Request for comments on the UI Performs proposed system

U.S. Department of Labor
Employment and Training Administration
Washington, D.C. 20210
Classification: UI
Correspondence symbol: TEUPR
Issue date: February 21, 1997
Rescissions: None
Expiration date: February 28, 1998

DIRECTIVE: UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 17-97

TO: ALL STATE EMPLOYMENT SECURITY AGENCIES

FROM: GRACE A. KILBANE
Director
Unemployment Insurance Service

SUBJECT: UI Performs Advance Notice of Proposed Rulemaking (ANPRM)

1. Purpose. To transmit for comment the ANPRM which begins the process of establishing the UI Performs system in regulation.

2. References. UIPL 41-95 (August 24, 1995), "Draft Narrative Describing the System for Enhancing Unemployment Insurance (UI) Performance: The 'UI Performs' System."

3. Background. On Thursday, January 16, 1997, the Department published in Volume 62 of the Federal Register at 2544-2546, an Advance Notice of Proposed Rulemaking for the UI Performs system. This ANPRM requests comments on the Department's proposal to develop a streamlined regulation covering the "UI Performs" system for promoting continuous improvement in UI operational performance. Comments are due by March 17, 1997. To facilitate State comment, this directive transmits a copy of the ANPRM.

4. Action Required. SESA administrators are requested to comment on the attached ANPRM in accordance with the instructions it contains. Comments are due in the National Office by March 17, 1997. SESAs are encouraged to share their comments with their Regional Office.

5. Inquiries and Comments. Direct questions to your Regional Office.

Attachment. ANPRM, "Federal-State Unemployment Compensation Program; Unemployment Insurance Performance System", Federal Register, Volume 62, No. 11, January 16, 1997, pp. 2544-2546.

Attachment: Advance notice of proposed rulemaking

Official attachment: https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/1997/UIPL17-97_Attach.pdf

DEPARTMENT OF LABOR
Employment and Training
Administration
20 CFR Parts 602, 640, and 650
RIN 1205–AB10
Federal-State Unemployment
Compensation Program;
Unemployment Insurance Performance
System
AGENCY: Employment and Training
Administration, Labor.
ACTION: Advance notice of proposed
rulemaking; request for comments.
SUMMARY: The purpose of this notice is
to obtain comments prior to proposing
a streamlined regulation regarding a
new, more unified system for improving
Unemployment Insurance (UI)
operational performance. The system,
called UI Performs, responds to the call
of the Vice President’s National
Performance Review for a more unified
approach to improving UI performance.
The broad goal of UI Performs is to
improve continuously the quality of
services to the UI system’s ultimate
customers (claimants and employers). It
does this by giving both Federal and
States partners a more unified
performance management system,
enabling them to manage more
effectively and plan more innovatively.
DATES: The Department invites written
comments on this notice. Comments are
to be submitted by March 17, 1997.
ADDRESSES: Submit written comments
to Mary Ann Wyrsch, Director;
Unemployment Insurance Service,
Employment and Training
Administration (ETA); U.S. Department
of Labor; 200 Constitution Avenue,
N.W., Room S–4231; Washington, DC
20210.
FOR FURTHER INFORMATION CONTACT:
Burman Skrable, Unemployment
Insurance Service, ETA; U.S.
Department of Labor; 200 Constitution
Avenue, N.W., Room S–4522;
Washington, DC 20210. Phone (202)
219–5922 (this is not a toll-free
number); fax (202) 219–8506.
SUPPLEMENTARY INFORMATION:

