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Minnesota Lawmakers Poised To Pass Deadline To Replenish Jobless Claims Fund, Spare Businesses Tax Hike

ST. PAUL, Minn. (WCCO) -- A divided Minnesota Legislature is still at odds over a proposal to replenish the state's unemployment trust fund, which means businesses in the state are poised to see higher tax bills come Tuesday, a deadline set by the state agency handling payroll taxes that support jobless claims.

Without a deal, businesses could see on average a 30% increase on those bills, according to the Minnesota Department of Employment and Economic Development (DEED), though there are variables that impact taxes owed by each employer.

DEED Commissioner Steve Grove said employers have already begun submitting tax information at a higher rate for this quarter, and that the rate will increase "dramatically" after March 15, a deadline he hoped lawmakers would meet.

"UI taxes are complex, and we want to make sure everyone has an accurate, timely bill," Grove tweeted Friday. "Delaying past March 15 creates confusion for businesses, and it might take months to recalculate bills and provide refunds to businesses who overpay."

Minnesota owes the federal government more than $1.2 billion it borrowed during the pandemic to keep the fund afloat when it faced a surge of people who were out of work due to COVID-19. A bill that got bipartisan support in the Senate pays the debt and fills the account back up at a price tag of more than $2.7 billion.

This plan has the support of Grove and Gov. Tim Walz.

"That fund provided incredible support and has stopped folks from losing their homes or not being able to eat," the governor said Monday. "That needs to be there if this happens again."

For design and consulting firm WSB in the Twin Cities, the increase is to the tune of $90,000.

"That's a significant increase when we're already faced with a lot of inflation and supply chain issues we're trying to juggle right now," said Bret Weiss, CEO of WSB, who also pointed to the competitive job market. "Any other cost that we have that takes away from benefits we're trying to provide makes it more difficult to retain staff."

House Democrats' proposal would pay back money borrowed for the UI fund, but not replenish it.

They also want to tie $1 billion for frontline worker bonus checks to any deal, which is an also overdue promise that Democrats cite as their top priority. Lawmakers agreed to approve the money by Labor Day and haven't done so months later.

In a letter to Gov. Tim Walz and GOP Senate Majority Leader Jeremy Miller last week, DFL House Speaker Melissa Hortman cited state law that states unemployment insurance taxes must be received by DEED "on or before the last day of the month following the end of the calendar quarter," suggesting the actual deadline for a deal is April 30, not March 15.

"The unemployment insurance trust fund is designed to go from surplus to deficit when the fund is tapped," she wrote. "State law provides a mechanism to refill the fund, which was agreed to by business and labor years ago. Employers pay more when the fund is in deficit to replenish the reserves. Conversely, when the fund gets a surplus, the state may take action to allow employers to pay less."

She wrote that House Democrats wanted negotiate both issues "expeditiously." But as of Monday, legislative leaders and Walz still had no deal. Now businesses are bracing for the increase as they begin filing those taxes.

"It happens to be the Ides of March," said Doug Loon, CEO of the Minnesota Chamber of Commerce in a news conference last week. "But I'm not a Shakespearean actor and we're not in Shakespearean play. This is real."

Walz said he has instructed DEED to have a contingency plan, since the legislature won't meet the agency's deadline.

"There have been some that have suggested, 'Well, just tell those businesses to wait,'" Walz said. "In my experience, I would not wait on the legislature to get something done, that there'd be a guarantee by the 30th of April."

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