Kentucky is one of just 10 states without such a provision in state law.

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State Violated Federal Rules In Rush To Pay Some Unemployment Benefits Thursday, Aug 20 2020 

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By late April, Kentucky’s unemployment insurance office was handling more than a hundred thousand claims a week, and Gov. Andy Beshear was urging anyone who was out of work to apply during his daily briefings.

He said the state was doing everything in its power to swiftly get money to people who lost work due to the coronavirus.

In its haste to help cash-strapped Kentuckians, however, Kentucky’s unemployment office took shortcuts that violated unemployment policies and drew criticism from federal officials in Washington, according to emails obtained by KyCIR through a public records request.


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Kentucky Violated Federal Rules In Rush To Pay Some Unemployment Benefits Thursday, Aug 20 2020 

By late April, Kentucky’s unemployment insurance office was handling more than a hundred thousand claims a week, and Gov. Andy Beshear was urging anyone who was out of work to apply during his daily briefings.

He said the state was doing everything in its power to swiftly get money to people who lost work due to the coronavirus.

In its haste to help cash-strapped Kentuckians, however, Kentucky’s unemployment office took shortcuts that violated unemployment policies and drew criticism from federal officials in Washington, according to emails obtained by the Kentucky Center for Investigative Reporting through a public records request.

The U.S. Department of Labor, which oversees unemployment insurance, had gotten wind that Kentucky was mishandling payments to independent contractors and self-employed workers by automatically approving applicants for the state’s minimum weekly amount, plus the $600-a-week in extra federal money offered in response to the pandemic.

That got benefits out the door faster, but at a cost: The state was likely underpaying some workers while violating the CARES Act, which required states to determine how much money workers were eligible to receive before starting payments.

“Hoping that’s not the case,” wrote Gay Gilbert, the U.S. Department of Labor’s administrator of unemployment insurance in an email sent on April 20 to Kentucky’s executive director of unemployment, Muncie McNamara. “[B]ut can you confirm?”

McNamara responded three hours later to Gilbert’s email to confirm: yes, Kentucky had indeed been automatically providing applicants with the minimum payments. But in his email, McNamara attributed much of the confusion to Gilbert’s agency.

McNamara wrote that Kentucky’s leadership was frustrated with the lack of timely guidance from the federal government, which he described as “more of an obstacle.”

“Frankly, I feel like Kentucky is being punished for acting quickly, as we were encouraged to do,” McNamara wrote in his email. McNamara was quietly fired two weeks later, as KyCIR reported last month

Marjorie Arnold, chief of staff at the Kentucky Labor Cabinet, which now oversees the unemployment office, said in an email that McNamara’s correspondence with Gilbert “[does] not represent the Kentucky Labor Cabinet’s position with respect to the U.S. Department of Labor, but are representative of the type of unprofessional behavior that was exhibited on a regular basis.”

“As with any emergency program, federal guidance evolved over time, and as issues arose, the Office of Unemployment Assistance worked diligently with U.S. Department of Labor personnel to implement guidance as it was provided,” Arnold said.

McNamara said his supervisor at the unemployment office was aware of the tone and content of the email. He added that he was fired without cause.

A spokesperson for the Department of Labor said that many states had issues implementing the new unemployment policies, and that it is working to make sure states follow federal law.

Kentucky Problems

In the week before Gilbert’s email, Kentucky’s unemployment agency handled just over 103,000 initial unemployment claims.

The agency was scrambling to keep up with the influx of claims by adding staff to operate phone lines and answer questions. Congress had weeks earlier authorized the Pandemic Unemployment Assistance program, which allocated unemployment funds for state agencies to distribute to newly unemployed independent contractors and self-employed workers who lost work due to the coronavirus pandemic.

It was the states responsibility to calculate how much money such workers were eligible for based on previous earnings. The best way to do that would be to use earnings statements from tax filings. However, the deadline to file taxes was pushed back to July, so states like Kentucky didn’t always have the documents they’d need to quickly calculate eligibility and start paying benefits.

Kentucky’s solution was to approve every claimant for the minimum benefit, initially set at $180 a week, plus the additional $600 payment also authorized by the CARES Act.