1. Background
   The legislative framework for the
   Federal-State UI program reserved many
   decisions to the States, such as
   specifying most criteria for eligibility
   and establishing most parameters of the
   tax structure. However, it gave the
   Secretary of Labor responsibility for
   ensuring compliance with minimum
   Federal guidelines and for assuring
   proper and efficient administration of
   the system. The Secretary’s role in
   carrying out this responsibility has been
   interpreted to include the assurance of
   certain minimum levels of operational
   performance. Over time, the U.S.
   Department of Labor (DOL) increasingly
   exercised the Secretary’s responsibilities
   for performance oversight by measuring
   and assessing program outputs instead
   of examining processes. It also spelled
   out some Federal performance
   requirements in regulations, as
   indicated below.
   Under the impetus of DOL, systems
   for measuring and improving various
   facets of UI performance were
   developed over the years and reflected
   the conditions of the time. Some
   highlights of this development include
   the following:
   • Since the 1930s, States have been
   required to submit financial and activity
   reports to the Department;
   • In the 1960s, States assessed
   various aspects of their performance
   using a self-appraisal system developed
   by DOL;
   • In 1971, the Supreme Court issued
   its decision in California Human
   Resources Department v. Java
   concerning prompt benefit payments
   and appeals. This decision led DOL to
   issue regulations, at 20 CFR Parts 640
   and 650, specifying Secretary’s
   Standards (SSs) that benefit payments
   and appeals decisions be made as
   quickly as ‘‘administratively feasible;’’
   • Later in the 1970s, the Performance
   Standards project developed the set of
   performance measures and numerical
   criteria now called the Quality
   Appraisal (QA) system. The QA system
   contains the measures of timeliness and
   numerical criteria considered to satisfy
   the SSs for first payment timeliness and
   lower-level appeals. It also contained
   other timeliness, quality and accuracy
   measures, including the Quality
   Performance Index (QPI) for rating the
   quality of nonmonetary determinations.
   Numerical criteria called Desired Levels
   of Achievement (DLAs) were set for
   some of these measures;
   • Also in the 1970s, the QA system
   was tied to the budget process: as a
   condition for obtaining administrative
   grants, all States pledged to meet certain
   performance levels and to develop
   corrective action plans (CAPs) if they
   failed;
   • In 1981, the workload data upon
   which administrative budgets were
   formulated and allocated began to be
   validated through the Workload
   Validation program;
   • Also in 1981, benefit accuracy was
   first assessed by field-verifying sampled
   payments through the Random Audit
   (RA) program. Desiring to improve the
   accuracy of benefit payments from the
   levels RA showed, the Department
   expanded RA into Benefits Quality
   Control (BQC) and required its
   performance by regulation, at 20 CFR
   Part 602;
   • In the late 1980s, DOL initiated
   Revenue Quality Control (RQC) to revise
   the QA tax measures and the
   Performance Measurement Review to
   improve the QA benefits timeliness and
   quality measures.
   Thus, by the early 1990s, the
   performance system of the UI program
   was characterized by the following:
   there were two explicit SSs (for benefit
   payments timeliness, and for lower and
   higher authority appeals promptness) in
   regulation; numerical criteria called
   ‘‘DLAs’’ were set for other measures
   under the Secretary’s authority for
   oversight of the system; systems for
   measuring benefit payment accuracy
   and tax operation (revenue) quality were
   established by regulation, but these
   contained no criteria indicating
   satisfactory performance; and other
   elements of a performance system, such
   as reporting and preparation of an
   annual performance and budget plan,
   were established under the Secretary’s
   authority. A small fraction of reported
   data was validated.
2. Impetus for Change
   A 1993 National Performance Review
   (NPR) issue paper on BQC summarized
   a number of concerns about the way UI
   performance was measured and
   improved. It called on the Department
   to ‘‘reexamine the present mix of
   systems for improving the performance
   of the unemployment insurance
   program and devise a unified strategy
   that improves its effectiveness’’ (Paper
   DOL21, in NPR, Creating a Government
   that Works Better and Costs Less:
   Department of Labor, September 1993,
   at 88).
   Although the various UI performance
   measurement systems and programs
   functioned well in many regards,
   experience showed the need for
   improving them. The numeric criteria in
   regulations had two major deficiencies.
   First, they were indicative of what the
   Department considered to be
   administratively feasible at the time the
   regulations were issued. However, over
   the years some States have improved
   their performance to the extent that the
   criteria now appear to be set too low. As
   an example, during 1980, 34 States met
   the criterion of making 87 percent of
   intrastate first payments within the 14/
   21-day timeliness standard, but only 4
   States made as many as 93 percent of
   payments timely. By 1995, 50 States met

