ST. PAUL, MN — A $2.73 billion proposal, SF 2677, to immediately pay off the state’s $1.2 billion in Unemployment Insurance (UI) debt today passed out of the Senate, said Senator Mary Kiffmeyer (R- Big Lake). This bill would pay the accruing interest, replenish the trust fund, protect employees’ benefits and help businesses survive.

On Jan. 1, 2020, Minnesota’s UI trust fund balance was $1.7 billion. However, the many people claiming unemployment during the pandemic greatly drew down the UI trust fund to the point where it hit zero. As a temporary solution, the state borrowed money from the federal government resulting in a negative balance of $1.2 billion in debt.

The state is currently paying over $50,000 a day on interest charges to the federal government for the loan.  

“Last year, we tried to get Governor Walz to repay the federal government earlier using the federal emergency assistance fund to avoid daily interest. It is very frustrating that the governor knew this back then and our state has continued to incur more debt since,” Kiffmeyer said. “Now, the governor is looking to do this at the end of session in May thus accruing even more interest. We need this done before March 15 when three premium surcharges would take effect.”

Employees do not pay into the unemployment insurance fund. This is paid by the employer and is a special charge that goes on every paycheck. Until the fund reaches a level considered adequate, state businesses would be penalized through a total of 16.5% average higher premium surcharges. 

“If employers are required to pay higher premiums, they will not have the money to hire employees and increase salaries or buy new equipment. And it puts at risk future employee benefits,” Kiffmeyer said. “Small businesses, which make up 75% of all businesses, are already struggling due to the pandemic. Those who survived could now be forced to close due to these greatly increased premiums. Paying off Minnesota’s UI debt is just good government. Our businesses and employees need the Legislature and governor to get this done now.”

According to the Minnesota Department of Employment and Economic Development, it would take more than 10 years of additional higher taxes on businesses to replenish the UI trust funds to blink off additional taxes and end the federal government tax penalty.

SF 2677 will now go to the House of Representatives for further consideration.