As accounting mistakes go, this is a big one.
As reported by the Globe’s Jon Chesto and Larry Edelman, Massachusetts used about $2.5 billion in federal money to fund jobless benefits during the pandemic. Those payments should have come out of the Massachusetts unemployment insurance trust fund. For some reason — so far unexplained — that’s not what happened, and now the federal government must be reimbursed.
The mistake dates back to 2020 and the administration of former governor Charlie Baker. But now it’s up to Governor Maura Healey to make it right. Who will pay for it? In a statement to the Globe, Lauren Jones, secretary of labor and workforce development, said the Healey administration “is determined to provide a solution with the goal of minimizing impact to the Commonwealth.” Meanwhile, business groups say employers should not be responsible.
If the mistake hadn’t occurred, employers — who fund the unemployment trust fund through assessments — would have footed the bills. There’s an argument to be made that they still should. That doesn’t mean sending employers a massive one-time bill to cover the $2.5 billion right now. The state could issue bonds to raise the money instead, and then charge employers fees to cover the resulting bond repayments. In fact, that’s what the state is already doing, having raised $2.7 billion to repay federal loans the state took out to meet the pandemic-fueled surge in jobless claims; it could borrow $2.5 billion more and charge more fees to employers.
But that seems more than a little bit unfair. This was a screw up by the state and the state is ultimately responsible for it. It also has the cash on hand. According to the Massachusetts Taxpayers Foundation, a business-backed think tank, there’s about $1.6 billion remaining in federal pandemic rescue funds and budget surpluses. The state’s rainy day fund also has a balance of about $7.2 billion. You could say the pandemic was the ultimate rainy day, so using rainy day funds to pay for it retroactively makes sense.
Besides figuring out who should pay for it, the other big question is: How did this happen under Baker, whose calling card was supposed to be fiscal and managerial competence? In reporting on the screw up, the state Labor Department did not say how the fund mix-up occurred or why multiple audits failed to catch it. It was ultimately caught by an outside firm that was reviewing the state’s annual financial report. “There needs to be some answers about what happened in the prior administration and who knew what, and when,” Jon Hurst, president of the Retailers Association of Massachusetts, told the Globe. He’s right. More transparency is required. There should be answers, not for the sake of blame, but for the sake of ensuring future sound accounting practices.
It’s true there was a lot of chaos during the early days of the pandemic. Federal relief money was pouring in and the state was putting new systems in place to handle the crush of jobless claims related to COVID-19 shutdowns. Healey is already dealing with another pandemic-era mistake involving the overpayment of unemployment benefits. In 2022, after the state paid out $4.3 billion in jobless claims, some recipients were told they might not have been eligible and would have to pay the money back. Most of the overpayments were waived, but in March, the Healey administration began the process of clawing back $719 million that it believes should be paid back. If Massachusetts can demand payback from people who got money they did not deserve, it should also pay back what it misused and owes the federal government.
There’s another reason for the state to cover the cost of its mistake. The surge in unemployment at the beginning of the pandemic was not really of employers’ making. It was the result of harsh, but necessary, public health steps that shuttered businesses and threw thousands of people out of work. It was the right thing to do. But the financial costs were high, and placing the burden for repaying them on employers doesn’t reflect the spirit of shared sacrifice that the pandemic demanded of all of us.
Editorials represent the views of the Boston Globe Editorial Board. Follow us @GlobeOpinion.