Narrative: a. 3.

STATE PLAN ALTERNATE YEAR NARRATIVE ARKANSAS — FY 2020 

During FY 2020, the Arkansas Division of Workforce Services (ADWS) will continue to pursue a strategic direction designed to take ADWS from a mainframe legacy environment to a new web-based environment using server technology and focusing on customer self-service.  The intent of this new environment is to better leverage staff resources due to continued declines in federal program and administrative funding.   

ADWS launched its Automated Adjudication System (AAS) in July 2005.  Like the UI State Information Data Exchange System (SIDES), ADWS’ AAS system is a web-based system designed to streamline and increase the efficiency of the nonmonetary determination process.  Since AAS was implemented in Arkansas, ADWS has continued to enhance the system to further streamline the adjudication process.  In March 2012, ADWS deployed its electronic response system for employers to the World Wide Web.  Through the electronic response system employers receive and respond to Notices to Last Employer, Notices to Base Period Employer, and questionnaires regarding nonmonetary issues via the Internet.  ADWS is aware that the United States Department of Labor (USDOL) encourages states to fully implement SIDES; however, ADWS’ Automated Adjudication System and electronic response system for employers, which is based upon our own server technology and state UI law, enables Arkansas to maintain the same functionality as SIDES along with ability to tailor questionnaires designed to elicit more information from employers with no additional subscription costs to the agency.  ADWS will consider incorporating SIDES into its modernized benefits system. 

To compliment ADWS’ electronic response system, during the second quarter of 2014, ADWS deployed the first phase of its fax manager system.  This system enables bar coded documents and any related attachments returned to the agency via fax to transfer seamlessly to the appropriate claim.  A subsequent analysis of field and central office operations revealed that one of the biggest areas of opportunity with regard to increasing staff efficiency related to the number of staff hours needed to prepare and process documents to the imaging repository throughout the unemployment insurance program.  During the fourth quarter of 2015, ADWS began utilizing the fax manager system as a gateway to electronically transfer appeal related documents to associated unemployment insurance claim files.    The electronic transfer of appeal related documents resulted in a measureable decrease in the number of staff hours devoted to processing appeal related document imaging repository.  In August 2017, ADWS implemented the new imaging process throughout the unemployment insurance program.  The implementation of the new imaging process has enabled ADWS to streamline some functions and improve overall efficiency of available staff resources.

 In March 2015, ADWS deployed its “Claims Processing Hotline” to selected Workforce Centers as a method of leveraging staff resources by shifting one local office’s claimstaking workload to another local office experiencing a lower claimstaking volume. The deployment of the Claims Processing Hotline did not alter existing claimstaking procedures, the only difference being that a claimant may be served at a local office via telephone rather than in-person. Due to the success of the Claims Processing Hotline pilot, during FY 2016 ADWS deployed the Claims Processing Hotline to all remaining Workforce Centers.   In June 2017, ADWS deployed a pilot project to selected local offices to evaluate the impact of transferring claimstaking and claims maintenance as well as the diversion of Workforce Center incoming telephone calls to a full hotline environment.  During the expanded pilot project, ADWS obtained sufficient data to meaningfully evaluate the impact of a full hotline environment on local office operations, internal and external customer satisfaction as well as UI timeliness and quality standards.  The expanded pilot project revealed increased efficiency of available staff resources with minimal adverse impact on claimstaking and claims maintenance functions.  By April 30, 2018, all local offices were integrated into the expanded Claims Processing Hotline environment.  ADWS will continue to examine its Claims Processing Hotline in an effort to effectively leverage available administrative grant funding.

