Colorado’s state government leaders knew they — and thousands of the state’s workers — had a problem when the coronavirus pandemic sent Colorado’s economy into chaos in mid-March.
The state had spent, over 22 years, more than $97 million to build a new unemployment benefits system. But when 21,000 people found themselves out of work on March 23, the system buckled.
People could not log on. Or they got bumped off the system. Confusing forms baffled users. Questions about how to file claims spilled over into weeks-long waits to talk to a person at a call center. For many, an unintentional computer error meant long delays for payments as their bills piled up. Fraud was rampant.
“To say we are working off a 30-year-old legacy mainframe built on three-decade old language and we just now are modernizing, it does seem unimaginable that it has taken this long,” Cher Haavind, the Colorado Department of Labor and Employment’s deputy executive director, said. “We agree. We wish we had been here sooner.”
On Sunday, the labor department will launch a new online system for the state’s 265,000 unemployed people to file claims. Since the pandemic’s start, the unemployment system has put $6.7 billion into the state’s economy, helping a million Coloradans pay their rent, electricity and grocery bills while the virus rages on and thousands of businesses remain closed. The need is unprecedented.
Labor department officials knew as early as 1999 that their computer system was outdated and vulnerable. Since then, there have been two failed attempts, including one that was a partnership with three other states, with a combined price tag of more than $99 million in state money.
And the project isn’t finished.
This spring, Colorado’s labor department will ask the General Assembly for permission to spend another $28.4 million out of the state’s unemployment premiums fund.
This latest effort comes with an almost $60 million price tag, Haavind said. But it only replaces the unemployment payments system. Updating the collections side, which is used by businesses that fund the system, will have to wait.
Labor department officials believe they, the Governor’s Office of Information and Technology, which has helped guide the project, and Deloitte Consulting, the giant professional services firm hired to create the new system, are ready for Sunday’s roll out even as they write new programs to meet the latest guidelines introduced Dec. 26 when the president signed a new stimulus package into law.
“I’m really, really excited,” said Colleen Lynn, the labor department’s director of business technology. “I feel like we’re better postured right now than we’ve ever been to go live with the system. This has been a long-time coming.”
On a media call last week, Haavind and Joe Barela, the labor department’s executive director, said the new system, called MyUI+, will be more secure and more user-friendly than its predecessor. And when new mandates come down from the state and federal governments on unemployment benefits it will be easier and faster to reprogram.
In an interview with The Denver Post, Barela, who became executive director in 2019, said that while the price tag is big, the new system will better protect Colorado from fraud, eventually saving the state billions.
“If anyone asks me if it’s worth the investment, absolutely it’s worth the investment,” he said.
Roll outs of new benefits programs have been troubled in other states. Last spring, Deloitte drew the ire of Florida’s unemployed and received public criticism from the governor when its benefits system collapsed amid a surge of claims filed amid the pandemic. The state paid Deloitte more than $40 million to create the system, which went online in 2013, and auditors had warned government officials for years that the system was flawed, according to reports in the Tampa Bay Times.
Colorado’s labor department will boost its call center staff and has a backup system in place should something go wrong, Haavind said.
How we got here
Colorado’s effort to create a modern claims system has included two failed attempts since 1999 that cost millions in federal and state dollars, including a multi-state project that fell apart within a year. It’s stretched through four gubernatorial administrations and two major recessions.
Colorado’s unemployment benefits computer system has two critical pieces — one is used by people who lose their jobs and want to file claims for benefits, the other is used by companies who pay taxes into the program so there is money to distribute to unemployed workers. This week’s upgrade only impacts the online benefits system for workers. The half that collects money from businesses will continue operating on the older model, Haavind said.
Both systems were built in the 1980s on a mainframe computer, and they used computer languages — COBOL and ADABAS — that essentially are the Latin of computer coding. They’re outdated and rarely taught in schools, meaning it gets more and more difficult to find tech professionals who understand how to update the systems, Lynn said.
