Reformer hired to fix Michigan’s unemployment system quits as problems mount

Michigan’s office charged with getting unemployment benefits to jobless workers is now under temporary leadership after its director resigned, following months of pressure over a system taxed by the wave of claims during coronavirus.

Steve Gray  – the former legal aid attorney who once exposed a false fraud scandal in the state’s unemployment system that led to legislative reform and ongoing lawsuits – left his job as director of the Unemployment Insurance Agency, state officials announced on Thursday.

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No more details were provided. Gov. Gretchen Whitmer’s spokesperson, Tiffany Brown, described the resignation as a personnel matter. 

“The department thanks him for his service and we wish him well in his future endeavors,” said Jason Moon, spokesperson for the Unemployment Insurance Agency.

Gray was appointed director by Whitmer in June 2019, bringing intentions of overhauling a department notorious for issues with customer service and accessibility.

But a year later, he was facing calls to resign as the global pandemic and statewide economic shutdown prompted historic numbers of jobless claims.

Between March 15 and Oct. 31, 2.92 million people applied for unemployment in Michigan, receiving $25.58 billion in benefits. 

The steep and sudden onslaught of claims overwhelmed the agency, resulting in processing backlogs that taxed the system and frustrated residents who couldn’t get through to file claims or get questions answered.

“The agency struggled to fix issues and properly communicate with claimants under Director Gray’s watch,” state Rep. Matt Hall, R-Marshall, said Thursday. “It seemed the agency never had a grasp on the true scope of the problem(s).”

Gray was called before legislators in July and September to defend his department. He’d made hundreds of hires to process claims, but ongoing system issues kept the pressure on internally and among the jobless. 

Questions continued to arise, notably after an uptick in fraud investigations that affected Michigan and other states. Hall told Bridge Michigan in October he planned to bring Gray back before the state’s Joint Select Committee on the COVID-19 Pandemic. 

Gray, a reformer who seemed uniquely fit to make meaningful changes in the department, stayed upbeat about the job even as his department took heat all summer.

“I love my job, and there’s so much to do right now, so there’s a lot of it to love,” Gray told Bridge Michigan in July.   “It’s kind of become politicized to some extent, but myself and the agency, we’re committed to making sure that people can get paid that are eligible and to do it as quickly as we can.”

Hall has said that he and other legislators continue to hear concerns about the UIA, including an inability to reach someone at the office to resolve what, at times, can be simple fixes. Many legislators pushed to get the state’s unemployment offices reopened.

“We heard stories from people who had not been paid timely for their claims and were struggling to pay bills and put food on the table through no fault of their own,” Hall said.

“The agency will not address how widespread the fraud is or what they are doing to fix it,” Hall said. 

Yet some recent changes in the department attempted to add transparency to the office and responsiveness to clients. Among them were a new phone appointment system and a web-page device to answer frequent questions, as well as a dashboard added in late October to show the number and types of claims.

“There’s been a lot of improvement,” said Rachael Kohl, a law professor at the University of Michigan, where she succeeded Gray as director of its Workers Rights Clinic.

Kohl has several concerns about Michigan’s approach to unemployment claims, including ongoing legal battles over the false fraud scandal and its computer system, which she said is designed to deny people benefits. 

However, she said, the wave of claims – which peaked at 400,000 in one week – put the UIA “in an impossible situation, and I think they did a really good job.”

The job got more complex as federal Pandemic Unemployment Assistance came into play,  adding extra money to payments and expanding eligibility. 

“He was the best person to handle the UIA during a pandemic and allowed Michigan to be a leader in the country with how quickly we were able to process and pay out [Unemployment Insurance]  claims, let alone set up the federal programs,” Kohl said.  “Michigan is better off because he was the UIA director.”

Beyond processing claims, Gray’s department faced additional problems due to the wave of fraudulent claims. One former worker faces charges and investigations continue. 

Since the pandemic began, the state has flagged more than 500,000 claims for identity verification. Of those, 128,000 were found to be legitimate claims for unemployment and paid, Gray told the state’s COVID-19 committee in a letter in October.

“The majority have not verified identity and represent likely impostor fraud cases,” Gray wrote of the other 379,000 flagged cases.

Meanwhile, there are 185,000 people with active unemployment claims who were not receiving payments in October.  UIA was  trying to verify the filers’ identity or eligibility, Gray said. But about 111,000 are suspected fraud attempts, he added.

Liza Estlund Olson, director of the Office of the State Employer, now will be acting director of the UIA, Whitmer’s office said on Thursday. Olson previously served in the same role from 2007-2008. 

“As director of the Office of the State Employer, Liza has proven time and again that she will do everything in her power to protect Michigan workers,” Whitmer’s Chief Operating Officer Trish Foster said in a statement.

“Ensuring Michiganders across the state have the unemployment benefits they need has always taken and will continue to take hard work. We are excited for Liza to get to work.” 

Hall said there is a lot of work left to do. He asked Gray on Monday to return to the Joint Committee. Now he will ask Olson. 

Gray’s “resignation does absolutely nothing to change our goal of

delivering accountability to people who have had immense difficulty working with the agency,” Hall said.