 Current Financial Considerations Impacting Performance

 Staffing, funding limitations and requirements to operate and maintain current systems continue to impact the ADWS’ ability to implement the move from a legacy mainframe environment to an Internet and server based environment. ADWS continues to examine ways to efficiently and cost effectively automate and reduce staff.  The completion of the UI Benefits Operations Self-Assessment Tool and collaboration with NASWA’s UI Integrity Center Review Team will further ADWS’ goal of effectively automating systems while maximizing available resources.  While ADWS performs well above the median in most performance measures, there are areas of opportunity for ADWS to further improve is performance ratings, particularly with regard to the Improper Payment Rate.  As highlighted by ADWS’ UI Benefit Operations Self-Assessment, the legacy mainframe environment is an impediment to fully maximizing available fiscal resources and staffing.  Due to continued delay in the development and implementation of movement towards a new web-based environment, ADWS will begin examining consortium and third party products in order to expedite the deployment of a modernized benefits system.  A concerted effort to move from a legacy mainframe environment to an Internet and server based environment will enable ADWS to reduce or eliminate barriers impacting the efficiency and accuracy of the UI program. 

 Training and retention continues to be major points of emphasis for ADWS in order to cultivate and maintain a well-trained and experienced staff.  ADWS continues in its mission of cultivating staff with a focus on succession planning.  During the summer of 2018, ADWS began utilizing the National Integrity Academy as a tool for staff development and improvement for UI Administration management staff.  In 2019, the National Integrity Academy was made available to Field Operations staff to further promote staff development and claim integrity.  ADWS remains committed to providing quality service along with a commitment to reduce and eliminate improper payments; training emphasis will continue to focus on promoting a thorough understanding and working knowledge of the unemployment insurance program.  This commitment to staff development will be instrumental in ensuring continued improved program performance with regard to Core Measures and Integrity efforts. 

 Integrity Related Law Changes for FY 2020 

ADWS continues in its effort to improve the prevention, detection, and recovery of improper unemployment insurance benefits.  During the 2019 Arkansas legislative session, ADWS pursued legislation designed to address issues impacting its Improper Payment Rate.  Act 453’s most significant provisions increases the disqualification period for committing unemployment insurance fraud, increases the length of enforcement of the disqualification, and increases the penalty assessed to fraud overpayments from 15% to 50%.  Act 453 also prohibits claimants who have fraud overpayments issued from receiving future unemployment insurance benefits until such time as their fraud overpayment is repaid in full, including penalty and interest.  The provisions of Act 453 will be assessed to nonmonetary determinations and overpayment determinations issued on and after October 1, 2019.  Finally, Act 375 creates the “UI Integrity Fund” which will consist of the proceeds of penalty in excess of the federal minimum of 15% assessed on fraud overpayments.  Act 375 limits the use of the 35% excess penalty to activities related to the prevention, detection and recovery of improper unemployment insurance benefits.  This revenue stream will enable ADWS to implement new programs designed to reduce  our primary cause of improper payments, Benefit Year Earnings issues; education of employers and claimants regarding their roles in preventing and reducing improper payments; and  to ensure claimants are engaged in meaningful and appropriate work search activities.   

GPRA Goals and Targets – FY 2020 

First Payments – Intrastate: The goal for FY 2020 is that at least 87% of intrastate first payments for full weeks of unemployment be made within 14/21 days from the week ending date of the first compensable week.  Actual performance for ADWS for the SY 2019 was recorded at 93.18% and  ADWS recognizes that this is a critical area and will continue to monitor first payments in an effort to ensure that we maximize performance results and continue to exceed the measure during FY 2020. 

New Status Determinations:  The GPRA goal for FY 2019 was that 89% of status determinations for new employers be made within 90 days of the end of the first quarter in which liability occurred.  ADWS’ performance for SY 2019 was at 90.90%.  The GPRA goal for FY 2020 is that 89.0% of status determinations for new employers be made timely.   While performance improved  slightly from SY 2018 to SY 2019, ADWS recognizes the importance of making new status determinations timely and will continue to train staff and monitor performance of its system and processes to insure ADWS continues to exceed the measure. 

Detect Benefit Overpayments:  The GPRA goal for FY 2020 is at least 54.5% of the estimated detectable, recoverable overpayments will be established. The overpayment detection rate for Arkansas was 50.43% for SY 2019.   ADWS will continue with its efforts to improve preventing, detecting and recovering improper unemployment insurance overpayments.   

