Seattle Times Editorial Misses Important Details on Employment Security Department

The Seattle Times published an editorial on May 21, 2020 called “Crisis reveals need for better state tech”.

The Times’ headline may be true but the editorial content misses some important details, and in one instance, is misleading.

The Times says this in one paragraph:

“That’s little consolation, though, for hundreds of thousands of residents desperately needing checks and stuck in the hell of a bureaucratic system meltdown.”

Then in the very next paragraph the Times says this:

“To her credit, LeVine acknowledged problems, promptly updated the system and presented a detailed plan to resolve 100% of claims by June 15.”

There are two issues in these two paragraphs:

  1. The numbers
  2. The update

The numbers

The reader may reasonably believe from these paragraphs that “100% of claims by June 15” refers to the “hundreds of thousands of residents needing checks and stuck in the hell of a bureaucratic system meltdown”.

But the reader’s reasonable belief is not so, because the “100% of claims by June 15” refers to “Operation 100%,” which WA Employment Security Department (ESD)  launched to resolve about 57,000 applications – not “hundreds of thousands” – in the adjudication process.

Here’s what LeVine said on her video announcement May 11, 2020 at about 1:17 into the video: “Our goal is to get through the lion’s share of these 57,000 pending claims over the next two to three weeks. Because of the complexity for those still remaining at that point we believe it will take until mid-June to have 100% of those specific claims resolved or paid. Again those specific ones are the ones that we had in queue up until May 1st.”

The Times’ editorial inaccurately implies that Operation 100% refers to “hundreds of thousands of residents,” thereby giving the reader an inaccurate impression of what ESD hopes to accomplish by June 15, 2020.

The update

We can assume from the Times use of “bureaucratic system meltdown” that “system” refers to the entire conglomeration of computer systems, phone systems, personnel systems, etc. In that regard the Times may be correct. But if referring to “computer systems,” where’s the evidence?

Governor Inslee said in a news conference on April 16, 2020 that Suzi LeVine was “using new technology to try to accelerate getting these dollars to hard pressed Washingtonians.” I asked the Governor’s media person “What is this new technology in use by ESD?” The one and only response I got was: “I have reached out to ESD but have not heard back.” But the Governor made the comment so why not reach out to the Governor to see what new technology he was referring to?

Other issues

The Times makes reference to ESD’s mainframe replacement:

“Also listed [in in the information officer’s dashboard] is a project started in 2007 to replace Employment Security’s mainframe for $46.8 million.”

“The dashboard shows the cost rose to $64.2 million in 2016, at which point the new system worked but still had issues to fix under warranty.”

This is only part of the story.

Next Generation Tax System

The $46.8 million was to replace the mainframe’s system for collecting taxes from employers. The new system is called NGTS — Next Generation Tax System. The majority of the money went to a company called Saber systems, which was a subsidiary of EDS, which in turn was purchased by HP. Subsidiary of EDS, an HP Company, to Modernize Washington State Unemployment Insurance Tax System: “EDS, an HP company, announced that Saber Government Solutions, its non-healthcare U.S. state and local government subsidiary, has been awarded a $24 million contract to develop and design the new tax system for the Washington Employment Security Department (WA ESD).”

The goal, according to the HP news release, encompassed a lot:
“Under the Next-Generation Tax System contract, Saber will perform project management, data conversion, business analysis, and application development and testing with the assistance of the WA ESD staff. As a result, the new system will improve UI tax functions such as employer registration, tax calculation, wage reporting, general ledger support, field auditing and collections.”

Implementation took longer than expected. After six years, in 2014, EDS launched the new system. According to a report by KING TV in 2016, not all was well. “But instead of making ESD’s job easier and providing employers with a more sophisticated and reliable collections system, the IT project created a wave of problems. Businesses were bit first by the new system’s many bugs.”

By 2016 there were still problems, even though earlier, strange problems had appeared. In 2014 when NGTS was launched, there was this report:

“For example, NGTS considers any empty field on an unemployment tax return to be an error… which sounds okay except the standard paper form provides six spots for six employees. So you have to fill in all six spots if you file your return using paper. You can’t avoid the penalty if, oh, say you have only one or two employees.”

“And it gets worse. Another bug in both the paper and electronic filing systems removes the leading digit in any employee’s Social Security Number if the number begins with a 6, 7, 8 or 9… and then because that Social Security Number is now “missing” a digit, NGTS assesses that employer an “incomplete” report penalty.”

FASTUI and false allegations

NGTS was the side that collects taxes from employers. Moving ahead for the benefits side — the side applicants use — ESD decided to use FASTUI from Fast Enterprises in Colorado. The contract for that purchase and implementation was in April 2017. The contract was signed by then Deputy Comissioner Lisa Marsh.

