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Refilling the Minnesota’s unemployment insurance fund might depend on getting bonus checks to essential workers

Legislative Republicans want the fund replenished from the state’s budget surplus before rate increases kick in for employers. But some DFLers aren’t there yet.

State Rep. Gene Pelowski, right, with state Sen. Eric Pratt
State Rep. Gene Pelowski, right, with state Sen. Eric Pratt: “This bill should pass all by itself. Not wait till the end of session, not be part of a omnibus bill, it should be a single bill.”
MinnPost photo by Peter Callaghan

It is a storied legislative technique, praised when your side uses it, condemned when the other side does. Known as linkage, it’s when an issue one party wants is tied to a sometimes-unrelated issue the other party wants.

As the 2022 Minnesota Legislature reaches its second week, two issues have been subject to that strategy: restoring the state unemployment trust fund and increasing the amount of money set aside for frontline worker bonus checks.

The two issues do have some things in common. Both are tied to the pandemic-induced recession. Both are expensive. And both have a deadline. But there is no reason, other than political leverage — and habit — that requires them to be put into a single bill or passed in sequence.

Backers of an effort to replenish the unemployment insurance fund point to statements from the Department of Employment and Economic Development (DEED), the state agency that runs unemployment insurance in Minnesota, that large increases in monthly premiums will fall on state employers if something isn’t passed by March 15.

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“This bill should pass all by itself,” said Rep. Gene Pelowski, DFL-Winona. “Not wait till the end of session, not be part of a omnibus bill, it should be a single bill.”

And Sen. Jason Rarick, R-Pine City, said there was a tacit promise made to employers who faced shutdowns during the early months of the pandemic. “Lay your people off as needed, they can collect unemployment and we are not going to hold you responsible for those expenses,” Rarick said. “If we do not do what we’re talking about with this bill, then we’re not following through with what we promised.”

The unemployment fund issue has mixed up statehouse politics, breaking less on party labels and more on ideology. DFL Gov. Tim Walz and a few DFL lawmakers have endorsed using $2.7 billion of the state’s $7.75 billion surplus on the proposal, which is also where legislative Republicans are, arguing that the rate increases will hit businesses trying to recover from the recession at the same time they’re still detailing with worker shortages and supply chain disruptions.

Minnesota's UI Trust Fund 2008-2022
Minnesota Employment and Economic Development
But most DFLers are either supporting a less expensive solution or don’t want to use the surplus for an issue that will fall on employers to fix if nothing is done.

During a hearing Monday before the House Labor Committee, Eric Harris Bernstein of We Make Minnesota, a coalition of labor unions, summed up that sentiment: Though the organization said it could support a less-expensive compromise, it considered the issue a “corporate handout.”

“It is really unclear what benefit regular Minnesotans should expect to receive from this unprecedented use of billions of dollars of public funds,” Bernstein said.

Many DFLers not convinced

When COVID-19 and the recession it triggered began, in the spring of 2020, Minnesota had about $1.5 billion in its unemployment insurance trust fund. The rise in joblessness — due largely to state-ordered closures of hospitality and retail businesses — sapped that fund and required the state to borrow heavily from the federal government, one of 13 states to do so. With monthly interest payments accruing, DEED estimates that $1.4 billion will need to be sent to the U.S. Treasury to resolve the debt.

But the money the state paid to unemployed workers was significantly less than what they were given through a batch of special payments included in federal COVID relief bills. Those included a $600 a week topoff payment, extensions beyond 26 weeks of benefits and checks for gig workers who hadn’t paid premiums into the system. Together, some $9.5 billion was sent to Minnesota workers in 2020 alone.

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Walz proposed using some of the state’s $7.75 billion surplus — and $1 billion in leftover federal funds — to pay the debt and rebuild the trust fund. Ten of the 13 states that borrowed have used federal pandemic relief money to pay back some or all of the money they borrowed.

A bill adopted Monday by the Senate Jobs and Economic Growth Committee, Senate File 2677, sponsored by Committee Chair Eric Pratt, R-Prior Lake, would set aside $2.7 billion, negating already-in-the-works increases in monthly premiums paid by state employers.

But the House DFL majority is not quite there yet, said House Speaker Melissa Hortman. “I don’t think there is agreement in the House DFL caucus to go to $2.7 billion,” she said before the session convened. “They don’t think that that case has been made to them yet.”

First, the caucus isn’t convinced that the entire amount is needed immediately. House Labor Committee Chair Mohamud Noor, DFL-Minneapolis, has a bill to cancel the premium rate increases and pay off the federal loan but not refill the trust fund. Instead, Noor’s proposal would allow that fund to grow over time with current rates, thus preserving about $1.5 billion of the surplus for other DFL priorities, such as child care and climate change programs.

“What we are proposing is to pay the debt, pay the interest, (and) make sure there are no additional assessments at all,” Noor said. “We want to make sure we take care of business.”

Pandemic initial claims
Minnesota Employment and Economic Development
And then there’s the linkage. The House DFL also wants the Senate to agree to spend $1 billion of the surplus for bonuses to some 650,000 people who worked in needed jobs during the pandemic. That group includes health care workers, first responders, corrections staff, food service workers, child care and school employees, grocery and food service workers.

One bill, sponsored by House Majority Leader Ryan Winkler, DFL-Golden Valley, puts the UI money and the $1 billion for bonuses together. The same bill also adds two other DFL agenda requests: paid family leave and paid sick leave.

Republicans have supported bonus checks, agreeing last year to set aside $250 million in federal funds for that purpose. But a workgroup could not agree on which workers, with Republicans favoring only health care workers and first responders as a way of making the checks larger. DFLers, in turn, suggested the way to keep checks higher while rewarding more workers was to increase the size of the cash pool.

During the House hearing Monday, DEED Commissioner Steve Grove opposed the Noor proposal, saying the state needs to have some surplus in the UI account to operate the program.

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“Unless we get up to $1.3 billion in our trust fund, taxes will go up for our employers,” Grove said. “We still have to pay people who are on unemployment, and if we have zero money in the account to do so, then we’re not going to be able to do so.”

Grove also pushed back on a DFL suggestion that the state cancel rate increases for small and medium-sized businesses but not for larger companies. “You can’t target particular businesses by size or industry,” Grove said. “We’re not given that leeway. No state is.”

About 70 percent of businesses in the state that are facing increases employ 500 or fewer workers.