Like millions of Americans, Kathleen Kroeger lost her job in the pandemic and needed help. Five months later, alongside scores of other Americans, she’s still looking for it.
States are swamped with unemployment claims, delaying the resolution of even minor paperwork issues. In some cases, it has taken legal action to break the logjam. It’s a problem states are wrestling with in different ways, ranging from adding phone staff to hiring contractors, and a challenge President-elect Joe Biden’s transition team has made a priority.
“Just the basic unemployment, $345 a week, would have made a big difference,” said Kroeger, 40, who managed a restaurant near her home in Piedmont, South Dakota, until it closed its doors in March because of the pandemic. She left soon afterwards to battle her own COVID-19 case and other health problems.
She also missed out on the $600 weekly enhanced benefits—offered by the CARES Act until July—because the state never approved her for benefits.
Kroeger has checked daily and made dozens of fruitless calls to South Dakota’s Department of Labor & Regulation.
“I must have talked to 35 people. It’s always the same story—‘It’s on somebody’s desk, they’re going through them all, they’ll let you know,’” said Kroeger, who depleted her savings and borrowed money from her family before finding another job in August. She applied for benefits in early May.
Backlogs have become the norm in almost every state, according to federal timeliness reports reviewed by Stateline and FlaglerLive. As of November 1, only three states, North Dakota, Rhode Island and Wyoming, met the federal standard of getting benefit payments out within three weeks for 87% of applicants.
The 87% standard, set in 2005 by the U.S Department of Labor, carries no penalties but requires states to have a plan to correct the problem.
South Dakota had the lowest timeliness rate, with only 18.8% of payments going out within three weeks, with Kentucky (27.1%) and Maryland (27.9%) next. The rate was less than half for 14 states, including New York and California.
Florida’s record has been poor throughout: it was at 70% in April, fell to 44% in May and to 22% in June, rising since to 55%, 75%, 68% and 60 percent in subsequent months through October.
Before the pandemic, almost every state was at or above 87%, but not Florida. In January, when the state’s unemployment rate was at historic lows, Florida failed the 87-percent standard by 1 point. North Carolina had the lowest rate, 79.6%. Forty-four states and the District of Columbia paid 90% or more of claims within three weeks; now none does.
States have a legal duty to pay benefits on time, said Andrew Stettner, a senior fellow at the progressive Century Foundation and co-author of an October report on state unemployment systems. Some advocates have gone to court to force payments and press for change.
“The inability of states to climb out of the hole of untimely payment is an example of the system failures exposed by COVID-19,” Stettner said. “The federal government ought to be pressing them to understand their backlog and bottlenecks and coming up with solutions.”
in mid-November, the News Service of Florida reported, plaintiffs’ attorneys filed a revised class-action lawsuit against the Florida Department of Economic Opportunity and Deloitte Consulting LLP, seeking damages because of major problems with the state’s unemployment-compensation system during the COVID-19 pandemic. The revised lawsuit, filed in Leon County circuit court, came after Circuit Judge John Cooper dismissed an earlier version in September.
The amended complaint makes a series of allegations and contends, in part, that the department and Deloitte were negligent and breached a fiduciary duty to the plaintiffs, who lost their jobs during the pandemic and faced problems getting unemployment benefits. The department administers the unemployment program, while Deloitte was a contractor that helped put in place the CONNECT online system, which could not handle the crush of unemployment applications this spring.
“As a direct and proximate result of the … unlawful acts and omissions of the defendants, plaintiffs have sustained economic damages including, but not limited to, lost income and also have sustained noneconomic damages including, but not limited to, emotional pain, anguish, humiliation, insult, indignity, loss of self-esteem, inconvenience and hurt and are therefore entitled to compensatory damages,” the revised lawsuit said.
In South Dakota, where the three-week payment rate dropped from 98.0% in January to 18.8% in October, the state is “working as quickly as we can” to process claims and is now getting payment out for most first-time claims within three weeks, said Dawn Dovre, deputy secretary for the state Department of Labor and Regulation.
“Some benefit payments are delayed for reasons ranging from simple clerical errors to more complex deductible income and job separation issues,” Dovre emailed. Dovre said she can’t comment on specifics of delayed cases like Kroeger’s, but that “these claims and situations are complex.”
In state after state this spring, bureaucracies struggled to keep up with millions of legitimate claims:
In Wisconsin, fewer than 1% of 41 million phone calls to the Department of Workforce Development were answered between mid-March and June, despite $9.3 million in spending for staff at three call centers, according to a nonpartisan state audit. The state has since partnered with Google in an attempt to clear 103,000 holds on backlogged claims.
In California, state prisoners who studied the system were able to figure out how to receive fraudulent jobless benefits while legitimate out-of-work residents struggled to get help, according to prosecutors.
And both Kentucky and Pennsylvania, wrestling with processing times, hired accounting firm Ernst & Young to move through claims and settle disputes. Results were mixed: Even with outside assistance, Kentucky’s three-week payment rate declined steadily from 92.5% in April to 27.1% in October.