“We decided it best to pay the minimum and the $600 to eligible PUA recipients so we could give them assistance as quickly as possible,” McNamara wrote to Gilbert.

This could result in underpayments, where the state paid unemployed workers less than they were entitled to, but McNamara wrote that if the agency later determined the individual was eligible for more money, the state would pay them in arrears and “make them whole.”

In a later email, Gilbert raised another issue with Kentucky’s administration of the federal unemployment program that could pose a more serious problem for people receiving benefits. The payments to independent workers were only supposed to be available to those whose unemployment was directly tied to COVID-19. Under federal guidelines, those workers were supposed to certify that the COVID-19 related conditions that led to their unemployment persisted for every week they filed a claim.

Gilbert attached a notice sent to people receiving benefits from Kentucky’s unemployment office that showed the state wasn’t asking people to certify their unemployment situation on a weekly basis, as required.

A spokesperson for the federal Department of Labor said it is working with states to correct policy violations such as these, but that states “may also be required to take specific corrective actions that may require reconsidering claims that may have been improperly determined as eligible for payment.”

Kentuckians who receive unemployment payments that are reconsidered and later determined to be improper will have to pay that money back. The state can collect on unemployment overpayment debts by withholding future benefits or even taking recipients to court.

Marjorie Arnold of the Kentucky Labor Cabinet said that Kentucky is “obliged to attempt to recover improperly paid benefits in accordance with federal and state law.”

Frustration

In his emails to the federal Department of Labor, McNamara said he was frustrated, and this frustration was shared by other officials in Kentucky’s unemployment office.

McNamara said the federal Labor department was slow to provide guidance, or at times gave guidance that conflicted with earlier policies. For example, McNamara said the federal government had initially set Kentucky’s minimum weekly benefit amount for independent contractors at $180, only to lower that amount to $174 in later guidance. “These may seem like minor things but given the volume of claims we have this represents a tremendous amount of money,” McNamara wrote.

The issues were compounded by the fact that neighboring states were moving slower than Kentucky. Indiana didn’t start accepting claims from self-employed workers and independent contractors until April 24, nearly a month after Kentucky. McNamara thought Kentucky was bearing the cost of that delay.

“As a result of their tardiness, people who live in Indiana and might be an independent contractor or self-employed doing business on both sides of the river are applying for PUA benefits in Kentucky, because we are making payments and Indiana isn’t,” McNamara wrote to Gilbert.

‘Extremely Concerned’

When Gilbert responded two weeks later, the federal unemployment administrator was conciliatory. “Having been in your seat as a state UI director, I understand why there is sometimes frustration and tension when our system is asked to quickly ramp up new and complex programs,” Gilbert wrote on May 4.

However, Gilbert said that the federal government was “extremely concerned” that Kentucky and other states were not implementing unemployment programs properly. Gilbert wrote that states needed to make sure payments were going to eligible claimants and not just simply make payments and determine eligibility later.

McNamara never got a chance to respond, however. He was fired the next day, and emails show interim unemployment director Stefanie Ebbens Kingsley scheduled a call with Gilbert to talk about the issues with Kentucky’s unemployment process.

When McNamara was invited to testify before a legislative committee last month about the state’s unemployment office, he mentioned that Kentucky’s rush to pay unemployment benefits resulted in errors that delayed claims for months at a time. He also said they were clearing holds on unemployment claims in bulk, without investigating the claims individually, until the federal government ordered them to stop.

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In Kentucky, Unemployment Checks Are Docked For Old State Debts Thursday, Aug 6 2020 

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Kimberly Iacono lost her job when the Bardstown Cracker Barrel closed its dining room in March.

Kentucky’s unemployment office approved her benefits but deemed her eligible for only $114 a week from the state, far less than she’d normally take home in tips as a server. Iacono has seen that modest check reduced even further because the Kentucky Office of Unemployment Insurance says she owes them $6,570. 

The office alleges she was overpaid eight years ago, and they docked her checks during the pandemic to begin reducing that debt. At one point, they asked Iacono to pay them $600 a month. Iacono was shocked. 


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In Kentucky, Unemployment Checks Are Docked For Old State Debts Thursday, Aug 6 2020 

Kimberly Iacono lost her job when the Bardstown Cracker Barrel closed its dining room in March.

