Transcript: Audit Report on the Impact of State Employee Furloughs on the SSA's Disability Programs

Hello, my name is Katie Greenwood, and I’m an auditor with the OIG Office of Audit in Boston. 

In November 2009, my office completed an audit on the Impact of State Employee Furloughs on the Social Security Administration’s Disability Programs.  This was our 2nd review on this issue.  We had previously issued a report in March 2009. 

To give you some background on this audit, SSA provides Disability Insurance and Supplemental Security Income benefit payments to eligible individuals under Titles 2 and 16 of the Social Security Act.

To receive either benefit, an individual must file an application with SSA. Once an application is filed, an SSA field office determines whether the individual meets the non-disability criteria for benefits, and if so, forwards the claim to the disability determination services, or DDS, in the State or other responsible jurisdiction. DDSs are located in each of the 50 States plus the District of Columbia and Puerto Rico.

SSA reimburses the DDS for 100 percent of allowable expenditures up to its approved funding authorization. The expenditures include both costs directly related to claims processing, such as disability adjudicators’ salaries, and indirect costs.

To deal with budget deficits, some States have instituted, or are considering, furloughs for State employees—including staff at the DDSs, which are 100-percent funded by SSA.

To perform this review and examine the effect of state furloughs on SSA’s disability programs, we

  • gathered and reviewed data related to workloads in fiscal years 2009 and 2010;
  • interviewed SSA officials to obtain information on SSA’s disability programs;
  • calculated the monetary impact of States that were furloughing all DDS employees and savings in States that were not furloughing DDS employees as a result of SSA’s efforts; and
  • researched the impact of State budgetary issues on DI beneficiaries and SSI recipients. 

At the same time that SSA has experienced a surge in new disability claims, State furloughs have affected the Agency’s ability to process claims.

In FY 2009, SSA spent about $2 billion dollars funding DDS operations for more than 14,000 DDS employees who processed almost 3.9 million disability claims nationwide.  Further, the Agency plans to spend more than $2 billion dollars in Fiscal Year 2010 on DDS operations and expects the DDS to process almost 4 million claims.  However, State furloughs have had an effect on SSA’s ability to process disability claims.

Between August and November 2009, nine States implemented or were considering furloughs for all DDS employees, and three States implemented furloughs for some DDS employees.  These 12 States included California, Connecticut, Hawaii, Maine, Massachusetts, Nevada, New Jersey, Ohio, Oregon, Rhode Island, Virginia, and Wisconsin. 

In the nine States furloughing or considering furloughing all DDS employees in Fiscal Year 2010, the DDS will encounter a shortfall of capacity up to 14 percent due to furlough days. 

As a result, we expect approximately 69 thousand disability cases to be delayed in processing over the next 12 months.  This wait will result in about $126 million dollars in benefits that will not be paid to disabled beneficiaries during this period that would have been paid had the furloughs not occurred.  Additionally, these States will lose over $39 million dollars in administrative funding from SSA because these employees will be furloughed.

Furloughs will also impact the Agency’s initiatives to expedite its disabilities claims process and the number of continuing disability reviews conducted.

The Social Security Act and Federal regulations give the Agency limited control over how the States set up and administer their DDS, even though they are fully federally funded.  SSA is involved in the States’ ongoing program management only as necessary and in accordance with regulations.
However, SSA has been proactive in addressing the impact of furloughs.  Since December 2008, the Commissioner has contacted all the State governors and some State legislators about the SSA/DDS, Federal/State relationship and the impact of furloughs.

Additionally, in July 2009, the Vice President wrote the Chair of the National Governors Association urging States to exempt DDS employees from furloughs and hiring freezes.

Furthermore, in October 2009, SSA filed a Statement of Interest with a California Superior Court that furloughs of DDS employees were inconsistent with the State’s obligations and responsibilities under the Social Security Act.  Specifically, regulations obligate California to provide adequate facilities and qualified personnel to carry out the disability determination function and, “. . . to the best of its ability, facilitate the processing of disability claims by avoiding personnel freezes, restrictions against overtime work, or curtailment of facilities or activities.” 

Because of the Agency’s efforts, Colorado and Maryland have fully exempted the DDSs from furloughs and Illinois, Maine, Massachusetts, and Nevada have partially exempted the DDSs from furloughs. 

Because of the Agency’s efforts, we estimate approximately 13,000 disability cases will be processed that would have been delayed.  These individuals will receive about $24.4 million dollars in benefits that would otherwise be delayed.  Additionally, these States will receive almost $6.7 million dollars in administrative funding that SSA would not have paid if these DDS employees were furloughed

Finally, SSA has worked with the States to coordinate the transfer of some cases between States and to the Federal Disability Processing Branches and Units.  These Units recently hired 192 new staff, and the Agency planned to rely on them to help process cases.

Even though SSA has had some success in lessening the impact of State furloughs, these actions—along with a significant increase in new disability claims—have affected the Agency’s ability to keep up with the initial claims workloads.

The OIG will continue to monitor this issue and initiate further work if necessary to demonstrate the impact furloughs have on SSA’s ability to process disability claims.