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State eyes federal funds to cover mistakenly paid unemployment

A legislative committee may have found a way to relieve all the debt of Missourians who were mistakenly paid too much from federal and state unemployment programs after COVID-19 crashed the economy.

The best part for lawmakers? They might be able to use federal funds, instead of general revenue, to cover the cost to the state unemployment fund.

During a hearing of the House Special Committee on Government Oversight, there was bipartisan support for waiving debts due to mistaken payments from federally funded relief programs.

“Certainly, on the federal portion, we are in lockstep agreement on that,” said Rep. J. Eggleston, R-Maysville.

Republicans resisted doing the same for debts owed to the state unemployment fund until state Rep. Peter Merideth, D-St. Louis, reminded them that late last year, Gov. Mike Parson was ready to move up to $500 million in CARES Act money to the fund rather than return it to Washington. A supplemental appropriations bill was passed to authorize the transfer.

The deadline for extending CARES Act funds was extended, so the transfer was never made. That means the money is still in the state treasury and available for a variety of purposes.

If the transfer had been made, Merideth noted, it would have left the fund with a large balance and “prevent any hit for business paying in the future and it would probably reduce the amount they would have to pay going forward.”

If CARES Act funds could be transferred to the unemployment fund in December, Merideth said, there seems to be no reason a small amount couldn’t be used to cover unemployment overpayments.

State Rep. Scott Cupps,  R-Shell Knob, said that his biggest concern about forgiving debt to the state fund was making sure it remained solvent. He told Merideth that he was seeking answers about whether the funds could be used to cover debts as the hearing continued.

“I would rather spend federal dollars here in Missouri rather than elsewhere,” Cupps said.

The exchange came during a hearing on six nearly identical bills and a resolution intended to forgive a part or all of the approximately $103 million in overpayments that flowed through unemployment programs. 

Thousands of Missourians have received notices that they were given too much in unemployment last year, with the amounts ranging from several hundred to several thousand dollars.

The committee took no vote Wednesday, but committee Chairman Jered Taylor, R-Republic, said he would have a bill combining the proposals ready in time for a committee vote next week, probably on Monday. He said he wanted to get the bill to the House floor as soon as possible.

Merideth is the sponsor of a resolution asking Parson to waive the debt for federally funded programs. Parson, however, has repeatedly said he wants the people who received overpayments to return the money regardless of its source.

During a House Budget Committee hearing on Feb. 2, Department of Labor and Industrial Relations Director Anna Hui said most of the overpayments were due to mistakes, not fraud, as her agency delivered almost $5 billion in payments in 2020.

None of the bills heard Wednesday would waive debt for payments obtained by fraud.

Overpayments occur in a number of ways. As Hui briefed the budget committee last week, she said the state had rushed to begin paying benefits and adjusted the amounts later as information about employer objections or other data were found.

There are overpayments every year, and the state is obligated to recover them, she said. What made 2020 different, she said, is that there were hundreds of thousands of people receiving payments and the payments were much larger because of federal supplemental aid.

During the oversight committee hearing, members said they were sympathetic to the hardship that repayment could cause people who remain unemployed or are working for less than they earned before the pandemic.

“I think we can all agree to give back the federal portion, because they say forgive it,” Cupps said.

The CARES Act passed in March 2020 added $600 per week to regular unemployment benefits. It also created relief programs, paid through the unemployment system, for workers who lost jobs not covered by regular unemployment.

A week after the CARES Act was passed, the U.S. Department of Labor issued guidance to states that overpayments could be forgiven “if the payment was without fault on the part of the individual and such repayment would be contrary to equity and good conscience.”

This article by Rudi Keller is published by permission of The Missouri Independent.

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