Michigan unemployment office to spend $78M to replace ‘antiquated’ system

• The MiDAS computer system has been connected to years of scandal with the Unemployment Insurance Agency
• A new $78 million system should be up and running by 2025
• The state has paid out millions after residents were falsely accused of fraudulent claims

Michigan’s unemployment office plans to spend $78 million over the next 10 years to replace a computer system that has been plagued with problems for a decade and led to numerous scandals.

The state’s Unemployment Insurance Agency said it wants the state to finalize a bid from Deloitte Inc. to get the new system up and running by 2025.

The system is already used in 15 states, including California and Florida, and “sets the tone for a new direction for the agency,” UIA Director Julia Dale said on Tuesday during a call with reporters.

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That means the state’s existing program — Michigan Integrated Data Automated System, known as MiDAS —  will remain at least two more years, even if the state’s Department of Technology, Management and Budget approves the contract with Deloitte, Dale said.

“We have really as an agency been hamstrung by some of the limitations that we have found in the existing system,” Dale said on Tuesday, adding that it has hampered the UIA’s ability “to make changes quickly to respond quickly.”

Dale became the UIA’s third director in 11 months when Gov. Gretchen Whitmer appointed her in October 2021.

The years-long wait to launch a new system comes as the UIA tries to make the agency more user-focused after massive delays and problems processing $40 billion in jobless claims during the pandemic.  About 3.5 million of Michigan’s 4.9 million workers filed for unemployment at some point during the pandemic.

The MiDAS system, which was installed in 2012 under then-Gov. Rick Snyder, was designed to flag potential fraud — and it did its job all too well.

Hundreds of thousands of state residents approved for benefits during the pandemic were accused of receiving overpayments and threatened with having to repay the money. 

The confusion resulted in the state seeking federal waivers for demanding restitution after a report found the UIA may have paid billions of dollars in potentially fraudulent claims.

In 2015, as Bridge has reported, the program flagged 40,000 people with valid unemployment claims for improper payments, forcing many to make restitution payments.

In 2017, the state agreed to sweeping reforms of its error-filled system, and in October spent $20 million to settle a class action lawsuit over the issue.

The agency anticipated choosing a vendor to replace the system in August, but needed more time to review the four bids that accompanied Deloitte’s.

The state budget added  $85 million in "additional one-time funding" to replace MIDAS and support other information technology projects in state offices.

Deloitte’s program is known as uFACTS, the Unemployment Framework for Automated Claim & Tax Services (uFACTS) system. It will be adapted for Michigan’s UIA, but it also will allow the state flexibility, Dale said.

Identifying the new system vendor comes as the UIA is refining best practices and recognizing what it needs for service delivery, workflow management and the ability to launch new programs, Dale said. 

“The advantage of being where we are now is that we have all of these lessons to learn from,” Dale said.