$2.5B blunder fallout
Healey: 'No one broke any laws'
There is no indication the Baker administration broke the law when $2.5 billion in federal money was erroneously used to pay off pandemic-era unemployment benefits, which should have been funded through state coffers, Gov. Maura Healey said.
Questions have swirled over the past week in the Beacon Hill orbit after the state’s Executive Office of Labor and Workforce Development confirmed the withdrawal of $2.5 billion in federal relief funds for unemployment claims that should have been covered by the state.
“No one broke any laws,” Healey told reporters outside the State House yesterday. “It’s just to a matter of whether this was done the way it was supposed to be done, or whether there were other ways that this could have been done. Again, it’s more about just getting a handle on it right now. And the most important thing is we’re in discussions with the U.S. Department of Labor. And other states are working through similar issues.”
It is still unclear whether Massachusetts is on the hook to pay the federal government back, a question that looms large over legislative conversations on tax relief. The discrepancy, the Healey administration has said, stems back to 2020, when former Gov. Charlie Baker was in office.
It was only recently identified through a yearly audit and previous inspections had not picked up on the error. An outside accounting firm hired to review the state’s Unemployment Trust Fund also previously missed the mistake.
Healey said officials are still “getting to the bottom of what happened in terms of disparities” and the administration is not looking into whether the error was an unlawful or illegal act.
Healey did not specify who in her administration has been in contact with the Department of Labor.
A spokesperson for Baker said the former administration “worked hard” to quickly set up new processes to ensure people received unemployment payments during the pandemic, including distributing tens of billions of dollars in benefits over two years.
“When complications were discovered, the administration immediately engaged an experienced outside consultant to help with reconciliation of the UI Trust Fund balance. The consultants issued a public report in December of 2021 that identified $300 million Massachusetts owed to the federal government, and the state acted quickly to resolve that issue,” the spokesperson, Jim Conroy, said.
Labor and Workforce Development Secretary Lauren Jones said last week the Healey administration is “determined to provide a solution with the goal of minimizing impact to the commonwealth.”
A U.S. Department of Labor spokesperson previously said they have been in discussion with state officials “about their error and is working with the state on options to rectify the situation.”
Members of the state’s congressional delegation sent a letter Wednesday to a U.S. Department of Labor Official urging federal officials to work with Massachusetts to rectify the “accounting error.”
“States have faced significant obstacles in appropriately administering federal pandemic UI funds. This is due in part to the prioritization of speed in disbursements, but also to the federal government’s unfortunate underinvestment in federal and state UI infrastructure,” the letter said, which was signed by U.S. Sens. Elizabeth Warren and Ed Markey as well as U.S. Reps. Lori Trahan, Stephen Lynch, Seth Moulton, Katherine Clark, Ayanna Pressley, William Keating, and James McGovern.
The multi-billion episode has drawn comparisons to summer 2022, when a little-known tax cap law required the government to send billions back to residents in the form of reimbursement checks.
That led legislative leaders to scrap talks on tax relief and sideline a massive economic development bill that was in the works at the end of the legislative session.
Senate President Karen Spilka did not say earlier this week whether this year’s scenario is similar to last year’s tax-cap situation.
“We’re in the fact-finding phase right now, trying to figure out what happened,” she said, adding the Senate will continue with a tax relief package that “will be out soon, so stay tuned.”
Addressing the misuse of federal funds should not preclude the Legislature from taking up a tax relief bill, Senate Minority Leader Bruce Tarr told the Herald on Wednesday.
The Gloucester Republican said he is “not convinced” that Massachusetts will be forced to pay the federal government back.
“I’d also hope that the federal government would recognize its responsibility in this matter. They were motivating us to put out the money as quickly … as we could. The rules seemed to be changing quite a bit when we’re trying to do it. And I think there’s some shared responsibility here,” he said.
He said state officials acted “in good faith” despite the error.
“That being said, this is a sizable mistake,” he said. “And I think we need to understand how it happened, and who is responsible for it. And how we can make sure that the employers in the commonwealth are protected, the taxpayers of the commonwealth are protected, and the integrity of our state government is protected.”