Kansas labor agency opens search of contractor to handle IT overhaul

Computer upgrade to help state avoid repeat of unemployment debacle

Amber Shultz, secretary of Kansas Department of Labor, said the agency issued a formal request for proposals from companies capable of working on a sweeping IT modernization program at the agency responsible for unemployment benefits. (Tim Carpenter/Kansas Reflector)
Amber Shultz, secretary of the Kansas Department of Labor, said the agency issued a formal request for proposals from companies capable of working on a sweeping IT modernization program at the agency responsible for unemployment benefits. (Tim Carpenter/Kansas Reflector)

TOPEKA — The Kansas Department of Labor is seeking bidders for a potential $46 million information technology overhaul of the agency’s unemployment computer system that was exposed as sluggishly anti-consumer and shockingly fraud-friendly during the COVID-19 pandemic.

The administration of Gov. Laura Kelly has come under withering criticism during the past year from Kansas businesses and individuals as well as state legislators for IT shortcomings that inhibited prompt processing of jobless claims and contributed to identity-theft fraud in amounts potentially ranging between $300 million to $600 million.

The agency was stuck a year ago with an archaic mainframe that had its origins in the 1970s and wasn’t upgraded a decade ago as intended. Prior to the pandemic, Kelly began the process of planning and financing a modernization program.

As the months ticked by during the pandemic, however, the labor department was only able to make adjustments to “stabilize” infrastructure. It was not equipped to handle the volume of pandemic claims nor the complexity of emergency federal relief programs.

Last week, the Department of Labor issued the formal request for proposals from businesses capable of handling an overhaul that could take three to five years.

“The RFP process is the next major step in our effort to modernize,” said Amber Shultz, the labor secretary. “We plan to expedite this process as much as possible, while taking care to engage the business community, workers and legislators.”

Since March 2020, the Department of Labor has paid out 4.2 million weekly claims totaling $2.8 billion between the state’s regular unemployment and the federal pandemic programs.

The Kansas Legislature is working on a bill that would require legislators to oversee the Kelly administration’s work to improve the department’s IT network.

“While we navigate the procurement process, we also need the Legislature to fund this critical upgrade,” the Democratic governor said. “It will not be cheap. Fixing a system that has been neglected for 40-plus years never is, but failing to act is not an option. I will continue working with the Legislature to get this critical project done. We owe it to the people of Kansas.”

She said the administration of Gov. Sam Brownback opted in 2011 to halt an IT modernization project at the labor department. The system was kept afloat during periods of modest unemployment in Kansas, but the COVID-19 crush of telephone calls, benefit applications, federal changes in financial support and the backlog of unpaid jobless claims tripped the network.

“Today, we are taking a major step in fixing our broken system. We will finish what other administrations failed to do,” Kelly said.

The House and Senate have been working on legislation aimed at improving the state’s response to unemployment claims, fraud and obligations to businesses paying into the state’s unemployment trust fund. Under House Bill 2196, the Legislature Coordinating Council would set a deadline for finishing the labor department’s IT upgrade.

A separate council would be established to focus on computer modernization with an eye toward improving responsiveness and security.

The bill also would transfer of $500 million in federal COVID-19 aid to the state unemployment insurance fund. Also, people victimized by ID theft wouldn’t be liable for fraudulent claims in their name. Kansas’ five-year ban on eligibility for unemployment benefits in cases of fraud would be cut to one year for first-time offenders, but remain at five years for subsequent offenses. The House version of the bill would reduce the ban to two years.