Brown proposes $146 million for Employment Dept. upgrades
Gov. Kate Brown has included $146.4 million in her proposed two-year state budget for a new computer system for the Oregon Employment Department and other items to make paid family leave a reality.
The amount includes the $85.6 million the federal government gave the state in 2009 for modernization of the mainframe system, which dates back to 1993. The system relies on a computer language that dates back to 1959, and though it performs some functions well, it also requires a lot of reprogramming.
For example, although Brown ordered an end last spring to the obligatory waiting-week period before people could receive regular unemployment benefits, the agency made its first payments a few days before Thanksgiving.
About 338,000 people have been paid, along with extra one-week federal benefits of $300 or $600, depending on when their waiting-week period fell. The extra money is unavailable if the waiting period was after Sept. 5.
Not all unemployed workers qualify for the waiting-week payments, specifically self-employed and gig workers who get federally funded benefits that had no waiting week.
The additional money for the start-up of paid family leave is actually a loan, which the Employment Department will pay back when the first contributions from employers and employees come in at the start of 2022. Benefits will be paid at the start of 2023.
Brown unveiled her 2021-23 budget proposal on Dec. 1. Lawmakers have until June 30, the end of the current budget cycle, to complete work on individual agency budgets.
"We did receive what we asked for," acting director David Gerstenfeld told reporters during a weekly conference call on Wednesday, Dec. 2. "It is the current best estimate of what we need to complete a successful moderation program and all the work we need to complete in this coming biennium. We know how vital it is to make sure that we can support people in the next recession and are able to be more agile in helping people."
Gerstenfeld was not the acting agency director back in 2009, when Oregon received the original $85.6 million. A Legislative Fiscal Office report issued in July faulted in part turnover at the top of the agency — there were three directors from 2006 until May 31, when Brown fired Kay Erickson and tapped Gerstenfeld as acting director — and insufficient attention to the project. The computer project also has been the target of state Audits Division reports.
Vendor is pending
The agency had taken a step on Sept. 11 toward selecting FAST Enterprises as the vendor to negotiate a contract. But a competitor objected and Gerstenfeld said the agency — in cooperation with the Department of Administrative Services, which oversees major computer projects — is required to take additional steps before proceeding.
FAST Enterprises is based in Centennial, Colo., 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 the Division of Driver and Motor Vehicle (DMV) Services, which just completed its three-year rollout of its Service Transformation Project this year. It enables DMV to comply with the requirements of the federal Real ID Act of 2005 to make driver licenses more secure.
Some lawmakers raised questions about the involvement of FAST Enterprises as one of the vendors in building a system in Michigan that generated far more fraud cases than was typical for that state's unemployment agency. The disputes are tied up in Michigan courts.
The questions arose during a session of the Senate Labor and Business Committee in September.
Gerstenfeld said then that state officials have taken extra time to avoid the pitfalls that befell agencies in other states seeking to modernize their systems.
Paid family leave
In addition to automating functions that are now done manually, Brown's budget request for a new Employment Department system covers the start-up for Oregon's paid family leave program. The Legislature approved it in 2019, joining California, New Jersey, New York, Rhode Island and Washington, which finally started its program back in January after its original passage in 2007. (Massachusetts and Connecticut will start up their programs before Oregon.)
The Employment Department has conducted several online sessions to gather comments to design Oregon's program.
Unlike state unemployment benefits, which are funded solely by payroll taxes on employers, paid family leave benefits will be drawn from contributions by employers and employees. Those contributions will start Jan. 1, 2022, and the first benefit payments are scheduled Jan. 1, 2023, both within the state's 2021-23 budget cycle.
Gerstenfeld became the director of this program back in 2009, after eight years in charge of the unemployment benefits division, until Brown named him acting director of the entire agency on May 31.
Gerstenfeld said the program will be designed while the computer system is upgraded.
"When you look at the amount of work that needs to be done, it looks a lot closer," he said, noting that the start dates are only a year or two away.
NOTE: Adds Massachusetts (2021) and Connecticut (2022) to list of states offering paid family leave. Oregon will start paying benefits in 2023.
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