Wisconsin, other states failed to meet federal rules for clearing unemployment appeals, a new report says

Laura Schulte Hope Karnopp
Milwaukee Journal Sentinel

MADISON – The state Department of Workforce Development failed to comply with federal regulations regarding unemployment appeals between June 2020 and May 2021, meaning that less than 80% of appeals were resolved in 45 days, according to a report from the Legislative Audit Bureau.

DWD, like its counterpart agencies in many other states, was far below that percentage in the time frame, hitting less than 20% between December 2020 and May 2021, according to the report issued Friday. 

Overall, the Audit Bureau received 30 hotline reports regarding unemployment since Jan. 1, raising concerns over payment delays, call center effectiveness and appeal timeliness, according to documents.

One example named in the report cited an individual who filed an appeal in September 2020 and didn't receive a hearing until March, 26½ weeks after the appeal was requested. After the hearing, which overturned a denial of benefits, the department didn't deliver benefits to the applicant until May, more than six weeks after the hearing. 

The department has a backlog of 13,282 appeals awaiting scheduling as of July 24, the latest data available from the department. More than 4,400 appeals have already been scheduled for a hearing. The average age of appeals filed that are awaiting a hearing is 58 days, nearly two weeks more than the number of days allowed by federal regulations. 

Most states are struggling to comply

In the report, the bureau also compared Wisconsin's appeals data with four surrounding states and found that none of the others were in compliance with the federal guidance, either. Wisconsin ranked third out of the five states studied. 

In comparison with the other 45 states and territories that also report appeals information to the federal Department of Labor, only two are in compliance with requirements, with Wisconsin's percentage of appeal determinations falling slightly above the median, according to the report. 

To address the backlog of appeals cases, the department indicated to the bureau that it has increased staffing assigned to the appeals process, including administrative law judges to overhear cases. Most of the hiring has occurred since December. 

The bureau recommended that the department hire additional staff to work on the backlog of appeals, develop a plan to reduce the number of outstanding appeals and comply with federal regulations, so that appeals are resolved in a timely manner. The bureau also requested the department prepare a report to the Legislature by Sept. 16 on the status of appeals as of the end of August. 

The department accepted the recommendations, the report says. The DWD told the Journal Sentinel Friday that the IT system upgrade will reduce the number of manual tasks that staff do during the preparation and scheduling of hearings. The department added that it is considering hiring additional staff.//

Victor Forberger, an unemployment attorney, said that the report isn't showing anything that he didn't already know. He's been watching the number of people waiting on appeals grow since the beginning of the year. He attributes it to the fact that the department is denying more claims than he's ever seen before. 

He also believes that simply hiring more judges isn't going to fix things. 

"The hiring of more judges presumes that most claims being denied is appropriate," he said. "But that's not the case. We need to fix the process." 

Forberger is also concerned about the uptick in delta variant cases, and the impact that could have on the unemployment system now that many of the measures removed last year to streamline benefits have been put back into place, like work searches and the one-week waiting period. 

"If this pandemic gets worse again, the system isn't functioning right now, it never functioned during the pandemic," he said. "It needs to be fixed now and we're playing games."  

More:Coronavirus exposed huge flaws in the Wisconsin unemployment system. Where things stand and what still needs to be done

Appeals backlog continues 18 months of issues

Appeals aren't the only issue facing the department, even as unemployment numbers have begun to recede as people get vaccinated. 

The bureau report also notes that the department struggled to implement the federal unemployment packages, often taking months to get the benefit applications online and operational. 

Another failure pointed out in the report was the department's struggle to detect and prevent overpayments. The bureau recommends the department complete outstanding reviews to see if payments were correctly handed out and establish overpayment amounts. The bureau also asked for a report on overpayments for September. 

Wisconsin's unemployment system has been plagued with issues since the start of the coronavirus pandemic last year. 

First, the wave of applications as businesses shuttered overwhelmed the department's outdated unemployment system, sometimes forcing applicants to wait months to have an adjudicator look at their case. As the cases flooded in, so did calls with questions, too. But the department wasn't prepared to handle those either, resulting in claimants waiting for hours on hold, many times only for the call to be dropped or go unanswered. 

Then Gov. Tony Evers called for the resignation of then-Secretary Caleb Frostman, who was replaced by Secretary-designee Amy Pechacek. Pechacek was able to forge a partnership with Google Cloud, which helped to clear the backlog of claims, while newly contracted call centers helped with the phone call issues. 

More:Report says Wisconsin should outsource unemployment services after pandemic failures

Appeals now remain the largest issue, as the number of those waiting for a hearing continues to grow, as noted in the report. 

On the heels of the report and the other struggles of the department, lawmakers have stepped forward to again criticize the unemployment program, which has caused issues for thousands of Wisconsinites. 

"While the global pandemic was an unparalleled event that stressed our UI program, the Department should have anticipated the next steps, which should have been taken to advance this bubble of claimants through the program," said Sen. Robert Cowles, R- Green Bay, who co-chairs the audit committee. "Instead, these audit reports highlight further lethargic reactions by DWD that have resulted in noncompliance, delays, and mismanagement."

Sen. Melissa Agard, a Democrat from Madison who is also on the audit committee, said Republicans had the opportunity to address the unemployment system but rejected a special session to take up Evers' plan and removed $15 million from his budget to address DWD workload increases. 

"The majority party in the Legislature is continuing to not take action on something they know is not working correctly," Agard said. 

Earlier this week, U.S. Rep. Mike Gallagher and the other Republican members of Wisconsin’s congressional delegation asked the acting inspector general of the U.S. Department of Labor to review Wisconsin’s and other states' unemployment systems. 

"For over a month, Republicans in the congressional delegation have been waiting on Governor Evers to inform us what steps DWD has taken to prevent waste, fraud and abuse of federal unemployment dollars. Today’s report that DWD isn’t in compliance with the most basic federal regulations doesn’t inspire any confidence in their ability to responsibly manage these funds," Gallagher said Friday.

In June, DWD officials said they believed more than $1 million may have been paid in fraudulent unemployment benefits and said they were working with the inspector general. Assembly Speaker Robin Vos has also said he wants the state to do more to audit work search requirements. 

On Tuesday, Republicans failed in their attempt to override Evers' veto of a bill that would have ended the state's participation in the federal unemployment programs that are set to expire in September.

Republicans and the state's largest business lobby have wanted to end the additional unemployment benefits, arguing it would help alleviate the workforce shortage. Democrats say issues like transportation and child care still remain to be addressed and that the challenges of the pandemic are not over.

Forberger, the unemployment lawyer, sees Republicans' complaints as useless, though. 

"All the places being trotted out that need work are part-time, so unemployment has nothing to do with job shortages there," he said.

Laura Schulte can be reached at leschulte@jrn.com and on Twitter at @SchulteLaura. Hope Karnopp can be reached at HKarnopp@gannett.com and on Twitter at @hopekarnopp.