At the turn of the millennium, the labor department knew it needed to move toward a more modern, server-based system that people could access online with their home computers.
In 1999, the labor department launched its first attempt to upgrade through a project named Genesis. Genesis was a $27.9 million failure.
At first, the labor department tried to pull off Genesis in-house. But three years after its start, the department contracted with Accenture, a multinational tech company, to develop a new system. By 2005, the contract was terminated with 97% of the project’s requirements incomplete. For its work, Accenture walked away with $24.2 million, according to a Dec. 6, 2017, budget presentation before the legislature’s Joint Budget Committee.
“That was part of the challenge is there wasn’t a vendor base out there that really understood the complexity and the breadth and depth of these programs so there was some underestimation of what it was going to take to build that,” Lynn said.
That project was such a disaster that Colorado expanded its Office of Information Technology to oversee major computer upgrades rather than each state agency trying to handle the projects in-house, the 2017 JBC report, written by staff member Amanda Bickel, said.
A small success, followed by failure
By 2007, the real estate loan crisis had triggered the Great Recession and the labor department was ill-prepared for a massive wave of claims. At this point, most American households had access to home computers and the internet, but the department was unable to provide an online claims system.
“When mainframe systems were built, Joe Customer out in the community did not have a computer,” Lynn said. “We weren’t accessing state services electronically.”
So, an internet self-service claims project was launched in 2009 and it was functional by 2010 although by then the Great Recession was winding down. That project, which is viewed as a success, cost the state $6,594,190, according to a Nov. 17 Joint Budget Committee presentation.
Still, the old mainframe system was operating behind the scenes. During the Great Recession, unemployed workers eventually qualified for 99 weeks of unemployment payments, and every time a federal benefits extension was granted, it took eight to 10 weeks to reprogram the system and dole out money to the unemployed, Haavind said.
Across the country, state labor departments were in the same boat — running unemployment benefits systems on outdated technology but without the means to replace them.
Enter the federal government.
Recognizing the problem was rampant across the country, the U.S. Department of Labor offered grants to states who formed partnerships to develop new unemployment computer systems. In 2013, Colorado joined Wyoming, Arizona and North Dakota to create the WyCAN consortium with Colorado accepting the lead role for the project.
The four states received a $62.2 million federal grant, and the Colorado legislature kicked in another $14.8 million. Every state has different rules when it comes to how long a person can receive benefits, how much they receive, how they adjudicate appeals and how much money is collected from businesses. Pretty soon the four labor secretaries realized that it was impossible to figure out one system that would serve all, Haavind said.
“It’s not an out-of-the-box solution,” she said.
By the time the four states threw in the towel, they had spent $15.4 million in federal money, and Colorado had burned through a third of the $14.8 million the legislature had allocated. The WyCAN consortium returned the unspent money to the U.S. labor department, and Colorado stopped the state’s financial contributions.
“We were disappointed we couldn’t see it to completion,” Haavind said.
Confidence in a solution
Labor department officials knew they couldn’t waste another decade trying to figure out how to build a new computer system. In 2016, the department approached the General Assembly to ask for money to once again try to modernize the unemployment insurance computer system. That year, legislators approved $51.5 million for the project. Since then, the price tag has increased to $57.8 million, according to JBC documents.
This time, a beefed up governor’s Office of Information Technology was ready to lead and it signed a contract with innoWake International to begin modernizing the computer system. InnoWake was one of the few companies with the technical know-how to shift a system from the old computer languages and mainframe to a more modern language, Haavind said. The company later would be bought by Deloitte, which now is designing the system.
The first step was to move the collections and payment systems off the mainframe and convert that old computer code into something more modern, in this case, JAVA, Lynn said. That took six months longer than expected, but by March 15, 2018, it was done, JBC reported in November.
However, the labor department and state OIT realized they would not be able to finish the entire project on the original $51 million budget. In the spring of 2018, the labor department asked for a budget amendment that would allow it to spend the entire amount to modernize the payments system. It would worry about the collections half, used by businesses, later.
