Audit: Oregon Employment Department struggled long before Covid pandemic

Oregon’s unemployment insurance program was struggling long before the Covid pandemic, an audit released Wednesday by the Secretary of State’s Office found.

“Antiquated” computer systems, limited phone lines and a shrunken staff caused by years of low unemployment numbers and federal underfunding left the Oregon Employment Department ill-prepared for a rapid rise in pandemic-related unemployment claims, the report said.

Read the reportThe Pandemic’s Effects on Oregonians Exposed Risks and Highlighted the Need to Modernize Oregon’s Unemployment Insurance System

Oregon went from around 4,000 new claims for unemployment benefits a week to more than 62,000 during the first week of April, 2020. New pandemic-related federal programs that increased and expanded unemployment benefits created more work for the already-stressed department.

“No states were prepared for the pandemic,” said Kip Memmott, the state audits director. “All state unemployment insurance offices and departments struggled to get these payments out.”

Yet Oregon was among the slowest to process applications during the early months of the pandemic, according to an analysis by The Oregonian/OregonLive in 2020. Tens of thousands of applicants had to wait weeks and even months for their money, the analysis showed.

Auditors found that the Oregon Employment Department could have prepared better by replacing its computer system – something recommended in a 2015 audit. And it should have improved its adjudication process, the report said. These involve thorough investigations of some applications.

“​We have to make sure that we provide these tools and these recommendations to both lawmakers and the agency to say ‘I’ll be damned if Oregonians will ever experience this again,’ when a program that they have paid into their entire working lives doesn’t work at the time when they need it the most,” said Secretary of State Shemia Fagan.

Problems predated pandemic

The Employment Department relies on a computer system that launched in the 1990s and uses an obsolete computer language, COBOL. Making simple changes can take hundreds of hours of programming, auditors found.

Prior audits in 2012 and 2015 criticized the computer system, noting that it made it difficult for the agency to respond to new state or federal programs. In both the Great Recession and the early stages of the pandemic, the federal government provided more benefits to people who lost work.

Oregon received about $85 million from the federal government in 2009 to replace and modernize the Employment Department’s computer system – but those upgrades aren’t expected until spring 2024.

The agency attributed the slow pace of the computer upgrade in part to its high volume of work during the recession and leadership turnover – the department has had four directors in the past nine years. And state officials are also more cautious about approving large IT projects after the well-documented failure of Cover Oregon, the state’s $300 million attempt at an online health insurance marketplace.

Fagan, who was a state legislator for eight years, said the Employment Department’s struggles should remind lawmakers to respond urgently to agency budget requests for IT funding.

“When agencies go before lawmakers and ask for money for IT projects, it is not an exciting topic,” she said. “It is not a sexy topic to say ‘Hey, let’s solve this potential worry. But this shows how important it is for lawmakers to act with urgency when there are big risks to IT systems.”

And funding, particularly for department staff, is tied to unemployment rates, said Ian Green, one of two audit managers. Unemployment rates in Oregon and across the nation were near record lows just before the pandemic.

“When rates are low, they receive less funding, they have less staffing,” he said. “When rates go up, they receive more staffing and funding to provide the services they need.”

The department hired and trained hundreds of new employees and opened new call centers in Salem and Wilsonville early in the pandemic.

Racial, economic disparities in waits for benefits

Auditors also found that people with lower incomes and people who identified as Asian, Native Hawaian, Pacific Islander, American Indian or Alaskan Native waited longer on average than other applicants to receive their benefits after a process called adjudication.

Only about one-third of applicants before the pandemic and three-fifths of applicants during the pandemic provided their race or ethnicity with their unemployment claims.

Not everyone who’s unemployed is eligible for unemployment benefits, including people who were fired for misconduct or who quit their jobs when they could have continued working. When it’s not immediately clear whether an applicant is eligible for benefits, adjudicators investigate.

Federal guidelines say adjudicators should make their decision within 21 days of an initial request. But that process took an average of over three months during the first year of the pandemic.

It took an average of 12 days longer for Asian applicants to receive their benefits than Black, Latino or white applicants. Native Hawaiian or Pacific Islander applicants waited an average of four days longer than Black, white or Latino applicants, and indigenous applicants waited an extra two.

And applicants claiming between $100 and $185 in weekly benefits waited two weeks longer than those at the high end of the income scale who claimed $615 to $700.

“A two-week delay could mean the difference in someone making an on-time car payment or losing their vehicle to repossession, or the ability to purchase food,” the report said.

Auditors recommend ombuds office

Auditors suggested that the Employment Department follow other Oregon agencies and unemployment offices in other states by adding an office for an ombuds, or an independent advocate to help people understand their rights and responsibilities. The Oregon Department of Consumer and Business Services, for instance, has an ombuds office that explains workers’ rights and how to file complaints about workplace issues.

State legislators filled that role for many Oregonians, but the report noted that contacting lawmakers isn’t an option for everyone.

“Individuals looking for help getting their claim resolved have few avenues to turn to outside the regular claim and adjudication processes, short of contacting their state legislator for help,” the report said. “Those who are less familiar with the unemployment system, who have less education, or for whom English is not their first language, may not be comfortable contacting their legislators or even know of that as an option.”

In a letter included with the audit report, Employment Department acting director David Gerstenfeld said the department is interviewing other states with ombuds offices to review how they work and will consider adding one.

He said the department is also considering whether to communicate with claimants through texting, though they’re concerned that it could result in fraud. Oregon had one of the lowest levels of unemployment fraud in the pandemic, paying out $24 million in fraudulent claims in 2020 – about 0.32% of the total claims.

A recent audit in Arizona, which has less than twice the population of Oregon, estimated that the state saw more than $4.4 billion in unemployment fraud. And California, about nine times Oregon’s population, paid $20 billion in fraudulent claims.

Oregon Capital Chronicle is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Oregon Capital Chronicle maintains editorial independence. Contact Editor Lynne Terry for questions: [email protected]. Follow Oregon Capital Chronicle on Facebook and Twitter.

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Julia Shumway is deputy editor of Oregon Capital Chronicle and has reported on government and politics in Iowa and Nebraska, spent time at the Bend Bulletin and most recently was a legislative reporter for the Arizona Capitol Times in Phoenix. An award-winning journalist, Julia most recently reported on the tangled efforts to audit the presidential results in Arizona.