Lawmakers to examine causes of state jobless benefit delays

Panicked Californians inundated the state’s unemployment agency with 20 times the normal volume of phone calls after a botched computer upgrade delayed jobless checks and crippled parts of the department’s website.

Call attempts surged after the Labor Day launch of a new system to process ongoing benefits claims. At its peak, nearly 6 million calls were made in just one week. The crush of calls was so heavy that people had to dial an average of 40 times just to get through to a recorded message.

These are among the key findings of a legislative report that detailed problems with the California Employment Development Department’s rollout of a $110-million software upgrade. The report will be at the heart of a hearing Wednesday in Sacramento in which state lawmakers will delve into the cause of the meltdown.

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“It’s unbelievable how bad this is,” said Assemblyman Curt Hagman (R-Chino Hills), vice chairman of the Assembly Insurance Committee, which has oversight of the unemployment insurance program. “This whole department … has been dysfunctional to say the least.”

The committee is expected to grill acting EDD Director Sharon Hilliard, who has not given interviews since the problems began. Representatives from the IT contractor behind the upgrade, Deloitte Consulting, are also expected to appear.

Lawmakers have received a flood of complaints from unemployed Californians who haven’t been able to get their checks for weeks. A problem converting old data to the new system halted payment to as many as 300,000 claims, according to internal emails obtained by The Times.

The EDD puts that number closer to 150,000.

EDD officials have repeatedly said the new system would make the lives of California’s unemployed easier, allowing for more self-service options online. Instead, it caused financial hardship for thousands who fell behind on rent and other bills.

The agency said it expected some problems when it transferred old unemployment data to the new system. The software flagged claims for review, requiring state workers to manually process them.

But the launch went forward because officials initially thought the workload would be manageable. With the economy improving, there are fewer Californians collecting unemployment than in recent years. But the EDD was nonetheless overwhelmed when the system malfunctioned.

The glitch also stymied unemployed Californians who tried to provide proof that they are still eligible to receive benefits. Typically, those collecting unemployment submit paperwork using the mail, telephone or the Internet. But after the computer upgrade, the phone and online systems temporarily went down, creating further delays.

The EDD has come under heavy criticism for its initial slow response to the problem.

But lawmakers will also direct questions at Deloitte Consulting, which has repeatedly defended its software. Deloitte and EDD officials say the system works, processing 80% of claims on time.

The New York firm also has been blamed for similar troubles with upgrades to unemployment software in Massachusetts, New Mexico and Florida.

Lawmakers in Massachusetts held a hearing late last month that largely left lawmakers dissatisfied. The state Senate plans to hold another hearing to dig deeper and ask further questions of Deloitte officials.

In California, the hearing is expected to address overtime costs associated with the IT problems.

State workers have been working extended hours and weekends to deal with the backlog of claims. The fear, according to the report, is that high overtime costs will affect the EDD’s budget planning through 2015.

It is unclear at this point how much has been spent on overtime since the upgrade rolled out. The state, however, has already burned through more than half the $9.5 million it has budgeted for overtime through 2014.

The software problems are expected to accelerate those costs. The EDD is worried that state money used to cover declining federal dollars will instead be spent on overtime costs, according to the legislative report.

The federal government has propped up many state unemployment insurance programs, providing funding for administrative costs, since the Great Recession.

States have received less money as the unemployment picture has improved.

A report to be released Tuesday by the National Employment Law Project blames that reduction in federal spending for many of the problems affecting states, including California.

Maurice Emsellem, NELP’s co-policy director, is expected to testify Wednesday at the Assembly hearing to issue the group’s findings.

NELP reports that in California and dozens of other states, laid-off workers are forced “to navigate extensive backlogs, jammed phone lines and often unreliable online claims systems.” That defeats the purpose of the unemployment safety net to provide “efficient claim filing and timely eligibility determinations and payments,” the report says.

In particular, the report highlights California as a poster child for poor handling of unemployment insurance claims. The state’s unemployment insurance phone system barely functions even after the EDD spent $30 million in 2011 to modernize its phone lines.

Roughly 9 in 10 respondents rated the EDD’s phone system “poor,” according to a July survey by the agency.

Emsellem said the report is an effort to give context to what’s occurring with state unemployment insurance programs. He called the problems across the country unprecedented and the result of “federal government neglect.”

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Twitter: @rljourno, @marclifsher