Funding of a $4.3 million computer system for handling unemployment insurance claims was hastened by the near collapse of the old system during the 1975 recession. Crash programs have raised payment rates to above average levels but the new head of IBES believes that computerization is the answer
THE COMPUTERS are coming. Repeat that sentence twice in a loud emphatic voice. Besides being a good American bicentennial slogan, or a passable science fiction title, it is an accurate description of Illinois' new unemployment compensation system.
If you are unemployed now, or expect to be so someday, computerization may not sound as alarming as news of a British invasion. Nevertheless, you should remember the slogan. You might even work up a bit of revolutionary satisfaction from contemplating computerization — especially if you recall the oppressive weight of red tape which has often delayed payment of compensation checks to the unemployed in Illinois.
Long delays in processing unemployment insurance claims became standard in Illinois during the economic recession in the spring and summer of 1975. Tardy checks (sometimes up to five months late) for qualified claimants were common, as were horror stories of resultant hunger, foreclosure and property reclamation.
The furor over the mess was understandably intense. It centered largely around the actions of one man, Christopher Nugent, then administrator for the Illinois Bureau of Employment Security (IBES). When Nugent was appointed by Gov. Dan Walker in October 1973, there were 54,192 people receiving jobless compensation. By July of 1975 there were over 260,000 Illinoisans collecting unemployment benefits, and the system for payment had all but collapsed. Nugent was then charged with mismanagement by officials of the American Federation of State, County and Local Employees, who said he failed to utilize available federal funds to hire additional workers. That criticism was repeated in a 234-page federal report published later that month. (Unemployment insurance is, of course, a federal program, administered by the states at federal expense, with actual benefits being financed by taxes on employers.)
Nugent said the conclusions of the three-month study done by 30 U.S. Department of Labor experts were filled with "blatant inaccuracies," and that many of the bureau's shortcomings were "inherited from prior administrations." Whatever the case, Nugent resigned slightly more than a month after the report was released.
I. Lawrence Richardson was appointed to succeed Nugent as head of IBES on October 1, 1975. Richardson, an administrator with a background in computer technology, made plans to modernize the bureau by computerizing most operations. In the meantime, Richardson instituted emergency measures designed to increase the speed of claims processing. With the help of management consultants from Arthur Andersen & Company, the addition of new personnel, and massive overtime for all employees, the disbursal of payments improved rapidly.
As of March, IBES was getting over 83 per cent of new benefit payment checks out on time (i.e., within 14 days after the first compensable week). The federal standard is 80 per cent. In October of last year the percentage of promptness stood at only 40 per cent, and at that time the federal requirement was 86 per cent.
But according to an Arthur Andersen report "the problems of the Bureau are too deep and too basic to be solved by any of the crash programs .... Without the new system (of compensation) it will continue to be impossible to manage the Bureau on an efficient basis."
Richardson agreed with that assessment. He asked the U.S. Department of
July 1976/ Illinois Issues /15
Computer use can be expanded to check public aid fraud and to run a job bank. A similar federal system is due in 1981
Labor for $4.3 million to build a system based on a completely new list of computer programs, forms, procedures and computer terminals (with television-like cathode ray tube readers). He was only given $1.5 million, but decided to go ahead with the project anyway. With permission from the state legislature, IBES was able to tap a source of federal money known as the Special Administration Fund. This fund gets its money from penalties and interests levied against employers for late or insufficient payments to the federal unemployment insurance system. IBES got $1 million from this fund in fiscal 1976 and Richardson hopes to get another million in fiscal 1977. In addition $250,000 is traditionally appropriated from the same fund each year for miscellaneous expenses. Last year this $250,000 was used toward payment for the computerization project, and will most likely be used for the same purpose in fiscal 1977, thereby bringing total funds for the project to $4 million.
Computer implementation began July 1, and installation should be completed at all 60 local IBES unemployment insurance division offices by September. How well will the expensive new system perform? That, of course, remains to be seen. The expectation is that we will see a quicker, more efficient and fraud-proof system of administration.
Under the old system, after an application was made at a local office it was sent to the central office in Chicago. The central office then sent the claimant a notice of how much money he or she was entitled to, and sent the application back to the local office. The local office then matched it with a card sent in by the claimant after a waiting week. The card certified that the claimant was actively seeking work, but had been unsuccessful.
