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Audit finds Virginia Employment Commission inefficient, understaffed, and unprepared

Charniele Herring and other lawmakers sit behind panels watching presentation
Del. Charniele Herring (D-Alexandria) and other lawmakers watch a presentation from JLARC staff on Monday. (Photo: Ben Paviour/VPM News)

The Virginia Employment Commission is inefficient, underfunded, and unprepared for future surges in unemployment claims, according to an audit released on Monday.

The report from the General Assembly’s nonpartisan research arm, the Joint Legislative Audit and Review Commission, sheds light on the struggles the commission has faced amid an unprecedented surge in unemployment claims during the pandemic.

The review found some pieces of good news. Phone wait times averaged around 20 minutes last month, down from ten hours in June, thanks in part to a surge in over 400 employees hired for call centers as part of a contract with Deloitte. The commission has also made headway in clearing backlogs it faced on some forms of disputed claims, some of which are the subject of an ongoing class-action federal lawsuit. And a long-awaited IT overhaul underway on Monday could reduce the commission’s reliance on old school, paper-based processes in favor of much faster automated systems.

The commission is not currently accepting new unemployment claims while it transitions to the new system. The process began Monday at 5 p.m. and is expected to last several days. 

The audit from JLARC found lots of room for improvement.

Virginia ranked in the bottom third of states for the time it takes the office to complete basic tasks, like filing initial unemployment claims.

“The delayed replacement of its outdated IT system meant VEC was reliant on inefficient, paper-based processes that severely hampered timely and satisfactory responses to claimants,” the report says.

Because the IT system didn’t allow people to check on the status of their claims -- something that should change with the ongoing overhaul -- the VEC’s phone line has been flooded with calls during the pandemic, though just 12% of calls were answered last month, up from 4% over the summer. Those call centers have been severely understaffed, according to JLARC, and employees from other state agencies weren’t eager to transfer to help. 

JLARC estimated the commission made more than $1 billion in incorrect payments, most from mistakes made by staff, employers, or unemployment claimants. The commission previously disputed that figure in a September meeting, saying that it made $87 million in overpayments that had been actually confirmed. The report recommended that the commission resume its currently-paused efforts to collect confirmed overpayments from the people who received them.

Further exacerbating VEC’s problems: the commission’s funding dipped 36% from 2010 to 2019, although it got a cash infusion in 2020. The shortfall largely stems from declining federal funding tied in part to efficiency metrics. But JLARC found the commission didn’t do an adequate job auditing employers to make sure they paid into an unemployment trust fund that’s used to pay out claims, and said those taxes were unusually low compared to other states.

JLARC raised broader policy and legislative questions about whether Virginia’s unemployment payouts do enough to help people in need. The commonwealth’s maximum weekly payout of $378 ranks 37th in the U.S. and isn’t enough to cover basic expenses, JLARC wrote. 

The report recommends over three dozen solutions to address the issues, including increased legislative oversight of the commission, creating a “resiliency plan” to prepare for future surges in unemployment claims and hiring a firm to conduct an efficiency review of the commission’s processes. JLARC also appeared to subtly critique Gov. Ralph Northam’s administration and his Sec. of Labor, Megan Healy, for not taking steps they said would reduce red tape, like reducing steps to converting wage employees to full-time hires.

“Given VEC’s critical role during severe increases in unemployment—and the operational challenges that arise from them—future administrations and secretaries of labor need to provide strong oversight and assistance to VEC during severe economic downturns or other relevant emergencies,” JLARC wrote in a summary of the report.

Healy and the commission did not attend the meeting, citing pending litigation. Lawmakers who have vocally criticized the commission largely stayed quiet in the presentation. In a statement after the meeting, Healy said the VEC has successfully paid out 10 years worth of claims over the past 20 months—“a remarkable achievement for an agency that has long been under-resourced.” Joyce Fogg, a spokesperson for the commission, said VEC paid out $14.5 billion to those in need and would work with JLARC to implement its recommendations.

Del. Ken Plum (D- Fairfax), who currently chairs JLARC, requested VEC’s commissioner, Ellen Marie Hess, pass along a written update in December on the commission’s progress toward the goals outlined in the JLARC report. 

Editor's note: This story has been updated to include comment from Sec. Healy and the VEC.