This week at the Capitol: Focus on jobless fund

The Minnesota Capitol in St. Paul
The Minnesota Capitol in St. Paul
Andrew Krueger | MPR News 2021

Fast-track legislation to patch a deep hole in Minnesota’s unemployment fund begins its march through the Legislature this week with a goal of averting automatic increases in business taxes.

A week into the new session, the proposal is part of a front-loaded batch of bills where there is conceptual agreement and some time sensitivity. Already, lawmakers have approved one bill to revive a lapsed worker’s compensation law tied to COVID-19. Short-term aid to hospitals and long-term care facilities dealing with staffing problems could be sped through, too.

The unemployment issue is deemed urgent given a debt that could trigger big spikes in employer assessments. Hearings are planned on competing bills in the House and Senate.

It goes back to the very beginning of COVID-19. When Minnesota, like most other states, imposed stay-at-home orders and other restrictions, it led to massive layoffs in hospitality, retail and other industries.

In the first month, Minnesota shed more than 400,000 jobs. And demand didn’t let up, as Department of Employment and Economic Development Commissioner Steve Grove told lawmakers in a presentation last week.

“By the time we were through, almost 1 in 5 Minnesotans had applied for unemployment insurance. One in five,” Grove said. “Most Minnesotans probably never thought they would ever need to engage in the system.”

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There were more than 1.3 million applications between March 2020 and September 2021, resulting in payouts of nearly $15 billion — some of it via federal benefit supplements — over that span. By comparison, there were $800 million in payments for all of 2019, according to DEED.

It wiped out what had been a healthy balance in the dedicated fund and required Minnesota to borrow $1 billion from the federal government to pay claims. Most other states did, too, but many of them have since retired their debt.

But officials say they also have to build the account back up to prepare for other draws on it. State law triggers various business tax increases in this situation. There’s emerging consensus that it would be better to tap into a projected budget surplus than put the burden on employers.

DFL Gov. Tim Walz has proposed taking $2.7 billion from the state’s budget surplus and plowing it into the account. That would both repay the debt and stock the fund to the point where taxes will not rise.

He said it’s an issue lawmakers shouldn’t get bogged down on.

Employers have already been told what their new assessments are. But those payments aren’t due until the end of March. Lawmakers will be working to get ahead of that payment.

Senate Republicans are in agreement with Walz and plan to outline their bill Monday and pass it soon. 

“The governor has been talking about it, the Senate has been talking about it, the House has been talking about it,” said Senate Majority Leader Jeremy Miller, R-Winona.

House DFLers say they also support a fix of some kind, but they want to pair it with other pressing things.

House Speaker Melissa Hortman, DFL-Brooklyn Park, said if the Legislature is going to put $1 billion or more into something to rescue businesses, it should spend that amount on those front-line worker checks that stalled out last year. 

Republicans want the two done separately and a lower amount in overall pandemic bonuses, so there could be a standoff.

Senate floor
State lawmakers gather in the Minnesota Senate chamber on Jan. 31 at the Capitol in St. Paul.
Glen Stubbe | Star Tribune via AP file

Public safety will continue to be a hot topic, and last week’s police shooting of Amir Locke in Minneapolis is expected to reverberate at the Capitol.

Walz has called for more changes to state law around no-knock warrants, which have been restricted under proposals adopted in recent years.

Rep. Esther Agbaje, DFL-Minneapolis and chair of the People of Color and Indigenous Caucus, said more regulations are needed. She said the caucus wants “meaningful changes in public safety this year.”

“We will be pushing for a statewide prohibition of no-knock warrants and further checks on unsafe police practices,” Agbaje said. “Everyone deserves to be safe in their own home.”

A leading pro-gun rights group is also questioning policies around this kind of warrant, perhaps giving Republicans a bit of cover.

But it puts a new dynamic into the public safety debate, which this year has been centered on adding more money and new approaches to fighting rising crime. 

Just last week, lawmakers of both parties promoted plans to recruit more police, perhaps through bonuses or tuition breaks.

Meanwhile, the status of Walz commissioner confirmations lingers in the background.

Many agency leaders are still in limbo three years into the Walz term.

Senate Republicans aren’t saying when they will act on them. A few are viewed as in danger of removal, including Housing Commissioner Jennifer Ho and Health Commissioner Jan Malcolm. 

Walz said during a Forum News Services panel discussion last week that he’s frustrated by what he sees as potential retribution against him, citing remarks by some GOP senators about taking prior confirmation votes to get his attention.

“There have been very public statements that these people are being removed because they disagree with my politics or are ideological rather than the individual,” Walz said, expressing hope that the new Senate leader will chart a different course.

Miller disputed the characterization, but he gave little indication of when and how his caucus might act.

“We do feel it’s important that commissioners interact and communicate with legislators. We may not always agree and that’s OK,” Miller said, adding, “nobody takes pride in voting to not confirm a commissioner. Trust me, it’s not a fun thing to do.”

Because of her role in the COVID fight, Malcolm has come up as an issue in the Republican governor campaign. Malcolm said she’s not considering a voluntary departure and isn’t focusing on her legislative fate. 

“We’re doing our best. Nobody says we’ve been perfect. But we’re working hard and I think doing good things for Minnesotans. I’m just focused on that,” Malcolm told MPR News in an interview last week. “The process will play out however it’s going to. I’m certainly happy to have those discussions but I’m not giving it a great deal of thought.”