The majority of Arkansas’ overpayments are the result of Benefit Year Earnings issues.  ADWS continues in its efforts to educate claimants on the importance of reporting earnings and reporting the earnings correctly.  Wage investigations are initiated on 100% of the cases involving employees reported through the National New Hire Directory and State New Hire Directory.  Each week, all hits involving active claims are distributed to local office staff in order to contact claimants and employers to ensure the timely and accurate reporting of earnings during the continued claim process .  ADWS’ IVR Cross Match System installs control dates on claims whenever there are matches made between claimants and the State New Hire Directory.   

Local offices then contact claimants and employers if a week is claimed and there is a match with the State New Hire Directory.  This process enables the local office staff another opportunity to address potential earnings fraud and to detect potential separation issues.  In October 2017, ADWS began electronically distributing its “Fraud: It’s A Crime!” newsletter to claimants who filed a new or additional claim.  In June 2018, ADWS deployed its “Stopped Earnings Report” to the local offices.  The report is designed to identify claimants who reported earnings for two consecutive weeks and then abruptly stop.  The “Stopped Earnings Report” enables local office staff to rapidly identify potential earnings fraud and other nonmonetary issues during a claim series.  On August 1, 2019, ADWS began electronically distributing a second fraud alert newsletter, “Fraud Alert—Unemployment Law Changes for 2019,” which highlights the increased penalties for committing unemployment insurance fraud beginning October 1, 2019. 

Assessment of Program Performance in Prior Years 

For the first time, ADWS’ performance did not fall below minimum performance standards for any of the established Core Measures.  Accordingly, there are no Corrective Action Plans required in accordance with the Additional Planning Guidance for Fiscal Year (FY) 2020 Unemployment Insurance (UI) State Quality Service Plan (SQSP) as per UIPL 15-19 dated June 28, 2019.

 Core Measures 

Detection of Overpayment Measure

ALP = the percentage of detectable/recoverable overpayments established for recovery must meet or exceed 50%.  With regard to the Core Measure, ADWS will continue to strive to meet or exceed the Core Measure of 50% to 95% for the Detection of Overpayments.  ADWS’ performance for SY 2019 was 56.36%, an increase from 48.35% for SY 2018 and from 47.94% for SY 2017.   

Effective Audit Measures

ALP = total score of 7 or more and passing scores in all four factors.  Passing scores in the four factors follow:  Factor 1, Employers Audited  = 1.0%, Factor 2, Change in Total Wages from Audits = 2.0%, Factor 3, Total Wages Audited = 1.0% and Factor 4, Average Number of Misclassified Employees Detected per Audit = 1.0%.

Performance for CY 2018:  ADWS had the following factor scores:  Factor 1 = 1.2%, Factor 2 = 3.3%, Factor 3 = 1.5% and Factor 4 = 2.3%.  ADWS anticipates again meeting the Core Measure for Effective Audit Measures for CY 2019.   

Data Validation – Tax

ALP = all tax populations submitted and passing.  

Improper Payment Measure – Integrity Action Plan Included.

ALP = maintain an Improper Payment Rate of less than 10% for covered programs. 

Performance for IPERA Year 2018:  The Improper Payment Measure is defined as all UI benefits overpaid and underpaid as estimated from the BAM survey of paid UI claims for the IPERA year which begins on July 1 and ends on June 30 of the following calendar year.  For IPERA year 2018 ending on June 30, 2018, ADWS met the ALP by recording an Improper Payment Rate of 9.864%.  While ADWS met the Improper Payment Measure, strategies will continue to be developed and implemented to continue to improve program performance in this critical area.   

UI Overpayment Recovery Measure

ALP = The recovery rate is calculated by dividing the amount of improper overpayments recovered by the amount of improper overpayments identified.  The ALP for the recovery rate measure is 68% for the 2018  IPIA period. 

Performance for IPIA Year 2018:  ADWS exceeded the ALP by recording an overpayment recovery rate of 126.51%.  

Secretary Standards in Regulation 

Data for the most recent Secretary’s Year showed acceptable levels of performance by ADWS in all categories.  No narratives required. 

