Republican leaders in the Minnesota House of Representatives are urging Gov. Tim Walz to provide relief for businesses from upcoming unemployment insurance payroll tax increases.
Due to the unprecedented surge in unemployment claims due to the COVID-19 pandemic, the Unemployment Insurance Trust Fund (UITF) ran out in July 2020. As a result, the state has borrowed over $1 billion to continue covering claims since then.
Starting Jan. 1, employer payroll taxes will increase to pay interest on the debt, pay off the debt, and restore the trust fund reserve to over $1.5 billion.
In a letter to Walz, the state GOP lawmakers are asking the governor to examine options to suspend tax increases until the debt is eliminated and the UI Trust Fund reserve is restored. They are also asking him to use unspent funds to replenish the reserves and pay off the debt.
“This is the rainy day for which our state has diligently prepared. While time is short to head off this potentially devastating tax hike, the state has significant surplus funds to help cover the debt and replenish the reserves. As of October 2021, over $1 billion in federal pandemic relief funds remain unspent, the budget reserves are full, and a multi-billion-dollar surplus is projected,” the letter states.
The lawmakers point out that 30 states have used federal pandemic relief funds to avoid or lessen UI tax hikes on employers who were able to survive the past two years.
“We urge you to join us in supporting small businesses with the use of surplus funds — including remaining American Rescue Plan money — to pay off the UI debt and help rebuild the trust fund reserve,” they added.