Unemployment Down, But Jobless Fund Picture Still Fuzzy

No Answers Yet On Overpayments, Borrowing Amount

FEB. 3, 2022…..Lawmakers got a better picture Thursday of the status of the state’s Unemployment Insurance Trust Fund but said there remains a decent amount more information they want as they consider how to deal with overpayments and how to ensure that the fund stays solvent moving forward.

The Joint Committee on Labor and Workforce Development held an informational hearing on the assessment of the Unemployment Insurance Trust Fund conducted for the state by KPMG and released by the Baker administration on Dec. 31. Tom Stanton, a managing director at KPMG, walked the committee through the accounting that revealed a structural deficit of $115 million in the fund as of the end of November and explained that his company’s review was limited to a reconciliation of inflows and outflows from March 2020 through November 2021.

“This was a period of time where there was a lot of change. There was a lot of growth in claimants, massive growth in money flowing through the system and additional federal funds being implemented. For example, in February 2020, there were approximately 20,000 claimants, and in March 2020, that number grew significantly to 160,000 claimants,” Stanton said. “Essentially we had a $2 billion program that grew into a $33 billion program in a very short period of time.”

The KPMG report is expected to inform Beacon Hill decisions about how much money state government should borrow to keep the unemployment insurance system solvent and benefits flowing. Gov. Charlie Baker in April signed a bill authorizing up to $7 billion in borrowing and Labor and Workforce Development Secretary Rosalin Acosta said in December that at least some of that $7 billion will need to be borrowed, with officials working to determine the extent of that bonding.

Sen. Patricia Jehlen, who co-chairs the committee with Rep. Josh Cutler, said Thursday that understanding the KPMG report is just part of “the work that we need to do very quickly in order to figure out what we need for bonding and for future solvency.”

“We don’t know how much is going to be collected [from overpayments] … We don’t know how much we anticipate in revenue in 2022 from UI taxes, and we don’t know any benefit projection for this coming year,” Jehlen said. “Those are outstanding questions that we need quickly to come to some resolution on.”

In addition to the committee’s review of the KPMG report, there is also an Unemployment Insurance Trust Fund Study Commission that is looking into similar matters and, Jehlen said Thursday, the Senate Post Audit Committee plans to hold its own hearing at an unspecified date to follow up on Thursday’s briefing.

KPMG was not asked to do a cost-benefit analysis of bonding to shore up the UI Trust Fund, but Stanton said that is the type of thing the firm could do. He said the firm has a “time and material” contract with the state and is still working on additional phases of its UI review. Cutler said Thursday that he is interested in “the merits of bonding and how much the commonwealth should bond and what the delta is between the projected bonding costs versus paying interest on the federal advances.”

“Obviously, our employers are footing the bill for this and we’re mindful of that,” Cutler said. “There’s a cost to bonding, certainly, that would be borne by them. So, if there’s a way to do this in a more efficient, cost-effective way, we certainly want to make sure we’re exploring that.”

Also “looming over this, which is pretty big,” Cutler said Thursday, are the frustrations of residents around Massachusetts who say they have been contacted to repay overpaid unemployment benefits doled out during the height of the pandemic. The Boston Globe reported last month that as much as $2.7 billion in overpayments went to over 700,000 claimants. Cutler said Thursday that there was about $367 million worth of state-level unemployment overpayments.

“Now, obviously, there’s some policy decisions there about whether those should be waived entirely or not,” Cutler said Thursday as part of a question to Stanton. “I understand that’s more of a decision for, I guess, us and the Baker administration.”

Asked about a forgiveness program for overpayments, Baker said on GBH Radio last week that he “would like us to work the process,” which in some cases involves collecting and submitting information from claimants that was not initially required by the federal government but that became necessary after the pandemic unemployment assistance program was rolled out.

“I get the fact this creates, for Brian and for all these other folks, a period of tremendous uncertainty,” Baker said on Boston Public Radio, referring to a caller. “If we don’t do it this way, that all we’re going to do at the end of the day is Massachusetts is going to write a very big check to the federal government. And I would much rather clean this up administratively; find out every opportunity and possibility we have to actually deal with the data issues that are at stake and not end up taking money that we could be spending on mental health services, on housing, on all sorts of other things and just sending it to the feds.”

Baker had already said that there will be “no clawback” of overpaid unemployment benefits and that $1.8 billion in overpayments had been waived for repayment by his administration. He also said on Boston Public Radio that his administration has been working with the state’s Congressional delegation and other members of Congress to change federal requirements around the program.

“We’re not going to chase people on this stuff until we get to the absolute bottom of the pile. And if at that point in time, we have issues associated with whether they can submit the data or we haven’t had any luck in changing the rules here at the federal level, then we’ll talk to the Legislature about coming up with some other kind of solution.”

Despite co-hosts Jim Braude and Margery Eagan pressing him on the idea of blanket forgiveness, Baker remained non-committal.

“I agree with both of you that this is not the way this is supposed to work. People participated in this program based on a set of rules that changed,” he said.