Michigan Overpaid Nearly $4B in Unemployment Benefits, Unlikely to Recoup Funds

A Michigan state audit revealed that the state's Unemployment Insurance Agency Office overpaid residents by about $3.9 billion, the Associated Press reported.

The unemployment benefits were mishandled at a time when 5.4 million people were applying due to the COVID-19 pandemic. This led to the agency sending out letters over the summer to 648,100 Michigan residents who were found eligible for benefits the previous year, telling them they needed to reapply for eligibility.

According to the audit, 347,437 of those who had qualified before were now found ineligible. The audit also pointed out that the state will most likely not be able to recoup the money it has lost, as the fault lies with the agency and not the claimants.

AP reported said that the former director of the agency Steve Gray, who resigned in November of 2020, made a presentation in April of 2020 discussing this issue. The agency weighed "paying ASAP and establishing eligibility in parallel" against "establishing eligibility and delaying payments until eligibility is verified." They acknowledged that there was an overpayment risk.

The agency used four eligibility criteria not authorized by the U.S. Department of Labor. Though they were not sure about the requirements, the audit said they did not reach out for clarification, despite the Department of Labor alerting them in June of 2020 of "critical" issues over implementation."

For more reporting from the Associated Press, see below.

Michigan Capitol
A Michigan state audit revealed that the state's Unemployment Insurance Agency Office overpaid residents by about $3.9 billion. Above, the state Capitol building in Lansing on January 20, 2021. Photo by Rey Del Rio/Getty Images

Republican lawmakers have criticized the agency and called for accountability, particularly concerned at the anxiety the letters caused Michigan residents and the agency's mishandling of funds.

Republican Representative Steve Johnson, who chairs the state House Oversight committee, issued a statement on Thursday blaming Governor Gretchen Whitmer's administration for confusing people navigating unemployment and her for implementing executive orders that shut down people's livelihoods during the pandemic.

"These findings provide concrete proof that a pivotal arm of Governor Whitmer's administration failed when people needed it most, this was a state mistake," Johnson said. "...rampant ineptitude and ineffectiveness at the agency led to weeks and months of hardship for a tremendous amount of people."

Leadership at the unemployment agency has changed at times amid criticism for slow payouts and fraudulent claims. Gray was replaced by acting Director Liza Estlund Olsen, who then was replaced by current Director Julia Dale.

Dale, who took over the agency in recent weeks, acknowledged the audit's findings in an email statement Thursday, saying the agency is working to implement the suggestions, but she maintained that the agency should still be proud of the work it has done.

"The work the UIA did this time supported millions of Michiganders by providing a temporary lifeline to pay for food, housing, prescriptions and other critical needs. So far, more than $39 billion has been paid out to nearly 3.5 million Michigan residents," Dale said. "But we should also be sure to learn from this experience so that we can do a better job of stopping fraud and paying legitimate claims in a timely fashion."