KY OFFICE OF UNEMPLOYMENT INSURANCE UPDATE Interim Joint Committee on

KY OFFICE OF UNEMPLOYMENT INSURANCE UPDATE Interim Joint Committee on Economic Development and Workforce Investment October 29, 2020

PRESENTERS Commonwealth of Kentucky Labor Cabinet Secretary Larry L. Roberts Buddy Hoskinson, Executive Director of Unemployment Insurance Amy D. Cubbage, General Counsel for the Office of Governor Beshear

OUI/CDO TRANSITION FROM EWDC TO LABOR The Office of Unemployment Insurance and Career Development Office officially transitioned to the Labor Cabinet on August 16, 2020. The Labor Cabinet has continued to utilize a limited number of staff from other state agencies to assist constituents with UI claims to ensure timely processing and payment. On August 3, 2020, Secretary Roberts appointed Buddy Hoskinson as Interim Executive Director of OUI: Mr. Hoskinson, former Executive Director of the Kentucky Office of Education and Training (the former combined entity housing OUI and CDO), has invaluable knowledge of state government and the unemployment insurance system

BUDGET AND STAFFING CUTS CAUSED A DELAY IN CLAIMS, EVEN BEFORE COVID 90 days before COVID-19 December 8, 2019 – March 7, 2020 44,84 1 77% Number of new claims filed Percent of eligible claims paid

CLAIMS FILED DURING COVID-19 STATE OF EMERGENCY

WHERE ARE WE TODAY? March 8, 2020 – September 30, 2020 1,126,00 0 Over 5 billion Approximate number of new claims filed Total amount of UI funds distributed

INITIAL CLAIMS FILED IN MARCH 167,420 Initial Claims filed in March As of October 28, 2020 276 UI & PUA Initial Claims filed in March to be worked. 3,195 are still in progress that need additional actions by the claimant.

KENTUCKY OUI/CDO TODAY Approximately 58 employees assigned to Benefits Branch (15 UI employees, 15 Adecco employees and 28 detailed from CDO) Approximately 40 employees assigned to Adjudication Branch (23 UI employees and 17 detailed from CDO) Approximately 50 contract employees handling calls from UI claimants OUI Staff 163 employees (133 18A & 30 FFTL) CDO Staff 93 employees (60 18A & 33 FFTL) Approximately 40 employees addressing initial claims with stops on their claims. Secretary Roberts has met with majority and minority Chiefs of Staff on two occasions to discuss and fine-tune this legislative referral process

OUI Technology Upgrades RFP for Technology Upgrades was published in January 2020. Projected cost of project estimated to be 60 million. Governor Beshear appropriated 4.5 million of CARES Act funding for 4 projects that were included in the original RFP. The RFP was amended in September to reflect changes and vendors responses due first week of November. KEWES Siebel \ Oracle Upgrades Upgrade of operating systems and platform, Increase security, Increase ability to scale based on volume of claims and Enable access to documents via mobile devices.

OUI Technology Upgrades Slalom \ Salesforce – Web upgrades Modernize and improve citizen facing technology Easier to use interface to file, update, and manage citizen unemployment claims Help reduce errors and duplicated claims that may be occurring because of being constrained by limitation of antiquated technology Improve self-service with automated assistance from Chatbot and help to reduce number of calls (Chatbot updated Internet browser agnostic Supports mobile devices

OUI Technology Upgrades IVR\VRU phone system upgrades Replace out-of-date legacy voice response system Improve performance Provide greater capacity Faster scalability based on number of calls Xerox – FileNet to OnBase upgrades Move from legacy, outdated and unsupported content management system More modern, secure, and scalable enterprise content management system Better integration with newer systems

ERNST & YOUNG (EY) New contract will extend through the end of 2020 4.9 million contract fee paid for with federal funding No general fund dollars will be used Contract was approved in Government Contract Review Committee on October 13, 2020 EY will provide a dedicated workforce to address the 70,000 claims which are awaiting, or in the process of, adjudication These claims require determination letters telling claimants whether their claim is approved or denied Determination letters were previously required to be written by state employees The U.S. Department of Labor waived this requirement, allowing EY employees to draft determination letters, making Kentucky only the second state — behind Indiana — with this waiver For first four weeks, 100 EY employees will focus on performing adjudicator functions, along with assisting OUI in reviewing claims and writing determination letters. For the rest of the contract, 25 EY employees will work on claims each week.

