Kentucky awards $55.5M contract to replace beleaguered unemployment insurance system

Kentucky’s beleaguered and antiquated unemployment assistance system — the same system that caused delays for hundreds of thousands of Kentuckians in need of unemployment benefits during the COVID-19 pandemic — is finally being replaced, the state announced Friday.

Deloitte Consulting has agreed to a $55.5 million, six-year contract with the Labor Cabinet’s Office of Unemployment Insurance to replace its aging system with a “modern and integrated platform that will provide easier access for UI claimants,” according to a news release.

“This new system will help us better the needs of Kentuckians by improving accessibility and claims processing times, as well as safeguarding against potential unemployment insurance fraud,” Gov. Andy Beshear said in a statement.

In 2020 and 2021, the pandemic forced in-person activities to temporarily cease, and Beshear issued a series of executive orders that, while limiting the spread of the contagious disease, shut down businesses and kept hundreds of thousands of people home and unable to work in-person jobs. As a result of the pandemic, the state and the federal government expanded unemployment eligibility.

To access those benefits, however, recipients needed to either register online or in person. Kentucky’s filing requests ballooned by 1,300%, the administration said, and the surge in new claims overwhelmed the system, which repeatedly crashed.

Unemployment office phone lines were backed up for hours, and hundreds of thousands of emails from Kentuckians requesting help were left unread.

In 2020, when word got out the state was setting up an ad hoc unemployment center outside the Capitol in Frankfort, hundreds of people drove from across the state to stand in line for hours in hopes of speaking with a UI staff member to access their benefits.

The problem was made worse when the Herald-Leader reported a state inspector general report that found a handful of state workers had gamed the system in order to access unemployment funds.

Lt. Gov. Jacqueline Coleman, secretary of the Education and Workforce Development Cabinet at the time, also used her position to connect friends and family to unemployment benefits.

A task force was formed, Beshear reorganized his cabinets to better solve the UI office’s problems, Ernst & Young was contracted for $17 million in 2022 to assist the state in reviewing backlogged claims, but a complete overhaul of the nearly 40-year-old system would likely take years, Beshear said at the time.

That time has finally come.

The Labor Cabinet and Deloitte will begin a 90- to 120-day planning process to determine a timeline for the project, which is expected to wrap by 2028.

Beshear, at the height of the pandemic, said a decision by his predecessor had compounded the UI system’s stress.

Republican Gov. Matt Bevin in 2017 shuttered more than 30 of the state’s 51 regional career centers, which had provided in-person unemployment insurance assistance, and cut the UI’s office by more than $16 million.

Beshear mentioned this again on Friday, saying, “additionally, the previous administration removed in-person unemployment services from the remaining career centers, forcing people to drive longer distances to the few remaining regional offices, or to contact the Frankfort call center, which had only 12 employees at the onset of the pandemic.”