Will NC be ready for a flood of unemployment claims in a future crisis like COVID?

The leader of the North Carolina agency tasked with providing temporary financial assistance to unemployed workers faces questions from state lawmakers on why the agency has not been providing benefits in a timely manner and keeping improper payments low.

And the state official says his agency is not on track to meet a federal benchmark on late payments within the next year — in a sign that problems exposed during the pandemic have not completely abated.

State Auditor Beth Wood’s office published two negative reports in 2022 on late and inaccurate payments, as previously reported by The News & Observer.

Late payments for unemployment benefits

North Carolina has failed to meet a federal requirement that at least 87% of first benefit payments must be sent to unemployed workers within 21 days.

As of late June, just over 64% of first payments were issued within the 21-day federal standard, according to Antwon Keith, assistant secretary of the Division of Employment Security.

Keith took over leadership of this division last year from Pryor Gibson, who was appointed to the role in mid-2020 during the COVID-19 pandemic, when the agency was flooded with unemployment claims. Gibson moved on to become senior legislative adviser to Democratic Gov. Roy Cooper.

We “have been completely absorbed with righting” the unemployment insurance “ship in the midst of the aftermath of a worldwide pandemic,” which is “second only to the Great Depression in terms of the unemployment rates,” Keith said during a meeting of a state House oversight committee on Wednesday. This committee is comprised of Democrats and Republicans but is controlled by the GOP.

“We went from 2,500 claims a week to a max of 54,000 in one day,” Keith said of the jump in claims during the pandemic as many businesses either shut down voluntarily or were ordered to close, to prevent the spread of the virus. “Over a million claims were filed in a 10-week span.”

While delays were exacerbated during the pandemic, as reported in a 2022 audit by Wood, DES has not met the 21-day federal requirement during any year for the last 10 years.

Questioned about these delays by Rep. George Cleveland, an Onslow County Republican, Keith on Wednesday said DES had lost 45% of adjudication staff, who make determinations on unemployment claims, since December 2022 — representing years of experience gone.

To make up for this, DES has shifted other employees to adjudication, paid overtime, and evaluated training programs, among other actions, he said. Asked by Cleveland if the state, with changes implemented, would meet the federal benchmark within a year, Keith said it would not.

Improper unemployment payments

As for improper payments, DES has overpaid about $735 million out of $14 billion since April 2020, said Keith. This is just over 5% of payments.

Overpayments can be due to fraud or application errors, with the state having prevented $142 million in fraudulent payments in 2022 and $68.5 million so far this year, according to Keith.

Of the $735 million in overpayments, DES has recovered about $130 million, said Keith. Recovery is done through various mechanisms including benefits offsets and garnishments.

The state fared worse than many other states, according to federal benchmarks. The U.S. Labor Department says no more than 10% of state’s payments should be improper, which occurs when the state makes payments to people who are ineligible, or in an incorrect amount.

North Carolina had an 18.85% estimated improper payment rate from July 1, 2019 through June 30, 2022, according to the DOL. Only eight states met this 10% benchmark in this timeframe, with North Carolina worse than 35 other states.

This benchmark looks at the state’s unemployment insurance program, which is funded by employer-paid unemployment taxes. The maximum weekly payment under this program is $350 a week for up to 12 weeks.

It does not look at federal unemployment programs implemented during the pandemic, which extended timelines and increased payments for some. Due to this high improper payment rate, the state UI program is designated as “High-Rate/High Impact” by the federal labor department.

Keith said that contrary to many other states across the country, North Carolina requires claimants to show proof they sought work with three employers every week. This leads to work-search issues, which is a top driver of improper payments in the state, to be over-represented in North Carolina in comparison to other states, he said.

The state also has no work-search waiver and requires verification of work-search contacts. “The reality is that it’s an unequal playing field,” he said. He also said the sample size set by the federal government, which was 130 paid claims and 39 denied claims for North Carolina, was too low and should be reevaluated.

Democratic Rep. Maria Cervania, from Wake County, told Keith that despite the federal benchmark potentially being misleading, “we can do better,” and “I will offer that you should.”

Improvements in serving benefits applicants

DES has been implementing various changes to improve, said Keith, including developing an automated chat box to help with applicant questions, which would also ideally help with various other repetitive tasks.

He also said DES was developing a dashboard, which will likely not be completed until 2024, to show applicants the status of their claims. It also has implemented mobile push alerts to keep people up to date on their paperwork.

The state also joined a claims processing system dubbed the Southeast Consortium Unemployment Insurance Benefits Initiative. SCUBI, shared with South Carolina, helps with automating the application process. But according to Wood, who is a Democrat, while automation is a helpful tool for improvement, this system causes lags when an application is flagged and kicked into manual review.

For further improvement, Wood suggested DES provide more clear metrics on timeliness and staffing needs. She pointed to a failed bill from the 2023 legislative session which would have required state agencies flagged for deficiencies to submit a progress report to the auditor’s office and the Joint Legislative Commission on Governmental Operations, which is currently composed of 42 members and co-chaired by Senate leader Phil Berger and House Speaker Tim Moore.

Wood, who is not running for reelection in 2024, also questioned whether the state would be ready for the next crisis similar to COVID-19, warning that economic downturns occur every five or so years.

“The thing I heard a lot is we’re working on, we’re working on, we’re working on. What we need to see are timelines. When you plan to get this done.” she said.

“We know it’s coming. And so are we ready?”