When Covid was at its height, and businesses were being shut down by state government there was a promise to make them whole. Government grant programs popped up to support business-grants that were competitive and had to be applied for.
The promise was that those who most needed the support would receive it. Local people ramped up their takeout ordering and picked up retail purchases from the curb. It was a great message. It was real.
So why is it that now businesses are being hit with rising government cost that was created during covid shutdowns? The Unemployment Insurance Trust Fund is a tool that pays for unemployment costs at the state. This fund was depleted during covid and now that the deficit in the fund hasn’t been filled, an automatic tax increase has hit every business and non-profit across the state of Minnesota.
For some businesses this may result in a few hundred-dollar increase, for others, it is thousands of dollars. Without action rates will result in an increase of $250-$850 per employee.
A local business explains that they kept all their employees on the payroll during covid shutdowns to do right by their people. Now their unemployment bill increased over 200% through this automatic state level adjustment. It’s a bill they have to pay until or if the state makes the fix.
Why isn’t it fixed? They have a $9+B surplus.
In a bipartisan vote the Senate passed a full fix of $2.7B to cover the $1.3B owed back to the federal government and $1.4B to replenish the UI fund. The governor says he supports the fix. House republicans say they support a clean fix. The House DFL supports repaying the UI fund too, but are tying in Hero Pay with the UI fix. This is where the bill has stalled.
“This should be nonpartisan, there’s adequate resources available, there’s federal dollars available,” said Minnesota Chamber of Commerce President Doug Loon in a recent interview. “Other states have done this easily, but yet Minnesota seems to be in a stare-off position that can be avoided.”
What’s the impact to business?
The UI increases take money out of employers pockets at a time when wages are increasing, product costs are going up and supply chain is slow. For some businesses, recovery from covid losses is still real.
Even if the legislature fixes the problem, and we certainly hope they do, getting those overpayments back will be a complicated process. Even the state’s commissioner of the Department of Employment and Economic Development (DEED), Steve Grove, is concerned about the process. In a Twitter post on March 15th he says, “From today forward, changing UI taxes gets more complex & will take way more time to administer. Let’s do this now.” This was in reference to replenishing the UI Trust Fund.
What about hero pay?
The debate is about how much should be spent giving money to front line workers from the covid pandemic. The House DFL wants to spend $1B on hero pay and the Republican controlled Senate wants to spend $250M. That gap hasn’t been resolved and at this point it seems neither the UI Trust Fund nor Hero Pay will be resolved until the end of session in May.
In the meantime, businesses across the state will spend more on a tax that most in the legislature and governor’s office don’t think they should pay. It is time to get this UI Trust fund problem fixed and hold businesses harmless for a problem they didn’t create.