UI Programs 

State Directory of New Hires (SDNH)/National Directory of New Hires (NDNH)

ADWS’ Benefit Accuracy Measurement (BAM) Unit is compliant with the NDNH matching requirements as set forth in ET Handbook No. 395, 5^th Edition, Chapter VI, UIPL 03-07, and UIPL No., Change 1. 

Benefit Accuracy Measurement (BAM)

The Benefit Accuracy Measurement (BAM) Annual Determination Letter for CY 2018 reflects that ADWS’ BAM Unit is compliant with investigative as well as all method and procedure requirements set forth in ET Handbook No. 395, 5^th Edition, and through findings established through ET Handbook No. 396, 4^th Edition.   

Tax Performance System (TPS)

ADWS’ UI Tax Operations are in compliance with Federal reporting and oversight requirements.  For CY 2018, all TPS sample reviews were passing. 

Data Validation (DV)

ADW submitted all DV items for validation and certification by June 10, 2019.  All DV items passed for Validation Year 2019. 

UI Program Integrity

During SY 2019, ADWS maintained an Improper Payment Rate of less than 10%.  While ADWS has maintained an Improper Payment Rate of less than 10% for the past few years, ADWS continues to experience fluctuations of the Improper Payment Rate of lowering to below 10% and rising to greater than 10%.  ADWS’ primary root cause of Improper Payments continues to be Benefit Year Earnings issues.  During the most recent legislative session, ADWS pursued legislation that will increase the penalties for individuals who commit unemployment insurance fraud and provide a revenue stream for activities designed to prevent, detect and reduce the Improper Payment Rate.   

Issue Detection Date and Determination Date

ADWS entered the correct Issue Detection Date and Determination date in at least 95% of the nonmonetary determinations evaluated during SY 2019.  While ADWS met minimum performance standards with regard to the Issue Detection Date and Determination Date, continued staff training and ongoing refresher Benefits, Timeliness and Quality training with regard to issue detection dates for adjudication staff.  Issue detection date errors remain part of the Adjudicators’ and Adjudication Supervisors’ performance appraisals; this internal performance standard should maintain the awareness of the importance of the need to maintain the desired level of achievement of at least 95%. 

Workforce Innovation and Opportunity Act (WIOA)

WIOA is designed to provide job seekers with increased access to employment, education, training and other support services to succeed in the labor market, match employers with the skilled workers they need to compete, improve the coordination of employment and training services and resources, and strengthen collaboration with state and local partners.  During SY 2018, ADWS continued its efforts in fully implementing the WIOA program, in collaboration with the program’s core and non-core partners. The State of Arkansas elected to coordinate and integrate as many workforce development programs as possible, and therefore, elected to submit a combined state plan designed to streamline the investments in our workforce development system. The combined plan integrates and streamlines the services provided by program partners: ADWS and its Arkansas Rehabilitation Services and Adult Education Services Divisions, the Division of Services for the Blind, and the Arkansas Department of Human Services. As part of this effort, ADWS hosts biannual statewide partner meetings each spring and fall. These training and strategy sessions included workforce development partners and stakeholders, including employers, economic developers, Workforce Development Board Members and community college representatives with the goal of developing broader and deeper partnerships, integration of programs and services within their regional area to help prepare Arkansas’ workforce to meet the needs of current and potential employers.

Additionally, our workforce development partners present their programs’ information to the Arkansas Workforce Development Board at their quarterly meetings in an effort to increase the level of integration of the state’s workforce program. Moving forward, ADWS plans to continue our efforts in collaborating with private sector employers, non-profit organizations and stakeholders who can assist us in maximizing the full potential of the Arkansas’ workforce system.  

ADWS has long benefited from the integration of its workforce partner programs, including UI, within its 30 local offices. The longstanding practice of having the UI program integrated into 30 local offices throughout the state has enabled the UI program to ensure that income support is available to eligible individuals who are simultaneously utilizing the onsite services provided by partner programs. To ensure that claimants are aware of the array of services provided through the workforce center, claimants are required to obtain ES staff assisted services as part of their initial claim filing process. Specific enhancements made by UI include notification to claimants with inactive Arkansas Job Link (AJL) accounts of the requirement that their accounts be activated and current, including a resume. Beginning in July 2016, ADWS began notifying claimants at the time of filing UI claims they must upload a resume to their individual AJL account. Resumes uploaded to an individual AJL account are then searchable by employers. An up-to-date AJL account ensures that claimants have maintained their work registrations and are able to access services offered through the Arkansas Workforce Centers. 

