Even before COVID-19 pandemic, Nevada’s withered unemployment insurance system struggled to handle workload
Cecilia Gonzalez made her first call to Nevada’s unemployment office last Friday at 7:59 a.m., hoping that she might snag an open line the minute the agency opened to resolve a sticking point in her claim about her work history and eligibility.
But she would have to make more than 100 attempts over the next two hours before she finally got “through” to enter her inquiry. And even “through” is a relative term — at the other end of the line was an automated message that all slots for the day were taken up and she needed to try again the next business day.
“I have tried calling unemployment the second they opened. THE PHONE DOESN’T EVEN RING. WHAT AM I SUPPOSED TO DO!!!????” Gonzalez, 28, tweeted during the ordeal. “I don’t sleep because of all of this anxiety about how I am going to survive.”
A substitute teacher who has worked on campaigns in recent months but now cannot find a job, Gonzalez is far from alone. Thousands of frustrated Nevadans, desperate to access cash payments of several hundreds of dollars a week while they’re indefinitely out of work, have flocked to social media to share that they can’t get into the system or feel ignored.
“We have processed over a quarter of a million unemployment claims,” Gov. Steve Sisolak said during a press conference last week, urging patience. “We do not have the structure in place, I can assure you, to process this kind of volume. This department...has never received the funding that it should receive.”
While Sisolak has briefly acknowledged that the state has not invested enough in recent years in the infrastructure of the unemployment system, the statement belies a stark reality laid out to lawmakers just a year earlier.
The unemployment insurance system may have a record high $2 billion in its reserve fund to pay claims, but with 39 positions eliminated last spring and years of successive budget cuts driven by dwindling federal dollars for administration, it headed into the pandemic with near-record low staffing and funding to help get the money out the door.
“Across the country, concern is growing that, while we have large solvency to the trust funds in preparation for the next recession, our administrative operations are at risk, and we will not be able to adequately respond to the next downturn,” then-program administrator Reneé Olson told lawmakers during a March 2019 budget meeting. “I do share these concerns for Nevada. It does not matter if there is money in the trust fund if we cannot service claims.”
The COVID-19 pandemic and mandatory shutdown of the state’s nonessential businesses led to a record-shattering spike in unemployment insurance claims — more than 240,000 initial claims were filed in the last three weeks, or about 16.8 percent of the state’s workforce. Analysts have warned that jobless levels that were below 4 percent a month ago could shoot up above 30 percent.
It has put immense pressure on the unemployment insurance system — a joint state and federal program supported by payroll taxes paid by employers. The lion’s share of the tax is paid to states to build up a trust fund that will eventually be paid out as benefits to laid-off workers.
A much smaller share goes to the federal government and is distributed to states to support the administration of unemployment insurance systems — including the staff that man Nevada unemployment call centers.
It’s designed as a cyclical system, meaning federal dollars paying administrative costs for states go down as the economy does better, but ramps up during economic downturns.
But even as the state enjoyed record-low unemployment and an economic boom a year ago, officials with the state Department of Employment, Training and Rehabilitation — which runs the unemployment insurance program — warned state lawmakers that they were struggling to meet the call demand.
Olson told legislators at the 2019 budget meeting that the office received an average of 4,100 calls per week in 2018, but that planned staffing reductions would reduce weekly call capacity to just 3,100 in 2019, and closer to 2,800 a week in 2020 with legislatively approved staffing levels.
“In general, people are not able to get through to our call center and provide information we require to process their claims,” she told lawmakers at the time.
A year later, nearly a fifth of the state’s workforce has filed an initial unemployment claim. The state says 96 percent of people have been able to file claims online while 4 percent applied by phone.
Many with slightly more complicated inquiries that cannot be resolved online, including Gonzalez, have reported trouble getting through to a call center that until recently had only 75 employees. That number is now up to 200, and Sisolak announced Thursday that the state had selected a vendor to add another 100 staff to handle incoming calls in the near future.
But state officials on Friday couldn’t immediately provide data on how many people were unsuccessful in their claims — either denied or pending and not receiving money. A state spokeswoman said the agency is unable to pull staff off their duties at this time to dig up the answers.
That leaves claimants with questions on whether the system is truly working.
“I'm trying to be understanding and patient, but I think the lack of transparency is also frustrating,” Gonzalez said. “Like, how many claims are getting through? Is anyone getting through the phone line? There's just so many different pieces of information out there and no one to really confirm it.”
