Criticism and strategizing for Employment Security before Legislature
The first week back at the Legislature — virtually, that is — saw plenty of conversation over what went wrong at the Employment Security Department this past year, and what steps might be taken to help out those who are unemployed.
With the pandemic came record unemployment, a backlog that has seen tens of thousands of people at a time waiting on benefits, a fraud attack that robbed government of hundreds of millions of dollars, and the looming figure of rising unemployment taxes on businesses to refill the Unemployment Trust Fund, which is funded entirely by these taxes.
The first of the potential solutions before the Legislature comes with the governor’s unemployment proposal — in the form of Senate Bill 5061. The bill is aimed at reducing the unemployment tax hit on businesses, and giving a boost to those who are unemployed.
While it is not exactly a tax decrease, it is a decrease in the amount the taxes will go up. Employment Security explained that business owners’ unemployment taxes on wages would be, on average, 38% less than originally calculated — an average of 1.17% instead of the 1.88% that had been estimated before. This past year, the average unemployment tax rate was 1.03%.
Sen. Karen Keiser (D-Des Moines), one of the bill’s sponsors, said mom-and-pop business owners in her district told her that the upcoming tax hikes were going to be too much to bear in an already devastating year.
“I’ve heard from many business owners who have received their tax bills … those tax bills for some of our hardest-hit employers have increased 500, 600% and more,” she said. “During a recession and a pandemic, that is unsustainable and unacceptable. We are going to do our best to address this problem.”
The tax increase would not disappear, however, but just get spread out over the next five years, gradually increasing to smooth out the pinch.
Some groups, such as the Washington Hospitality Association and the Unemployment Law Project, said this would provide much-needed relief for businesses and their employees.
“This is a significant change. One [of our members] had an increase of 216% — that would drop to a 60% increase,” said Tammie Hetrick, president of the Washington Food Industry Association. “It’s a savings of $200,000 in 2021 from original notices.”
Other business leaders expressed concern during testimony that this was just postponing the inevitable pain on businesses. The Association of Washington Business thought it was premature to set rates for the next several years not knowing how long the pandemic may last and how the federal government may step in. The Washington Retail Association suggested using money from the state’s Rainy Day Fund to offset some of the burden on businesses.
“The current version of the bill essentially kicks the can down the road … yeah, it’s great that the increase has been reduced, but eventually, someone is going to have to pay,” said Tom Kwieciak, representing the Building Industry Association of Washington. “Whether that’s a year from now, two years, five years from now, that’s going to be difficult for employers. I want to remind everyone that employers did take one for the team during this pandemic. They made huge sacrifices for the good of all of us.”
Wanting stronger measures for Employment Security
In addition to the changes for unemployment taxes, the bill would also increase the minimum benefit for workers from 15- to 20% of the average weekly wage. ESD noted that the minimum increase would go from $201 to $270.
It would also waive the waiting week for benefits when those benefits are at least partially covered by the federal government, would allow people who are high-risk or live with a high-risk person and cannot work from home to collect unemployment, and would require ESD to regularly report to the Legislature on the topics in the bill.
Some workers, while appreciative of the increase in benefits and protections, said the bill does not go far enough in holding Employment Security accountable for this year’s failings.
“Workers are still struggling. Workers who were going paycheck-to-paycheck previously are now on the verge of homelessness, starvation, financial ruin,” said Joaquin de la Puente of Olympia. “This bill is not directly addressing that.”
He has been waiting for seven weeks’ worth of benefits since March, when he had to stop his work in the cinema industry. Every time he has called in or emailed, he has received no response. Once, he said, he got an email giving him a number to call — only to find that the phone number was out of commission.
“I have zero way to resolve this issue, because there is no way to actually get communication with ESD,” he said. “Getting through is literally a matter of hundreds of calls and dozens and dozens of emails on my part, and still no response.”
Nick Demerice, ESD’s public affairs director, acknowledged before legislators this week that the lack of responses has made things especially challenging for claimants.
“Historically, we’ve always had this ‘safety valve’ — within a day or two, you could get on the phone with the right person who could help you work out your issue, get it resolved, and get your payments flowing again,” he said. “The scale and speed of what happened overwhelmed that safety valve.”
The safety valve meant that in the past, people with a question about how to fill out an unemployment form could simply call in and get the confusion resolved. Now, however, people are left to figure the forms out on their own — and making one mistake on a form can land a person in adjudication for months. This means that the lack of communication can just further exacerbating the backlog problem.
De la Puente wants the bill to take a firmer tone with ESD, requiring the department to get funds to people on a much faster basis and respond to claimants’ questions in a timely manner, whether that might mean hiring more staff or expanding contact hours.
“There has to be a direct line of communication open to ESD for people to be able to resolve their disputes more quickly,” he said.
A local finance expert who has worked in accounting and financial management said ESD likely made a set of critical errors in its response to the fraud and the unemployment backlog.
His guess is that mistakes were made after the fraud that led to more and more people going unpaid.
“You could speculate that in response to the fraud, a lot of immediate steps were taken that maybe had unintended consequences.”
The expert, who wished to remain unnamed, also believes that Employment Security Commissioner Suzi LeVine, the former United States ambassador to Switzerland, does not have the qualifications to lead a state’s unemployment system.
“We’ve got the wrong person for the job,” he said. “She wasn’t hired for her expertise, and they need someone with some insurance experience.”
He also wants to hear less deflection of criticism and more owning up to failures.
“If I would hear her or the governor say one time, ‘I own this and it will never happen again,’ that would be accountability in my opinion,” he said. “But I have not heard that.”
If he managed ESD, he would have done a root cause corrective action analysis — a term for repeatedly asking why something went wrong until reaching to the root cause.
“Ask five times, ‘Why can’t anyone answer the phone?'” the expert said. “Eventually, you’ll get to a root cause.”
The Employment Security Department said earlier this week when it met with the House committee that oversees it, Labor and Workplace Standards, that it is working on solutions — such as quadrupling the number of people responding to claimants, through inter-department transfers and temporary hires.
“We had around 300 people in our customer service team for unemployment insurance [when the pandemic began],” Demerice said. “We have now added about 1,000 individuals.”
Labor and Workplace Standards members questioned exactly how the backlog grew so much.
Continued unemployment claims are still hitting records, rivaling the peak of Great Depression, Demerice said. He noted that they’re examining what they could have done better, especially when it comes to preventing fraud and being responsive to claimants on the phone system.
“We are tireless in working to address some of the issues that have been holding us back,” he said. “And I will say, in all fairness, the technology, even though updated, has been a significant point of difficulty.”
The report for the first of five state audits of Employment Security found that ESD did not have enough “internal controls” to prevent the fraud attack. Notably, one automated process that flags suspicious claims was out of commission until May. By then, much of the fraud had already taken place.
ESD said their technology was very modern when the pandemic started, which put them ahead of other states. Still, they have learned that there are improvements to be made.
For example, when switching people from one type of unemployment to another, the system has accidentally flagged people as ineligible, and has sent out overpayment notices mistakenly. Demerice suggested that a better way to do this might perhaps be not sending letters until the entire switch between types of unemployment has been completed.
“We are really focused on, ‘How do we handle them in a more compassionate way?'” Demerice said.
ESD thanked legislators for helping to bring individuals’ unemployment issues to attention, saying they could not have done it without them.