Wolf admin refuses to release details on multimillion-dollar unemployment mistake

Angela Couloumbis
Spotlight PA
The Department of Labor & Industry admitted it owes millions of dollars to formerly unemployed Pennsylvanians.

HARRISBURG — Democratic Gov. Tom Wolf’s administration is refusing to provide details on the scope and timeline of an internal investigation of a state error that resulted in thousands of unemployed Pennsylvanians being overcharged millions in interest payments over a decade.

In emails with Spotlight PA this week, the governor’s office confirmed that the state Office of Inspector General had performed an inquiry into the error at the Department of Labor and Industry, which oversees Pennsylvania’s vast unemployment compensation system. But it would only say that the two agencies are working together to provide a summary of the inquiry’s findings.

The office sidestepped questions about when the investigation was launched, who ordered it, when it was completed, who reviewed the results and what, if any, actions were taken once it was done.

In response to a Spotlight PA investigation, the Department of Labor and Industry on Friday admitted that, between 2006 and 2016, it charged hundreds of thousands of people an inflated interest rate if they, for various reasons, were overcompensated in unemployment benefits.

More:Department of Labor admits it overcharged unemployed Pennsylvanians millions of dollars

Minutes after the announcement, the agency told Spotlight PA in an email that the inspector general’s office had agreed to the terms of how it was going to address the issue.

A spokesperson for the inspector general on Friday said the office was unfamiliar with any investigation, as it typically does not deal with unemployment compensation issues. The next day, he said the office had completed a report but that he could not comment further.

The dearth of information underscores the secrecy surrounding how the administration responded to the problem once it was discovered in 2016. Former employees of the Department of Labor and Industry who worked on the issue told Spotlight PA they were directed to keep the error secret when they were employed at the agency — a claim officials denied.

Department spokesperson Penny Ickes said this week that officials do not know who requested the inquiry or when it was launched.

“Current L&I staff does not have this information,” Ickes said in an email.

When pressed, the governor’s spokesperson Elizabeth Rementer said Tuesday that Wolf only learned about the issue last week, “had discussions with staff over the weekend and directed L&I to complete the correction process.”

Rementer also said Wolf will defer to the inspector general’s office on the timing of making its findings public.

The office historically has not made its investigative reports public — they are given to the governor and to the agency being investigated — although governors can choose to authorize their release. After a change in state law in 2017, the office said it would prioritize making most of its findings public.

In an email this week, Ickes said addressing the issue “was not a simple or fast process,” because of the problem’s scope and the pandemic.

She said some affected people have already received refunds. But those occurred on a case-by-case basis, usually when agency staff discovered the person was owed money while helping with an unrelated issue.

In the announcement on Friday, less than 24 hours after Spotlight PA asked for a formal comment on the error, the department said about 250,000 people had been overcharged and it would issue $14 million in refunds.

The agency also said that most people were owed $50 or less in refunds. Former employees who worked on the problem came forward and told Spotlight PA they believe many people were owed far larger refunds.

According to interviews, internal emails and other documents reviewed by Spotlight PA, when the state learned about the mistake in late 2016, it referred to it as the “interest rate problem.”

Spotlight PA’s investigation found the agency failed to adjust interest rates set annually by the state Revenue Department, which ranged between 3% and 8%, from 2006 to 2016.

Instead, the agency charged a fixed 9% interest rate.

An initial analysis by a department staffer found that in that time, the state established more than 674,000 overpayment claims, totaling $889 million, according to records reviewed by Spotlight PA.

Of these claims, about 124,000 were considered “at-fault” — representing about $345 million owed by people the state overcompensated because they made a mistake on their paperwork, for example, or their claim was disputed by their employer, or as a result of deliberate fraud.

The rest were considered nonfault overpayments, which were the result of a mistake made by the state and were not charged interest.

Steep penalties follow if a person cannot pay their bill and the high interest rate. The state can place liens on a person’s property, causing credit to be significantly diminished by the debt, or place them in a probation program.

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