Massachusetts must pay feds $2.1B after mistakenly using pandemic funds to cover unemployment benefits
Massachusetts has found itself in a financial predicament, owing the federal government a staggering $2.1 billion over the next decade. This debt stems from a mistake made by the previous administration under former GOP Gov. Charlie Baker, where federal pandemic funds were erroneously used to cover unemployment benefits.
The current Governor, Maura Healey, a Democrat, along with her team, recently unveiled details of a settlement reached with the outgoing Biden administration. This agreement outlines the repayment plan for the state to settle its debt, as reported by the State House News Service.
In 2023, Governor Healey’s administration discovered that around $2.5 billion in federal pandemic relief funds were improperly utilized to cover unemployment benefits that should have been funded by the state. The total liability, including fees and interest, exceeded $3 billion. However, through negotiations with the U.S. Department of Labor, the amount owed was reduced to $2.1 billion over the next ten years.
Governor Healey expressed disappointment over the previous administration’s oversight but emphasized the importance of minimizing the impact on Massachusetts residents, businesses, and the economy. The repayment plan will commence on December 1st, with annual payments scheduled for the next decade.
The agreement stipulates that principal payments will be sourced from the Unemployment Insurance (UI) Trust Fund, funded by employers’ taxes and used for benefits coverage. Interest payments, on the other hand, will be covered by the state’s General Fund. To alleviate the burden on businesses, unemployment insurance rates will not increase until at least the end of next year, with future rates dependent on system reforms.
Governor Healey is committed to collaborating with the business and labor community to implement meaningful reforms to the Unemployment Insurance system. She has tasked state Labor Secretary Lauren Jones and Administration and Finance Secretary Matthew Gorzkowicz with conducting a comprehensive review to assess potential reforms and soften the impact on employers.
Despite the financial setback, Governor Healey remains optimistic about addressing the challenges ahead and ensuring the state’s economic stability. The Healey administration foresees the UI Trust Fund facing significant debt by 2028, even before factoring in the additional $2.1 billion in payments. By proactively addressing these issues, Massachusetts aims to navigate through this financial hurdle and emerge stronger in the long run.
