Debt ceiling politics could derail plans for modernizing unemployment benefits delivery

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The department has a plan to build on modular modernization advances piloted in New Jersey, but provisions in the debt ceiling compromise legislation could claw back funding pledged in the American Rescue Plan Act.

The Labor Department thinks that New Jersey is getting technology modernization for unemployment benefits right, and it wants to scale the state’s modular modernization approach to other states, officials said during a Tuesday briefing. 

New Jersey has been working with the Labor Department and the White House’s U.S. Digital Service as one of two states in a claimant experience pilot started in 2021, said Jill Gutierrez, a director in the New Jersey Department of Labor and Workforce Development. 

Arkansas — the other state in the pilot— has been working with the Labor Department to test government-run identity verification options, as Nextgov/FCW previously reported.

“Our partnership with New Jersey… is showing that states can adopt the modular approach in ways that minimize risks, deliver tangible results that are also visible and makes sense to them faster, cheaper and easier to maintain,” said Larry Bafundo, deputy director for technology in the Labor Department’s Office of Unemployment Insurance Modernization.

Last year, the state launched a new, mobile-responsive, plain language initial application overlaid across old infrastructure. It’s also working on redesigning its self-service claims status page, updating email and paper notifications for claimants to make them easier to understand, as well as releasing a new claimant intake application.

“It's an agile approach to building the technology and it's a human centered approach in how we prioritize what comes next,” said Gutierrez, who added that improvements can be made as the state continues to make a strategy for updating “the real innards of how we process the claims.”

The goal is to move from a monolithic architecture built in one piece to a system made up of component parts, making it easier to change over time, she said. 

The Labor Department wants more states to adopt that modular tech.

“Big states, small states and states at different points of the political spectrum all agree that even small changes to their IT systems are prohibitively time consuming, costly and risky. This really is the core issue to address,” said Bafundo.

“It's not just that there were mainframes during the pandemic that didn't necessarily meet the demands at the time,” he said of the problems states faced working through swells in claimants and implementing new programs passed by Congress. “It’s that those mainframes were difficult to modify and change to meet the new requirements of the program, and that's what we're hoping to address with the strategy moving forward.”

The Labor Department’s plan is to be a “helper agency” that sets standards for what a good system looks like and gives states building blocks to get there, Bafundo wrote in a department IT modernization strategy earlier this month. 

Although the work in New Jersey has been specific to the state, aspects of New Jersey’s work can also be made available to other states as open source, said Bafundo. 

That’s something the department plans to do after more forthcoming work with other states “with a goal towards showing how states of different sizes and disposition can achieve similar results, so that we can produce a playbook that is rooted in, ultimately, actual successes and lessons learned,” he said, noting that open source functionality can also be reused in whole or in part by other states to accelerate change. 

Will debt ceiling politics intrude on modernization plans?

The Labor Department has also been offering funding to states, although how that will look long-term is changing.  

The department got a $2 billion investment via the American Rescue Plan Act, but that funding would be cut in half as part of clawbacks of COVID relief dollars included in the compromise debt ceiling bill working its way through Capitol Hill. 

The agency has made $1.6 billion available to states so far, but only about $500 million has been given to states through award notices at this point, according to a Labor Department spokesperson. If the debt ceiling bill passes, it would trim the remaining balance of money to $500 million. 

Last week, the department announced the availability of up to $653 million for states to use for tech modernization. Last month, $200 million was allocated for identity verification and fraud prevention. 

“Regardless of the outcome of this [debt ceiling] legislation, we are really confident the vision for technology that Larry outlined in the presentation will move forward in the years ahead with the American Rescue Plan Act funding,” Andrew Stettner, the Labor Department's deputy director for policy in the Office of Unemployment Modernization, said during the Tuesday briefing.

The exact specifics of how these proposed cuts would impact the department’s work is “not clear yet,” Michele Evermore, senior fellow at the Century Foundation and the former deputy director for policy in the Labor Department's Office of Unemployment Insurance until late 2022, told Nextgov/FCW. “[The Labor Department] and the administration will have to figure that out. But the long and short of it is they clearly won’t be able to do all of the incredible things they announced.”