CT businesses will be spared from unemployment tax hikes for now.

This story was updated on Sept. 23, 2021. 

Several Democratic lawmakers are calling on the state to stop pursuing thousands of people who collected unemployment benefits over the past year and are now being ordered to return all, or part, of that aid.

Sen. Julie Kushner and Rep. Robyn Porter, the co-chairs of the legislature’s Labor and Public Employees Committee, held a press conference Thursday in an effort to push the state Department of Labor to provide forgiveness for people who received jobless benefits during the pandemic but were later found ineligible for that assistance. They were joined by other Democratic lawmakers, including Sen. Jorge Cabrera and Rep. Anne Hughes.

The public pressure from the lawmakers comes several days after the CT Mirror published a story about the growing number of people who are being confronted with an alleged overpayment of unemployment benefits and the burden those debts can place on low-income individuals who have been out of work for months.

Between April and June of this year, the state identified more than $8.6 million in overpayments — a huge uptick from previous years. And the lawmakers said they’ve asked the Department of Labor to provide a fuller accounting of how many overpayments could be added to that list in the coming months.

Some overpayments can be attributed to fraud. But many stem from unintentional mistakes on the part of the applicant or the state unemployment agency itself.

In other cases, people are notified about an overpayment as a result of their former employer appealing and overturning the initial decision to grant them benefits.

Porter and Kushner said they are concerned about the growing number of people facing potential repayments and the size of some of the debts, which have ballooned into the tens of thousands of dollars in some cases. But they also emphasized that the state will not provide any forgiveness for people accused of fraud.

“This is an awful issue,” Porter said on the steps of the steps to the capitol.

State officials have the ability to waive the repayment of the money under certain circumstances, as long as the unemployment applicant isn’t directly accused of fraud. But both Kushner and Porter want to see that process improved and sped up.

“The burden of correcting these overpayments shouldn’t be on the recipients who filed their applications in good faith,” Kushner said, in a prepared statement. “It’s incumbent on us in state government to resolve this and resolve it quickly to put people’s minds at ease. We’re still in the midst of a pandemic and we need to step up.”

“It is unfathomable to me that there would even be a demand for claimants to repay overpayments, especially as a result of a pandemic that continues to persist,” Porter added. “I am very frustrated but also hopeful that we will get this issue resolved expeditiously for those who legitimately made claims to the best of their ability.”

Juliet Manalan, a spokeswoman for the Department of Labor, did not specifically respond to the remarks made by lawmakers on Thursday. But she said the agency had released all of the information it had about overpayments to the media and was working to provide additional details to the legislature.

Spotting and correcting overpayments is a normal part of the state unemployment system. It’s required by federal law. But the problem is far more complicated and consequential right now because of the pandemic and the economic downturn it brought on last year.

The coronavirus pandemic created a litany of problems that led to the spike in overpayments this year: The unemployment system was overwhelmed, many applicants had never filed for jobless benefits before, and the labor department was asked to roll out several brand new federal unemployment programs at the same time.

Eric Brown, a labor attorney based in Watertown, said he’s represented people in the unemployment system for 28 years but he’s rarely dealt with overpayment issues until this year.

Several of the people Brown counseled and represented in recent months, he said, were facing overpayments between $20,000 and $30,000. Those individuals were approved for unemployment benefits by the state in 2020, he said, but they had their benefits overturned roughly a year later after their employers appealed the initial decision to grant them aid.

In normal times, the state would have reviewed those cases within a month or two and decided whether the applicants were actually eligible for state unemployment assistance.

But with the record-breaking number of unemployment claims filed during the pandemic, those contested cases dragged on for months as the applicants continued to collect jobless benefits. Time ticked on, and the debts ballooned.

At the end of August, data provided to the federal government showed there were nearly 12,000 unemployment cases stuck in the first phase of an appeal. And more than 4,000 of those appeals had been waiting for a decision for more than half a year.

Kristina Nigro, of East Haven, received unemployment benefits last year during the first wave of the coronavirus pandemic. More than a year later, she received a mail from the Connecticut Department of Labor alleging that she was not eligible for that money and as a result she was ordered to repay more than $30,000. Yehyun Kim / ctmirror.org

“This is a problem that could follow these people for the rest of their working lives,” Brown said. “There’s got to be a way to assist them.”

If people don’t voluntarily repay the money, the Department of Labor can move to garnish people’s wages or seize their state and federal tax returns.

House Republican Leader Vincent Candelora agrees that the overpayments are a problem. He told the CT Mirror on Wednesday that he shares his Democratic colleagues’ concerns about “trying to claw back funds from households that desperately needed the money.”

But Candelora is also worried about the long term health of state’s unemployment trust fund, and the Connecticut businesses that pay taxes into that system.

That fund took a huge hit over the past year as the state paid out billions of dollars to more than half a million unemployment applicants. In fact, the situation was so dire in the past year that the state was forced to take out a $725 million loan from the federal government just to keep cash flowing to unemployed workers.

The point is that there is already a lot of financial pressure on the trust fund, and if the state chooses to waive a large number of overpayments, that pressure will continue to grow — potentially by millions of dollars.

Candelora does not oppose forgiving many of the overpayments, but he wants to find a way to do that without hiking future taxes on Connecticut businesses, which are also still recovering from the pandemic.

One solution, he believes, would be to dedicate more federal relief money to the state’s unemployment trust fund. Connecticut leaders already decided earlier this year to use $155 million in federal aid to shore up the trust fund. But Candelora wants the Democratic-controlled legislature to dedicate even more money to that cause.

The state, Candelora said, still has roughly $280 million available from the American Rescue Plan, approved by Congress earlier this year. He thinks that money would be best spent rehabilitating the unemployment system, which many economists credited with propping up the state and national economies over the past year.

“We can’t put this on the backs of businesses,” he said.

Kushner did not want to commit to dedicating more of the federal relief money to the unemployment trust during the press conference. Democratic lawmakers, she said, were considering using that money compensate public employees and other front-line workers who continued to do their jobs over the course of the pandemic.

Still, she suggested the legislature could find money for the unemployment trust fund from other sources outside of the federal stimulus funds that were given to the state.

“We have the resources as a state to step up and back people up,” she said.

Andrew joined CT Mirror as an investigative reporter in July 2021. Prior to moving to Connecticut, Andrew was a reporter at newspapers in North Dakota, West Virginia and most recently South Carolina. He’s covered business, utilities, environmental issues, the opioid crisis, local government and two state legislatures. Do you have a story tip? Reach Andrew at 843-592-9958