the 87 percent criterion, and 27 States
paid at least 93 percent timely.
Second, these fixed criteria could be
interpreted to mean that performance
above the criteria was neither needed
nor expected, which does not encourage
continuous improvement. Meanwhile,
some States continued to perform at
substandard levels. For example, in
appraisal year 1995, 11 States failed to
meet the criterion of disposing of 60
percent of lower authority appeals
within 30 days (down from 22 in 1980).
However, 15 States were able to dispose
of more than 80 percent within 30 days.
Other performance measures also had
problems. A 1989 General Accounting
Office (GAO) report notes that some of
the QA performance indicators ‘‘may be
inappropriate and provide misleading
indications of service quality, wherein
an improvement in the measure could
actually be indicating a decline in
service quality.’’ They cited as an
example the field audit penetration rate.
The report also concluded that the QA
benefits measures ‘‘overemphasize
timeliness as opposed to other, more
qualitative aspects of program
performance.’’ (GAO Report GAO/HRD–
89–72BR at 44.) At the same time, some
areas are not measured at all. For
example, the accuracy of paid claims is
measured, but not of decisions to deny,
(the samples of nonmonetary
determinations rated for quality using
the QPI include denials, but the scores
are not reported separately). There was
no single system linking performance
measurements to corrective actions.

3. Development of a New Approach: the
   UI Performs System
   Responding to the NPR call to
   reexamine current performance
   improvement systems and develop a
   unified strategy to improve its
   effectiveness, in 1993, the DOL
   assembled the Performance
   Enhancement Workgroup (PEWG). This
   was a team of Federal UI Service
   managers and a corresponding team of
   senior State employment security
   personnel (designated by the Interstate
   Conference of Employment Security
   Agencies) asked to address jointly
   various concerns regarding the
   improvement of UI operational
   performance. The group met fifteen
   times in two years to develop the
   outlines of what it would call the UI
   Performs system. It set itself the broad
   goal of developing an approach by
   which the UI system could continuously
   improve services to the system’s
   ultimate customers (claimants and
   employers) by encouraging both Federal
   and State partners to unify their
   approach to planning and operational
   improvement. The PEWG proposed
   embodying key elements of the UI
   Performs system in a short, streamlined
   regulation, reserving detail (e.g.,
   definitions of measures and numerical
   benchmarks) to implementing issuances
   such as handbooks so that they could be
   changed more easily as needed. The
   system would rest on the following six
   main building blocks.
   Block One: Partnership Principles
   The basic principles are maintaining
   mutual trust and respect, working as
   partners with complementary roles,
   setting high standards, and teamwork.
   The partners are expected to work
   closely together in developing measures,
   setting criteria, and planning for
   improved performance.
   Block Two: Complementary Roles
   Federal law gives the Federal partner
   primary responsibility for leadership of
   the UI system as a whole, for providing
   adequate administrative resources, and
   for oversight of State operations to
   ensure that the requirements of Federal
   law are met. States are responsible for
   creating their own UI laws in
   conformity with the requirements of
   Federal law and conducting basic UI
   operations in accordance with their
   laws. This block recognizes the
   existence and wisdom of the
   complementary functions in the
   Federal-State UI partnership.
   Block Three: Key Performance
   Objectives and Measures
   The workgroup conducted an
   extensive review of UI activities and
   identified a set of customer service
   objectives for which the DOL and the
   States should both be held accountable.
   They then decided how performance
   relative to those objectives would be
   measured. Most of the performance
   measures, which included those used
   for Secretary’s standards, are already
   being implemented by States. The group
   then designated certain of these
   measures for the eventual setting of
   national performance criteria. National
   criteria are intended to reflect the same
   level of performance in all States, so the
   measures must have the same meaning
   in all States. They also had to represent
   basic performance objectives, and so all