How we got here: ‘Excessively and unsustainably expensive’
A combination of factors led to cuts in recent years — reductions in federal funds, technology that’s costly to maintain, and a decision by lawmakers to have the agency focus on building its budget reserves and cease using penalty and interest funds to “backfill” positions.
It’s important to note that the sheer volume of unemployment claims is unprecedented. Just 13 weeks into the year, 2020 is already the second-worst year since 1990 for initial unemployment claims in Nevada, behind 2009.
“It was never designed to handle anything like this,” said Democratic Assemblywoman Maggie Carlton, who chairs a budget committee. “It’s a tsunami of unemployment.”
But a year ago, administrators of the unemployment insurance program saw storm clouds on the horizon. DETR officials told lawmakers that the 2019 federal government shutdown led to a sudden increase of about 500 new unemployment claims — a minor but unexpected stress on the system that required outside DETR staff to pitch in to get the claims processed.
“After the transfers and position eliminations, this will be one of the lowest (Full Time Equivalent employee) counts we have ever had in this program,” Olson said.
Since at least 2015, the staffing and budget of Nevada’s unemployment insurance administration program has been cut in every legislative session, almost entirely because of decreased federal funding for administrative costs.
In 2019, the agency’s budget was set at $54 million, including $47 million in federal funding — about a 12.5 percent decrease from the previous two-year budget. That funding level also included cutting 39 full time positions — 30 of which were not filled at the time — including 22 call center representatives.
The Great Recession wiped out Nevada’s unemployment reserves, forcing it to borrow nearly $800 million from the federal government to keep paying checks. Over nearly a decade, payroll taxes were devoted to reimbursing the federal government and building up the reserves.
DETR officials told lawmakers that they tried to carefully balance staffing levels below their full allocations, given expectations that federal funding would likely decrease year-over-year and thus reduce their staffing levels in future budget cycles.
“During the Great Recession, we added a lot of permanent positions, which are a part of the yearly reductions we have been making,” Olson said during the 2019 budget meeting. “Nevada's low base funding is similar to other states. We are funded and staffed below base because of the cost of our system. This is something we need to resolve to mitigate impact.”
But 2019 was just the latest in a series of budget and staffing cuts. These included:
- In 2017, eliminating 20 full time unemployment insurance division positions, because of a $2.7 million reduction in federal dollars. Overall, the unemployment agency budget was $62 million, with $51 million in federal funding.
- In 2015, lawmakers approved eliminating another 50 full time equivalent positions because of decreased federal grant money, including 27 front line and customer service employees.
The cuts could have been worse. The 2017 two-year budget in part relied on $2.9 million in funding from a “penalties and interest” revenue stream — assessed on businesses that don’t pay unemployment taxes — and was used by DETR to continue funding 14 positions in the agency.
But lawmakers at the time requested that those funds not be used in future budget cycles, saying that DETR should instead use those funds to build its budgetary reserve and not backfill administrative positions — helping contribute to an even sharper cut in the 2019 budget.
Instead, penalty and interest funds — used in 2013 to help pay for an upgrade to the state’s back-end UI technology — were reallocated to a major, $1.9 million Spanish translation project for the unemployment insurance claims filing system that was required by the federal Department of Labor.
Costly computer system
Olson, who no longer works for DETR, told lawmakers during the March 2019 budget hearing that workloads for call centers were on the whole decreasing because of self-service options available online, but that those “small gains” were eaten up by the “excessively and unsustainably expensive” system technology used to process unemployment claims, UiNV.
The former DETR administrator told lawmakers that the total cost for the system — including license maintenance agreements, technical staff and a database management system — was more than $5.6 million a year. Cutting that cost in half, she said, would have freed up the funding for 25 additional staff members.
“I honestly do not know if cutting system costs in half is possible or if the costs are reasonable,” she told lawmakers during the meeting. “I do know that other states have much less expensive systems. We can capitalize on technology solutions that did not exist before.”
Olson told lawmakers that DETR planned to return to the 2021 Legislature to ask for project funding for a more efficient system technology, including designing it to work better with mobile phones.
In an email, DETR spokeswoman Rosa Mendez said the cuts were caused by reduction in federal grant dollars and the inability of the agency to use the “penalties and interest” budget account for staffing. She said the cuts were generally targeted “across the UI spectrum and not focused [on] one specific unit or division within UI.”
