Feb 8, 2022 - Business

Pressure to pay off Minnesota's unemployment debt picks up

illustration of a briefcase on the edge of a hundred dollar bill
Illustration: Sarah Grillo/Axios

A push to replenish Minnesota's pandemic-battered unemployment fund is picking up as a potential tax increase looms.

The big picture: Record unemployment claims filed during the pandemic left the Unemployment Insurance Trust Fund $1.2 billion in debt to the federal government.

  • Now, lawmakers at the divided state Legislature have just over a month to bring the fund back into the black to avoid triggering higher payroll taxes.

The stakes: While the dollar amount of the hike would vary based factors such as a company's size, several business owners at the State Capitol Monday said their tax bills were set to go up by tens of thousands of dollars a year.

  • Business groups say such increases will hurt companies already dealing with inflation, supply chain troubles and a tight labor market.

State of play: Legislation to spend $2.7 billion of the surplus on replaying the debt and refilling the fund cleared a key committee in the GOP-controlled Senate Monday. Backers urged swift action from both chambers.

  • "We need to get done ... what we can agree to today and pass a standalone clean bill and get it to the governor's desk as quickly as possible," GOP state Sen. Eric Pratt, who chairs a key jobs committee, said.

Yes, but: While Gov. Tim Walz proposed a similar approach, DFL leaders in the House want to make the UI measure a package deal with other early spending priorities, such as increasing the pool for frontline worker bonuses.

  • "We could take care of Minnesota workers and businesses in pretty short order," Speaker Melissa Hortman told reporters last week. "This is money [we] have in the bank."

Between the lines: Some Democrats have also floated trying to target relief from UI tax hikes to smaller businesses and those hardest hit by the pandemic.

  • But Steve Grove, commissioner of the Department of Employment and Economic Development (DEED), said Monday that's probably not doable under federal law.

The deadline: Taxes are due in April, but DEED says it needs the change signed into law by March 15 in order to give businesses an updated bill in time.

The bottom line: The UI fund has become a chip in bigger negotiations over how to spend the surplus.

  • Expect the debate — and dealmaking — to intensify as the deadline nears and lawmakers get a budget update in the coming weeks.
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