Now that the Federal government, via the Department of Labor (DoL), has signed up to put $2 billion of stimulus-related funding into shoring up beleaguered state unemployment insurance (UI) systems overpowered by the jobless claim surge due to coronavirus pandemic, Federal and state officials discussed how those efforts will roll out during a panel discussion at MeriTalk’s State Tech Vision virtual program on September 15.

The State Tech Vision conference – the first in a series planned by MeriTalk – remains available for on-demand viewing.

Historical Support

Joining me on the panel were Rick Kryger, Deputy CIO at the Labor Department, Scott Sanders, chief executive officer at the National Association of State Workforce Agencies (NASWA), and Gary Markham, Vice President, Integrity Global Security.

With few exceptions, state and local governments began their current fiscal year on July 1, and most are still working to determine how these new Federal funds will be allocated to IT investment, especially for UI system modernization.

Sanders organization, NASWA, has a unique viewpoint as its membership includes the directors of those state agencies responsible for managing unemployment systems throughout the country.

“Unemployment insurance (UI) programs are a Federal-state partnership based on the law that was passed many years ago,” he said. “In the early days there actually were supplemental budget requests under which states could ask the Department of Labor to help fund their IT systems,” said the former Indiana workforce agency director.

The Department of Labor also had some consortium grants that it issued when the agency wanted multiple states to join together in one system. “States, by and large, have tried to fund IT out of their UI administrative dollars that come from the Federal government, but that doesn’t typically cover enough to launch a new system, as we all know systems don’t come cheap,” he said. “And so states did need additional funding.”

States typically receive what’s called a base funding allocation from the Labor Department to fund their UI programs. Unfortunately for states, that base has remained flat over the past 10 years.

“With the cost of inflation and flat funding, state UI teams typically begin to eat into their operation’s budget, and that’s why I think prior to the pandemic, most of the agencies were probably at their lowest level of employment,” Sanders said.

“So obviously, when the claim tsunami hit, to be able to ramp up to expand their systems became quite a challenge,” he continued. “And I do have to say that I know at least during the pandemic, the U.S. Department of Labor has done a great job at providing funds to enhance integrity and fight fraud, but part of it is when your staffing is low, it’s tough to get all hands on deck.”

DoL’s Kryger agreed, saying, “It’s been an enormous challenge for states and we need to recognize that.” He continued, “these are state-run programs, and let me just start off by recognizing all the hard work the states and industry partners have put in, especially during the pandemic.”

The Labor Department has traditionally provided to state governments oversight, policy, and direction, along with funding assistance through grants for primarily administrative support, plus some additional help with modernizing IT systems. However, that IT support has not been as extensive as the categorical IT funds provided by, for example, Federal Department of Health and Human Services (HHS) agencies. Rather, the majority of state UI funding comes through the tax programs for unemployment insurance that the states operated themselves.

“So it’s probably a little bit different than some other Federal programs,” Kryger said. “Of course, especially during the pandemic, we’ve tried to step up financial assistance and grants for things like fraud prevention, as we know this has been a really big challenge.”

Cybersecurity, Anti-Fraud Imperatives

A closely related issue for UI systems is cybersecurity, and Integrity Global Security’s Markham talked about the impact that Federal funding could have for strengthening cyber defenses.

“When we start putting money towards things and we start identifying what we’re trying to protect, if we just throw money at it, it really doesn’t help,” he said. What is really needed is an organized, ready-to-go plan for identifying those key pieces that need to be protected.

“One of the biggest mistakes folks make is to just throw a bunch of funds at it, especially after a cyber attack, and especially, a successful cyberattack,” Markham said. “What ends up happening is all you’re doing is putting band-aids on the problem.”

What is instead required is to have an organized effect, an organized plan, and a way of attacking the security problem so that these types of events can be prevented in the future. “That’s where organizations have to start shifting their focus and funds towards prevention of future vulnerabilities from cyber attacks,” Markham said.

“Right now we’re so focused on just responding to everything that’s happening out there,” he said. “There’s no time and there’s no money to start putting towards prevention, so that’s really where I think the biggest benefit will come, is starting to work on prevention, instead of reaction.”

Who Gets the Money?

I asked DoL’s Kryger for some insight into what every NASWA member wants to hear: how does the Labor Department plan to allocate the $2 billion in stimulus funds for states’ UI systems and related areas.

“That’s really the $2 billion question that we get asked quite frequently,” he replied. “Just in the last couple of weeks, the Department of Labor released a memorandum on this exact topic. Obviously, there has to be direct assistance to the states, and we’re putting a heavy emphasis on fraud prevention.”

DoL also recently awarded blanket purchase agreements that states can leverage to identity spoofing, in order to ensure that the individuals that are submitting claims are in fact who they say they are. Plus there are direct grants to the states.

“However, we also want to take a look at some different approaches here,” Kryger said. “Where are some commonalities, where is there the ability to develop common IT systems in a modular way, that can be adopted by the states,” he asked, indicating that DoL is rethinking its IT support approach. “It’s a close partnership issue with the states because you can’t just say here’s the solution,” he said. “You really have to work this as a partnership, and to make sure you get to the right goal.”

As for the DoL allocation, NASWA’s Sanders was more specific.

“There’s about $140 million going out for fraud prevention, and $260 million to improve equity outreach and customer service, which I think is key. The states have been stretched and must improve that overall experience for claimants,” he said.

Apparently, the plan for the rest of the allocation of DoL’s $2 billion to states is still being developed.

In closing, I asked NASWA’s Sanders – given the mission-critical nature of state UI systems, and the problems and even the tragedy that can and has occurred due UI program challenges – what he would like to tell DoL Secretary Marty Walsh if he were on our State Tech Vision panel.

“Well, I think, first of all, one size doesn’t fit all,” Sanders replied. “I think one of the things we need to work out is to find components of the UI system that we can be potentially leveraged, and put it out there and have states kind of test it and plug it in, if they think that best suits their system.”

And he admitted that it would be a real challenge to convert 53 state and territory UI systems into anything new. What’s needed is strategic mapping, identification of system assets, and then an evaluation of what’s working well and what is not.

“As I said at the beginning, it really is a Federal-state partnership,” Sanders said. “It’s important to make sure that states’ views are there as well as the Federal government’s, and really find those components that are really kind of that plug and play, to really be able to improve the system, and put some kind of a fraud recognizer on the front end. That would be probably one of the first steps I like to see.”

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John Thomas Flynn
John Thomas Flynn
John Thomas Flynn serves as a senior advisor for government programs at MeriTalk. He was the first CIO for the both the State of California and the Commonwealth of Massachusetts, and was president of NASCIO.