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Contract talks will start with FAST Enterprises, which has done two other state projects.

COURTESY PHOTO: OREGON EMPLOYMENT DEPARTMENT - The Employment Department building in Salem. The agency has finally announced a vendor to negotiate for a modernized computer system.A long-planned modernization of the Oregon Employment Department's antiquated computer system has taken an important step forward.

The agency announced Friday, Sept. 11, that it intends to negotiate a contract with FAST Enterprises for the system that handles unemployment benefits and other functions.

Once a contract is signed, it will still take years for the agency and the vendor to complete the rollout. A new system will not be available in time for the agency to resolve issues with processing the volume and complexity of record unemployment benefit claims during the COVID-19 pandemic.

"But it will give us a lot better idea of the timing and cost for that modernization project," Acting Director David Gerstenfeld told reporters on a weekly conference call.

Gerstenfeld was with the agency, but not its director, when Oregon received $85.6 million from the federal government in 2009 for modernization of a mainframe computer system that goes back to 1993. The system relies on a computer language that originated in 1959.

The money has not been spent.

Gerstenfeld said modernization will enable the agency staff to automate many functions that are done manually now.

FAST Enterprises is based in Centennial, Colorado, outside Denver.

It was the vendor for two major Oregon projects in the past decade. One is the GenTax system for the Department of Revenue, which rolled it out between 2013 and 2017 to replace a system that dated back to the 1980s. The other was a new system for Driver and Motor Vehicle Services, which just completed its three-year rollout of its Service Transformation Project this year. It enables the DMV to comply with the requirements of the federal Real ID Act of 2005 to make driver's licenses more secure.

FAST Enterprises also has done work for Portland city government.

The other finalist was Deloitte Consulting. Five firms responded to the agency's initial requests.

Because of the fiasco with the Cover Oregon website, which led Oregon to abandon its own state-run health insurance marketplace in 2014 and rely on the federal exchange, new state government computer projects are subject to greater scrutiny by the Department of Administrative Services, the Legislature and outside participants in addition to the agencies involved. Oregon and Oracle Corp. settled a lawsuit in 2016, but the state recouped only a portion of the $240 million spent on the project.

Gerstenfeld said in addition to DAS and the Legislature, the U.S. Department of Labor — which oversees state administration of unemployment benefit programs — will be involved.

"While we move forward with modernization, we won't turn off old systems until we are confident the new ones work," he said.

Record workloads

COURTESY PHOTO: OREGON EMPLOYMENT DEPARTMENT - David Gerstenfeld was named acting director of the Oregon Employment Department by Gov. Kate Brown on May 31, after she dismissed Kay Erickson.Between March 15 and Sept. 5, Oregonians filed more than 561,000 claims for regular unemployment benefits, which are drawn largely from a trust fund that employers pay taxes into. For the comparable period in 2019, Gerstenfeld said, the total was 68,500.

Oregon's unemployment rate shot up from a modern-low 3.5% in March to a record-high 14.9% in April as the coronavirus pandemic triggered widespread business shutdowns and curtailments. The rate has fallen since then to 7.7% in August.

Oregon's trust fund stands at $4.3 billion, down from $5 billion at the start of the pandemic.

As part of the $2 trillion coronavirus aid plan that Congress passed and President Donald Trump signed March 27, the CARES Act made self-employed and gig workers eligible for federally supported benefits for the first time and gave most unemployed workers supplemental payments of $600 per week. Those payments stopped at the end of July, and it is uncertain whether Congress will resume them. (An executive order by Trump draws money from the Federal Emergency Management Agency for six more weeks of payments, but only at $300 per week.)

Oregon received more than 100,000 applications under the new Pandemic Unemployment Assistance program, and even though the agency has cleared a backlog, thousands are still waiting for adjudication of their claims before they can receive benefits. About 54,000 are receiving benefits.

The same law also requires states to verify that these applicants are ineligible to receive regular benefits from state funds. Gerstenfeld said applicants can be eligible for both types, depending on when and how they were employed.

The law also extended benefits from 26 to 39 weeks, and the federal government picked up the cost of payments to employees in Work Share programs — for employers that reduced employee hours by 20% to 40% — through Dec. 31. About 65,000 Oregon workers are covered.

So far the agency has paid out $4.4 billion in benefits, some of it federal funds.

Into the future

From 2011 to 2019, when he took a different job within the agency, Gerstenfeld led the unemployment insurance division.

"A lot of things we are seeing right now are similar to what we saw during the Great Recession," he said. "We saw new programs created to offer more weeks of benefits and provide some more dollars in benefits."

During the Great Recession, states were allowed to pay a maximum of 99 weeks in benefits, but that ended in 2013.

Gerstenfeld said he knows of no state, regardless of the status of its processing system, that handled the sheer volume and complexity of benefit claims. He said agencies like his, banded together as the National Association of State Workforce Agencies, are still preoccupied with the current situation.

"But we are having discussions about the long-term changes we think are needed," he said. "Some of these things were advocated for after the Great Recession."

Oregon's Employment Department, like most others, relies primary on federal funds for operations. Gerstenfeld said agencies tend to get adequate federal aid during economic downturns, but not during good times.

"It's like someone giving you a smoke alarm after the house is on fire," he said.

"When we are in a crisis like this, federal funding tends to be sufficient and a lot of attention is paid to these programs. When the economy starts to recover and unemployment benefit programs affect fewer people, it's not as vital to the overall economy, although it's still vital to each individual who relies on it. Funding levels go down significantly, and states have suffered from year after year of inadequate federal funding to administer the programs."

Oregon Sen. Ron Wyden has proposed to tie the amount of future benefits to statewide average unemployment rates so that benefit levels stay higher until rates go down. Democrat Barack Obama offered a similar proposal in the final year of his presidency in 2016, but Republican majorities in Congress ignored it as the U.S. economy emerged from the Great Recession.

Although Gerstenfeld didn't endorse a specific idea, he said states should be able to gear up to pay benefits once there is another downturn.

"Every state will know ahead of time what it is it will have to implement," he said, "instead of having to wait until a law is enacted to figure out how to reprogram our computers and start to talk with people who need these benefits.

"Those would go a long way toward making state systems more resilient in the face of recessions."

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NOTE: Fixes title of Oregon DMV; also updates some numbers released after the original posting of this story at PortlandTribune.com on Saturday, Sept. 12. The story was reposted on the BusinessTribune website.


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