Massachusetts must pay the feds $2.1 billion after they mistakenly used pandemic relief funds to cover unemployment benefits
Massachusetts must pay the federal government $2.1 billion over the next 10 years to address the debt after the state under former Republican Gov. Charlie Baker mistakenly used federal pandemic funds to cover unemployment benefits.
Incumbent Gov. Maura Healey, a Democrat, and her deputies on Monday announced details of a settlement they reached last week with the outgoing Biden administration that will see the state pay back most of the money it owed because of the mistake, State House News Service reported.
In 2023, Healey announced that her administration had discovered that the previous administration had improperly used about $2.5 billion in federal pandemic relief funds to cover unemployment benefits that should have been funded by the state.
The total liability exceeded $3 billion, including fees and interest, according to Healey’s office. Negotiations with the US Department of Labor reduced the total debt to $2.1 billion over the next decade.
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Maura Healey, the governor of Massachusetts, speaks at Roxbury Community College in Boston, Massachusetts, on Wednesday, Jan. 10, 2024. (Adam Glanzman/Bloomberg via Getty Images)
“We were horrified to discover early in our tenure that the previous administration had spent billions of dollars in federal relief funds and that our state was facing what could have been more than $3 billion to pay it back,” Healey said in a statement. on Monday.
“For the past year and a half, we have engaged in extensive negotiations with the US Department of Labor to minimize the impact on Massachusetts residents, businesses and our economy,” she continued. “Today we reduced our potential liability by more than $1 billion and agreed to a 10-year payment term to soften the impact.”
The the governor added that it was “incredibly frustrating that the previous administration allowed this to happen,” but that the current administration “will use this as an opportunity to partner with the business and labor community to make significant reforms to the unemployment insurance system.”
Former Massachusetts Gov. Charlie Baker speaks during the June 16 commemoration at Nubian Square in Boston, June 18, 2021. (AP Photo/Elise Amendola, File)
Payments will begin on December 1 and continue annually for the next decade.
The agreement states that principal payments must come from the Unemployment Insurance Fund (UI), which is funded by taxes on employers and is also used to cover benefits, according to the State House News Service. Interest payments will come from the state’s General Fund.
Healey’s office said businesses would not face higher rates on their unemployment insurance payments until at least the end of next year, when rates would depend on reforms to the system.
Massachusetts Gov. Maura Healey answers questions from reporters, Jan. 31, 2024, during a news conference in Boston. (Stuart Cahill/MediaNews Group/Boston Herald)
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The governor has vowed to continue making changes to ease the burden on employers, who already face higher costs to support growth claims during the pandemicaccording to the State Press Service.
Healey directed Secretary of Labor Lauren Jones and Minister of Administration and Finance Matthew Gorzkowicz to “conduct a comprehensive review of UI’s solvency and evaluate potential reforms.”
The Healey administration projected that the UI Trust Fund would be hundreds of millions of dollars in debt by the end of 2028, even before taking into account $2.1 billion in additional payments.