A technical job
The state is now ramping up operations for its unemployment insurance call center. DETR Director Tiffany Tyler-Garner has said the agency had been leveraging staff from other departments, retired contractors and staff from other state agencies with unemployment insurance experience to quickly bolster the ranks.
But the process of training and ramping up a workforce to take at times highly complex questions about unemployment insurance could take time.
A 2017 Department of Labor study found that state unemployment claim call center employees took between six to eight months to become proficient in the complex world of UI laws and benefit programs, but that staff turnover was exceedingly high (35 to 50 percent) because of low salaries and the “nature of the work.”
Employees working call centers described the grueling and emotional nature of their jobs in a press teleconference this week organized by the union AFSCME. Some claimants have waited for hours before they get an operator; some break down crying.
“When I answer the phone, I sit there for a second and I let them talk. Because they have the phone on hold and I go, ‘you've got a human not a robot,’” said Helen Esposito, who processes unemployment claims in New York State. “We are the therapists for these people. We are the psychiatrists, we are the shoulder.”
AFSCME members in other states told similar stories of frequent budget cuts that have hobbled their claims systems. Jason Suggs, who processes claims in Maryland, said his agency is working at a third of the levels they had during the recession.
“Between retirements and people finding jobs for better pay, we've lost a good amount of people,” he said. “The hiring process and the pay rate is making it difficult for people to get in and to stay in and be trained in time.”
Carlton, a longtime state lawmaker who chaired the Assembly budget committed in 2017 and 2019, said that even had lawmakers decided to backfill the unemployment insurance positions, they would have likely been criticized as wasteful given the state’s record low unemployment at the time.
“You make those decisions and evaluate that budget based on that snapshot in time,” she said. “If we would have built it to handle that, we would have been wasting money and people would have criticized us for that.”
What comes next
The federal Department of Labor says it has distributed more than $500 million in additional administrative funding to UI departments in 39 states, which is about half of the $1 billion allocated by Congress almost a month ago.
Nevada has so far received about $5.3 million in funding from the federal government through the “Families First Coronavirus Act,” an earlier piece of federal legislation that in addition to new paid sick leave policies, also allocated millions in federal funds to states for increased costs of unemployment insurance administration.
That $5.3 million amount is only half of what Nevada is allocated under the federal law. The federal Department of Labor split the amount allocated to each state in the federal legislation into two allotments, with one given to states that meet minimum requirements on providing unemployment insurance information to laid-off workers.
The other allocation — also worth $5.3 million — requires a state to show that initial claims for unemployment have increased by 10 percent over the same “rolling” quarter, and that the state has taken steps to ease eligibility requirements. In mid-March, Sisolak waived work search requirements and a seven-day waiting period for approved unemployment benefits.
The federal CARES Act, which Congress passed later in March, allocates billions in direct payments to citizens and loans to small businesses but also contains additional administrative funds for states to operate expanded unemployment insurance programs.
“Nevada is in the process of applying for these administrative funds, but has not received any distribution of administrative funding under the CARES Act yet,” DETR spokeswoman Mendez said in an email. “Further, benefits to claimants under these program[s] are also federally-funded, and those federal funds will be drawn for distribution to claimants as soon as those programs are implemented in Nevada.”
On Wednesday, DETR announced it was working through “preliminary steps” to implement federal stimulus programs but is still awaiting federal guidance on implementation. On Friday night, it announced the unemployment insurance website would be temporarily down on Saturday “in order to conduct system enhancements and take steps towards the fast-track implementation of the federal CARES Act.”
These programs, which enhance Nevada’s base benefits of 13 weeks of unemployment and a maximum of $469 per week, include:
- A “Federal Pandemic Unemployment Compensation” for an additional $600 per week in unemployment benefits through July 2020.
- A “Pandemic Emergency Unemployment Compensation” for an additional 13 weeks of unemployment benefits.
- A “Pandemic Unemployment Assistance” program for independent contractors, freelancers, gig workers and other workers not covered by standard Unemployment Insurance.
AFSCME and its partners, however, say it’s not enough. They want to see another $500 billion allocated to state and local governments, in part to update unemployment systems that have withered over the years.
“These systems were already under funded before the crisis,” said Thea Lee, president of the left-leaning Economic Policy Institute. “Many are using outdated systems and technology. These are a result of prior ill conceived austerity measures.”