Unemployment backlog on menu for ARPA spending

Department of Labor and Industry wants more than $5 million for system modernizations

By: - March 17, 2021 3:08 pm

Helena, Montana, United States, North America

The state Department of Labor and Industry is looking to use an estimated $5.2 million in the recent federal COVID-19 aid package to modernize and reform the administration of its unemployment insurance benefit system, improvements the agency says are needed after processing delays slowed down the disbursement of jobless benefits during the pandemic.

That sum comes from a total of $2 billion set aside in the American Rescue Plan Act to improve unemployment insurance administration in states across the country. The U.S. Department of Labor has discretion on how to spend that money, and whether it wants to implement these reforms at the national or state level — so it’s possible that the state doesn’t get that full $5.2 million.

But what it does get the department wants to use to address longstanding complaints about a backload of cases, slow customer service and aging technology, said Natalie Smitham, a division administrator in the department who testified to lawmakers on a subcommittee Tuesday.

A lot of attention has been given to the outdated nature of unemployment benefit systems across the country,” Smitham said. “Ours is 20 years old, and it’s based on an outdated platform.”

Training for new employees to use that platform takes around six weeks, and it’s difficult to find programmers with existing knowledge of how to use it, she said.

That platform, combined with the near-unprecedented turmoil of the COVID-19 pandemic, left many jobless Montanans waiting weeks or longer for their claims to process, even as the department used existing funds to increase staffing to reduce the number of outstanding claims.

One of the most common complaints from constituents that I’ve received over the last year was about waiting to get their unemployment claims,” said Sen. Pat Flowers, D-Belgrade, one of the lawmakers on the panel tasked with recommending how to spend hundreds of millions of dollars of congressional COVID funds to improve government services. “Anything you can do to use this money to staff up in a way that really eliminates that backlog as best you can…that’s something that directly benefits all of our citizens that are hurting right now.” 

Nationwide, ARPA created billions of dollars in funds to continue support for relatively new unemployment programs like Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation. That allocation is handled from the federal government. But what could be left up to the states is the separate pot of money for administration and fighting fraud, which unemployment officials say has skyrocketed in the PUA and PEUC programs — though the department has said that its systems itself have not been breached.

Smitham said these dollars are needed in addition to other pots of money intended to modernize the state’s unemployment program, including around $5 million in House Bill 630, a bill brought by Rep. David Bedey, R-Hamilton, that frees up federal COVID aid from the CARES II package in December. Lawmakers are debating that bill this week alongside the broader ARPA package, HB632 — nicknamed “the beast.”

“That’s additional money that comes in from the federal government that is based on our claim load,” Smitham said. “We project spending the majority of that money this fiscal year. Things are looking fairly tight right now.”

The department has also requested $45 million either from the feds or the state to replace the state’s unemployment software as part of House Bill 10, which still needs to move in the House Appropriations Committee. The state doesn’t have the money to support that project on its own, so DLI would need to tap into federal funds like those contained in ARPA.

Montana’s unemployment rate is around 4%, a low figure. But this belies the caseload, said Kathleen O’Leary, deputy commissioner with the department.

“Four percent is misleading compared to the number of claims we’re seeing,” O’Leary told the subcommittee. “We have a population eligible for unemployment right now that are not normally able to be eligible for those programs (referring to PUA and PEUC). The number of claims we’re seeing is higher than what we’d normally be seeing.”

The subcommittee will assemble a package of recommendations for spending the ARPA money on Thursday.

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Arren Kimbel-Sannit
Arren Kimbel-Sannit

Arren Kimbel-Sannit is an Arizona-bred journalist who has covered politics, policy and power building at every level of government. Before getting his dose of northern exposure, Arren worked as a reporter in all manner of Arizona newsrooms, for the Dallas Morning News and for POLITICO in Washington, D.C. He has a special interest in how land-use decisions affect working-class people, which he displayed through reporting on the epidemic of pedestrian deaths in the U.S. for the Los Angeles Times and PBS Newshour. He's also covered housing, agriculture, the Trump presidency and more.