How the Legislature’s deal on pandemic worker bonuses and unemployment insurance got done

In the Minnesota Legislature, one happy ceremony has a way of washing away four months of acrimony.

Gathered in the governor’s reception room on Monday to watch Gov. Tim Walz sign a facsimile of a bill he’d signed days before — Republicans and DFLers, labor and business were all smiles, all handshakes, all backslaps. Once he signed a certificate created for the occasion, all received souvenir pens with Walz’s name on them. Group photos were taken.

The actual bill that had been rushed to Walz at his son’s volleyball game in St. Paul Friday evening would spend $2.7 billion. It would use that money to repay a federal loan and refill the state’s unemployment insurance trust fund. But it would also appropriate $500 million to distribute bonuses to frontline pandemic workers. And unlike an agreement last summer that fell apart over how to distribute the bonus money, the version Walz signed adhered to DFLers’ demands that up to 667,000 workers — from nurses to bus drivers — could get up to $750.

It also gave Walz $190 million to spend as he thinks best on additional COVID-19 health and economic responses.

All three issues had been front-of-mind for lawmakers since they convened for the 2022 legislative session on Jan. 31. All had moved barely an inch until the week before an April 30 deadline for employers to pay higher unemployment premiums, which would have gone to cover both the federal loan and the restoration of the trust fund.

Walz and legislative leaders have hailed the deal as a breakthrough — not just on the particulars but on a fledgling working relationship between Walz, House Speaker Melissa Hortman and the newish Senate GOP leader Jeremy Miller, who took over the job in the fall.

“From now until May 23rd, we’re all on Team Minnesota,” said Hortman. “We’re not Democrats and Republicans. We’re on Team Minnesota.” 

Miller stood between the governor and the speaker who he had sat with negotiating behind closed doors for weeks. “This is the result of Democrats and Republicans working together in the House, in the Senate, together with the administration to get a positive outcome,” Miller said. “This process isn’t meant to be easy, and this took much longer than any of us hoped for, but the outcome was probably better than most expected.”

Why it took so long

Before the session began, Walz’s Department of Employment and Economic Development said unless the Legislature funded the federal loan and refilled the trust fund, employers large and small would face significant increases in their unemployment premiums. Walz, legislative Republicans and some DFLers said those premiums should not increase, since the draining of the trust fund and the federal borrowing were due mostly to Walz’s mandated closures of many businesses in the early months of the pandemic.

There was even talk that the issue could be one of the legendary “early wins” that are often speculated about but rarely achieved at the Legislature. 

But some DFLers searched futilely for ways to avoid reducing the jobless taxes for large employers, calling it a tax cut for corporations. They then sought to cut the tab from what Walz had requested, $2.7 billion, to $1.4 billion and then $1.8 billion by not fully refilling the state’s trust fund right away.

DFLers also linked the issue to growing the amount available for bonuses in order to provide them to more workers. Paying such bonuses was one of four explicitly stated uses for the $350 billion sent to states under the America Rescue Plan Act (ARPA) last spring. But relatively few states have directly rewarded those with jobs who couldn’t work from home and often lacked adequate personal protective equipment when the infectiousness of the virus was unknown.

At the same time, the Senate GOP insisted on putting no more than $250 million toward the bonuses and tried to put the blame for higher employer taxes on the DFL. 

The DFL insisted on a bigger bonus pool and also added another issue to the mix: making seasonal school employees like bus drivers and food service workers eligible for unemployment when they aren’t working.

“The only thing we’ve heard from Sen. Miller is a repetition of his position over and over and over,” Hortman said after walking out of a closed-door session within minutes of its convening. Miller, she said, lives on “Planet Republican” where he thinks he took care of the bonus issue last spring before a group of lawmakers met repeatedly but failed to agree on how to spend the $250 million.

“Here on Planet Earth we actually have to negotiate in good faith,” she said. 

That same mid-March day, Miller said he was disappointed with Hortman’s departure before repeating his position, well, over and over again. And he enjoyed noting that his Senate passed the bill in February with bipartisan support while the House hadn’t brought theirs to the floor. Miller said he was still open to spending the $250 million and even deferred to the DFL to decide who gets how much, but said his priority was for “permanent, ongoing tax relief for all working Minnesotans.”

Miller could wait because he had what Hortman lacked: a unified caucus. Hortman denied it, but there was evidence that she couldn’t have mustered a majority for either a $2.7 billion unemployment insurance rescue or the lower amounts in the House bill, losing votes from the left flank of her caucus on the bigger bill and from the middle on the lower total. Only when it was coupled with a $1 billion bonus fund and jobless pay eligibility for school workers did it pass with DFL votes alone.

What else can get done?

When Sen. Paul Gazelka was the Senate majority leader, it was often Hortman who moderated between him and Walz. This year, it was Walz who tried to calm the differences between Hortman and Miller. “We’ll continue to try to make progress on this, to try to get folks back to the table,” Walz said after the “Planet Earth” blowup. 

It should be easier, he said, because money isn’t the issue. Even if the state spent $2.7 billion for the unemployment system and went to the DFL position of $1 billion for hero checks, there would be money left over from the state’s $9.23 billion surplus and the $1.1 billion in unspent ARPA money.

But Walz was prescient that day when he said deadlines force lawmakers to compromise, even if he said it on a day the Legislature blew past a deadline set by DEED for when it would need to send out new bills to employers to keep them from paying higher premiums.

Hortman went all the way up to $2.7 billion for the unemployment fix. Miller bumped the frontline worker pool to $500 million. And while Walz had asked for more than $500 million to let him respond to emergency pandemic needs, he would get $190 million now, with a promise of a return to St. Paul in the fall if there is a surge of infections that requires more spending.

A lesser talked about sweetener for the GOP was the agreement to spend the unused ARPA funds first. If left unspent by the end of the regular legislative session, those funds could then be spent solely by Walz. Having that money around at the end could have been a tool for the DFL to win other concessions since GOP lawmakers had complained about Walz having appropriations powers that belong to the legislative branch.

“Often I’ve said you shouldn’t get a pat on the back for doing what you’re supposed to do,” Walz said Monday. “Doing what you’re supposed to do was hard in this case and they did it.”

But if Hortman ended up at the same dollar amount as Walz requested in January, why wasn’t this an early win?

“Deals before May are ‘early wins’ at the Legislature,” Hortman quipped.

She would keep trying to get seasonal school workers into the unemployment system, though there now appears to be little leverage to get the GOP to drop their objections.

The negotiations did cause Hortman to drop a suspicion she has had since the start of the session, that Miller and the Senate GOP would prefer to wait until the next election, where Republicans think they can win majorities in both houses and perhaps the governor’s office.

“It was very hard to get Republicans to the table,” she said shortly before the bill passed the House. “It was concerning because it led us to believe they would let things blow up and would rather use issues as a tool in the campaign. But I do think after lots more communication with Sen. Miller that the Senate is really interested in passing budget bills and a tax bill, at a minimum a couple of budget bills and a tax bill.”

The two houses are currently very far apart on how to reduce taxes and how to spend the rest of the surplus. Serious negotiations have just begun, and the session must adjourn on May 23. Walz has said he will not call a special session if those bills are not completed. Because the state is in the midst of a two-year budget, there is no risk of a government shutdown if they fail. 

But Walz said the deal around the unemployment system and bonus checks bodes well for continued progress. “Just a week ago it was pretty stubborn. We were in a pretty stubborn spot,” Walz said Monday. “But it shook loose. I’m hopeful.”

Said Miller: “I am confident we can continue to work together and really get good things done for the people of Minnesota. For today we can celebrate this and know there is a lot of work ahead.”