The local office then mailed the certification card and application form back to Chicago, and Chicago sent out a check from its 35-year-old computer. This is an immense simplification of the nightmarish, labyrinthine system of paper shuffling which formerly characterized IBES. (The magnitude of the system is staggering. IBES had an operating budget of $84.9 million in fiscal 1976, and paid out over 15 million weeks worth of claimed benefits. Also, the Illinois State Employment Service, a division of IBES, says it hopes to place 86,000 Illinois residents in suitable jobs in fiscal 1977.)
Theoretically, under the new system, after a claim is filed the claims-taker will use a cathode ray terminal to check it immediately. Punching essential information into the computer terminal on the typewriter-like keyboard, the claims-taker will instantaneously have access to the applicant's wage record. It will appear in eerie green lettering on the tube. In seconds, the claims-taker will be able to determine whether or not the claimant is eligible for benefits, and if so, what the weekly allowance and total maximum amount will be. If there are any problems, that too will appear, and IBES personnel may begin to work on them. For instance, if an employer has not sent in wages for an employee, it will be evident at once, and not take six months to figure out.
The day after the claim has been filed a printed wage record will be automatically mailed to the claimant to confirm eligibility. After a one week wait, the claimant will certify that he or she is available for work and has tried to find a job, but failed. This certification will initiate payment in the form of a check produced by the central office computer. It should be mailed within 48 hours after certification. Every two weeks claimants must certify eligibility. With each check a certification form will be attached for the next payment, to be used if needed.
IBES administrator Richardson was interviewed last April for Illinois Issues. He talked about the advantages of the new system over the old one: "Now the local office has jackets containing the files of each local claimant, including all certifications, information about benefit amounts, dependents, and so forth. These will be completely eliminated. The record system will be totally housed in a computer — except for cases on appeal and adjudication matters, which will require legal documentation. Those must be kept in the local office, but even the fact that there are appeals or adjudication will be on the computer.
"In other words, if it is not paying, we'll know why: There is an appeal from an employer or claimant, or there is a discrepancy in benefit amounts. There may be a stop-payment because of fraud, labor dispute, lack of actively seeking work, or other disqualification.
"Everything will be there to allow the local office to make every decision necessary to handle the claimant's problem. Right now there is a combination of local office personnel, and central office personnel in Chicago, a manuscript filing system, and a computer filing system, all trying to correlate.
"Now, we have a lot of NIFs (not in file). There will never be a NIF on the computer system, an operator will have authority and power to place a claimant's record on the computer if it isn't there.
"The key factor, though, is there'll be one master file handled on the computer, and there'll be many ways of getting to a claimant's information — by social security number, address, claim number or name.
"Also, every action taken against a claimant's record is a statistic that will be captured. Now we create approximately 1,000 reports each month in our research and analysis division, most of which are required by the federal government. This is mostly statistical data, such as how many claimants and appeals we've had, how many nonmonetary determinations, and so on. These statistical data elements will be part of the system itself. Those 1,000 reports will be generated by the computer in readouts."
Richardson was asked if the system would stand the test of time, and the stress of high unemployment: "Yes, it'll last forever. It's the latest technology, a system built to be modular, to handle low unemployment, which means we can take some modules out. It is also geared to handle high unemployment, by adding modules. What that means is that master file information is on disks. It depends on how many claimants and employers we have as to how many of those we use. If there are less claimants we use less of them, and it costs less.
16 / July 1976/ Illinois Issues
Unemployment insurance
|
|
Total unemployed |
Insured unemployed |
Weeks claimed |
Benefits paid |
|
|
(Annual weekly average) |
(In millions) |
||
|
1970 |
193,000 |
79,000 |
4.1 |
$180 |
|
1971 |
240,000 |
96,000 |
5.0 |
$233 |
|
1972 |
245,000 |
87,000 |
4.5 |
$222 |
|
1973 |
203,000 |
68,000 |
3.5 |
$178 |
|
1974 |
223,000 |
90,000 |
4.7 |
$248 |
|
1975 |
355,000 |
* |
* |
$450 |
Source: "Unemployment Insurance Statistics," U.S. Department of Labor Manpower Administration. *Not available
"The technology allows us to build a system so we can have weekly reporting, or bi-weekly reporting, etc. If there's a change in the law, the system is modular to the point that we can easily change a portion for law changes. It is flexible enough so that we can build a benefit information system now and an employer taxing system next, and they can be attached directly together.
