Senate Republicans push quick action to refill state unemployment fund

Minnesota Republicans want to fast-track a proposal to replenish a state fund to help sidelined workers, saying slow action could mean big tax hikes on businesses that were forced to shut down at the height of the pandemic.

The idea has the backing of DFL Gov. Tim Walz, who is also proposing to spend billions out of the projected budget surplus to make sure workers are covered by the state's unemployment fund if Minnesota faces another crisis. State employment officials say it would take more than a decade to restore the fund to pre-pandemic levels without help from the Legislature this year.

"This fund was there for our workers when they got laid off, but there's no better way to kill our job growth coming out of this recession than to have this tax go on our small businesses," said Sen. Jason Rarick, R-Pine City, who is co-sponsoring a bill to replenish the fund. "That's going to keep them from hiring people back, they won't be able to afford it."

Democrats in the House have signaled support for the idea but say they're worried big businesses that saw their profits increase during the pandemic will benefit.

"When we think about how we're intervening, one of the things we are talking about is making sure we are targeting our resources to the businesses, industries and the workers that have been hardest hit," said Rep. Emma Greenman, DFL-Minneapolis, who serves on a House workforce and development committee. "This pandemic has not hit all businesses and all industries the same."

Roughly one in five Minnesotans received unemployment benefits at some point during the pandemic, according to the state Department of Employment and Economic Development. The historic level of requests drained the state's Unemployment Insurance Trust Fund, which sat at $1.7 billion in January 2020. Minnesota then borrowed more than $1 billion from the federal government to keep the unemployment payments coming.

Many states borrowed from the federal government during the pandemic to cover unemployment costs, but more than half have already paid the federal government back. Minnesota is among nine states and the Virgin Islands that owe the federal government a combined total of about $39 billion.

His bill also covers more than $8 million in interest the state owes to the federal government on the debt, which is accruing at a rate of roughly $50,000 a day.

"Every day we're racking up additional interest that's not helping workers, it's not helping business people, and it's not even helping the state finances," said Pratt, R-Prior Lake. "It's going straight to the federal government."

The proposal would also stave off tax increases for some businesses, which pay into the unemployment fund through a payroll tax. Businesses have already received assessments and face a March 15 billing deadline.

D & G Excavating in Marshall, Minn., is facing a roughly $26,000 increase in payroll taxes on top of the $109,000 it paid into the unemployment fund last year, said CEO Kristin Gruhot. Lauryn Schothorst, who works on workforce development with the Minnesota Chamber of Commerce, said most businesses are facing double-digit tax hikes at a time when they're trying to offer benefits to entice people back into the workforce.

"Double-digit payroll tax increases make offering those enhancements and hiring workers that much more challenging, and this is entirely avoidable," she said.

Democrats have also been pushing to add hourly school employees to the list of workers who are eligible for unemployment benefits.

"This policy will not only help these workers, but also school districts by providing a more stable workforce," said Rep. Carlie Kotyza-Witthuhn, DFL-Eden Prairie, who added hourly school workers to her bill to fully replenish the state's Unemployment Insurance Trust Fund.

But Republicans — and at least one House Democrat — are pushing back on tacking any other items onto the bill, which would complicate its quick passage this session. Last year, lawmakers quarreled until July over tax cuts for businesses that got Paycheck Protection Program loans to help them weather the pandemic.

"We borrowed about $1.2 billion and if we don't pay it back our businesses get an unwarranted tax increase," said Rep. Gene Pelowski, DFL-Winona. "It's time to return to a Legislature where individual bills are brought up on the House floor and sent to the governor."