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Payroll tax hikes could come next week as impasse stalls Minnesota jobless fund repayment, hero pay

Legislative leaders emerged from closed negotiations without budging on their positions. Republicans wanted to pass a $2.7 billion bill to repay the state's jobless fund and Democrats said they wouldn't agree without first paying checks to front-line workers.

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House Speaker Melissa Hortman, D-Brooklyn Park, on Tuesday, April 7, 2020, gavelled into session to take up a proposal expanding workers' compensation coverage for first responders sickened with COVID-19.
Dana Ferguson / Forum News Service

ST. PAUL — Minnesota business owners are set to see payroll tax hikes next week as legislative leaders continue negotiations about a path forward for a plan to repay the state's jobless fund and send out hero checks to front-line workers.

But whether business owners will be expected to pay those taxes or could later see some of the money returned remained at issue this week.

Minnesota has to pay back the federal government more than $1 billion after the state borrowed the money to pay out unemployment claims during the pandemic. An unprecedented number of Minnesotans — almost one in five workers — pulled down jobless benefits in 2020 and 2021 due to state mitigation efforts and altered consumer demands.

The state also has a looming deadline to replenish the state's empty fund to $1.3 billion. Without it, state law says that payroll taxes will be increased to help bring more money into the fund. And letters announcing that increase are set to roll out on March 15 unless a bill can be signed into law before then.

The Minnesota Senate has approved and Gov. Tim Walz has said he supports a $2.73 billion plan to repay the federal government and replenish the unemployment insurance trust fund. And they've said the Legislature should pass the bill quickly, without any other provisions.

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But Democratic-Farmer-Labor leaders in the House of Representatives have said they're unwilling to approve the bill unless it is paired with a $1 billion plan to send hero checks out to front-line workers.

Twice this week, House Speaker Melissa Hortman, DFL-Brooklyn Park, Senate Majority Leader Jeremy Miller, R-Winona, and Walz met in private to try and reach a deal that could avert the tax increases. But after both conversations, the leaders remained unmoved.

“There’s no willingness to negotiate on giving money to workers on the part of the Republican Senate, so all they want to do is cut taxes for businesses and do anything for workers, so we’re not interested in that,” Hortman said after lawmakers left a Thursday meeting.

Miller said that Senate Republicans didn't plan to support a plan to tie the trust fund bill and hero pay checks together. He and Hortman said there were no additional negotiations planned over the weekend, though Hortman said she left her schedule open for additional meetings.

In the face of an impasse, Republican lawmakers and business leaders on Thursday held a news conference to urge House lawmakers to pass the unemployment insurance bill before Tuesday.

"We hit a point of no return on Tuesday, the billing cannot stop," House Deputy Minority Leader Anne Neu Brindley, R-North Branch, said.

Minnesota business leaders echoed that concern and said that even if managers had until the end of April to pay their taxes, many would do so sooner. And they said businesses would struggle to pay the extra payroll tax tacked on given higher inflation, drained savings and residual damage incurred by the pandemic.

"The clock is ticking and it matters," Minnesota Chamber of Commerce President and CEO Doug Loon said. "March 15 was the date the system picked, it happens to be the Ides of March. Now I'm not a Shakespearean actor and we're not in a Shakespearean play, this is real ... it matters to the workers of Minnesota, it matters to businesses and we need to have a solution."

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Hortman and other DFL lawmakers in the House disagreed that March 15 was the firm date by which they had to act. They also said lawmakers should consider that some businesses thrived during the pandemic and shouldn't get a leg-up from the state.

“It is not a hard deadline, if you look at Minnesota statute, regarding unemployment insurance, the quarterly payments are not due until April 30, so we have until April 30 to reach a resolution on this issue,” Hortman said. “If the Senate Republicans were willing to give front-line workers the bonuses that they deserve and they have earned, we could pass this all today.”

MORE FROM DANA FERGUSON:
Several incumbent state legislators, particularly in the Senate, edged out competitors with more extreme views on COVID-19, election security and more.

Follow Dana Ferguson on Twitter  @bydanaferguson , call 651-290-0707 or email  dferguson@forumcomm.com.

Dana Ferguson is a Minnesota Capitol Correspondent for Forum News Service. Ferguson has covered state government and political stories since she joined the news service in 2018, reporting on the state's response to the COVID-19 pandemic, the divided Statehouse and the 2020 election.
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