The Labor Department has awarded all of its remaining funding from the 2021 American Rescue Plan Act for modernizing the technology of state unemployment insurance systems, officials said.

The Labor Department has awarded all of its remaining funding from the 2021 American Rescue Plan Act for modernizing the technology of state unemployment insurance systems, officials said. SDI Productions/Getty Images

The money's out the door in nationwide unemployment insurance modernization push

A Labor Department official said efforts to help states modernize their UI systems are trending in the right direction, but funding may be insufficient.

The Labor Department awarded the last $204 million of grant money for unemployment insurance modernization late last month to 18 states and the U.S. Virgin Islands to move to the cloud and more modular technology that’s adaptable to change.

Of the $2 billion initially allocated for the department’s jobless aid modernization and fraud prevention under the 2021 American Rescue Plan Act, about $800 million was set aside for grants. Congress clawed back $1 billion from the effort as part of the debt ceiling deal. 

The department has allocated nearly all its funding from ARPA, according to a spokesperson. The remaining money is being used to oversee the grant funding and implement identity proofing solutions for states, said Stettner.

But the push to update the jobless aid system is not over, Andrew Stettner, the department’s deputy director for policy at the Office of UI Modernization, told Nextgov/FCW in an interview late last month. 

“Now it’s on us to deliver improvements so the next time the system is tested — whether it be an individual state like a natural disaster, or whether it be a national crisis — [it] is ready,” he said. “We really are using this grant to help prove out a vision that we have for sustainable IT modernization, and that vision really focuses on re-architecting the systems so they can adapt and change more affordably and more effectively.”

Other ARPA-funded efforts for unemployment modernization are also inching forward. The tiger team effort, where experts are dispatched to states to provide recommendations, is largely now in the implementation phase, said Stettner. The department also had a series of pilots around identity verification, claimant experience and plain language, which are finished in two states and ongoing in Rhode Island, according to the department spokesperson.

Pushing states to move from monolithic technology architectures that are difficult to change to modular technology is a big focus for the department. 

Stettner said he often heard from state officials during the pandemic as they were trying to implement policy changes and new programs in the system that “if we make this one change in our system to change the benefit amount, the whole code will crash.”

How exactly the department helps states make progress has changed some, however. Moving forward, the Office of Unemployment Insurance Modernization is planning to be “more of a facilitator” by working with the Unemployment Insurance IT Support Center at the National Association of State Workforce Agencies, said Stettner, which has a partnership with the department that’s being expanded through ARPA. 

Last month, the department awarded NASWA $15 million to aid with IT modernization, according to a department spokesperson. The Labor Department has also invested ARPA funds in the IT Support Center, which has a new technical advisory group to develop interability protocols to guide the development of future tech that can be shared across states.

“That’s a big part of our plan… working with that organization to bring technology experts together and define what the marketplace should be delivering,” said Stettner. “What are the customers' needs in terms of modules?”

Housing some of those modular tech components centrally at the department has been a target for the agency, although it has had to grapple with how to do so in an environment where states differ dramatically. The agency did announce the availability of centrally provided identity proofing solutions in May, however. 

“There were definitely some challenges in the cost of adoption in the states and for us for maintaining those technologies. We do think there will still be appropriate places for us to house certain modules,” said Stettner of the modular approach.

The unemployment program is decentralized across different states who administer benefits for their respective residents. Stettner explained that “part of our strategy is more helping states develop [that] model and encouraging more private sector development to develop more modular components.” 

At the same time, Stettner also emphasized the need for policy reforms, especially the administrative funding formula for states, which is tied to the number of claims they receive, as well as the ability of the Labor Department “to reward states that do a good job and have a little more effective ability to correct states that go in the wrong direction.”

“I would be remiss if I didn't say that we hear … every day that the ongoing investment in this system is insufficient,” he said. “Things are moving in the right way, but it's gonna be hard to transform the program unless we deal with some of the systemic challenges.”