ERNST & YOUNG PROCESSING-EXTENDED CONTRACT Date # of Issues w/ 492 Drafted Jan Feb Mar Apr May Jun Jul Aug Sep Month Unknown Oct 9/11 - 10/6 13967 1 2 17 33 3139 1994 362 42 21 0 29 10/7/2020 388 0 0 0 1 89 281 14 1 0 1 1 10/8/2020 363 0 0 0 0 57 300 2 0 2 1 1 10/9/2020 336 1 0 1 3 41 280 7 0 1 0 2 10/12/2020 412 0 1 0 0 38 278 91 0 2 0 2 10/13/2020 452 0 0 0 0 32 229 186 3 2 0 0 10/14/2020 454 0 0 0 0 18 98 334 3 0 0 1 10/15/2020 441 0 0 0 0 5 47 389 0 0 0 0 10/16/2020 438 1 0 0 0 8 11 407 11 0 0 0 10/19/2020 449 0 0 1 1 9 43 389 6 0 0 0 10/20/2020 315 50 23 9 2 10/21/2020 391 78 50 13 1 10/22/2020 329 28 10 0 Total 1873 0 0 0 processed 3 15 58October 155 Total issues/claims through 21, 2020 0 0 0 1 32 107 109 0 3 0 3 0 19 1 4 44 77 116 53 352 380 256 24 12 34 39

FEMA OVERVIEW Saturday, August 8, 2020 – Presidential Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019 75% percent Federal Cost share 25% Match from state Kentucky is one of only three states to provide the extra 100, increasing payments to 400 Administered through and by FEMA Benefits available August 1, 2020 – December 27, 2020 LWA may terminate earlier if: FEMA expends the 44 billion from the Disaster Relief Fund designated for LWA by the President or DRF reaches 25 (whichever is first) or billion Congress enacts legislation to provide additional UI resources

FEMA OVERVIEW CONT. Total FEMA Dollars to date: 72,031,200.00 32,430,000.00 37,213,500.00 37,213,500.00 37,213,500.00 Total: 216,101,700.00 Total CARES Dollars to date: 72,026,400 Total Overall: 288,128,100.00 FEMA dollars paid as of today 183,000,000 The Labor Cabinet has submitted an application to FEMA in order to obtain grant funds to pay claimants who were found eligible upon “forced” self-certification and upon appeal

LOST WAGES ASSISTANCE WEEK ENDING ELIGIBLE PAID August 1 138,786 116,500 August 8 125,357 104,178 August 15 122,097 103,590 August 22 116,993 100,919 August 29 114,710 99,152 September 5 109,895 91,925

TRUST FUND BALANCE IN MILLIONS

CURRENT STATUS OF UI TRUST FUND 460,207, 409 Interest will begin accruing on January 1, 2021; however, the US Treasury will not take action to collect the loan until January 1, 2023. The Federal Employment Tax Act (FUTA) sets a rate of 6% and Kentucky employers receive a credit of 5.4% when they file their Form 940. When a state has an outstanding loan balance on January 1st for two consecutive years and does not repay the full amount of its loan by November 10th of the second year, the FUTA credit rate will be reduced each year until the loan is repaid As of October 27, 2020

JANUARY 1, 2021 UI TAX RATE FOR KENTUCKY EMPLOYERS The Office of Unemployment Insurance shall not allocate charges to employer’s reserve account for individuals who are paid for reasons related to COVID-19 based on the Administrative Order issued by Lt. Governor/Secretary Coleman on March 25, 2020. Schedule applicable January 1, employers E will be the schedule effective 2021. Majority of will experience a Current Average UI Tax Rate in 2020 – 1.76% Projected average UI Tax Rate in 2021 – 2.52% Projected Average UI Tax Rate in 2022 – 3.23%

JANUARY 1, 2021 UI TAX RATE FOR KENTUCKY EMPLOYERS Approximately 23,000 employers will not incur a percentage increase in 2021 as they have not been in business for over a year. Interest Payments on the UI Trust Fund Loan Balance will begin accruing on January 1, 2021 and will steadily increase until the loan balance is maximized. Pursuant to KRS 341.614, there shall be a surcharge upon all subject contributing employers for any year there are insufficient funds in the Unemployment Compensation Administration Fund for the The formula contained in the statute will be calculated at nineteen hundredths of one percent (.19%) of the first 11,100 in wages paid to each worker by a subject contributing employer. The surcharge shall be due and payable at the same time and in the same manner as employer contributions. This surcharge will increase the cost for contributing employers by 21.09 and it will generate approximately 38 - 40 million each year.

Pandemic Unemployment Assistance In response to the effects of COVID-19, on March 27, 2020 Congress passed legislation which created PUA Guidance at the time allowed for citizens to draw benefits on the basis of fear of exposure to COVID-19 On April 27, 2020, the US Department of Labor changed PUA eligibility, meaning citizens would not qualify for PUA benefits on This created overpayments for those who were previously eligible under the PUA program However, Kentucky is currently not pursuing collection of these overpayments On October 23, 2020, the Labor Cabinet submitted a request to the US Department of Labor asking for a waiver of collection for these overpayments

QUESTIONS?