Virginia was unprepared to handle unemployment spike, concerns remain for modernization, JLARC finds

RICHMOND, Va. (WRIC)- A new report from the state’s non-partisan watchdog agency found the Virginia Employment Commission could’ve been better equipped to handle the large increase in jobless claims during the pandemic and that the agency was often slow to implement improvements. 

Those findings from the Joint Legislative Audit and Review Commission (JLARC) were presented to members of the General Assembly on Monday in a lengthy presentation.

The report acknowledges that the VEC was under unprecedented stress as it managed a tenfold increase in claims during 2020, noting that efforts to respond were often complicated by shifting federal guidance and office closures. 

However–with a long-awaited modernization project weeks away from launching–JLARC raised significant concerns about the agency’s ability to successfully complete the transition. 

An outdated system

JLARC’s report said an outdated unemployment insurance IT system developed in 1985 underpinned a number of the agency’s pandemic problems by hampering customer service and making it difficult for staff to navigate the process. 

JLARC Project Lead Lauren Axselle said an accelerated modernization effort would have mitigated some of those issues. 

Axselle said the overhaul has been underway for 12 years and it’s still unfinished 8 years after the original target date for completion. 

“All things considered, the VEC’s modernization project has taken much too long to complete,” Axselle said. “These projects should be completed in 3 to 5 years according to subject matter experts. Several other states have shown this is possible.”  

The project was put on pause once again in 2020 due to the pandemic. According to Axselle, that meant the agency was overly reliant on paper processes and manual data entry, which made it challenging to quickly modify ever-changing program requirements. 

“We just have to put this on the front burner,” said Del. Terry Austin (R-Botetourt) after the presentation. “Get it fixed. It’s an issue of grave concern.”

Much of the VEC modernization project is due to launch Oct. 1. Axselle said it should help address some of these issues but concerns remain.  

“Several major project risks have not been fully mitigated and continue to threaten VEC’s UI modernization project, even though the new system launch is fast approaching,” Axselle said. 

For example, the new system will have a customer portal where people can check the status of their claim online, which will help decrease the amount of inquiries coming into the overburdened call center. 

However, automatic texts and email notifications for status updates and document submission requirements have not been enabled.

“Claimants will have to proactively log in to check for these notifications which may cause delays in claims processing,” Axselle said. 

Another finding is that the agency hasn’t conducted sufficient usability testing with claimants and employers to identify possible areas of confusion.

Furthermore, Axselle said the VEC has made numerous data conversion attempts and is still struggling with accuracy. Issues with data conversation could cause errors for previous and ongoing claims. 

There is also a risk that the system may need to stay down for more than the planned 5 to 7 days, according to Axselle. That would halt the filing and processing of claims.

There are also concerns over whether staff training will be complete in time. Axselle said it just began on September 13th and the VEC is still finalizing guidance. 

At this point, the VEC and VITA remain optimistic that the modernized system will go live Oct 1, though some elements aren’t expected to be complete until June 2022.    

“I think it is an excellent step and it will solve a lot of the issues we saw during the pandemic but we’ll keep working closely with our peer states and the Department of Labor,” Virginia’s Secretary of Labor Megan Healy said to the panel of lawmakers. 

Communication issues continue

JLARC’S report found unclear communication from the VEC made it difficult for claimants to navigate the process. The report said that likely contributed to application inaccuracies that exacerbated a backlog of claims in need of review. 

“The VEC’s communications to customers and internal communications to staff have been infrequent and incomplete during COVID. This has caused significant frustration, confusion and mistakes,” Axselle said. 

“The lack of clear communication resulted in increased calls to the VEC and legislators and prevented eligible individuals from accessing UI benefits,” she furthered. 

The agency’s communication issues are multi-faceted, according to Axselle. 

The report said documents sent to claimants are confusing and overly-complex, written above a college reading level. JLARC said the VEC should urgently simplify documents explaining program eligibility and the identity verification process, as well as launch online instructional videos to reduce unnecessary errors like other states have done. 

The report also detailed poor performance from agency call centers, which serve as the main source of communication for claimants under the current system. 

The presentation said, as of June 2021, the agency has answered 4 percent of 2 million calls received. The average wait time was 10 hours.  

It said staff at call centers are often unable to answer questions in part because the management system is hard to navigate and learn. Also, third party contractors processing initial claims cannot see details about existing claims. 

Those communication issues existed internally as well, according to JLARC. The report said the agency at times failed to communicate problems to local offices before claimants and the news media heard about them. 

“Insufficient communication made it difficult for staff to respond to questions and process claims effectively,” Axselle said. 

Backlogs are still building

JLARC found that the VEC has not effectively responded to the increase in adjudications during the pandemic and the backlog of claims needing further review remains significant, even after a class-action lawsuit forced the agency to increase processing speeds. 

As of June 2021, the report said 2 percent of more complex claims were processed within the federal standard of 21 days and 82 percent of adjudications took longer than 70 days. 

It furthered that more than 100 thousand claims not included in the May 2021 lawsuit still require adjudication and staff estimate that an additional 1 million more issues could require review as the VEC revisits previously bypassed claims. This means some claimants will have to repay benefits if they are ultimately found ineligible. 

JLARC also noted that first level appeals are typically taking 275 days–longer than twice the U.S. average of 125 days. 

To address this, JLARC recommended the VEC develop a plan to resolve the adjudication of outstanding issues as of Sept. 20, 2021 as well as those that were previously bypassed. That plan should be submitted to the General Assembly and the Governor by Nov. 1, 2021 with quarterly status updates online. 

Slow to increase staff

The report said VEC had too few staff managing adjudications and working in call centers before the pandemic. 

Between Jan 2020 and Aug 2021, there was a net increase of 473 full time staff. Overtime increased by 1,600%. 

The state was unable to shift staff from other agencies due to lack of interest and decided not to deploy the Virginia National Guard, both of which helped in other states, according to JLARC. 

The report said the VEC took some early action to address staff shortages in call centers but the most significant steps were just taken recently, including hiring Deloitte to add 300 additional contractors. 

The VEC continues to face challenges finding adjudicators to reduce the backlog of more complex claims. JLARC said 46 percent of full-time positions in this area are currently vacant and high turnover has been an issue. The agency is attempting to streamline recruiting and hire contractors but turnover there has been a problem as well. 

Calls for more oversight 

Since there were several areas where the VEC under-performed, JLARC said additional oversight of the agency is necessary at the state level.  

JLARC is still considering different oversight models, which will be included in another report due in November 2021. That report will also address several new topics including funding, emergency planning, trust fund solvency, employer tax rates and benefit levels. There will be updates on modernization and call center performance at that time as well.