Maintaining Solvency of the State’s Trust Fund

The continued strengthening of Arkansas’ labor market is reflected in the unemployment insurance data for SY 2019.  For the weeks ending April 7, 2018 through the week ending March 30, 2019, Initial Claims totaled 93,290 and Continued Claims totaled 590,846.  Arkansas had an average insured unemployment rate of 0.96% during that same period.  During the comparable period of SY 2018, Initial Claims totaled 102,482 and Continued Claims totaled 707,704.   The average insured unemployment rate was 1.16% during that same period.  The data for SY 2019 represents a 8.9% decrease in Initial Claims; a 16.5% decrease in Continued Claims activity; and a 0.2% decrease in the average insured unemployment rate.   

Arkansas’ Unemployment Insurance program served as an important safety net for thousands of Arkansas families during the Recession.  Unfortunately, the increase in demand for unemployment claims quickly exhausted the program’s trust fund.  Arkansas was one of 35 states that had to take advances from the federal government in order to meet the funding needs resulting from additional UI claims. The ADWS UI Trust Fund received $360 million in Title XII Advances in order to pay UI Benefits. As of the end of CY 2018, the UI Trust Fund had an average high cost multiple of 1.21 and will continue to rise in CY 2019.   ADWS projects a trust fund balance of $855,000,000 at the end of CY 2019.    

During the 2019 Arkansas legislative session, ADWS sought to ease the tax burden on employers by pursuing legislation to create a flexible taxable wage base.  SB 298, now Act 512 of 2019, is designed to slow the growth of the UI Trust fund while easing the tax burden on Arkansas’ employers by providing for the automatic adjustment of the taxable wage base based on economic factors directly affecting the UI Trust Fund.  Beginning January 1, 2020 the taxable wage base has the potential to increase or decrease between $7,000 and $10,000 every calendar year based on the average insured unemployment rate for the most recently completed state fiscal year.  Act 512 of 2019 also contains special triggers that could result in the taxable wage base being set at $11,000 or $12,000 depending on expenditures from the UI Trust Fund and the UI Trust Fund balance as of June 30, 2019.  These special triggers will supersede the regular factors used to determine the taxable wage base for the following calendar year.  

ADWS implemented the Treasury Offset Program concerning delinquent employers in October 2015.  For the period of January 1, 2019 through July 31, 2019, ADWS received $25,979.81 through offsets of delinquent employers’ tax returns.  An additional $104,955.09 was received in response to the tax intercept notices sent to employer.  Since the implementation of the Treasury Offset Program, ADWS received $214,126.73 through offsets of delinquent employers’ tax returns and $560,948.39 in response to notices sent to delinquent employers who received notices that their debts were submitted for collection through the Internal Revenue Service. 

In addition to the current legislatively authorized activity, ADWS previously implemented some varied strategies to protect or replenish the trust fund.  ADWS began participating in the Treasury Offset Program in SY 2013 to recover benefit overpayments.  Since that time, ADWS has intercepted $57,081,171.61.  For the period of January 1, 2019 through July 31, 2019, ADWS intercepted $3,337,630.76.   

In March 2012, ADWS began matching claims with the state payroll system, AASIS, in order to detect improper payments to state employees as quickly as possible.  The cross-match returns weekly earnings for the match weeks, eliminating the need to send wage audit requests to individual agencies. In 2014, ADWS deployed its front-end identity verification to reduce the risk of fraudulent unemployment insurance claims.  ADWS enhanced its front-end identify verification practices in 2016.   In order to make initial claim eligibility determinations faster and more accurate, ADWS will continue to seek to increase employer utilization of the online response systems available to employers to respond to notices to last employer, notices to base period employers, the adjudication questionnaires, and wage audit notice requests.  ADWS continues to experience positive results with the online, general fraud reporting system available to the general public on the ADWS home page.