Not all went well when FASTUI was rolled out in January 2017 to applicants seeking benefits. KING TV reported: “The trouble with the system resulted in more than 750,000 calls for help to claim center staff on Tuesday [January 3, 2017] .”

Fast Enterprises has been a partial focus of problems in Michigan. The combined systems that included Fast Enterprises software in Michigan were known as Michigan Integrated Data Automated System (MiDAS). The Detroit Free Press reported:

“State officials have said that between Oct. 1, 2013, when the MiDAS system came on line, and Aug. 7, 2015, when the state halted the auto-adjudication of fraud determinations and began to require some human review of MiDAS findings, the system had a 93% error rate and made false fraud findings affecting more than 20,000 unemployment insurance claims. Those falsely accused of fraud were subjected to quadruple penalties and aggressive collection techniques, including wage garnishment and seizure of income tax refunds. Some were forced into bankruptcy.”

A Fast Enterprises spokesman told the Free Press:

“It”s not the role of a software company to tell an agency what to do or not to do, in general,” James Harrison of Fast Enterprises told the Free Press. “We can make suggestions.”

Regardless of fault, the attorney for plaintiffs in one of the lawsuits about this issue was reported in an NBC News article to have said that “40,000 fraud determinations were ultimately overturned.”

(For more detailed undersanding of what went on, read this published Opinon from United States Court of Appeals for the Sixth Circuit. See excerpts below.)

Assuming all ESD upper management is aware of the massive false fraud allegations that happened in Michigan in relation to software from Fast Enterprises and associated software, it is not unreasonable that ESD would want to require human review of ID associated with an application to substantiate that the application is not a fraud attempt.

On the other hand, with automation capability, one might wonder if automation is partially responsible for all the fraud. LeVine won’t say, but if ESD swung to the opposite end to avoid false fraud determinations, might it be possible software configurations were too loose? Here the Seattle Times is right: “Fuller explanation is needed to assure residents that state systems handling sensitive information are truly secure and less vulnerable to being spoofed. The public also needs to know if its government erred and what corrective measures are needed.”

Moving forward, why not consider strong, national cryptographic identity like Estonia?

System of systems

One software product can be complex. Then add other software systems and you have a bigger complex system. In a March 25, 2020 consultant’s report: “The Employment Security Department (ESD) has over 170 applications/systems providing both direct support to Washington residents as well as administrative support to the operation of the Department, including employee payroll and vendor payments.”

Add the complexity of setting up hundreds of workers to work from home. Whose computer is used? How to establish secure connections? How to route phone calls? Are all programs that an in-office worker would use be available at home?

Juggling all this is certainly a huge challenge when confronted with an onslaught of applicants that push software, infrastructure, and people into operations never designed for that magnitude.

What’s Missing?

In a March 2020 report from a consultant hired by ESD, the agency does not have a method of rapid recovery. “Currently ESD does not have a back-up or disaster recovery (DR) plan that would enable ESD to pay unemployment benefits to Washington residents in a timely manner in the event IT infrastructure, systems, or data became unavailable. The current back-up solution includes snapshots of data every 24-hours stored in one of ESD’s claim centers. Recovering the snapshots would require a manual process taking weeks to months to return to an operational state. Interruption to or total loss of technology systems and associated IT infrastructure would significantly disrupt critical services to job seekers and employers, potentially causing significant social and economic impact to residents of Washington State.”

— Bruce Miller

Excerpts from the Court of Appeals Opinion mentioned above

“If the employee reported no income for any week during a quarter in which he or she earned income, MiDAS automatically determined that the claimant had engaged in fraud. The Agency made no effort to assess whether the claimant truthfully reported no income for the week(s) in question.”

“The Agency assessed the penalties even when claimants did not actually receive benefits. Many claimants were assessed penalties that ranged from $10,000 to $50,000.”

“The only time real-life Agency employees evaluated a particular instance of suspected fraud was when a claimant filed an appeal. Claimants had 30 days to appeal the fraud determination to an Administrative Law Judge (“ALJ”). But “the vast majority” of claimants did not know about the fraud determination until the window to appeal had expired and they had been assessed thousands of dollars in fines. And when claimants attempted to appeal, Agency employees informed them that they could not appeal because more than 30 days had passed, even if the claimants still had the right to appeal because they never received notice. Furthermore, according to the Michigan Auditor General, the Agency never answered over 90% of the calls to its “Help Line.” In fact, out of the last 50,000 calls the “Help Line” received before the Auditor General conducted the audit, “not a single one had been answered or returned.”

Related Pages

Ticking along with ESD

WA State CIO apparently OK with ID sent by email

Washington State Sets Unemployment Benefit to $0 by making up job title

Enhancing Seattle Times ESD Article on Missed Red Flags