Debate on unemployment benefits for school workers derails key MN budget piece

Education continues to be one the biggest points of contention for Minnesota lawmakers putting the new state budget together, and a disagreement over unemployment insurance for hourly school workers has derailed progress with just two weeks left in the session.

This past week, it appeared that Democratic-Farmer-Labor and Republican House members found agreement to end a newly created unemployment benefit for hourly workers in 2028 — despite pressure from labor groups and the DFL’s progressive wing.

Historically, school staff like bus drivers, cafeteria staff and paraprofessionals did not qualify for unemployment insurance in the summer or other breaks in the school year. Backers of extending the benefit argued that it’s unfair to exclude those workers from unemployment.

DFL-controlled Legislature granted hourly school workers unemployment insurance in 2023, and while the state was set to fund it through 2027, school districts would eventually have to pick up the cost. Critics have said it’s an unfunded mandate for school districts and local taxpayers.

Change of course

A compromise education budget proposal ending the mandate, which had been signed by House Education Finance Co-Chairs Cheryl Youakim, DFL-Hopkins, and Ron Kresha, appeared to be headed toward the House floor this past week.

But the DFL changed course Wednesday in the House Rules Committee.

“We as Democrats are going to stand up for workers,” said Rep. Luke Frederick, DFL-Mankato. “We’re going to stand up for Minnesotans to make sure the best bills that get passed off the floor of the House are going to be the best that they can be. And this bill is not that.”

DFLers blocked the bill from moving forward in what would have been the bill’s final stop before a floor vote. The state House is presently tied 67-67 between the parties, so committees are split down the middle. The education finance bill stalled in committee in an 8-8 vote on Wednesday.

GOP response

Republicans said they were frustrated with the DFL making an about-face on an apparent deal as time left in the regular session dwindles. Rep. Peggy Scott, R-Andover, noted lawmakers only have a few weeks to pass the budget or they’ll have to return to the Capitol for a special session.

She also asked DFLers what else they might change in the education finance bill to reduce the burden of state mandates on local schools if they wanted to keep the unemployment insurance for hourly workers.

“If you’re going to stick that one back in what other mandates are you going to roll back so our school districts don’t continue to be in a deficit position, where they’re going to have to pass that down to the property taxpayers?” she said.

A flashpoint in negotiations

Unemployment insurance for hourly workers is not a significant portion of the state’s multibillion-dollar education budget. The 2023 bill provided around $135 million to cover the program for four years, though the state has already burned through most of that money at this point.

But even though it isn’t a huge portion of the budget, its emerged as flashpoint in negotiations on one of the biggest pieces of state spending.

Scott and other Republicans decried what they called DFL obstruction, though Rep. Michael Richard, DFL-Richfield, called the debate over unemployment insurance a policy matter, not a funding matter.

“The obstacle is Republicans insisting on extreme policy that harms workers,” he said. “The provision in question, to take away unemployment insurance for paraprofessionals, for our school bus drivers for workers making $17 an hour, is not necessary to pass our state budget.”

The sides haven’t given up on a deal. On Thursday, the Rules Committee moved to place the education finance bill on the calendar for a House floor vote on Monday, pending a new deal on education. A compromise hadn’t been publicly approved as of Friday evening.

Budget bills

A stream of budget bills continues to move through the Senate and House, though human services and education — the biggest spending areas in the current two-year state budget of a bit over $70 million — remain the biggest snags for lawmakers.

On the human services side, Republicans have been trying to cut state-funded health care benefits for people in the country illegally, which the DFL-controlled government also approved in 2023. There are also talks about cuts to the DFL-created paid family and medical leave program set to go live in January 2026.

There will be cuts this year, though just how big they’ll be and where they’ll happen is up for discussion as the clock continues to tick. Minnesota is set to have a $456 million surplus for the next two years, but that’ll give way to a $5 billion deficit in 2028-2029.

Walz proposed in his $66 billion two-year budget big cutes to long-term disability reimbursements and nursing home aid, as well as reimbursements for special education.

The regular session ends on May 19, and lawmakers have to pass a two-year budget by the end of June 30 or the state government shuts down. In the last decade, there’s been a special session every time control of government is split between the parties.