Minnesota lawmakers reach deal on unemployment insurance taxes, worker bonuses

Minnesota lawmakers say they have settled one of the biggest questions of the legislative session.

Legislative leaders' deal includes $2.7 billion to refill the state's unemployment insurance fund, $500 million in bonus payments to reward workers on the frontlines of the COVID-19 pandemic, and $190 million for the Walz administration's response to the pandemic.

"The final deal’s a good deal for the people of Minnesota and we’re happy to get it done," Senate Majority Leader Jeremy Miller, R-Winona, told reporters Thursday.

The frontline worker bonuses will average $750 for 667,000 workers. Top lawmakers agreed to use the distribution system approved by the House in February, which makes workers in 15 industries eligible for the checks, including health care, grocery stores, food service and child care.

The $500 million pool is half the size that House Democrats had sought in negotiations. The DFL favored $1,500 bonus checks.

"We eventually had to decide whether frontline workers were going to get a bonus, or there would be a risk of nothing," House Speaker Melissa Hortman, DFL-Brooklyn Park. "Absolutely I’m frustrated. I can’t imagine how Senate Republicans can look at our frontline workers and say they didn’t earn a $1,500 bonus."

Top lawmakers planned to pass the bill and send it to Gov Tim Walz's desk before the weekend. That speedy movement will require agreement among all four caucuses to suspend the House and Senate rules.

The $2.7 billion for the unemployment insurance fund will repay a federal loan and bring the account's balance back to required levels. Without legislative action, state law requires businesses to bear the burden through payroll tax increases, and quarterly payments are due April 30.

"Lawmakers finally using available funds to replenish pandemic-induced unemployment debt is welcome but long-overdue news," Minnesota Chamber of Commerce President Doug Loon said in an emailed statement.

Yet the last-minute deal comes too late to avoid the tax increase because there's no time to recalculate and send out updated bills before Saturday, state Department of Employment and Economic Development officials said.

So, lawmakers extended the quarterly tax payment deadline to May 31 from April 30 by waiving fees and penalties for nonpayment. Businesses that have already paid the higher tax will get the money back through refunds or credits, a process expected to take two or three months.

Business groups, economic development officials, Walz and Senate Republicans had said that March 15 was the true deadline to avert a tax increase. House Democrats considered April 30 the deadline to pass legislation.

Businesses have already paid in $90 million in first quarter payments, state officials said. A total of $427 million is due, though the deal would cut that nearly in half, to $230 million.

Meanwhile, the worker bonuses came together after a nine-month stalemate over how to reward people who worked at their jobsites during the pandemic.

To claim a bonus, a worker would need to: have worked at least 120 hours in an eligible industry between March 15, 2020 and June 30, 2021; not have been eligible for telework; and not have collected unemployment benefits for more than 20 weeks during that period. Income is capped at $175,000 for people who worked with COVID patients and $85,000 for all others.

Workers will eventually need to apply to the state Department of Labor. The agency is waiting until the bill passes before building out the application portal, a spokesman said.

It could take a few months before checks get sent out, said state Sen. Karin Housley, R-Stillwater, who was involved in the negotiations over the worker bonus provision.

Separately, the deal gives Gov. Tim Walz authority over $190 million in general fund money for the state's pandemic response.

The agreement does not include $161 million to make hourly school workers eligible for unemployment benefits during the summer months. House Democrats had inserted that provision into a bill earlier this week, and top DFLers said they would continue pushing for the change later in the legislative session.

Lawmakers have now used $4.2 billion of the state's projected budget surplus and federal relief cash since the start of the session. It leaves roughly $6 billion in available money over the next year.