Fired Unemployment Director Testifies About Chaotic Pandemic Response

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The former executive director of the Kentucky Office of Unemployment Insurance told legislators Thursday the agency’s chaotic rush to deliver benefits in the early days of the coronavirus pandemic led to months-long delays — and may have violated federal unemployment regulations. 

Muncie McNamara testified before the Interim Joint Committee on Economic Development and Workforce Investment. The Kentucky Center for Investigative Reporting first reported the details of McNamara’s time at the Office of Unemployment Insurance earlier this month; he was hired personally by Lt. Gov. Jacqueline Coleman in January and fired in May, amid the chaos of the pandemic. 

McNamara spoke for almost half an hour about the issues he saw at the agency. After his testimony, Republican lawmakers questioned him about Gov. Andy Beshear’s response, the months-long delays and data security. Only one Democratic lawmaker was called on to ask questions. 

McNamara told legislators that neither he nor Josh Benton, the Deputy Secretary for the Cabinet for Education and Workforce Development, were consulted before Beshear announced a statewide shutdown of in-person business that led to a massive spike in unemployment. 

According to McNamara, Beshear and Benton wanted to quickly extend benefits to independent contractors and other workers who previously wouldn’t have qualified. 

“[Benton] stated he wanted to do this as soon as possible, and he did not want to wait for the feds, the U.S. Department of Labor, to act,” McNamara testified. “He wanted Kentucky to take the lead in this.”

McNamara said that decision to move quickly at the beginning has contributed to the months-long delays for benefits the state is now trying to untangle. The agency’s computer systems were set up to reject these claims, and McNamara said staffing shortages left the agency unable to respond quickly to the huge number of claimants. 

“Looking back on it, we should have taken a more reasonable, measured response,” McNamara said. “This didn’t mean waiting a long, long time…We needed to take a little bit more time to come up with a plan on how are we going to pay these people that otherwise aren’t covered, and how are we going to administer that portion of the program?”

Unemployment claims skyrocketed as businesses closed in March. The unemployment office processed 49,000 claims by the 21st of that month. The office processed another 113,000 claims the following week.

McNamara said Benton and Beshear seemed to want to ask for forgiveness from the federal government, rather than wait for permission. And it seems they may need to: McNamara said the federal Department of Labor intervened at some point and told Kentucky officials to stop clearing claims en masse. 

McNamara said, in order to get money to claimants as quickly as possible, the office began clearing the “stops” on unemployment claims that delay payments, without investigating the claims individually. McNamara said it was “probably an underestimate” to say thousands of stops were cleared this way.

Federal regulations require each claim be investigated and cleared individually. “So whether practically speaking that was a good idea to try and get people paid, legally speaking you can’t do that. You have to investigate each individual claim,” McNamara said.

Rep. Daniel Elliott, a Republican from Danville, asked McNamara if that practice was against the law. McNamara didn’t answer directly.

“I will say that the federal government, the Department of Labor, the United States administrator for the federal unemployment system got wind that we were doing that and told us that we had to stop,” McNamara said.

Data Breaches Discussed

McNamara also addressed a high-profile data breach at the unemployment agency, saying that the Beshear administration’s explanation for the incident is “partially true.” State officials have said they took swift action as soon as the breach was identified on April 23. 

But McNamara said he emailed Benton and the executive director of the Office of Technology Services on April 22 about a potential data breach; he received an email that showed a claimant’s application contained someone else’s driver’s license.

It wasn’t until the next day when another, similar data breach was found that cabinet officials took action and temporarily shut down the system, McNamara said.

“That was the second one. I had forwarded them the initial one a day earlier, so they knew about it a day before they acknowledged that there was an issue,” McNamara said.

Republicans, including Attorney General Daniel Cameron and Kentucky Auditor Mike Harmon, have criticized the Beshear administration for not reporting the data breach to the correct agencies within three days, as required by Kentucky’s data protection law. The breach didn’t become public knowledge until May 28, over a month after it occured.

Another data breach was reported Wednesday, according to a statement from the Labor Cabinet. 

Sen. Karen Berg, a Democrat from Louisville, criticized McNamara for not doing enough.  

“Apparently, you are the first person in the administration to have been notified of this data breach, and you left your office without closing down the systems,” Berg said. “I don’t understand how.”

Committee co-chair Rep. Russell Webber, a Republican from Shepherdsville, rebuked Berg, saying McNamara was not on trial or there to be cross-examined. 

Berg also criticized the previous administration’s handling of the unemployment office. Berg said that a reorganization under former Gov. Matt Bevin resulted in the loss of 95 trained unemployment specialists who would have been helpful in dealing with the current crisis. 

McNamara said he knew he was walking into a challenge when he took the executive director job. 

“When I walked in, the office was in bad shape,” McNamara said.

Beshear said at a press briefing later Thursday that McNamara’s firing was valid and that the concerns McNamara raised at the time have all been addressed. Beshear said McNamara was one of a number of state officials who did not handle the data breach properly.

“What I was shown is that they forwarded an email to people that are getting thousands of emails, and then went home,” Beshear said. “If you’re the head of something, you’ve got a bigger obligation than that. And I believe when the inspector general report comes in about that data breach it’s going to show a number of people in leadership positions should have done more, and we’re going to make sure that we correct that and we’re going to make sure that we’re transparent about it.”

(Read: Cabinet Officials Defend Hiring, Firing Of Unemployment Director)

Berg was the only Democrat who questioned McNamara. After the hearing, a group of Democratic lawmakers told reporters that Republicans are on a “witch hunt” and didn’t allow them to ask questions, according to a tweet from WKYT’s Phil Pendelton.

Note: This story was updated at 6 p.m. Thursday to include comments from Gov. Andy Beshear. Contact Eleanor Klibanoff at eklibanoff@kycir.org. Contact Jared Bennett at jbennett@kycir.org.