Today Senate Republicans 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.
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.
“We need to do what’s right by our businesses and their employees, and the right thing to do is pay down this crippling debt so we can ensure its accessibility for employees’ future use,” said Senator Karin Housley (R-Stillwater). “Somehow, the State has managed to carry this balance far longer than necessary, despite being sent federal dollars meant to pay it off—many states have already paid off similar debts! Minnesota is currently incurring over $50,000 a day on interest charges—a cost that gets unfairly passed onto consumers and employees. It’s time for Minnesota to follow the lead of other states and pay off this debt. In doing so, we are helping main street businesses by upholding our promise to them, and we are protecting and preserving one of the most important benefits for employees!”
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.