   relate to Federal conformity and
   compliance requirements. The
   workgroup’s list of key performance
   objectives, how they are to be measured,
   and which measures should have
   national performance criteria set for
   them is contained in UIPL 41–95
   (August 24, 1995), a copy of which can
   be obtained from the contact person
   listed in the summary. The PEWG also
   recommended that objectives, measures
   and criteria be reviewed periodically
   and adjusted if necessary.
   Block Four: A continuous Improvement
   (CI) Cycle
   States will use the results of past
   performance to help set future
   directions and take actions through the
   planning process to improve
   performance continuously. Federal
   responsibilities include setting national
   priorities; working with each State in
   creating its plan and setting its planning
   targets; approving the plan; assisting
   with analysis of results; providing
   technical assistance to States needing or
   requesting it, based on their past or
   planned performance; and taking action
   to ensure States meet national
   performance criteria.
   To ensure CI, a new annual planning
   process would replace the Performance
   Budget Plan process. Called the State
   Quality Service Plan (or SQSP) it would
   be the primary vehicle through which
   the State, working closely with Federal
   staff, assesses its situation and sets
   priorities for improvement while
   maintaining performance in other areas.
   Federal UI performance objectives for
   the planning cycle would set the stage
   for this State-specific assessment and
   priority-setting process.
   The proposed cycle envisions a more
   active Federal role in shepherding and
   motivating performance improvement.
   This includes technical assistance,
   either provided directly or brokered
   from one State to another. The DOL will
   establish mechanisms for identifying
   and acknowledging superior
   performance. It will also work actively
   to identify deficient performers.
   Initially, it will try to get poor
   performers to improve their customer
   service through the SQSP process. If this
   routine mechanism proves insufficient,
   DOL would take steps which may lead
   all the way to conformity/compliance
   actions or other actions under Federal
   law.
   Block Five: A Simplified Regulation
   The system envisions a relatively
   short, general regulation (outlined
   below). Details on key measures and
   national Federal performance criteria
   based on certain of the measures would
   be contained in implementing issuances
   such as handbooks so they can be
   updated as necessary. State staff would
   be involved in crafting all changes and
   all States would be given opportunity to
   comment. Implementing the measures
   and performing up to criteria levels
   would be explicit parts of the States’
   administrative grant agreements.

Block Six: Front-end Activities and
Strategies
To succeed, the UI Performs program
requires the development of skills and
other capacities at both Federal and
State levels. Key capabilities include
data and systems analyses and the
computer capacity and program
knowledge to support them. The DOL
will both work to enhance its own
capabilities in these areas and identify
particular skills in various States which
can be drawn upon when needed.
The outlines of this new approach
have been presented to the UI system
and its stakeholders for comment in
Unemployment Insurance Program
Letter (UIPL) 41–95 (August 24, 1995),
and its underlying basic principles in
UIPL 46–94 (September 30, 1994).
Copies are available from the contact
person listed in the summary above.
The DOL is now in the process of
‘‘rolling it out’’ by developing and
implementing the various components.
The main tasks are: Completing the
development of new measurement
initiatives, including an approach to
validating required reports data;
modifying the BQC program and
reducing its resource requirements;
developing, in consultation with States,
measurements to fill performance
measurement gaps, including denied
claims accuracy; developing in
consultation with States benchmarks or
performance floors for certain key
measures; developing the new annual
planning process including mechanisms
for the negotiation and approval of
State-specific objectives; developing a
process for the identification,
development and brokering of
performance improvement skills;
development a system of rewards for
recognizing exceptional performance;
and developing a regulatory base for the
UI Performs system. Full development
of the system is expected to stretch into
1999.