"Then phase three will be an employment service, to include a job bank, job matching, cost modeling and a check of each claimant's application with the employment service. [Such checks are made to determine if a claimant is looking for work. Presently, checks are made only sporadically because of the high volume of claims.]
"We're planning also to tie this in with public aid records, for instance, to help with their fraud cases. We probably will even tie it in to employers in time, whereby if a person gets a job today we will be notified within two days that that person is working, and we can check to see if he's drawing unemployment. [Now this can often not be done for four months, since employers report on a quarterly basis.] We will also be able to interconnect with the Department of Revenue to determine if a worker is paying his state income tax. The interchange of data will be extensive."
Richardson was asked if this might not eventually facilitate an invasion of personal privacy. He replied: "It is not really a confidentiality problem, which a lot of people are going to raise. You know, 'Big Brother is looking at you.' It's a case, really, of fraud detection. All these records are confidential, except under very specific circumstances with the Departments of Revenue, and Public Aid, and the Department of Transportation."
Will the new system open the door to a lot of computer fraud? Richardson said no, explaining that "the computer is more fraud-proof than a bunch of human beings. The security measures are built into the system whereby only those qualified may enter. Everyone who enters the system will be logged as to time and identity.
"Anything out of the ordinary will generate exceptional security reports, which will cause an investigation. Also the computer will have degrees of security, whereby certain people will only be allowed certain information. There will be regular audits and security codes of access will be changed at intervals."
Richardson says he hopes to have phase one (benefit information) of the new system installed by September. Phase two (contribution tax accounting) will be put in immediately after and completed no later than the third quarter of 1977, with phase three (employment service) to be added no later than early 1978.
Meanwhile, the federal government recently released a plan for unemployment computerization nationwide, which they hope to complete by 1981. It's conceivable that the federal government may ask Illinois to slow its computerization to coincide with that completion date of 1981. If so, IBES might have to comply to get full funding for operation of its unemployment program. But sooner or later, for good or for ill, the computers are coming.
July 1976/ Illinois Issues/17
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Current benefits for unemployedTHE 1975 session of the 79th General Assembly passed two bills into law that made important changes in unemployment benefits. Senate Bill 285 (P.A. 79-80) provided for increased benefits up to a maximum $135 weekly. It also allowed payments to locked-out workers and workers who refused to cross picket lines. House Bill 1654 (P.A. 79-98) granted extended benefits on the basis of a determination by a claims adjudicator. Under the old law the weekly benefit amount was determined from a table based on the claimant's prior average weekly wage. Now, a simple percentage of the prior average weekly wage determines the benefit amount. For a single person the appropriate percentage is 50 per cent, for a person with a non-working spouse 60 per cent, and for those with a child or children it is 66 2/3 per cent. The minimum weekly benefit amount has been raised from $10 to $15. The maximum has been raised from $67 to $ 103 for a single person, and from $92 to $123 weekly for married persons with a non-working spouse, and from $118 to $135 for those with children. Moreover, the new maximums are determined as percentages of the statewide average weekly wage (presently $206). The maximum amounts are redetermined every six months to reflect changes in the statewide average. Duration of benefits under the old law was dependent upon the amount of a claimant's base period wages. Now all eligible claimants are entitled to 26 weeks of benefits, and there are state and federal extended benefit programs under which benefits are available for up to 65 weeks. There have been important changes in the legal definition of availability for work. Formerly a claimant was diqualified for quitting a job to marry or because of marital, filial or domestic circumstances. Pregnant women could not receive benefits for 13 weeks prior to birth and 4 weeks after birth. Nor could one quit a job to accompany or join a member of his or her family in another community. Under the new law all of these exemptions have been eliminated — if claimants can prove that they were able and available for work and otherwise qualified. In the past it was necessary to report to a local unemployment insurance office each week in order to collect benefits. Now, only initial claims must be filed in person. All subsequent reporting is done by mailing a card every two weeks. Also, the initial waiting week, during which unemployment compensation was not collectable, has been eliminated if the claimant is unemployed for more than three weeks during the benefit year. Under the old law if an employer merely alleged that a claimant was ineligible, benefit payment was interrupted until a decision was made on the allegation. Now, specific facts must be presented by the employer to support such an allegation before benefit payments will be interrupted. Until last July, unemployment compensation benefits were denied to workers either on strike or locked out in a labor dispute. Now a worker may collect if locked out by an employer. Also, workers cannot be denied benefits solely because of their choice not to cross a picket line. July 1976/ Illinois Issues/17 |