Minnesota GOP stops ‘bail out’ for Cleveland-Cliffs as part of mining unemployment extension bill

Minnesota lawmakers have fast-tracked a $10.27 million plan that would extend unemployment benefits for laid off Iron Range workers while a Cleveland-Cliffs taconite mine in Babbitt and a processing plant in Silver Bay remain idled.

But the legislation to support Northshore Mining workers hit a snag this week in the state Senate when Republicans accused DFLers of going easy on the large corporation, setting off unexpected debate over what appears to be an otherwise popular bill. The GOP objected because the bill would have exempted Cliffs from paying more in future unemployment taxes as a result of the benefit extension, something the Legislature has done for mining companies amid layoffs in the past.

“If I was a mom-and-pop business owner, which I am, I would not be getting the same treatment that Wall Street seems to get,” said Sen. Rich Draheim, a Republican from Madison Lake, during a Senate committee hearing on Tuesday for the bill. “I have a hard time bailing out a company that had $20 billion in revenue last year.”

The pushback is unlikely to stall the bill since DFLers eventually agreed with Republicans on the issue — and because Democrats have majorities in the House and Senate. But the dispute in some ways cut against political stereotypes at the Capitol, leaving Democrats to defend a tax break for Cliffs after many argued last year that using state money to refill Minnesota’s unemployment insurance trust fund drained during the COVID-19 pandemic was an unacceptable gift for big business.

“I was just looking at following that precedent and really just defending an industry that’s a major employer in my district, trying to get our workers back to work,” said Sen. Grant Hauschild, DFL-Hermantown, who sponsored the bill in the Senate.

What inspired the unemployment bill

Cleveland-Cliffs first idled its Northshore Mining facilities in May, resulting in more than 400 workers being laid off. Officials at the company say the decision to temporarily close the mine and pellet plant is because of a lack of demand, but it’s also tied to a dispute over royalties with another company, Mesabi Trust.

Under Minnesota’s unemployment system, laid off workers typically can get benefits for up to 26 weeks, and those benefits are usually about half of an employee’s usual salary. But those benefits have already dried up for most, and Cliffs doesn’t plan on reopening Northshore operations until April at the earliest.

At a hearing Monday in the Senate’s Jobs and Economic Development Committee, Hauschild said extending benefits another 26 weeks — retroactively to cover those whose payments have already stopped — would help hard-working people who may have struggled to pay for basic costs like mortgages and holiday presents when they lost a job through no fault of their own.

Janelle Jones, president of the Lake County Chamber of Commerce, told the committee that the layoffs have caused mine workers to leave the area, which affects the local community and economy especially because they often pull children from local schools and spouses from other jobs. That leaves the tourism-heavy region in a precarious state considering mining jobs are some of the few stable and living-wage year-round gigs.

Rick Goutermont, a retired Northshore miner and Lake County commissioner, said the number of houses for sale in Silver Bay went from two prior to the shutdown to 26 last week. “Most of these belong to workers who have run out of insurance and are now forced to sell out and relocate for employment purposes,” he said.

State officials estimate there are 490 eligible workers, mostly from Cliffs, which means the benefits extension would average to roughly $20,000 per worker. A few are from the far smaller Dyno Nobel, a company that contracts with Cliffs to do blasting work at the mine.

The unemployment extension bill appears to have broad bipartisan support. It has several Republican cosponsors in the House and Senate from northeastern Minnesota and is likely to be one of the first bills passed by the DFL-controlled Legislature this year. The Senate passed the measure on a 56-10 vote Thursday, and the bill cleared a House committee on Wednesday.

Its swift passage is certainly tied to the current needs of mine workers, but it also is about politics. The bill is a priority of lawmakers in political swing districts. Hauschild won a close race that helped Democrats win a one-vote majority in the Senate. In the House, the bill is sponsored by Rep. Dave Lislegard, a DFLer from Aurora who won a close election in the narrowly-divided House. Republicans will likely hope to compete in both districts next election cycle.

Should Cliffs face an extra tax?

Still, two GOP senators had concerns over the potential impact on the unemployment insurance system. The $10.26 million cost would be paid out of the state’s $1.7 billion trust fund, which was refilled with taxpayer money after the pandemic but is normally funded by business taxes.

Those taxes are higher for a company that lays off more workers.

Under the original proposal, Cliffs would not have seen an extra hit to their “experience rating” used to calculate those taxes when employees use extended benefits beyond the initial regular unemployment help. Democrats said that has been done before in the past during mining layoffs in the up-and-down industry.

In 2016, the Legislature approved a 26-week extension that cost $29 million during a much worse mining downturn that impacted thousands of workers. That law said extended unemployment benefits would not be factored into future tax rates for the mining companies.

This year, Draheim, the top Republican on the jobs committee, said Monday he supported extending benefits, but couldn’t stomach giving “big billion dollar mining companies” an exemption when the costs to the unemployment trust fund would be otherwise borne by other businesses in the state.

Sen. Eric Pratt, a Republican from Prior Lake, said he’s protective of the unemployment fund because of the pandemic. And he said lawmakers should hew toward letting the system work as intended.

“Just like if you have more speeding tickets and car crashes, your auto insurance goes up — if you have more claims and higher, more costly claims, your unemployment premiums should go up,” Pratt said. “And yet we’re holding them harmless and I’m wondering why we’re doing that.”

Hauschild said during the Monday hearing that he was following past precedent in other unemployment extension bills. But it was also because of the impact Cliffs has in the region. “The reason for that is because this is one of the largest employers in my district,” he said. “I want to make sure that these workers get back to work as soon as possible. I want to make it as easy as I can for that to happen.”

Still, the next day Hauschild cited Pratt and Draheim in amending the bill to impact the tax rating for Cliffs, though not Dyno Nobel, when workers use the extended benefits.

It’s unclear how much money that might cost Cliffs or how it would impact the company’s tax rate in the unemployment system. An official with the Department of Employment and Economic Development said it may be private information. There are maximum rates, but it’s not publicly known if Cliffs has hit them. Cliffs did not testify at the hearing, and two registered lobbyists for the company did not respond when asked about the legislation.

In an interview, Hauschild said the snare wasn’t a big issue, though he said last session the Legislature footed a bill that otherwise would have been paid for by businesses in refilling the depleted unemployment trust fund. “I was sent to St. Paul to look out for my district, to look out for workers and families and to make sure that we’re protecting industry,” Hauschild said.