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Employment Department computer project back on track

The long-awaited modernization of the Oregon Employment Department computer system is back on track.

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The agency reaffirmed its notice of intent to award a contract to FAST Enterprises as the vendor for the new system. Gov. Kate Brown’s two-year budget for the cycle starting in mid-2021 proposes $146.4 million for that project, which has been in the works for more than a decade, and for other work that will make Oregon’s paid family medical leave program a reality by 2023.

Acting Director David Gerstenfeld said Wednesday that the agency has completed a procurement review prompted by a competing vendor’s objection to the original notice announced Sept. 11.

“While this is not a signed contract, it means we can do the detailed negotiations to move our unemployment insurance modernization forward with urgency,” Gerstenfeld told reporters during a weekly conference call.

“We want to make the experience for Oregonians seeking benefits much faster, smoother and friendlier. On the back end, we want to make sure we can make it easier to process and pay claims, better communicate with those seeking our services and implement new programs.”

The agency operates on a mainframe computer system that dates back to 1993 and relies on a programming language that goes back to 1959. The new system would incorporate parts of the current system, but it would be more adaptable to program changes, such as the record volume of regular unemployment claims filed during the coronavirus pandemic (more than 600,000 in nine months) and thousands of Oregonians added because of newly created federal benefits for self-employed and gig workers.

Under state law, a formal objection can still be filed to the agency’s new Dec. 3 notice. Gerstenfeld said that appeal period has not yet expired.

Brown’s budget request includes the $85.6 million that the federal government awarded to the state back in 2009 for the new system. A Legislative Fiscal Office report issued in July has attributed delays to changing agency leadership — there have been four directors, counting Gerstenfeld, in the past decade — and a lack of sustained attention to the project. It also has been the subject of critical state audits.

Although Brown had ordered an end last spring to the obligatory waiting-week period before people could receive regular unemployment benefits, the required computer reprogramming delayed the first payments until a few days before Thanksgiving. (About 385,000 people have since been paid, and 22,000 others are on track to be paid by the end of December.)

Not all unemployed workers qualify for the waiting-week payments, specifically self-employed and gig workers who get federal benefits that had no waiting week.

FAST Enterprises is based in Centennial, Colorado, outside Denver.

It was the vendor for two major Oregon projects in the past decade. One was the GenTax system for the Department of Revenue, which rolled it out between 2013 and 2017 to replace a system that dated back to the 1980s. The other was a new system for the Division of Driver and Motor Vehicle Services, which just completed its three-year rollout of its Service Transformation Project this year. It enables DMV to comply with the requirements of the federal Real ID Act of 2005 to make driver’s licenses more secure.

Some lawmakers raised questions about the involvement of FAST Enterprises as one of the vendors in building a system in Michigan that generated far more fraud cases than was typical for that state’s unemployment agency. The disputes are tied up in Michigan courts.

The questions arose during a Sept. 22 session of the Senate Labor and Business Committee.

Gerstenfeld said then that state officials have taken extra time to avoid the pitfalls that befell agencies in other states seeking to modernize their systems.

“We did receive what we asked for” in the governor’s budget, he said Dec. 2. “It is the current best estimate of what we need to complete a successful moderation program and all the work we need to complete in this coming biennium.”

In addition to a computer system that will automate many functions now done manually, Brown’s budget request covers the start-up costs for Oregon’s paid family medical leave program. The Legislature approved it in 2019, joining California, New Jersey, New York, Rhode Island and Washington, which finally started its program back in January after its original passage in 2007. (Massachusetts in 2021 and Connecticut in 2022 also will start ahead of Oregon.)

Unlike state unemployment benefits, which are funded solely by payroll taxes on employers, paid family medical leave benefits will be drawn from contributions by employers and employees. Those contributions will start Jan. 1, 2022, and the first benefit payments are scheduled Jan. 1, 2023, both within the state’s 2021-23 budget cycle.

The additional money for the start-up of paid family leave is actually a loan, which the Employment Department will pay back when the first contributions from employers and employees come in.

Gerstenfeld told the Senate Labor and Business Committee Dec. 8 that the agency staff would consider whether the new computer system could incorporate elements of the new program. “We were already very far into detailed planning on the modernization project before the paid family medical leave program came into existence,” he told reporters Dec. 9.

Gerstenfeld became the director of this program in 2009, after eight years in charge of the unemployment benefits division, until Brown named him acting director of the entire agency May 31.

Gerstenfeld said the program will be designed while the computer system is upgraded.

“When you look at the amount of work that needs to be done, it looks a lot closer,” he said, noting that the start dates are a year or two away.