[Federal Register Volume 62, Number 11 (Thursday, January 16, 1997)]
[Proposed Rules]
[Pages 2544-2546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-1102]
[[Page 2543]]
_______________________________________________________________________
Part IV
Department of Labor
_______________________________________________________________________
Employment and Training Administration
_______________________________________________________________________
20 CFR Parts 640 and 650
Federal-State Unemployment Compensation Program; Unemployment Insurance
Performance System; Proposed Rule
Federal Register / Vol. 62, No. 11 / Thursday, January 16, 1997 /
Proposed Rules
[[Page 2544]]
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.
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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
[[Page 2545]]
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.
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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.
1. 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?
2. 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.
3. 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?
4. Should the Secretary provide rewards for good performance? If
so, what specific rewards and under what conditions?
5. 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]
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