States were first slammed with benefit applications in March, when claims jumped from 282,000 to almost 6.9 million, and new claims continue to pour in at an unprecedented rate of more than 700,000 a week. Massive delays and a chorus of complaints led to shakeups in state labor departments, expanding computer capacity and even calling in the National Guard to answer phone lines.
Yet even as modernization increases efficiency for routine cases, the number of left behind and unresolved cases continues to grow, and late payments are increasing in most states. States that paid quickly were targeted for fraud and began to scrutinize applications more closely, creating more bottlenecks.
As he announced his economic appointments this week, Biden repeated a pledge to “deliver immediate economic relief to the American people.” Faster unemployment benefits were a key part of his transition plan, which included a pledge to make “Americans who lose their jobs financially whole by ensuring they get their unemployment insurance on time and in full.”
The plan promises help for states with staffing capacity, technology, training and best practices from other jurisdictions.
Some legal experts, though, see bureaucracy as the biggest obstacle to payment.
The most common cause for delay is an unusual situation or accidental wrong answer, such as mistakenly checking the box that indicates a person was unavailable to work, meaning they don’t qualify for benefits.
Such blunders, however trivial, require personal attention and many states are just too overwhelmed by the volume of jobless claims to perform once-routine investigations, said Sarah Hymowitz, an attorney for the Workers Legal Rights Project, a New Jersey nonprofit that serves low-income people with problems getting benefits.
Rules that require more scrutiny are more of an impediment than staffing or computer power, Hymowitz said. New Jersey’s three-week payment rate is 56.2% as of October, down from 97.4% as recently as March.
Mark Thierman, an attorney leading a class-action lawsuit against Nevada for slow benefit payments, said another factor is the use of pre-loaded bank cards and wire transfers to speed payment. While well-intentioned, he said, they created tempting targets for criminal fraud because a well-crafted fake application can produce instant cash.
Wire transfers and debit cards are too tempting to organized fraudsters, which forces the state to hold up legitimate applications for investigation, Thierman said, creating another bureaucratic thicket that leaves more legitimate claims unpaid.
Fraud would be much more difficult, but payment could be faster if states paid with paper checks, he said.
“[Nevada] could easily do a computer check of the initial application, follow the rules and pay by check, with the bank doing the identity verification,” Thierman said.
The overlapping rules often mean people wait months for action, and then file lawsuits to force payment. In one typical New Jersey case, a client had filed for temporary disability before the pandemic, creating a red flag in the system that had to be investigated to make sure he was available to work again, Hymowitz said.
“There’s no quick fixes for this,” Hymowitz said, because unemployment systems favor employers with hedges against excessive claims, not workers who need help in an emergency, she said.
Outdated systems have contributed to delayed payments and false fraud accusations, but modernization also has brought automated decision-making that sidelines legitimate applications, according to an October report calling for “worker-centered design” that’s more user-friendly.
The report was written jointly by The Century Foundation, based in New York City and Washington, D.C., the National Employment Law Project in New York City and Philadelphia Legal Assistance. All three groups lobby for more support for low-wage and unemployed workers.
Although modernization can be a double-edged sword, it’s still important to help states cope with an unprecedented tide of jobless claims, said Stettner.
“Modernized systems give states a better fighting chance to scale to the challenge of 2020,” Stettner said, citing Michigan as one example, though its three-week payment rate has fallen from 90.1% in April to 38.3% in October. Michigan was able to “turn off those chokepoints” that held up claims and became one of the fastest states to process claims early in the pandemic, according to the report.
Laid-off workers are often the most vulnerable because they tend to work in the low-paying tourism and hospitality industries, said Serdar Birinci, an economist with the St. Louis Federal Reserve. The national unemployment rate for low-income people rose from 5% to 25% at the height of the pandemic in April and has been slower to recover than the rate for higher-income people, which grew only from 2% to 5%, Birinci said.
More importantly, lower-income people, those in professions paying less than $35,000 a year, are less equipped to tolerate delays in benefits, Birinci said. On average a lower-income worker can make ends meet for less than a month without help, while higher-income people have an average cushion of two months between savings and other assets.
For some, delay spelled catastrophe.
“I filed on June 5 and never heard a word from them until mid-November,” said Derrick Lande of Yankton, South Dakota, a former welder who also has worked for a hunting resort. “They paid me nine weeks but by then it was too late. I lost a house and a vehicle,” he said. He was forced to move. Married with three children, he needs to stay home to help with child care.
In South Dakota, Kroeger was relatively lucky in that she got a new job in August as manager for a hotel, although that job too is endangered amid cancellations of group trips in a new upsurge in coronavirus cases. She has no idea why her application is delayed, though she suspects her break from work for medical care might have raised a red flag that needs to be resolved.
“The system is broken,” said Kroeger. “I’ve never been on unemployment. I’ve always had a job before, and this really threw me for a loop.”
She’s still waiting on more than seven weeks’ worth of benefits.
–Tim Henderson, Stateline, News Service of Florida and FlaglerLive