Kentucky unemployment office cites staffing cuts and system rebuild for adjudication backlog; seeks 25 positions

FRANKFORT, Ky. (Feb. 11, 2025)

Jamie Link, secretary of the Kentucky Education and Labor Cabinet, told the same House Budget Review Subcommittee that the Office of Unemployment Insurance (OUI) is working through a backlog caused by staffing reductions and concurrent work to build a new unemployment insurance system. "The only source of funding for the Office of Unemployment Insurance is federal funding from the US Department of Labor," Link said, explaining that federal funding reductions in late 2023 required the cabinet to eliminate 49 positions in November 2023.

The presentation, led by Greg Higgins (executive director, OUI) and Andy Hudgins (deputy executive director), gave a snapshot of the adjudication workload and a staff-funded proposal to address it. As of Feb. 3, OUI reported about 8,900 individual claimants with nearly 17,300 unresolved issues (individual claim files can contain multiple issues). OUI said adjudication currently resolves roughly 1,000 issues per week; by comparison, OUI reported it resolved about 3,115 weekly decisions in November 2023 when it had 58 full-time adjudicators. The U.S. Department of Labor guideline is that a claim should be processed within 14 to 21 days; OUI said its adjudication timeline has stretched to roughly 14 weeks.

OUI proposed adding 25 adjudication staff at a recurring cost of about $2.6 million per year, which it said would generate roughly 750 additional decisions per week and restore processing times toward federal guidelines. The cabinet offered two funding options discussed with the governor and state budget director: (1) use remaining Service Capacity Upgrade Fund (SCUF) authority tied to employer assessments to pay for the positions, or (2) shift appropriations from other state agencies where funds were not needed; the cabinet said either approach would be structured to have net-zero impact on the state general fund.

Link said the department has also proposed a statutory requirement used in about 20 other states that would require employers to notify separated employees of the employer-stated reason for separation upon exit, which OUI said would help resolve claims faster by providing claimants the documentary information needed at filing.

OUI officials described the state's multi-year effort to replace its unemployment IT system. Andy Hudgins, deputy executive director, said the project is being built in phases with Deloitte under contract. The tax phase was completed; OUI said the benefits and appeals phase is in design with development and implementation planned in later years. Hudgins said parallel operations will be required while the new system is built and that experienced adjudication staff have spent substantial time on system design, which has reduced time available for casework. He said the tax phase was implemented July 1, 2024, and the broader benefits/appeals work is expected to take until 2028 for full implementation.

Committee members pressed OUI staff about efficiency and hiring timelines. Representative Klein calculated the November 2023 average (about 53.7 weekly decisions per adjudicator) and contrasted that with current per-adjudicator rates (about 27'32 decisions per week); OUI said some of the productivity gap reflects the complexity of regular UI issues compared with pandemic-era PUA issues, seasonality, and the portion of experienced staff assigned to vendor design work.

OUI said some remedial steps already taken include bringing back retired adjudicators on a part-time basis and pursuing available vacant federal-funded positions. The cabinet said it had requested additional OUI positions in recent biennial budgets but those requests were not approved. No formal appropriation or personnel action was taken at the subcommittee meeting; OUI asked the subcommittee to consider the staffing proposal and funding options during budget deliberations.

What's next: OUI said it expects continued parallel operation while the new system is built and asked the Legislature to consider funding the adjudication hires either via SCUF adjustments or interagency appropriation shifts during the budget process.