Kentucky’s unemployment office approved her benefits but deemed her eligible for only $114 a week from the state, far less than she’d normally take home in tips as a server. Iacono has seen that modest check reduced even further because the Kentucky Office of Unemployment Insurance says she owes them $6,570. 

The office alleges she was overpaid eight years ago, and they docked her checks during the pandemic to begin reducing that debt. At one point, they asked Iacono to pay them $600 a month. Iacono was shocked. 

“I’m eligible for $114 a week in unemployment insurance and you’re telling me that you want me to pay $600 a month,” Iacono said. “I mean, that’s absolutely preposterous.”

More people in Kentucky and across the country will likely find themselves in a similar situation. Policy experts and public benefits lawyers say the unemployment crisis has already created a wave of overpayment debts due to the complexity and speed at which state administrators adjusted to the circumstances.

Cali Mills, an executive advisor with the Kentucky Labor Cabinet, which began overseeing the unemployment office in May, said the office is mandated to collect debts, and they will soon start pursuing legal action against fraudulent claims and overpayments alike.

For some unemployed Kentuckians, that could mean a day in court. 

Fraud prosecutions have been limited due to the pandemic, Mills said in an email to KyCIR, “but with the courts beginning to resume a more regular schedule, legal actions will resume.”

Her Debt, But Not Her Fault

Iacono’s debt stems from 2012, when Iacono was allegedly overpaid in unemployment benefits during a stint between jobs. At first, state workers said they couldn’t provide any information about the overpayment besides how much Iacono owed, and that they would withhold $25 a week to put towards the debt.

After KyCIR asked the state about Iacono’s debt, the unemployment office called her with new information: The last time she filed for unemployment, her employer challenged Iacono’s claim and won. But no one told Iacono.

The state kept sending her unemployment checks, though she was no longer eligible, and now, she’ll have to pay that money back. It will likely take a long time: She’s back to work and no longer collecting unemployment, but she’s agreed to a payment plan of $28 a month.

Overpayment debt can pop up years after a person first collected unemployment, says James Maxson, an unemployment insurance lawyer who served as in-house counsel of Kentucky’s Office of Unemployment Insurance from 2008 until 2016.

“If you’ve received benefits and it was later determined that you were ineligible, not only do you stop receiving benefits prospectively, not only do they turn off the tap, but you actually have to pay those benefits back,” Maxson said.

State agencies are required by federal regulations to pursue any overpayment in unemployment benefits, but some states have passed laws allowing them to waive debt that is the result of an agency error, or that causes financial hardship. Kentucky is one of just 10 states that does not allow a waiver of overpayment debt in any circumstances, according to the federal Department of Labor.

“It’s an aspect of Kentucky’s system that I disagree with very much,” Maxson said. “But I’m sure that (overpayments) are beginning to happen and I’m talking to people pretty regularly who say, ‘They told me I’m not eligible and they want me to repay that amount.’”

To recover the overpayment debt, Kentucky’s unemployment office can withhold future benefits, as it did with Iacono, or file a lawsuit. Once that debt turns delinquent, state unemployment agencies are required to turn it over to the federal Treasury as the debt collector of last resort, though often, that happens before any collection attempts.

The Treasury withholds tax returns and other federal payments to offset the debt. This means the feds have been withholding aid to people put out of work by a global pandemic to pay a debt they probably didn’t know about.

The Treasury can withhold up to 50 percent of the $600 weekly payment Pandemic Unemployment Assistance authorized by Congress’ coronavirus relief package. In just the first half of 2020, the Treasury offset program has collected more than $1 million on behalf of Kentucky’s Department of Labor and more than $202 million for state agencies nationwide.

Improper Payments Abound

Unemployment overpayments are fairly common in Kentucky under normal circumstances.

The federal Department of Labor estimates that Kentucky’s unemployment office made nearly $26 million in improper payments last year, including overpayments and underpayments.

According to 2016-19 data from the Department of Labor, Kentucky overpaid on unemployment insurance benefits roughly 17% of the time. That’s well above the 10 percent improper payment rate the federal government requires states and federal programs to maintain.

