Massachusetts must pay the federal government $2.1 billion over the next decade after the Baker administration mistakenly used federal pandemic funds to cover unemployment benefits, officials announced Monday.

Gov. Maura Healey, who succeeded Baker in 2023, and her deputies unveiled details of a deal they reached with the outgoing Biden administration Friday in which the Bay State will repay most but not all of the amount it owed due to the error committed years ago.

“For the past year and a half, we have engaged in extensive negotiations with the U.S. Department of Labor to minimize the impact on Massachusetts residents, businesses and our economy, Healey said. “Today, we have reduced our potential liability by over $1 billion and negotiated a decade long payment window to mitigate the impact.”

Healey also doubled down on plans to pursue unemployment insurance reforms while the state works to erase its debt.

The settlement reduces the potential burden on Massachusetts by more than $1 billion, according to Healey’s team, while also saddling the state with a major new cost at a time when budget-writers are grappling with a series of other headaches and the unemployment insurance system already faces looming insolvency.