By Rep. Kristin Robbins

Guest Columnist

Minnesota businesses, despite surviving closures and continued uncertainty, are now facing a new challenge. The Unemployment Insurance (UI) Trust Fund, or UITF, currently owes nearly $1.1 billion in debt to the federal government. Minnesota, like many states, began borrowing from the federal government in the summer of 2020 to pay a surge in unemployment claims caused by the Governor’s shut-downs in response to COVID. The UITF needs to restore a balance of approximately $1.6 billion to meet federal solvency requirements. Approximately $2.6 billion in total is needed for full solvency.

In addition to the current $1 billion in debt to the federal government, we are racking up significant interest payments every month. Current interest accrued for the fiscal year is already about $4.2 million, but thus far, we have only paid $35,000 in interest payments.

Until the UI debt is repaid and the UITF reserve is restored, Minnesota businesses, through no fault of their own, will face large unemployment insurance tax increases from both the state and federal governments.

MN DEED will be sending letters to employers confirming the tax increase the week of Dec. 8 to 15th. Conservatively, it looks like most businesses are facing a combined federal/state UI tax increase of 15-20% for 2022. If we don’t pay off the debt in 2022, UI taxes will continue to rise in subsequent years, based on the amount of debt and the formula.

Unlike FICA taxes, UI payroll taxes are the entire responsibility of the employer, not employee, so the burden of repaying the UITF falls solely on business owners.

Thirty-one other states paid back their UITF debts by using funds from the CARES Act or American Rescue Plan. Despite a surplus and over $1 billion of federal pandemic relief funds, Minnesota has put $0 towards paying down our UITF debt.

I began sounding the alarm on this pending tax increase more than a year ago and introduced a bill in the 2021 session to address it. My bill, HF 2455, would have required the state to use the first $2 billion of the federal American Rescue Plan (ARP) funds to replenish the UITF “before any additional assessment, special assessment, or other state unemployment tax rate increase is calculated or imposed on taxpaying employers.”

At the end of the last special session in June, the Legislature set aside $1.1 billion in federal ARP funds to address future COVID-related expenses. I am working with my colleagues and a group of business leaders to develop a proposal to use that $1.1 billion, as well as some of the expected state budget surplus, to repay our UITF debt and replenish the reserve so employers won’t be on the hook for these large tax increases.

Surprisingly, Democrat members of the Senate announced last week that they oppose using the federal ARP money to repay the UITF debt, arguing that employers should “pay their fair share” and pay the UI tax increase to repay the debt.

It is unconscionable that government would force businesses to close and then require them to pick up the tab for debt incurred to provide unemployment benefits. Businesses didn’t want to shut down – they were required to. If they are forced to pay a double-digit tax increase, many will not be able to make it.

Small businesses are still trying to recover from their losses during the closures and are continuing to struggle with labor shortages and supply chain problems. The last thing businesses need is a substantial UI tax increase. We must work quickly to solve this crisis and help Minnesota’s job creators.

Rep. Kristin Robbins, R-Maple Grove, is the House District 34A representative. The district covers the cities of Dayton, Maple Grove, and Rogers.

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