Businesses pay for Legislature's failure to act on unemployment fund

Three weeks ago, when the Minnesota Legislature blew past a deadline to pay back the federal government for its help in covering a crush of unemployment claims during the pandemic, some 130,000 Minnesota businesses weren't the only ones left picking up the tab.

Nonprofits in the state were also sentenced by legislative inaction to pay 30%-or-higher increases in their unemployment insurance tax rates to make up the state's shortfall.

"They were expecting to be held harmless, and clearly they're not. They're in the pool with everyone else," Minnesota Chamber of Commerce President Doug Loon said of Minnesota's nonprofits in an interview last week with Duluth News Tribune Editorial Board members. "So it's not just a tax on businesses; it's a tax also on the nonprofit community, which, I think, is an aspect of this that hasn't really been fully shared with the broader public or the folks at the Capitol."

Also not getting enough attention is that for every single day lawmakers in St. Paul blow off fixing their unemployment-fund mess, it costs the state another $50,000, which is the clip at which interest from this state debt to the federal government is accruing.

"Every day that a deal is not made, there is an expense attached to that," Duluth Area Chamber of Commerce President Matt Baumgartner said in the interview, which was conducted virtually. "And that's an important thing to remember at a time when there is bipartisan (and) bicameral support around doing this. It's just the politics that are getting attached to it. And so I think it's critical that we keep drawing attention to it, that we keep pushing the gas on it, and don't allow it to be something that gets done at 11:59 of this session. There are so many more important things that we can address as soon as this gets tackled. We're hopeful that we can get this across the goal line sooner than later."

The state has a $1.7 billion debt in its Unemployment Insurance Trust Fund after the state was forced to borrow $1 billion from the federal government during the pandemic; roughly 1 in 5 Minnesotans lost work and needed unemployment checks, quickly draining the state's unemployment reserves.

Other states borrowed, too, but most paid the money back already, many using federal pandemic relief dollars.

A Senate Republican bill this session proposed spending $2.73 billion to pay off Minnesota's debt while also responsibly replenishing the state's unemployment fund, an important safety net for Minnesota workers. The money would come from the state's record $9.3 billion surplus, a use of the surplus supported by DFL Gov. Tim Walz. Like the governor, House DFLers signaled support, too — but then politically tied the allocation to other unrelated matters like front-line worker pay and paid family and medical leave.

Most Minnesotans agree with bonus checks to front-line workers who stayed on the job and helped get us through the pandemic, as the News Tribune has stated in previous editorials. But that and other issues can be dealt with separately. Tacking unrelated items onto the unemployment-insurance legislation only complicated the bill, contributing to its lack of passage so far.

"It's unfortunate that this has been treated as a political football to drive other agenda items," Loon said.

Sure, lawmakers can still vote this session to use the surplus to pay off this debt and replenish the state's unemployment fund. And sure, businesses who pay a higher tax bill in the interim can seek a tax refund or a credit later. But it could take months to recalculate bills or to provide such refunds, as Steve Grove, commissioner of the Minnesota Department of Employment and Economic Development, has indicated. It's not even clear how that could happen.

"Retroactive tax relief is hard," said Loon. "This is definitely tying businesses' hands. … This is an unexpected tax increase … in a tight year when they are already facing an ever-increasing number of new costs that they weren't forecasting, whether it be because of supply-chain problems or workplace-related costs."

Also, with every day that passes, Loon and Baumgartner said, Minnesota becomes a little less competitive with neighboring states, in particular those which already have taken care of their unemployment-fund shortfalls. Nowhere is that clearer than along Minnesota's borders, in places like Duluth.

"This should not be a partisan issue," said Loon. "This should be bipartisan straight through to make sure that Minnesota does not find itself in a tough spot."

But Minnesota is in a tough spot after the politically divided Legislature failed to take necessary and responsible action. And it's not as if DFLers and Minnesota Republicans can't work together. They've shown this session they can, including bipartisan votes to invest in finding a cure for ALS, or Lou Gehrig's disease; to extend the state's reinsurance program; and to divest the state from investments in Russia over its brutal and inhumane invasion of Ukraine.

For Minnesota workers, for the state's tens of thousands of betrayed businesses and nonprofits, and so the state can stop throwing away $50,000 every single day, the unemployment-trust-fund issue needs to be promptly taken care of, too.