Finally, the labor department scheduled a go-live date for April.
But it wouldn’t be fast enough.
In mid-March the pandemic arrived in Colorado and Gov. Jared Polis ordered a shutdown, closing bars and restaurants, gyms, hair salons, malls and other businesses. Within two weeks, the state went from a historic low unemployment rate to a historic high. For example, on March 9 just 400 Colorado workers filed initial claims for unemployment. By March 23, 21,000 people had filed initial claims. By April, the number reached 100,000 in a week.
“It’s so fresh on our minds,” Barela said. “In February we were moving along and we had an April launch date. Who knew by the time April came around we would have more than 100,000 claims overnight?”
So, the launch was postponed, and that, too, has cost money.
Since August, the cost rose by $5.4 million to adjust for new requirements mandated by the CARES Act, a federal stimulus package that changed the rules for unemployment benefits. Even Polis’s decision to give a one-time $375 direct payment to some Coloradans cost more than a half million dollars because Deloitte needed to reprogram the computers, according a contract between the Governor’s Office of Information Technology and Deloitte.
“It’s blown up our world,” Haavind said.
But Colorado is not alone in its IT woes. Nor is it lagging the rest of the country in updating its unemployment insurance system.
Less than half of the states have modernized, said Michele Evermore, a senior policy analyst with the National Employment Law Project and an author of “Centering Workers — How to Modernize Unemployment Insurance Technology.” She used the word “modernize” lightly, saying none of them completely meet the needs of those applying for benefits.
“There’s really no UI system in the United States that I would want to use,” she said. “Even in the top-tiered systems, I make the joke that the next screen says I died of dysentery because they’re all so antiquated.”
But the options to improve any unemployment system are few. And they are expensive, Evermore said.
“Vendors really do take the states to the cleaners on some of these things,” she said.
Anne Paxton, an attorney and policy director at the Unemployment Law Project in Washington, said she wouldn’t be surprised if there are glitches in this week’s roll out.
“It’s what they say, ‘If you want to really mess things up, get a new computer system,’” she said.
For its part, Deloitte says it successfully has modernized labor and workforce programs in two dozen states and believes it will deliver a good product to Colorado. Already, the company’s tech professionals wrote the program so Colorado could pay out pandemic unemployment assistance to out-of-work gig workers and independent contractors, who did not qualify for unemployment benefits until Congress passed the CARES Act last spring.
“During the COVID-19 pandemic, we have been proud to help Colorado and several other states stand up, scale, and support systems necessitated by the federal CARES Act and other state and federal programs,” Deloitte spokesman Austin Price wrote in an emailed statement. “The IT systems we developed and maintained over the past nine months have delivered more than $125 billion in benefits to nearly six million unemployed workers throughout the United States..”
Colorado Joint Budget Committee, Staff Budget Briefing for the Colorado Department of Labor and Employment, Fiscal Year 2021-2022: https://leg.colorado.gov/sites/default/files/fy2021-22_labbrf.pdf
Colorado Joint Budget Committee, Staff Budget Briefing for the Colorado Department of Labor and Employment, Fiscal Year 2018-2019: https://leg.colorado.gov/sites/default/files/fy2018-19_labbrf.pdf
“Centering Workers — How to Modernize Unemployment Insurance Technology,” The Century Foundation, Oct. 5, 2020: https://tcf.org/content/report/centering-workers-how-to-modernize-unemployment-insurance-technology/?agreed=1
Sourcing & Methodology
To report this story on the development of a new Colorado Department of Labor and Employment unemployment insurance IT system, The Denver Post filed Colorado Open Records Act requests for contracts between Deloitte and the Governor’s Office of Information and Technology and reviewed documents on spending that were written by Amanda Bickel, chief legislative analyst for the Colorado General Assembly’s Joint Budget Committee. The reporter also conducted interviews with key staff members at the labor as well as unemployment insurance policy experts at the National Employment Law Project and the Unemployment Law Project in Washington.