Marjorie Arnold, chief of staff at the Kentucky Labor Cabinet, said in an email that recent changes in program administration have lowered overpayment rates to around 9%.

Quarterly payment accuracy reports would reveal how much Kentucky has overpaid since the coronavirus pandemic struck the commonwealth in March, but those were put on hold until July.

Michele Evermore, an unemployment policy expert at the National Employment Law Project, said that the pandemic has without question created a looming overpayment problem.

When the first coronavirus case popped up in Kentucky and businesses closed, the state expanded unemployment to reach independent contractors and the self-employed. The CARES Act followed shortly after, codifying the expansion in federal law and creating another $600 weekly payment under the federal Pandemic Unemployment Assistance.

Kentucky officials rushed to get money to people who desperately needed it. Evermore said the sheer number of people collecting unemployment, along with the new policies states like Kentucky have implemented on the fly, means state agencies are more likely to make mistakes.

“The administration in Kentucky really seems like they are trying their best to adopt whatever best practices they can to get benefits out the door as quickly as they can,” Evermore said. ”Ironically, some of the states that are doing the best at trying to get benefits out might get hit with this a little more.”

The problem isn’t likely to go away, even if state unemployment officials would prefer to avoid collecting overpayments. The Department of Labor Office of Inspector General said in its most recent report to Congress that it is considering auditing state workforce agencies’ efforts to detect and recover overpayments. 

The inspector general said it expects that phase of oversight, including any audits, to be completed by September 2021.

The inspector general’s report focuses on fraud in the unemployment program that can result in overpayments. But more often, overpayments are the result of simple paperwork problems or even administration errors made by the state, according to David Super, a public benefits attorney who teaches at Georgetown Law School.

“There needs to be program integrity and there needs to be serious measures taken (to prevent and punish fraud), but that’s not most of what we’re talking about here,” Super said. “A lot of what we are talking about are people who needed the money and were subsequently eligible for the money, but the paperwork went wrong.”

For example, Kentucky reports the most common “root cause” of overpayments in its unemployment system is that applicants didn’t register for required employment services, to connect them with job leads or training opportunities.

Most unemployed people have no problem doing so, Super said. “But if they are never asked, or the form is never handed to them or it sticks to another form and doesn’t get signed, then that becomes an overpayment,” Super said. 

If programs were properly administered and the application process simplified, he said, fewer people would be caught by paperwork errors.

In fact, Marjorie Arnold, chief of staff at the Kentucky Labor Cabinet, said in an email that the unemployment office has significantly lowered its improper payment rate after loosening the requirements surrounding employment search registration.

‘Broken for many, many years’

Submitted

Kimberly Iacono

The state has withheld hundreds of dollars from Iacono at a time, she said, when every penny counts.

She’s mostly been kept afloat by the $600 per-week in federal Pandemic Unemployment Assistance authorized by the CARES Act. But in July, $300 of that check was withheld, with no warning or explanation. 

Iacono said the unemployment office told her this week that it’s too late to appeal the decision, even though they made a mistake in not cutting her off once her employer successfully challenged her claim. She says she’s planning on talking to an attorney about it.

Iacono knows that, given the state of Kentucky’s unemployment system, things could be worse. The application process was confusing and full of mixed messages even when she filed for unemployment back in 2012, and she knows people who filed claims back in March and who have yet to receive a single check. 

“It’s not working and it’s been broken for many, many years,” Iacono said. “Unfortunately now taking into consideration the events that have caused so many to have to file for benefits, the evidence that it’s broken is even greater.”

Iacono went back to work at Cracker Barrel a few weeks ago. Business has been slow, and she’s worried about getting sick.

She wishes the unemployment office told her about the debt when it supposedly took place, instead of waiting until she was out of a job. “I would have had the opportunity to resolve this eight years ago, and not have this thrown in my face at a time when it’s not exactly ideal to have to contend with this.”

Contact Jared Bennett at jbennett@kycir.org.

The post In Kentucky, Unemployment Checks Are Docked For Old State Debts appeared first on Kentucky Center for Investigative Reporting.

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.

The post Fired Unemployment Director Testifies About Chaotic Pandemic Response appeared first on Kentucky Center for Investigative Reporting.

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