WA unemployment system still suffering from COVID-era problems

While much of Washington is moving past COVID, the unemployment system still faces pandemic-era problems that left hundreds of millions of dollars in the wrong hands.

Even as many Washington employers have moved past the pandemic, the unemployment system is still dealing with pandemic-related problems that raised costs and left hundreds of millions of dollars in the wrong hands. The problems, which range from organized unemployment fraud to $1 billion in mistakenly paid benefits, are adding pressure on the state Employment Security Department as it braces for a post-COVID-19 normal marked by heightened risks and fewer resources. On the fraud front, investigators have now recovered two-thirds of the $647 million in pandemic benefits taken by cyberthieves in early 2020. That includes $42 million the state Attorney General’s Office extracted from 26 banks where criminals had stashed stolen benefits.Yet the remaining $223 million in stolen benefits likely will never be recovered, ESD officials acknowledged last week. In the meantime, fraudsters have only stepped up efforts to steal benefits, despite the expiration of generous federal pandemic benefits that drew criminals in the first place. “Fraud levels have definitely not returned to what we saw pre-pandemic,” said ESD spokesperson Chris Barron. ESD is also grappling with another batch of pandemic-era benefits that went where they weren’t supposed to.

In January, ESD said it had identified 136,000 claimants who had received $1.2 billion in pandemic benefits to which they weren’t entitled. The so-called overpayments often stemmed from complicated eligibility rules that claimants didn’t know they were breaking, but claimants were technically on the hook to repay the benefits, which were substantially larger than normal jobless benefits. In some cases, individuals were asked to repay tens of thousands of dollars in pandemic benefits, which were available from Feb. 2, 2020 to Sept. 4, 2021. Since then, ESD has been trying to lighten that debt load for claimants who can show they weren’t at fault for the overpayments. Under a special federal program, ESD automatically waived repayment for around 21,000 of those claimants, and in April, began allowing the remaining 115,000 claimants to apply for overpayment waivers. The good news: 81% of the applications processed so far have been approved for waivers. The bad news: ESD has processed only around 200 of the 28,000 applications it has received, and those represent only around a quarter of those eligible to apply, according to ESD data.Part of the slowness is intentional, as the agency trains staff to assess applicants under criteria that were expanded by the federal government to reflect challenges claimants faced early in the pandemic. For example, overpayments can be waived if claimants misunderstood the often-complicated filing instructions for pandemic benefits, received incorrect instructions from ESD staff, or lacked language skills or internet access, among other criteria.

The extra criteria meant ESD reviewers need additional training to ensure consistent decisions across tens of thousands of applications, said JR Richards, ESD’s director of unemployment insurance customer support. The new waiver applications “are not easy to adjudicate,” Richards said.Richards said the first wave of adjudicators have finished training and that processing should pick up speed. ESD also believes more claimants will apply and eventually expects between 70,000 and 80,000 applications, Richards said.But ESD may be contributing to the slow response in other ways, some outside observers say.ESD’s waiver notifications are often so vague that claimants may not understand they might qualify under the newly expanded criteria, unemployment advocates say. For example, a notification dated Sept. 14 that was shared with The Seattle Times informs claimants that ESD “may be able to waive your pandemic-era overpayment so you do not have to repay it,” but makes no clear reference to the expanded eligibility criteria. 

The federal waiver program represents a “huge expansion of the analysis that [ESD] would use in order to make a waiver [but] they won’t lay it out in detail for the claimant,” said Anne Paxton, of the Seattle- and Spokane-based Unemployment Law Project, which represents people who are denied unemployment benefits. Paxton and others worry that vagueness is discouraging many claimants from applying.That was the case for Larry Bafus, 60, of Shoreline. The notification he received in September merely stated he had a pandemic-era overpayment, but didn’t offer a dollar figure or clarify whether the overpayment in question was the same one Bafus already repaid in 2021. Hoping for answers, Bafus started filling out the online waiver application, but after answering a few questions, and not finding any information about how much he owed, he stopped. “It just felt weird — they’re looking for a lot of personal information, but they haven’t explained to me what it is that I’ve done,” Bafus said. 

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ESD said the waiver applications are going to anyone who received a pandemic overpayment; those who have repaid their overpayments but later qualify for waivers will get refunds. In the past, ESD has been criticized for unclear communications, and Richards said the agency has tried to make the overpayment waiver letters easy to understand and persuasive. But while most recipients seem satisfied, she said, “we still created confusion and angst for some folks.” The agency has modified its website and will work to clarify communications in future notifications, Richards said. ESD is also working on how it communicates about another benefit program. 
In 2021, ESD mistakenly paid unemployment benefits to people who were also getting Paid Family and Medical Leave benefits, which ESD also administers, according to a Sept. 28 report by the state auditor’s office. Such double payments are prohibited under state law.Over a three-month period in 2021, auditors estimate that ESD likely paid around $1 million in PFML benefits to around 1,600 people who were also receiving jobless benefits.The audit doesn’t indicate whether improper payments may also have occurred before or after the three-month audit period. But from the instances identified during that time period, “it’s clear there was not a process in place to prevent double-payments,” said state auditor spokesperson Kathleen Cooper. “During our next audit, we will verify that the department has fixed this.” ESD officials acknowledged the double-payment problem. They said the agency plans to better communicate with leave applicants and wants to automate the process of cross-checking all unemployment and leave claims to prevent double payments. Cross-checking is currently done manually. But the fixes likely won’t happen overnight. Plans to improve PFML controls would require additional staff and are included in an $8.6 million state budget request that if approved would go into effect after July 2025.That points to what may be the agency’s most enduring pandemic-related problem: greater demands and fewer financial resources.

ESD gets around 70% of its administrative budget from federal funds, which are based on the volume of unemployment claims the agency receives. Federal funding swelled during the pandemic, which let ESD add customer service staff. But as the pandemic faded, so have federal dollars, leaving ESD with a smaller staff despite many linger pandemic-era problems.As of June, ESD had the budget for around 239 full-time customer service staff, down from 964 in late 2021. The agency got state funds for additional workers specifically for the overpayments task, but that money is temporary. The agency has partly compensated with technology, such as a new phone system rolled out this spring, which has helped address problems claimants had in reaching the agency during the pandemic.In August, 21% more callers got through to ESD staff than did so in April, and average wait times fell 32%, to 23 minutes, despite a 54% increase in the number of people trying to contact the agency.Many of ESD’s post-pandemic challenges, such as increasingly cunning cybercriminals, will ultimately require more money, said Cami Feek, ESD commissioner. But that’s a tough ask in the current budget climate. State lawmakers did not increase ESD’s anti-fraud budget. And Congress recently nixed proposed funding to improve state unemployment computer systems, even as some federal officials have criticized states’ anti-fraud efforts.Fighting “the sophisticated kind of fraud” that occurs today is more expensive, Feek said. “If Congress wants to bash states for what happened [to unemployment systems in 2020], they should also be funding the prevention and ongoing protection of those systems,” she added.

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