State unemployment call system subject of House hearing

David Weissman
  • State Department of Labor and Industry furloughed more than 500 employees in December.
  • Call wait times to unemployment compensation service centers have skyrocketed since furloughs.
  • GOP-led Senate failed to vote for additional funding last session; audit currently underway.

State Labor and Industry Secretary Kathy Manderino was called to appear at Wednesday's House Appropriations hearing, and she knew the majority of questions would involve deficiencies in the unemployment compensation system.

Mark Zeleznock, CEO of Dataforma, left, gives State Department of Labor & Industry Secretary Kathy Manderino a tour of the ocal roofing industry software company, during the "Jobs that Pay" tour, Monday, April 25, 2016. 
John A. Pavoncello photo

The "elephant in the room," as Manderino called the issues as the hearing began, refers to a significant increase in call-wait times to unemployment compensation service centers after the department closed three centers and furloughed more than 500 employees in December.

The furloughs and closures occurred after the Republican-led Senate refused to vote on a bill that would have provided the department an additional $57.5 million for 2017. The bill, which would have extended a fund that provided the department with $178 million from 2013 to 2016, had passed the House, 175-13.

The Service and Infrastructure Improvement Fund was created by the Legislature and signed by former Gov. Tom Corbett in response to declining federal funding with the intent to "improve the quality, efficiency and timeliness of services provided by the service center system" and "infrastructure components that the secretary determines are likely to result in significant and lasting improvements," according to Act 34.

Multiple House members asked Manderino why the department's technology wasn't updated within the four-year window that the act had allowed for additional funding, as she detailed that they are working with a nearly 50-year-old legacy system "that is put together with chewing gum and duct tape."

Manderino said the department has been careful in selecting a vendor to overhaul the system after a failed multi-year, multi-million dollar contract with IBM that preceded SIIF's creation. Manderino added that she expects to sign a contract with a new vendor in June.

She also said the purpose of modernizing the system wasn't to eliminate employees, but to improve efficiency and reduce frustration for claimants.

'Band-Aid': One Republican House member asked her why the department would become so reliant on the additional funds if they knew the act was set to expire at the end of 2016.

"The system today is what the system looks like running only on federal dollars," Manderino said, pointing out that claimants have had to wait as long as "a disgusting" six hours to reach call centers since the furloughs.

She told committee members that 39 other states supplement their unemployment compensation delivery system with state funding, including a high of $175 million in California.

Unemployed wait two hours to call for help on compensation

Manderino, a former Democratic House member, added that legislators often pass bills with end dates for the purpose of reevaluating the act and not necessarily because they know it will no longer be needed.

The department is seeking funding to restore as many furloughed staff members as possible, and Manderino said she expects it would take three to six weeks to get ramped back up if funding were approved. However, difficulties exist, she said, because closed centers in Lancaster and Allentown were in leased buildings.

Rep. Peter Schweyer, D-Lehigh County, has proposed legislation similar to the bill providing one year of additional funding that stalled in the Senate last session, but Manderino said she's not interested in "putting a Band-Aid on the problem and ripping it back off again in a couple months."

Getting the employees back quickly is important, Manderino said, because new claims are expected to increase at the beginning of April.

Wagner: On the other side of the Capitol building, the Senate Appropriations Committee was simultaneously holding a hearing with Auditor General Eugene DePasquale.

The Auditor General's Office is currently auditing the SIIF, and Sen. Scott Wagner, R-Spring Garden Township, used his questioning time to praise DePasquale and denounce the labor department's issues.

State Sen. Scott Wagner. Dawn J. Sagert photo

Wagner, who previously said he led the charge against holding a vote on the bill to provide additional funding last session, said he feels $400 million was "totally wasted, pissed away, whatever term you can use," referring to a combination of the failed IBM contract and SIIF.

"It had to be fraud," Wagner said. "Criminal activity took place, and someone needs to be held accountable."

Department spokeswoman Sara Goulet wrote in an email that no fraud or criminal activity has taken place in the department to the best of her knowledge.

Wagner, who plans to run for governor in 2018, also pointed to a combined $248.4 million in over-payments the department has made since 2014. Approximately $138.4 million of that money has been recouped, he added.

"I hope your department sinks their teeth into the legs of the people who are supposed to be running this and find out where the money is," Wagner said to DePasquale. "It's out of control."

Goulet said a common reason for over-payments is people are supposed to stop filing claims as soon as they get a job, but many often continue filing claims until their first paycheck.

EDITORIAL: Keeping an eye on Wagner

If a claimant has been overpaid and seeks benefits again, they must repay the department first, Goulet said, emphasizing that over-payments recouped must go back into the fund for benefit payments and therefore wouldn't solve their current funding crisis.

House Appropriations Chairman Stan Saylor, R-Windsor Township, concluded the hearing by stating that he plans to send a letter to DePasquale asking his office to audit all state department's technology contracts.

More hearings: Manderino is set to appear before the Senate Appropriations Committee at 10 a.m. Tuesday and before the House Labor and Industry Committee at 10 a.m. March 1.

She had been scheduled to appear at a joint House and Senate Labor and Industry hearing Feb. 6, but the meeting was canceled at the request of Gov. Tom Wolf's office in light of a letter sent by Randy Albright, secretary of the state Office of the Budget, to DePasquale.

Albright's letter detailed that expenditures associated with that fund were reported incorrectly and resulted in reduced federal unemployment compensation funding, and the employee responsible for the error has resigned.

— Reach David Weissman at or on Twitter at @DispatchDavid.