4. The UI Performs Regulation
   An integral part of the overall design
   of the UI Performs system is a new
   regulation. The Department envisions a
   streamlined regulation that would
   propose the following:
   a. Replace/incorporate key features of
   20 CFR 602, 640, and 650, in a more
   cohesive and, if possible, shorter form;
   b. Set forth the goals (e.g., continuous
   improvement, service to ultimate
   customers) and requirements (e.g.,
   greatest performance that is
   administratively feasible, performance
   of certain activities necessary for proper
   and efficient administration) of the
   unified strategy embodied in the UI
   Performs system;
   c. Set forth what the UI Performs
   system requires States to do, including:
   • Prepare an Annual Performance
   Plan (the SQSP) as the basis for
   receiving administrative grants;
   • Conduct certain performance
   measurement activities, identified or
   developed through a consultative
   process, and report data to DOL;
   • Validate certain key measures;
   • Operate the UI program (pay
   benefits, collect taxes) with the highest
   quality (accuracy, timeliness,
   completeness, adherence to procedure)
   that is administratively feasible; and
   • Take effective action to ensure
   performance standards are met;
   d. Establish Federal performance
   criteria, developed through a
   consultative process, for certain
   measures;
   e. Provide that, in determining
   whether to recommend to the Secretary
   the commencement of proceedings to
   determine whether tax credits and/or
   administrative grants (as appropriate)
   should be withheld on account of
   sustained deficient performance, the
   Department will evaluate all the facts
   relating to a State’s performance in the
   deficient area; and
   f. Require Periodic Review of
   Measures and Criteria to ascertain
   whether the measures are useful and the
   criteria are appropriate and adjust either
   as needed.
   Comments Solicited
   Reviewers are encouraged to comment
   on all items in the proposed regulatory
   design and to pay particular attention to
   the specific questions below.
5. This regulation would propose, as
   Federal requirements, the basic core of
   performance system. The core
   components would be: (a) Certain
   performance measurements or
   measurement systems; (b) validation of
   certain reported data elements; (c) a
   performance plan on an annual cycle;
   and (d) the premise that performance
   must be of the greatest quality
   administratively feasible, implemented
   in practice by a mutually agreed-upon
   system of nationwide performance
   criteria for States to meet. Does this
   characterization include all appropriate
   core requirements for the UI Performs
   system?
6. UIPL 41–95 solicited comments
   from States and stakeholder groups on
   proposed UI Performs measures and
   measures for which national
   performance criteria would be set. State
   staff will participate in setting actual
   performance criteria and the system will
   be asked to comment on them. The
   Department offers this Notice as an
   additional opportunity to comment on
   what aspects of the UI program should
   be measured, how these aspects should
   be measured and what constitutes
   acceptable performance.
7. Once measures and performance
   criteria have been agreed upon, the
   means ensuring adequate performance
   must be addressed. At present, the
   Secretary may withhold administrative
   grants or the Federal Unemployment
   Tax Act offset credit after notice and an
   opportunity for a hearing have been
   provided to the States.
   (a) What actions, short of the total
   termination of tax credits or grants, are
   appropriate to bring about compliance
   with performance requirements?
   (b) Should there be available to the
   Secretary less drastic remedies such as
   a more graduated series of sanctions for
   sustained poor performance, and if so,
   what specific sanctions?
   (c) How should ‘‘sustained poor
   performance’’ be defined?
8. Should the Secretary provide
   rewards for good performance? If so,
   what specific rewards and under what
   conditions?
9. Should the regulation provide for
   the waiver of measurement
   requirements that are not necessary for
   the proper and efficient administration
   of a State’s UI program? If so, under
   what conditions should such waivers be
   granted?
   List of Subjects
   20 CFR Part 602
   Grant programs, Labor.
   20 CFR Parts 640 and 650
   Unemployment compensation.
   Dated: January 10, 1997.
   Timothy M. Barnicle,
   Assistant Secretary of Labor.
   [FR Doc. 97–1102 Filed 1–15–97; 8:45 am]
   BILLING CODE 4510–30–M