Lawmakers poised to miss deadline to block business tax hikes

Melissa Hortman and Jeremy Miller
House Speaker Melissa Hortman, DFL-Brooklyn Park and Senate Majority Leader Jeremy Miller, R-Winona after a negotiating session with Gov. Tim Walz at the Capitol this week. A plan to plug a hole in the state’s unemployment fund is stalled and now appears unlikely to pass by a fast-approaching deadline of Tuesday.
Brian Bakst | MPR News file

Updated: 6 p.m.

Minnesota business leaders, many lawmakers and the state agency that oversees unemployment benefits have had March 15 circled on the calendar. That’s when they had hoped to have resolved a $1.3 billion debt in the state’s unemployment trust fund and refill it to a level where automatic tax increases on businesses wouldn’t kick in.

The fund was drained when unemployment spiked during the early months of the COVID-19 pandemic.

Tuesday is the first day the Department of Employment and Economic Development expects to begin processing quarterly payments from businesses, which are due to shoot up at a double-digit rate without a fix. Businesses deserve certainty, said DEED Commissioner Steve Grove.

“Once those checks come in, we've officially taxed businesses at that level and unwinding it gets complicated,” Grove said. “So March 15 is an important day for that reason.”

The Republican-led Senate has passed a $2.7 billion bill to head off the increase. But no companion measure has cleared the House, where DFL leaders say it should be coupled with long-delayed approval of “hero checks” for workers on the front-lines during the pandemic.

An effort to force an immediate House vote failed Thursday.

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There’s general agreement that a fix of some kind will eventually pass, though it’s unclear when. But the session’s first big skirmish isn’t sending very promising signals about how the rest of the year will go as lawmakers decide what gets done with a projected $9 billion surplus.

Neither side appears to be flinching, and a final vote by Tuesday seems doubtful.

Republicans stood with business leaders Thursday to blast their Democratic counterparts for inaction.

“If you don't think these taxes on employers are going to impact every Minnesotan, then I mean we're not living in reality,” said Rep. Anne Neu Brindley, R-North Branch, adding that businesses are already coping with supply chain woes, energy price spikes and generally high inflation.

Republican lawmakers and a business owner
Eric Gibson, who runs a 60-person sign company in Chanhassen, attended a news conference on Thursday with Republican lawmakers at the Minnesota Capitol to urge the House to pass a fix to the unemployment insurance trust fund so that his taxes don't go up.
Brian Bakst | MPR News

“I really want to urge House Democrats to do the right thing here,” Neu Brindley said. “Put the bill on the floor, let it get a vote. Whether that's up or down, let folks vote on this bill.”

House Speaker Melissa Hortman, DFL-Brooklyn Park, said it’s Republicans who won’t budge. She said the Legislature promised as part of a summer budget deal to give bonus checks to those who risked their own safety to do essential duties during COVID-19. But that’s stuck, too.

“Providing bonuses to front-line workers is something that we should be ready to act on right now,” Hortman said. “This is something that's been pending since the June agreement.”

Republicans have balked at the $1 billion plan the House approved over the bill’s size and the number of people eligible.

Walz said he’d like a grand deal if possible.

“I've said all along, it seems like a natural fit,” Walz said this week. “The House has passed a proposal building on what we passed in May to get front-line worker pay their money. We think it's a great economic stimulus. We think it does right by those most hurt by the pandemic. And then the Senate has passed the UI. It seems like the natural fit to me would be to couple those two things together.”

But the DFL governor said getting the unemployment fund problem solved now is critical, suggesting a commitment to get agreement on the pandemic bonuses could be the way to go.

As for the unemployment situation, Hortman isn’t convinced March 15 is as pivotal of a deadline as Republicans and the Walz administration have made it out to be. Current law gives businesses until the end of April to get payments in before facing any penalties. The Legislature can extend the deadline if it wants, Hortman said. And she noted there’s a built-in credit system for those who pay more than they actually owe.

“If I were a Minnesota employer and I were watching the debate at the Capitol, I would be paying closer to April 30 than March 15,” Hortman said. “March 15 would be the earliest somebody would decide to cut a check and send in the amount that they owe on unemployment insurance.”

Minnesota Chamber of Commerce President Doug Loon said that’s not how many businesses operate.

“Us sending a message ‘Don't pay your bills,’ that's not a good message,” Loon said. “Businesses pay their bills. And when they get a bill that's going to be above what they paid last time, they're going to be surprised. They're not going to be happy. They're going to wonder why the Legislature didn't get its job done.”

He said the missed deadline would be unfortunate. 

“It happens to be the Ides of March. I’m not a Shakespearean actor. And we’re not in a Shakespearean play,” Loon said. “This is real. This is real dollars and cents. It matters to the workers of Minnesota. It matters to businesses.”

Eric Gibson is one of those business owners. He runs a 60-person sign company in Chanhassen. Gibson said the unemployment fund ran dry because of safety measures taken during the pandemic and businesses shouldn’t bear the brunt. He didn’t budget for a higher tax.

“If this comes through, and we have to pay additional cash that I didn't have budgeted in the account, something has to go,” Gibson said. “People may have to go, trucks may have to go that I need to do the job.”