Even before COVID-19 triggered a tsunami of layoffs, it was hard to overstate just how frustrated businesses were with the state’s unemployment insurance system.
Massachusetts has among the most generous jobless benefits in the country, and it maintains a low bar for eligibility. Businesses, which fund unemployment payouts through taxes, see the state as an extravagant spender — of their money. They resent that neither the Legislature nor the Baker administration has made overhauling the broken system a priority.
“Employers are frankly pretty fed up with special groups which simply point at the business community and the funding side to seek solvency and higher benefits,” said Jon Hurst, president of the Retailers Association of Massachusetts.
With that as context, consider what I reported on Monday: The Department of Unemployment Assistance paid at least $2.7 billion over the past two years to hundreds of thousands of people who got more money than they were due or who weren’t eligible for compensation when they lost their jobs. The overpayments I focused on were not caused by criminal fraud but human error — by DUA staff or benefit-seekers.
It’s no surprise that employers don’t want to get stuck paying for the DUA’s mistakes. But the business groups I reached out to also recognize that the state is putting a significant swath of unemployment recipients in a tough spot: forcing them to repay benefits they applied for in good faith, and probably have already spent.
“We need an approach that is both fair and preserves the integrity of the system,” Jim Rooney, chief executive officer of the Greater Boston Chamber of Commerce, said in an e-mail.
The state has the authority to claw back overpayments. And we can’t let people who lied on their claim forms off the hook. But these aren’t normal times. There needs to be some accommodation for honest folks caught in the quagmire that is the overwhelmed and overly bureaucratic DUA. A logical approach, according to Rooney and others, would be to tap a combination of leftover federal pandemic relief money and the state’s budget surplus to waive some or all of the overpayments. The Massachusetts unemployment insurance trust fund is already slated to get $500 million from those two pots of money to help build back from a negative balance caused by the crush of all COVID-related claims.
I know. It’s a lot of money for the state to forgo: About $1.1 billion of the $2.7 billion in nonfraud-related overpayments made by the DUA from the start of 2020 through the end of September 2021 was pegged to the unemployment trust fund.
The remaining $1.6 billion came out of federally funded programs created by the Cares Act of 2020.
But there are couple of reasons not to go after nonfraud overpayments.
First, between the state and federal programs, there are 383,000 claimants with open cases, Rosalin Acosta, secretary of the Executive Office of Labor and Workforce Development, said a legislative hearing last month. That’s a lot of people to track down and make pay up.
“How much will it cost, especially when there will be legal proceedings involved?” said the Boston Chamber’s Rooney, as he wondered just what kind of return on investment the clawback effort would yield, especially from smaller claims.
Second, clawbacks take money that would otherwise be largely spent in the local economy, putting it back in the trust fund or sending it to the US Treasury.
“It’s bad for people and bad for businesses,” said state Senator Patricia Jehlen, a Democrat from Somerville who is co-chair of the Joint Committee on Labor and Workforce Development.
And third, penalizing unemployment recipients for the DUA’s errors just doesn’t seem fair. It often took months for the department to notify these folks, many of whom were relying on jobless benefits to cover necessities like food, housing, and utilities.
Jehlen agrees, but she’s hesitant to endorse a waiver or other ways to ease the burden on people until she has more information.
That isn’t easy when dealing with the sclerotic DUA, which is notorious for withholding information.
“We need an accounting,” Jehlen said.
True that, senator.
But we also need to upgrade our outmoded and expensive unemployment system.
Funding and benefits need to be reassessed against the burden on employers. Workers should have to contribute to the insurance fund. The state has to modernize its technology.
All this is being looked at in one way or another, but there doesn’t seem to be any sense of urgency in the Legislature or the Baker administration.
No wonder employers are steaming.