Hello from the State Capitol,
If you are a local employer, you knew this day was coming. April 30 marks the date that payments for the unemployment insurance (UI) tax increase are due. And with only days remaining before that deadline, I can tell you our House Democrat majority is not acting with any urgency on this issue.
You’ll recall I’ve previously discussed the need for Minnesota to replenish its UI Trust Fund. When Governor Walz required businesses to close due to the COVID pandemic two years ago, thousands of Minnesotans were forced to go on unemployment. The federal government loaned Minnesota more than $1 billion to meet the unemployment insurance demand, and that bill has now come due. Currently we are paying $50,000 a day just in interest costs, so this problem needs to be solved.
Unless the Legislature designates another revenue source, the default repayment is a 15% or more tax increase on every Minnesota employer. Fortunately, the state has other revenue sources to utilize to prevent this unnecessary financial punishment on local business owners. They include more than $1 billion in unallocated federal COVID relief dollars, as well our state’s $9.3 billion surplus.
Unfortunately, the House majority has been unwilling to use either one of them. In fact, House Democrats approved their updated budget targets this week. Those targets show a $7.4 billion increase in overall state spending, utilizing the majority of the state’s budget surplus. If approved, Minnesota would now spend $59 billion for the current two-year budget cycle.
Omitted in these budget targets: any funding for repayment of the UI Trust Fund. Because of this, one is left to speculate that the House majority has no intention of paying back the UI Trust Fund. If the trust fund is not repaid, it would result in ten years of higher taxes on employers.
It doesn’t have to be this way, and with all the challenges our local employers are facing - inflation, supply chain, and hiring issues – there is no reason to financially punish them when the state is sitting on a record surplus.
Worth remembering: The Minnesota Senate passed a bill to refill the UI trust fund on February 14 on a broadly bipartisan 55-11 vote. Replenishing the UI Trust Fund enjoys broad support from Governor Walz, House Republicans, Senate Republicans, and Senate Democrats, but has been stalled thanks to inaction by the House Democrat majority. It’s time for that inaction to end, and preferably, it would happen before April 30.
Talk to you soon,
Nathan