Connecticut lawmakers are set to consider a bill this session that would provide financial relief to individuals who received unemployment benefits during the pandemic but were later ordered to repay all, or part, of that money to the state.
The proposed legislation would allow thousands of additional people to qualify for forgiveness from what the state describes as “overpayments,” which occur when someone receives jobless benefits that they are later found to be ineligible for.
Overpayments are a normal part of running a state unemployment program. The federal government requires states to identify instances where money was improperly issued to people.
But the problem became more pronounced during the coronavirus pandemic as millions of Americans lost their jobs and state labor departments were inundated by a historic number of jobless claims.
The Connecticut Mirror published a story last year highlighting the millions of dollars in overpayments that the state Department of Labor identified in early 2021 and the growing number of people who were receiving demands to return that money.
But the problem has only grown since then.
Connecticut’s Department of Labor identified more than $25.7 million in overpayments in 2021, which is more than the previous two years combined. And that doesn’t include all of the federal unemployment programs that people collected money from during the pandemic.
An unspecified portion of those overpayments are tied to fraud. But many others are the result of unintentional mistakes on the part of unemployment applicants or the state.
It’s the latter cases that state Democratic lawmakers want to remedy with the legislation this year, which they refer to as unemployment “amnesty.”
Sen. Julie Kushner, D-Danbury, said it is unfair to ask workers who honestly submitted an unemployment application to repay money because of filing errors or other mistakes that were outside of their control.
The concern among lawmakers, Kushner said, is that households that are just starting to recover from the recession will be forced to repay a significant amount of money — in some cases, tens of thousands of dollars.
“Too frequently, the money has already been spent, and the person isn’t earning enough to repay,” said Kushner, who chairs the legislature’s Labor and Public Employee Committee.
The bill that Kushner and her colleagues introduced did not get much attention during a busy public hearing this week, but several groups, including the state’s most prominent labor organization, submitted written testimony in support of the legislation.
Ed Hawthorne, the president of the Connecticut AFL-CIO, which represents roughly 200,000 unionized workers in the state, argued the legislation was needed to protect the tens of thousands of people who filed for unemployment assistance during the pandemic.
“Unemployment insurance should have provided them some assistance and helped quiet their fears until they could return to work,” Hawthorne wrote in his testimony. “Unfortunately for some workers, their unemployment applications may have contained mistakes, were mishandled, or not adequately reviewed for months.”
“They received weekly payments to help survive the downturn, but now, months later, the state has deemed them ineligible and wants that money back,” he added, citing the CT Mirror’s story last year.
There is already a process in place for people to apply for forgiveness of overpayments as long as state officials don’t allege any fraudulent behavior on behalf of the unemployment applicant.
Data that is submitted to the federal government shows Connecticut used that process to waive more than $5.4 million last year — or roughly 21% of the overpayments the state identified in that time frame.
Eligibility for the waivers requires certain findings by the state. The overpayment, for instance, needs to be caused by “unintentional error” or the state overturning someone’s benefits after an appeal hearing.
It’s ultimately up to state officials in the Department of Labor to make the determination in each case.
The agency also takes into account things like whether someone filed for bankruptcy or whether the person has a mental or physical disability that limits their chances of finding a new job. The applicant’s death can also guarantee them a waiver.
But Democratic lawmakers are concerned that a significant number of people may have missed their chance to apply for that forgiveness during the pandemic.
A legal group that frequently represents low-income individuals in Connecticut agreed with that assessment. Sara Parker McKernan, the legislative advocate for CT’s Legal Services, told lawmakers in written testimony this week that it has not been easy for everyone to apply for those waivers.
The state sets strict timelines for anyone seeking a waiver. The applicants only have 14 days to submit the needed paperwork after they are notified about an overpayment.
The instructions that the Department of Labor provided in the past, McKernan added, were not always understandable, and the details were not easily identifiable on the state website or in the notices that were mailed to unemployment claimants.
CT Legal Services, she said, worked with the state agency to produce flyers and other educational material, but in many instances, she said, people fell through the cracks.
“The Legal Services Programs were inundated with questions from clients and potential clients about what to do in response to letters saying they owed what was often viewed as an insurmountable amount of money to the state,” McKernan wrote.
“This proposal will make a huge difference for individuals who have found themselves, through no fault of their own, faced with the burden of paying back benefit amounts for which they were initially determined to be eligible,” McKernan added.
A $50 million fund
The proposed legislation seeks to increase the number of people qualifying for that forgiveness in several ways.
The bill requires the Department of Labor to re-notify anyone who could qualify for a waiver, and it gives those individuals up to six months to apply.
That change, Kushner said, should benefit a large number of people who didn’t apply on time or didn’t know they were eligible for forgiveness.
“What we are doing is reopening a window and urging those folks to ask for a waiver,” Kushner said.
The bill also calls for $50 million in state funding to be set aside to cover the debts of anyone who doesn’t qualify for a waiver under the traditional guidelines used by the Department of Labor.
Those cases would still exclude anyone accused of fraud, Kushner said, but it would allow far more people to avoid having their wages garnished or their tax refunds intercepted by the state.
The $50 million would be used to pay back the state or the federal government, depending on where the money initially came from.
That money could be important for Connecticut’s unemployment trust fund, which has been historically underfunded.
As of this month, the state owed the the federal government roughly $462.9 million, which it borrowed in the past to help keep the fund solvent.
Officials with the Department of Labor didn’t oppose the legislation during the public hearing this week, but the agency raised numerous questions about how the legislation would work in practice.
Heidi Lane, the agency’s legal director, provided written testimony to the labor committee laying out a number of issues she identified with the bill.
Gov. Ned Lamont’s proposed budget, she pointed out, does not include the $50 million in funding that the bill calls for.
She also asked lawmakers to clarify several other questions about the bill.
Should the applications be processed on a first-come, first-served basis? What happens with individuals who already paid back part of the money the state said they owed? How will the forgiveness work with state and federal taxes, since jobless benefits are considered personal income?
The effective date of the law would also need to be adjusted, Lane told lawmakers, so the Department of Labor could finish rolling out its new online system for processing jobless claims, which is expected to launch in July
It’s unlikely that the agency and its employees would be available to start reviewing the additional waivers until this fall at the earliest, Lane said.
Meanwhile, other overpayments will continue to be identified, she said.