The Kansas Department of Labor has chosen a contractor to modernize the state’s 1970’s-era unemployment technology, which buckled under the unprecedented demands produced by the pandemic’s onset in 2020.
Speaking to lawmakers in a joint commerce committee meeting, Labor Secretary Amber Shultz said the state had chosen a vendor for the roughly $40 million project. The name of the firm cannot be released until after the state has completed the contract, Shultz said, but she was hopeful that negotiations would be finished in a few weeks.
The announcement comes a year after Shultz’s appointment to the unemployment agency which has been embroiled in fallout from backlogs and fraudulent claims.
“When we came in there was a lot of factors. The pandemic was high, vaccines were unavailable,” Shultz said. “I joked with people, when we came in our agency, not just our agency a lot of agencies, were wildfires. And now they’re just like smoldering dumpster fires that are contained and controlled.”
“We’ve really moved forward in a lot, a lot of ways.”
When Shultz took the job a year ago, she walked into an ongoing crisis. She was the fourth secretary to lead the program in less than a year.
At the onset of the COVID-19 pandemic, Kansas’ unemployment rate soared to 12%, 187,000 people. The state was tasked with administering state -level benefits to those individuals as well as vastly expanded federal programs created in COVID-19 relief legislation.
In response, the agency’s 1970s IT mainframe collapsed, resulting in a mammoth claims backlog and jammed phone lines. The state paid out between $300 million and $600 million in fraudulent claims according to studies by KDOL and the nonpartisan Legislative Post Auditing group. The fraud is believed to have originated with international groups that targeted unemployment systems nationwide.
“I don’t pretend that every problem is solved, that we’re not still working through cases,” Deputy Secretary Peter Brady told the House Appropriations Committee Jan. 27. “This agency in many regards, and the system, failed Kansans … There is a lot of work being done not only to understand what happened but chart a path forward.”
Efforts to secure the system against fraud resulted in some legitimate claimants getting flagged as fraudsters and blocked from receiving benefits.
In April, lawmakers approved a bill giving the Legislature oversight over modernization of the IT mainframe and reforms at KDOL.
According to invoices the agency received from a contractor hired to assist with the surge, Accenture, KDOL spent more than $64 million by July 2021 trying to get a grip on the crisis.
Unemployment claims have plummeted, returning to pre-pandemic levels. Calls to the state’s call center have dropped to 20,000 a month, down from more than 150,00 a day at the height of the crisis.
The state still has 78 workers through Accenture, Shultz said, but that’s a steep decline from the hundreds of contract employees taken on last year.
The state, Brady said, is still working to resolve issues for some Kansans who have not yet received benefits owed.
Those individuals included people who were flagged as fraudulent and are being investigated and those appealing a denial of benefits.
“Right now we are hiring more administrative law judges so we can hear those cases,” Brady said.
Rep. Sean Tarwater, a Stillwell Republican, said he believes some Kansans are still owed back pay, and hopes the reduced call volume means the state can finally help them.
“I’m afraid a lot of Kansans gave up,” Tarwater said. “I’m hoping that those people will speak up so that we can help them.”
As for fraud, Kansas is currently experiencing an uptick in fraudulent claims but, Brady said, nothing compared to what the state has faced in the past.
Kansas is currently seeing 1,000 to 1,500 fraudulent claims a week. This time last year, Brady said, the state saw more than 10,000 weekly.
Lawmakers were pleased with the department’s recovery but made it clear the process wasn’t over.
“If my constituent casework is any indication then yes I feel like we have made that progress and that recovery,” Rep. Stephanie Clayton, an Overland Park Democrat said. “My major concern … is that this is cybercrime. These fraudsters are criminals who are attacking the state.”
“This is cybercrime that needs to be investigated and it’s a pretty systemic issue.”
Tarwater said continued legislative oversight would be key as the modernization process continues.
“That’s the positive thing about having that (modernization council) in place is that we will oversee the installation of whatever product it is and we’ll make sure it’s done right,” Tarwater said. “It’s not gonna be overnight. It’s gonna be a slow, long process.”