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December 27, 2023

Talks with feds over Baker administration financial error drag on as state budget concerns mount

Photo | Courtesy State House News Service Former gov. Charlie Baker and former First Lady Lauren Baker walk up the front steps of the State House accompanied by Maj. Gen. Gary Keefe, Adjutant General (right), ahead of the governor's second inauguration on Jan. 3, 2019.

Exploding emergency shelter costs and lackluster tax collections have made headlines recently as state budget stressors, but a nearly $2.5 billion error continues to lurk in the background as a potential costly wild card.

More than six months after auditors discovered the Baker administration mistakenly used federal funds to pay jobless benefits during the COVID-19 emergency instead of the state's Unemployment Insurance Trust Fund, there's still no clarity on whether Massachusetts will need to repay that money or how.

"The amount that may be due to the federal government, and the timing, method, and source of such reimbursement, are currently unknown," the state Department of Economic Research wrote in its latest monthly report about the UI Trust Fund. "The Commonwealth is engaged in discussions with USDOL to resolve this matter."

Healey administration officials say their predecessors mistakenly used about $2.491 billion in federal funding between fiscal years 2020 and 2022. If Massachusetts needs to repay some or all of that money, it could cause massive headaches for state budget-writers, who are also facing nearly $1 billion per year in costs to manage record demand on the shelter system while tax collections lag projections by hundreds of millions of dollars.

Neither state nor federal officials have shed much light on the UI outlook. In November, the U.S. Department of Labor declined to make anyone available for an interview.

"The Department is still actively engaged with Massachusetts on this issue, but we don't have an update to provide," a U.S. Department of Labor spokesperson said last month.

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