Colorado Department Of Labor Writing Off $61 Million In Overpayments Made During Pandemic

DENVER (CBS4)- A CBS4 Investigation has learned that the Colorado Department of Labor and Employment is writing off more than $61 million in overpayments it made to tens of thousands of unemployed Coloradans during a 10-month period of the pandemic, with the agency saying it would spend more to collect the overpayments than it would get back.

"Pay it forward somewhere," recommended Phil Spesshardt, Colorado's unemployment insurance director, who suggested claimants could leave large tips at restaurants, donate to their community somehow or make a contribution to alleviate homelessness.

Asked about trying to recover the overpayments, Spesshard said, "It's pointless" and "not cost-effective to collect" the overpayments.

The department previously acknowledged making about $19 million in payments on fraudulent claims during the pandemic, but until queried by CBS4, had not released how much money has been overpaid during the pandemic due to processing errors and mistakes and will not be recovered.

Responding to a CBS4 Open Records Request, the Colorado Division of Labor and Employment reported that from March 2020 through December 2020, a total of 30,559 overpayments had been written off, amounting to $61,802,393.92 which will not be recouped. Figures were not yet available for 2021.

Precisely how many individuals received the overpayments could not be determined since the agency does not track the overpayments by individuals, but by the overpayment.

Jessica Hudgins Smith, Press Secretary for the Division of Unemployment Insurance, told CBS4, "The non-fraudulent overpaid benefits that are written off end up being spent in the local economy. This allows struggling businesses to remain open and hire additional staff while also continuing to pay various taxes, benefitting all Coloradans."

Smith went on to say, "The overpaid benefits, if returned, would have no impact on the unemployment trust fund related to the reserve ratio and premium rates paid by employers. As such, greater economic good for the entire state is realized by writing off these overpayments."

Kathleen Morsette of Golden is one Coloradan who does not agree. When the trucking company she works for furloughed her in March of 2020, she later applied for 13 weeks of unemployment payments, the amount of time she was furloughed. But after she applied, CDLE mistakenly paid her for 29 weeks of unemployment.

"It kept showing up in my bank account, boom, boom, boom," said the 72-year-old grandmother.

Morsette immediately notified unemployment officials of the error, sending them a note saying, "I need you to stop depositing money in my banking account- TOO MUCH," she wrote.

CLDE eventually agreed they had made a mistake and overpaid Morsette. But when she attempted to repay her $8,454 that had been overpaid, CDLE officials repeatedly ignored or rebuffed her. She sent a personal check to the department in 2020, which was never cashed. Then in April, she made an appointment to return the money in-person to a Department of Labor office. But when she showed up, she said she was given the runaround and told to leave with her check and just mail it. She declined to do that since her first check had never been cashed.

When CBS4 began asking questions about her case, a CDLE worker called Morsette the next day and left a voicemail saying, "The overpayment balance you had on your unemployment account has been taken care of, it has been written off due to the fact it was a division error."

Morsette told CBS4, "I just thought this is absolutely asinine. How can nobody want their money back? I'm willing to pay it back. Why is it so difficult?"

Spesshardt told CBS4 "No way, no how" would the department allow Morsette to return the overpayment. He said she should have been told that months earlier.

Morsette said, "Unless they have a huge slush fund that they can write these things off with, that gets passed on to somebody."

The United States Department of Labor does allow states to forgive overpayments that were not the fault of the claimant. CDLE says it will however attempt to recover overpayments it knows were due to fraudulent activity.

In 2019, figures from the CDLE show the department wrote off about 2/3 less in overpayments compared to 2020. A total of $19,378,271.71 in overpayments was written off in 2019.