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Paulsen Releases GAO Report on Unemployment Insurance Information Technology Systems

September 26, 2012

Washington, DC – Today, Congressman Erik Paulsen (R-MN), Acting Chairman of the Subcommittee on Human Resources of the Committee on Ways and Means, released a report prepared at his request by the Government Accountability Office (GAO).  The report, titled “Information Technology: Department of Labor Could Further Facilitate Modernization of States’ Unemployment Insurance Systems,” reviews how the Department of Labor (DOL) and States are addressing complex demands for information technology (IT) within the unemployment insurance (UI) program. 

The GAO report found that of the nine States1 surveyed, each had varying degrees of progress and success with the management controls in place to help mitigate technology-related challenges within their UI programs.  It goes on to recommend DOL do more to document and disseminate lessons learned by individual States and multi-state consortia as they strive to modernize their IT systems.  GAO concludes that DOL’s failure to implement improvements will “hinder states’ ability to draw upon each others’ experiences to mitigate future challenges and facilitate success going forward to improve the effectiveness and efficiency of modernization efforts.”

Acting Chairman Paulsen said, “This report highlights the challenges that States face as they pursue the much-needed upgrade of their unemployment insurance IT systems.  States are making progress, but UI is a joint effort.  DOL should help States coordinate and share information so mistakes can be prevented and the necessary improvements can be made as cost-effectively as possible.”

The Federal-State UI program provides partial compensation for lost earnings of eligible individuals who become unemployed through no fault of their own.  In general, State employer payroll taxes support the cost of regular unemployment benefits, while Federal payroll taxes support the cost of program administration, as well as the federal share of extended benefits and other expenses.  In FY2011, over $177 billion in taxpayer dollars was spent on total UI benefits and expenses, through a complicated structure of State and Federal benefits, including $13.7 billion in improper payments.

The UI program faces significant technological challenges that impact the program’s effectiveness.  A July 2010 state survey revealed that the “vast majority of UI IT systems are old” and “cannot efficiently handle their current workloads.”  Similarly the survey found that, “Eighty-two percent of states report difficulties implementing new federal or state laws due to the constraints posed by their IT systems,” including recent law changes involving Federal extended benefits.

In response to this survey and other feedback from States, Paulsen asked GAO to review current efforts to address aging UI IT systems and GAO did so by reviewing the recent operations of nine states.  GAO reviewed DOL’s role, sources of funding, the status of modernization efforts, and the management controls in place to monitor progress of rebuilding highly complex tax and benefit IT systems.

The Ways and Means Human Resources Subcommittee has jurisdiction over the UI program, including its taxes and various State and Federal benefits.

1 The nine States included in the review were California, Colorado, Florida, Indiana, Minnesota, Ohio, Tennessee, Vermont, and Virginia.