A plan to give out $216.5 million in state aid to Minnesota businesses suffering pandemic pain has backing from both parties at the State Capitol, but they remain split over unemployment benefits.

Republican and Democratic lawmakers have spent weeks negotiating a relief package meant as a financial bridge for Minnesotans struggling with the toll of COVID-19 and awaiting another round of federal aid. Gov. Tim Walz has urged the Legislature to approve a relief package during Monday's special session.

While legislators want to start distributing aid to businesses by the end of the month, they continued to clash Thursday over the scope of the state assistance. Negotiators agreed on an amount to be distributed to businesses, but they remain "too far apart" on unemployment insurance, said Sen. Eric Pratt, R-Prior Lake.

House Democrats say they won't send money to businesses unless there's relief for the unemployed along with it.

"We are not going to help business and then screw the people who have been laid off," said House Majority Leader Ryan Winkler, DFL-Golden Valley.

On Dec. 26, 100,000 to 125,000 Minnesotans could lose the federal unemployment benefits they rely on, said Rep. Tim Mahoney, DFL-St. Paul. He proposed allowing people to extend their unemployment benefits for 13 weeks, while Senate Republicans have suggested a five-week extension. Mahoney said people could use the additional unemployment benefits until April 24 under his plan, but the GOP set a March 20 deadline. Republicans also want a $200 million limit on how much the state could borrow from the federal government for the benefits.

Pratt predicted the federal government would act on unemployment in the next week.

"We wanted to do something that was truly a gap, they wanted to do something that was much broader," Pratt said. "We understand that this isn't just about business, that we have employees that have been laid off that are hurting as well, and those discussions are continuing."

Legislators are still working on other components of the COVID relief package, said Rep. Dave Baker, R-Willmar. He said he expects they will have an unemployment insurance plan in time for Monday's special session.

The work on business aid started last month after Walz ordered restaurants, bars, gyms and other entertainment venues to shut down for four weeks to prevent the spread of COVID-19, Pratt said. The new bill includes $100 million in relief for businesses hit by the closures that have seen at least a 30% reduction in sales compared with last year. The payments would range from $10,000 to $45,000.

Pratt said he hopes to get that money out to business owners in a matter of days.

The business aid package also includes $102.5 million that counties would distribute to local businesses and $14 million for movie theaters and convention centers.

"It really is a time for emergency action," said Liz Rammer, president of Hospitality Minnesota, which represents restaurants, hotels and other industries. "We really have an opportunity here to provide that lifeline to those operators and give them some financial relief until more assistance comes from the federal government."

A state budget forecast last week put Minnesota in a more favorable position to dole out some extra cash. The outlook for the current two-year budget, which ends June 30, went from a $2.4 billion deficit to an expected $641 million surplus.

Democrats have also been pushing for $500 payments for low-income households. Rep. Mohamud Noor, DFL-Minneapolis, proposed using $15.7 million from a federal fund already designated for needy families to give one-time payments to families with children.

"I know some people will say that those poor people don't deserve anything. But these are Minnesotans, they are struggling at this moment of need. With the economic crisis, with the health crisis, we need to stand up for every family, for every individual," Noor said.

State leaders have closely watched Congress as they consider different pieces of their Minnesota aid package. After a half-year deadlock, federal lawmakers appear to be close to a relief deal. A bipartisan package that some in Congress have been pushing for would include unemployment benefits, small business aid and funding for education, rental assistance, health care providers and other needs.

"Everybody is looking out of the side of their eye to what's happening in D.C.," Walz said earlier week. "If Washington provides what they should have many months ago in help to businesses and help to individuals, will that change the calculus of what Minnesota should do? Yes, yes it will."

The state wants to help fill any gap in COVID assistance, but it needs Congress to act, said House Speaker Melissa Hortman, DFL-Brooklyn Park. She said many Minnesota businesses are going through the toughest time in their history, and some workers and families are struggling to hang on financially.

It's like state officials are watching their neighbor's house burn, Hortman said. They are trying to put out the fire with a garden hose, she said, and waiting for the fire department to arrive.

Jessie Van Berkel • 651-925-5044