For the tens of thousands of Washingtonians being asked to repay more than $1 billion in pandemic unemployment benefits, state plans to cancel some of that debt are getting complicated.
In January, the state Employment Security Department said it will review the cases of around 136,000 Washingtonians collectively on the hook for $1.2 billion in “overpayments,” or jobless benefits ESD says they shouldn’t have received.
Under a federal waiver program, ESD will be able to cancel some of those overpayment debts, which are often for tens of thousands of dollars, in cases where the overpayment isn’t found to be the fault of the claimant. ESD plans to start the review process in late March.
But this week, ESD reset expectations for that relief.
First, only 21,000 or so claimants can count on having their debt waived, the agency said. How many of the remaining 115,000 might be eligible for debt relief or when they’ll find out isn’t yet clear, in part because ESD is short-staffed and can’t count on extra funding for the complicated review process.
That means months of additional stress for people like Brendan Dillon, a Washington State University student with $20,000 in debt for pandemic benefits he got after being laid off from a restaurant in early 2020.
“Twenty-thousand dollars in debt and I’m 19 years old,” said the dismayed Bellevue resident.
It’s also more stress for Kenneth Moon, 36, a disabled Spanaway resident who faces a $19,000 debt, which he’s paying off at $250 a month.
Federal pandemic benefits seemed “perfect for his situation,” said Moon’s father, Gary, of the jobless claim his son filed in 2020 after COVID-19 temporarily closed the Auburn auto dealer where he worked part time.
“I had no idea that there would come a time when they would say, ‘No ... you’ve got to pay it all back,’” Gary said.
ESD’s sprawling overpayment backlog is one of the larger and more painful legacies of federal pandemic policies that churned out billions of dollars in relief during the pandemic’s first chaotic months.
Those funds were a lifeline for millions of people in Washington and elsewhere who found themselves jobless. But that rescue came with complicated, shifting eligibility rules that claimants could easily break without knowing.
In some cases, overpayments occurred because ESD retroactively determined that claimants who’d qualified for federal pandemic benefits actually should have been paid state benefits; the agency notified these claimants that they needed to, in effect, reapply for state benefits.
But because the notifications were hard to understand and frequently arrived long after claimants had returned to work, they often were disregarded. That triggered overpayment debts and letters demanding payment, as well as warnings that the claimants could face garnishment of wages and bank accounts, deductions from their tax refunds or lottery winnings, and liens on their property.
“They started hitting me with the overpayment letters” in late 2021, said Shirley Baerg, 66, of Lake Stevens, of her nearly $31,000 in overpayment debt from pandemic benefits. “And then comes the ‘Well, if you don’t pay this off, we’re gonna garnish your income tax [refund] and your bank accounts.’”
Baerg’s overpayment was eventually canceled after she appealed her case, but she had to wait a year to get a date with the state Office of Administrative Hearings, which has been swamped by the overpayments issue.
“It took such an emotional toll on me,” said Baerg, who at one point was so worried about losing all her savings so close to retirement that she emptied her accounts. “I just didn’t want them messing with anything,” she says.
Last year, the U.S. Department of Labor tackled the overpayments problem by authorizing states to waive overpayment debt that resulted from a narrow list of circumstances. For example, states can cancel debt if a claimant was eligible for benefits, but was incorrectly paid a higher amount.
Under these “blanket” federal waivers, ESD says it can automatically cancel overpayment debt for about 21,000 claimants, who won’t need to take any action.
But sorting the remaining 115,000 claimants requires more time.
One reason is that each of these cases will need to be manually reviewed against other, more complicated criteria.
For example, ESD may wave debt in cases involving a range of “personal factors,” such as limited English proficiency, physical or mental health disabilities, homelessness or education level.
Claimants who think they qualify under these criteria will need to request waivers on the agency website. ESD staff will then determine whether claimants qualify, which will likely require “some back and forth with a claimant,” says ESD spokesperson Clare DeLong.
That points to another problem: staffing. ESD is currently short-staffed for its normal claims workload, much less for a overpayment backlog equivalent to the population of Everett. Of the agency’s 239 customer service positions, 26 are vacant.
ESD has asked for another $11.7 million in state funds for a dedicated 118-person overpayment team. The request, which got the greenlight from the state Office of Budget Management still needs approval in a legislative budget with lots of competing priorities.
Several legislators say they’re optimistic the funding will come through. The budget office’s approval “certainly makes it easier for us to add it ... without having to fight the governor’s office on it,” says state Rep. Gerry Pollet, D-Seattle, who has pushed for additional agency funding.
But even if approved, funds won’t arrive till July 1 and hiring 118 new staffers won’t happen quickly, given the tight job market, says DeLong. In the meantime, ESD will start processing the backlog in late March, after the regular claims volume typically drops off, by reassigning some of its customer service staff.
“ESD is committed to waiving as many overpayments as we can,” DeLong said. But the agency is tamping down expectations and cautioning that the waivers won’t apply to everyone and won’t come quickly.
“I think it’s fair to say that it’s going to take months to resolve this,” DeLong said. “And the fewer resources and staff we have, the longer it’ll take.”
Many of those in the overpayment backlog may struggle to wait. Even if the debt is eventually canceled and any payments refunded, “making payments on something that they may or may not owe is still really devastating economically,” Lexy Salas, a campaign organizer with the labor advocacy group Working Washington.
And after months of failed efforts resolve their overpayments, often with frustrating efforts to reach ESD customer service, “there there’s a lot of mistrust from claimants especially when it comes to ESD’s administrative abilities,” Salas says.
Dillon, the WSU student, agrees.
After trying for months to resolve his $20,000 overpayment issue while also dealing with school and work, he said, “it’s hard to be optimistic.”