On Monday, Senator Paul Gazelka (R-East Gull Lake) joined his Senate Republican colleagues to pass legislation authorizing $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.  

“Senate Republicans are committed to helping Minnesota workers and our small businesses as the state continues to work past the pandemic and unnecessary government shutdowns,” Sen. Gazelka said. “We made a promise at the start of the pandemic, and we’re following through. We need Governor Walz and House Democrats to follow suit quickly too. If we don’t resolve this before March 15, the tax increase will take effect and crush businesses and job creation. At that point, only folks responsible will be those in Democrat leadership.”

On January 1, 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 accrued over $4 million in interest alone to the federal government on the debt. The $2.73 billion in appropriations from SF 2677 would use about $1.15 in American Rescue Plan Act funds and the rest from the $7.7 billion surplus to pay off the debt and interest owed to the federal government and also replenish the trust fund to pre-pandemic levels. The state is currently paying about $70,000 a day on interest charges to the federal government for the loan.  

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 the Minnesota Department of Employment and Economic Development (DEED), it would take nearly 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.