Kentucky awards contract to replace unemployment insurance system that struggled during the pandemic

FRANKFORT, Ky. (AP) — Kentucky has awarded a long-awaited contract to replace its decades-old unemployment insurance system, which showed its shortcomings during the COVID-19 pandemic when a record surge of jobless claims resulted in processing backlogs, the state said Friday.

The state Education and Labor Cabinet reached an agreement with Deloitte Consulting this week to replace the antiquated technology for processing unemployment claims, Gov. Andy Beshear’s administration said.

The state’s six-year contract with Deloitte Consulting to develop the replacement system is for $55.5 million, cabinet spokeswoman Jill Midkiff said. The cost of the new system, including ongoing operations and maintenance expenses, will be supported by $85 million in funding approved by lawmakers, she said.

The project’s timeline will be determined in the next few months by the Office of Unemployment Insurance and Deloitte Consulting. But the state said it anticipates the new system to be fully implemented by 2028. State officials pointed to the complexities in developing the replacement system.

Once operational, the upgraded system will provide easier access for Kentuckians filing jobless claims as well as for staff members who use the system to assist people seeking employment, the state said.

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“This new system will help us better meet the needs of Kentuckians by improving accessibility and claims processing times, as well as safeguarding against potential unemployment insurance fraud,” Beshear said in a news release Friday.

Efforts to find a contract partner to replace the aging technology for claims processing ran into delays. In 2021, concerns about cybersecurity caused the state to extend its search. A year later, another solicitation was canceled after the selected vendor failed to sign and return the contract.

The existing system was implemented almost 40 years ago, the state said.

Like other states, Kentucky was overwhelmed by record waves of claims for jobless assistance caused by the coronavirus as businesses were locked down to contain the virus’s spread. Tens of thousands of Kentuckians found themselves in limbo for months as they waited for their jobless claims to be processed. The delays became a nagging political problem for Beshear.

The Democratic governor accepted responsibility for the state’s response but noted that budget and staffing cuts hobbled the unemployment insurance system before he took office in late 2019, just months before the global pandemic hit.

Beshear won reelection last year as he campaigned on the state’s record pace of economic development growth during his tenure as governor. Republican lawmakers say the economic growth stems from policies enacted in recent years by the GOP-dominated legislature.