Harmsworth: Auditor’s Office Continues to Have Problems with Its Investigation of Inslee’s ESD

This week’s Newsmaker Interview is with former state representative and current analyst with the Washington Policy Center Mark Harmsworth.  As the disastrous events of the past year have unfolded at Governor Jay Inslee’s Employment Security Department (ESD), Harmsworth has been talking with insiders, and he has a good idea of what caused one of the largest thefts in American history to take place there last Spring. He describes what needs to be done to correct the many problems that plague the ESD.  Harmsworth also reveals that the Washington State Auditor’s Office is still having difficulties in obtaining the information it needs to perform its investigation. (It appears Governor Inslee’s appointed ESD leader Suzi LeVine was able to use her “privilege” to escape accountability for the mess she created, by donating $400,000 to “buy” herself a job in the Biden Administration, and will dodge responsibility for the investigation’s findings.) 

 

Governor Inslee’s Employment Security Department, headed up by his appointee (and political fundraiser) Commissioner Suzi Levine has had a pretty bad year. Nigerian fraud, huge backlogs in paying claims and mismanagement of the trust fund to name just a few of the problems. What do you see as the fundamental issue with the agency that led to these problems?

Leadership. As they always say, the buck stops at the top. When an agency couldn’t even detect it was paying fraudulent un-employment benefits on its own employees, the problems are systemic and not isolated. Don’t forget, ESD also, until it relaxed its adjudication process as I think Shift reported, was also facing massive backlogs in paying claims. Arguably, the agencies primary function was to pay claims correctly and on time and it couldn’t even do that.

ESD was given $44 million taxpayer dollars by the legislature several years ago to correct and upgrade some of the issues it was facing. Apparently, that money was mis-spent and both the ESD leadership and the governor’s office are responsible for the mismanagement.

Commissioner Suzi LeVine took over the agency several years ago, yet it appears nothing was done to prepare for large unemployment events despite the Governor’s office requiring every agency to have disaster recovery plans. Is this a failure in her leadership or given the impact of the pandemic, is that an unfair characterization?

I don’t think that it’s an unfair mischaracterization at all. The issues with the Employment Security Department are due to outdated systems that were not upgraded in time for the pandemic. That’s both the personnel training and recruitment polices, and the automated systems. It’s not the ESD department workers fault that they didn’t have the tools to handle the increased workload, it’s the leadership team that didn’t have a plan and didn’t prepare.

We live in an active earthquake zone and every agency is supposed to have plans to deal with the unfortunate eventuality that a major earthquake will hit this region. ESD should have been prepared for an increase in unemployment claims caused by an earthquake. Why then could they not handle the increase in unemployment claims due to the pandemic?

Do you see the Washington Auditors recent audit admonition against ESD as significant?

Yes. For another government agency to publicly describe its problems dealing with ESD and the constraints the ESD was placing on the audit process is pretty dire. Democrat State Auditor Pat McCarthy asked for more transparency and accountability from former ESD and Commissioner Suzi LeVine said she would direct the department to be more co-operative, but apparently that didn’t happen. McCarthy described the ESDs response in an interview as unlike anything she’s encountered at any other state agency since she took office in 2017.

I understand the auditor’s office is still having challenges and will likely have to delay the results of the audits due to the lack of cooperation from ESD.

What do you think of the recent bill passed by the legislature (HB 5061) that was designed to bring relief to small businesses that were facing up to a 700% increase in unemployment taxes?

Senate Bill 5061 is a step in the right direction, but it does not go far enough with reforms and the increase in benefit payments will create a long-term funding issue. The cap on the unemployment tax rates is, however, desperately needed. For some employers the cap will make the difference between staying in business or not.

HB 5061, while it gives some immediate relief, doesn’t fix the structural problem and kicked the tax increases down the road. I would like to see the legislature address the long-term problems before the end of session.

Is ESD out of the woods yet, or are there more problems on the horizon?

Not yet. The trust fund has been depleted by $4 billion and has about $1 billion left. If it falls much further, it will trigger a federal loan requirement to replenish the fund. With HB 5061 changing the weekly unemployment check from 15% to 20% of the average weekly wage and less money coming into the account, the fund balance will continue to fall.

The recent audit is likely to surface other issues, particularly with transparency in the agency. It is not the responsibility of Government agencies to arbitrarily decide if that, or any other information, is suitable for public release. State employees work for the citizens of Washington and should not be deciding what the people can or cannot see. That decision is left to elected representative government, the State Legislature.

I haven’t seen any good suggestions or significant changes come out of ESD to reform the agency nor its polices, other than hiring more employees to help with the adjudication process. If we end up in another prolonged lock-down, we will see a sad repeat of the problems we saw last year.

What do you think needs to happen to fix the problems with the Employment Security Department?

There is no one silver bullet. I think it’s a combination of things. We can see clearly that ESD officials should update their computer systems to be more flexible by having both physical and software-based systems that use modern, cloud-based software that can scale up when needed. Pre-registration of employees during the hiring process would reduce the emergency nature of unemployment. Along with that, streamlining employer reporting to catch fraudulent claims more quickly.

We live right next to a couple of massive cloud hosting companies that ESD should contract with for cyber-security advice and to create a properly authenticated unemployment system to enable claims to be made efficiently, automatically, and securely.

Allowing workers to have individual accounts would reduce the cost and fraud of the existing, outdated system.

And of course, regular audits of the unemployment trust fund and improvements in transparency are needed to restore public trust in the system.