Unemployment Insurance System Cuts Cost and Delays in Minnesota

Minnesota self-service Unemployment Insurance Program improves efficiency.

by / March 6, 2008

When Minnesota's economy took a nosedive in the late 1990s, thousands of newly unemployed workers struggled to get by on unemployment insurance - and the state's Department of Employment and Economic Development (DEED) was saddled with piles of paperwork.

All applicants to the system had to complete an initial screening and weekly review. They had to show they were seeking a job and were entitled to an unemployment insurance check. Each of the state's 130,000 employers was required to keep up-to-date tax information on file with the state's Unemployment Insurance (UI) Program office.

"Imagine a 10-by-10-foot cube filled with paper," said Kathy Nelson, the director of Minnesota's UI Division.

Those were dark days, filled with recession and cardboard boxes. Because an economic downturn is what unemployment insurance is there for, the office's leadership decided to do something to get rid of the boxes.

Former UI Director Jack Weidenbach envisioned and sold state officials on a nearly paperless system to relieve the burdened and small UI staff. The new system was designed to handle the glut of applications that would inevitably, as the economy soured, bog down the paper-based system. "The concept was, how do you build for the future?" Nelson said. The UI wanted a solution to respond to any fluctuations in the unemployment rate.

From those seeds of discontent, rooted in the recession nearly a decade ago, Minnesota developed a streamlined Web-based system to efficiently serve applicants and employers, and cut the state's labor and paper costs.

Self-Service Unemployment
The UI system's initial phase rolled out in 2005, and focused on letting companies self-report their tax information. In the past, state staff calculated what each company owed to the UI program based on that company's employment and financial records. Today, the company enters the relevant data itself, and the software returns an updated balance due. It even alerts companies to periodic updates.

"We needed to get out of the data entry business," Nelson said. "The work we do with the most value is determining whether employees should be paid, and whether employers should pay for that."

This let the UI office cut its staff from 60 employees to 20 because they no longer needed to calculate employers' payments, a time-consuming duplication of labor.

"We can now get done in one month what used to take three," Nelson said.

Melinda Skalicky, who works for Technology Navigators Inc., a consulting firm in Owatonna, says though online tax payment systems are now commonplace, she was won over by the online UI system's clarity amid so many dense tax regulations.

"It's very confusing," she said about tax regulations. "We thought we had submitted everything for the quarter, but it turned out we hadn't." She started looking for information on Minnesota's UI Program because the company was continuously getting fined.

When she explored the new UI program site in April 2007, Skalicky said she found answers to her questions, payment alerts sent by the system and free tutorials the state offers on how to use the program.

Now Skalicky knows where to go for company payment status updates, and it's easy to update information when the time comes. "If I submit a payment online, I can go back and double-check right away," she said. "It's one of those things like, 'Why wouldn't everybody do this?'"

Doing More With Less
In November 2007, the UI added an online application process that makes the program more efficient and user-friendly. Those without computer access can apply via a new phone system instituted with the program overhaul. The new application system is more responsive to unemployment surges and slowdowns - a crucial feature for the state.

"Minnesota probably has one of the highest

seasonality rates in the nation," Nelson said. The state's unemployment rate peaks in mid-January, during the state's harsh winters when construction and other outdoor work slows. "When we have the seasonality rates that we have, it's hard enough. In a recession, that pretty much doubles and it hits fast. There's no way we could ramp up for that kind of volume," she said. "If people use the online application, it's not as staff-intensive. That's one of our goals because our funding was flat and now it's falling."

With the online application system, an out-of-work Minnesotan can learn about UI entitlements and complete an entire application online. Applicants receive payments weekly through direct deposit; unemployed workers used to be paid every two weeks.

Kathleen Murray was an unemployment counselor in St. Paul for more than three years. When funding for her job was cut, she suddenly found herself in the same position as the people she once helped. Murray turned to UI while she explored new career options. The new online system made applying to UI simpler, she said, than it had been for those she previously counseled.

The detailed online help section has been just that for Murray - extremely helpful. Without the online system, she said, it would take longer to get a phone response.

"Everything is there. I go on once a week, and it takes less than five minutes," she said. The biggest time-saver for her has been the online weekly update, where she confirms she is still out of work and looking for a job.

The system is available to online applicants during daytime hours on weekdays, but system maintenance requires some downtime when it can't handle applications, Nelson said. "To have a system that was both batch ready and online ready, it added so much complexity and cost that we didn't think it was worth it," she said. Nelson hopes to make the online UI program available on Sundays soon.

The employers' side of the site, which is in less demand, runs 24/7. Fraud detection is built into both the employers' and applicants' sides of the system, Nelson said.

Increased Usage
Since the new system went online, the number of Minnesotans taking advantage of the UI program has increased.

"Never underestimate how difficult it is for people to change," Nelson said. "A lot of old applicants and employers said, 'What was wrong with the old system?' When you explain to them that it costs three times as much money to process that piece of paper, and that you can get your work done in one place rather than needing to handle all these pieces of paper, they're a little more appreciative."

What has made Minnesota UI's technology integration so successful, Nelson said, is that it specifically targets the unique needs of Minnesota's UI Program.

"Even though we changed all of our technology, we wanted to make sure business was driving the technology and that our business practices were going to change," she said. "We wanted to ensure we weren't just going to apply new technology to the old cow path."

With the new tech-heavy system in place, the Minnesota Unemployment Insurance Program reached its goal of doing more with less - but that wasn't the case during the system's early planning days.

In the late 1990s, Weidenbach, with DEED Legal Director Lee Nelson, began selling state legislators on a budget to make an electronic overhaul of the UI program happen.

Nelson was hired in 2001 to lead the new project, and to develop a strategic plan and solicit bids for developing the new UI system. Her early tasks included sketching out a rough timeline and articulating expectations for the new system: "For the next four to

six years, what will be the goals?" Nelson said. "How will we measure success?"

In 2003, the UI Program selected BearingPoint Inc. to handle the entire integrated system, which included Web-based interfaces for employers to report tax data and individuals to submit applications online, as well as a new phone bank for taking applications offline without creating more paperwork.

BearingPoint tapped a handful of subcontractors for specific pieces of the new system, like FileNet Corp., whose Business Process Manager program handles the electronic workflow, according to a FileNet white paper. According to a UI Program press release, the project was completed in 2007 "on time and on budget" for $42.6 million. Special taxes on Minnesota employers contributed $25 million to that cost. The rest came from supplemental federal grants and the U.S. Department of Labor's allotment for the state's UI program, according to Minnesota UI spokeswoman Kirsten Morell.

BearingPoint also worked closely with UI staff to ensure the new system would meet Minnesota's needs, and keep the UI staff's learning curve to a minimum, Nelson said. "We took 20 staff within the [UI] program who understood what we were trying to get at, and they worked side-by-side with the developer to learn the new system."

The staff participation was one key to the system's success when it was time to bring the system online, said Ed Valencia, CIO of the Minnesota Department of Employment and Economic Development. What were other important success factors? "Constantly evaluating risk, moving the project along and making adjustments to expectations," he said.
Patrick Michels Contributing Writer
Patrick Michels is based in San Francisco and Austin, Texas. He writes for Government Technology, Texas Technology and Emergency Management magazines.
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