ies ‘COMMONWEALTH OF PENNSYLVANIA February 3,2017 ‘The Honorable Eugene DePasquale Auditor General Commonwealth of Pensylvania Finance Building 613 Nom Stet, Room 229 Harrisburg, PA 17120-0018 ear General DePasquae: Pennsylvania's wnemplayment compensation system is under signticam strain. This fll, the ‘administration didnot receive the legislative authority to transfer resouees to the Service Improvement fand Infrastructure Fund (SIF). As a result, thee unemployment centers have been closed and approximately 500 employees were laid off This has led to increased. wait times and put the ‘unemployment compensation system under additonal distress. Additionally, these issues are compounded hy the fact that bipartisan legislation was passod last year 10 reform our unempleyment compensation stem, which gave Benefis to over 45,000 Pennsylvanians who are currently out of work. Earlier this year, you announced an audit of the unemployment compensation system. The audit hasan anticipated completion date of Apri It sour hope that we can come toa resalation that will help ‘ur system provide the level of service Pennsylvanians expect prior tothe release ofthe aut. However, ‘tis important for your aut to explore some of the root causes of the problems in our unemployment system. ‘As you have embarked on a discovery proces, our Budget Office has done parallel work to try to ‘identify opportunities to improve ur services and maximize taxpayer dollar. During this process, deficiencies were found that we believe can help inform your audit and allow us all to reach a final resolution ofthis ongoing problem. First this week the administration has also learned that since 2013, under the previous administration, the Department of Labor and Industry incorrectly reprted expenditures associated with ‘Act Minds, reducing the federal unemployment compensation funding allocation for the ‘commonwealth, We are working with the federal government to recover the Federal funding that was not drawn, As you know, efforts to modernize our unemployment compensation system date back to the Rendell Administration. Attha ime, the Department of Labor ad Industry procured a vendor to deliver a modernized system to provide tmemployment benefits. That conrat, later terminated, cost the ‘commonwealth more thin $100 million, and filed to deliver on is promise of a modernized systom. In 2013, as federal administrative funds declined, causing the depariment to close a sevice center. Already, ‘he tmemployment system as operating on antiquated technology. Unemployed workers suffered because of these circumstances, Tacing exorbitant call wait times and, in some eases, missing filing deadlines“The Honorable Eugene DePasquale February 32017 Page Two On October 18, 2016, the House of Representatives amended House Bill 2375, atthe request of the administration, to provide an additional $15 milion t be wansfrred to SIIF to pay one year’s worth ‘of benefit modemization costs. The bill a it was orginally eported from the House Labor and Industry ‘Committe, had incladed prohibition preventing the department fom moving forward with benefit ‘modernization, The administration had been informed by the Department of Labor and Industry thatthe procurement schedule for selection ofa vendor to complete benefit modernization included selection of the vendor in January 2017, ‘The administration sought removal ofthe prohibition and inclusion ofthe funds needed for one year, arguing thatthe procurement process would have to begin anew and likly would result in driving tp the costs of the vendor. The House aepted and amended the bill We have now learned that on Ostober 11, 2016, an extension was granted to vendors by th Office of Administration ~ with the knowledge of the Department of Labor and Industry ~ and that this extension would make it impossible to seloct a vendor in January. This was not communicated to Department of Labor and Industy legislative or other staff, nor was it communicated tothe Governor's Office. ‘These erors are not accepable, and the individual responsible has resigned. Responses to the ‘benefit modernization Request for Proposals (RFPS) ae still in the process of being scored. The Department of Labor and Industry and the Office af Administration are working to speedup the vendor selection process We are also working with the Office of Administration to accelerate the RFP process to implement longer-term modernization solution. This problem has been many years inthe making, and ‘we are committed to fixing the unemployment compensation system once and forall. Weare proud of the Work we have done to fx other long ter contracting and vendor problems ‘Again, we have addressed the mistakes in the unemployment compensation system and we are actively monitoring the program to make sure there are no additional legacy problems. We wanted t0 shae this information with you as soon as we received it so that we can fix our unemployment system in ‘collaborative manner, Despite these eros, one of which dates back several years, nether ofthese situations erase the underlying problem the unemployment compensation system is curently fazing. To adequately provide Serviees to Pennsylvanian, we sil need an authorized transfer from the Service Improvement and Infrastructure Fund (SIF), ‘We wanted to make sure you had this updated information and will always be available to diseuss tee ea reine a = HL andy Avi Sct oe tee‘The Honorable Eugene DePasquale February 3,2017 Page Three (Ce: Senate Republican Leadership Senate Democratic Leadership House Republican Leadership House Democratic Leadership Senator Ward ‘Senator Tartaglione Representative Kauffinan Representative Galloway