Today, Senator Jason Rarick (R-Pine City) joined his Senate 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.  

“There is no better way to kill job growth in Minnesota than to leave this Unemployment Insurance issue unaddressed,” Sen. Rarick said. “When the pandemic shutdowns began, thousands of Minnesotans were laid off and relied on this fund. We promised our small businesses that we wouldn’t hold them responsible for replenishing that fund. Unfortunately, we haven’t followed through. Now, our employers face the potential of a business breaking tax. This legislation allows us to keep our promise, replenish the fund, and get Minnesota’s economy back on track.”  

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.