Today Senator Eric Pratt (R-Prior Lake) proposed $2.73 billion to immediately pay off the state’s $1.2 billion in Unemployment Insurance (UI) debt and refill the fund to protect employees’ benefits. Sen. Pratt was joined at a press conference by Senator Jason Rarick (R-Pine City), Representatives Barb Haley (R-Red Wing) and Gene Pelowski (DFL-Winona), and with leaders from the Minnesota Chamber of Commerce and the National Federation of Independent Businesses.
On January 1st, 2020, the UI Trust Fund balance was $1.7 billion. Unemployment Insurance claims during the pandemic drained the fund to a negative balance of $1.2 billion in debt to the federal government. Every dollar from the UI trust fund went directly to employees. Minnesota has accrued over $8 million in interest alone to the federal government on the debt. The $2.73 billion in appropriations from SF 2677 would pay off the debt and interest owed to the federal government and also replenish the trust fund to sufficient levels. The state is currently paying over $50,000 a day on interest charges to the federal government for the loan.
“This bill affirms our commitment to fiscal responsibility in paying down the unemployment insurance debt, but more importantly, we are looking out for employees by replenishing the Unemployment Insurance fund for future use,” said Pratt. “This bill has broad bipartisan support because it preserves one of the most important benefits for employees. Many other states have already paid off this debt, but by keeping Minnesota’s balance active, the state is being charged interest daily. This cost is then being passed onto consumers and taxpayers across the State, and with a surplus of $7.7 billion, there’s no excuse for this. What’s worse, we’re risking the accessibility of a benefit that was critical for employees and employers throughout the last two years. With inflation already presenting a financial burden to Minnesotans in every industry, it is our responsibility to preserve and protect this fund for future use by eliminating the debt and ensuring taxpayers do not incur that responsibility.”
Until Minnesota’s UI trust fund reaches a level of funding considered adequate by the federal government, Minnesota businesses will also be penalized through higher federal taxes to increase the available funding. According to DEED, it would take over 10 years of additional higher taxes on businesses to replenish the UI trust funds in order to blink off additional taxes and end the federal government tax penalty.