Lawmakers finalize plan to ensure Kansas Department of Labor unemployment system woes aren't repeated

Andrew Bahl
Topeka Capital-Journal

Days after the Kansas Department of Labor announced plans to move forward with a highly anticipated revamp of its unemployment systems, legislators quickly moved to give themselves more say in the process.

The plan comes as part of a months-long effort to address the agency's recent woes, with legislators pushing to investigate the scale of fraudulent payments, ensure businesses aren't affected by those bogus payouts and seeks to shore up the fund used for unemployment benefits.

During the COVID-19 pandemic, KDOL became overwhelmed with a backlog of unemployment claims, as well as a rash of bogus filings, which officials attribute in part to out-of-date fraud controls.

But after KDOL put out a call for bids on the modernization of the computer system —  which forms the backbone for claim processing, payroll tax payments and other core services — legislators quickly amended a sweeping unemployment bill to give businesses, workers and themselves more input in the process.

More:Kansas Department of Labor forges ahead on IT upgrades, as legislators debate timeline

Amber Schultz, secretary of the Kansas Department of Labor, presents before lawmakers last month. The Kansas Legislature signed off on a bill giving it more oversight of KDOL.

After months of tension over the embattled agency, the legislation passed both chambers of the legislature unanimously Friday and now heads to Gov. Laura Kelly's desk.

The governor praised the final form of the bill Friday night, and while she didn't say explicitly she will sign the legislation, all signs point to it becoming law.

"The passage of this legislation makes clear our commitment to Kansas businesses and workers to ensure that we are prepared for whatever challenges the future may hold," Kelly said.

Legislators want a say as Kansas plays catch up in modernization

The state's current backend system was developed more than 40 years ago, and meaningful change hasn’t occurred in well over a decade.

The Kelly administration has blamed one of her predecessors, former Gov. Sam Brownback, for halting progress on the project during his term. Republicans have countered Kelly didn't move quickly enough on the issue when she took office.

Kansas isn't alone in moving slowly to modernize.

The National Employment Law Project said more than half of all states haven't tackled improvements to their benefits' systems. The states that have moved on upgrades largely did so in the mid-to-late 2000s, when a pot of federal money was made available for the purpose.

A NELP report noted the experiences of three states that had already completed modernization projects showed one key finding: You pay a price for not involving outside stakeholders in the process.

More:Unemployment questions remain for employers, Kansans as legislators tackle problem

"This led to systems touted as convenient and accessible, but which claimants often found challenging and unintuitive," the report said.

Lawmakers are aiming to ensure that doesn't happen.

The bill would quickly stand up a council to tackle a variety of tasks. Its membership would include KDOL officials, legislators and business and labor representatives. 

In negotiations between Senate and House members, language was included to require the council, and later a group of top legislative leaders, to weigh in on the terms of a contract for the modernization project before KDOL signs it.

Initially, this raised some alarm. Kelly's chief of staff Will Lawrence said the initial plan was to halt the search for a contractor until the council could weigh in, potentially delaying its progress.

Rep. Sean Tarwater, R-Stilwell, listens to a report on unemployment fraud last month. Tarwater has been one of the key members involved in a push to increase oversight of the Kansas Department of Labor.

Rep. Sean Tarwater, R-Stilwell, noted that wasn't the intent and legislators eventually found a compromise with Kelly's office and KDOL on the matter.

Not taking action, Tarwater noted, would have been a serious blow to the push for oversight.

"The main reason we set up the council was to be involved in the design and contracting of the program," he said.

Project timeframe still point of contention

The legislation also includes the ability for legislators to set a deadline for the project's completion — something that hasn't sat well with everyone.

According to documents submitted by KDOL, the goal is to have the modernization efforts completed by 2023, although the contract with an outside vendor could run until 2028, at the latest.

While these types of projects in other states were largely plagued by delays in the mid-2000s, contractors have gotten more skilled at getting them done in a timely manner.

Indeed, KDOL has indicated they want much of the project to be built on what has worked in other states, with some tweaks based on Kansas-specific needs.

The legislation calls for modernization to be wrapped up by the end of 2022, although it can be extended by top lawmakers.

Sen. Tom Holland, D-Baldwin City, expressed support for a plan to increase oversight of a major overhaul of the Kansas Department of Labor but expressed concerns about mandating a timeframe for the agency to complete its work.

Sen. Tom Holland, D-Baldwin City, expressed concern this would color negotiations with a potential contractor, meaning the state would have to pay more to get the same work done.

"I just think the first thing we're setting ourselves up for expectations failure, at this point, specifying a date, when the stakeholders don't even know the approach and the methodology and the timeframe to how this is going to get done," Holland said. "Because there are different ways to skin this cat from a technological standpoint."

More:Legislators sign off on permanent KDOL leader, amid hope that agency is on improved track

Tarwater, who has said in the past there was no reason the project couldn't be completed by 2022, softened his stance and said they would work with KDOL on an appropriate timeline.

"We don't want to stand in the way of getting something done," he said.

With bill's passage, lawmakers look to future

Residents having issues with KDOL's online benefits application would now have another way of verifying their identity, as law enforcement agencies would now be authorized to handle the matter.

More than 60 sheriff's departments across Kansas have agreed to allow residents to bring acceptable forms of ID to their office, rather than going through the labor department.

The bill also takes direct action aimed at remedying the flood of fraudulent payments — the extent of which remains in dispute. KDOL's own figures peg the scale of fraud at $290 million, while the Legislature's nonpartisan auditing arm says the number is $600 million.

It would address this by injecting $250 million in federal relief dollars into the unemployment trust fund and set aside a second tranche of $250 million depending on the eventual size of the fraud.

More:Kansas Department of Labor, legislative auditors at odds over scale of unemployment fraud

Because employers pay into the fund, the fear was they would be on the hook if fraudulent payments decimated its balance.

"It was always our intent and our promise to the business community that we would make them whole on all these dollars that they paid into an account and we let it go because we didn't watch them," Tarwater said.

The bill's passage, lawmakers say, is a sign all parties involved are looking to the agency's future — and ensuring the woes of the last year are a blip in the state's history.

"This is the long-term fix, so this never happens again," Holland said.

He paused.

"Let's hope it never happens again."