Tim Walz’s Democratic vice presidential nomination highlighted his progressive reforms as governor, particularly the expanded Minnesota Child Tax Credit and the universal school lunch program. While these achievements justify the high-profile attention they have received, they risk overshadowing another seemingly less exciting but equally critical success: Minnesota’s ability to provide strong unemployment insurance protections for workers and families them.

Since 1935, the federal government has funded states to administer their UI programs. Because states have wide discretion in determining how to raise revenue, eligibility criteria, and benefit levels, there is significant variability in system performance among them.

UI has recently dominated headlines due to widespread dysfunction during the pandemic, particularly in states like California and New York, which have struggled with improper payments and escalating program debt. The situation has fueled the perception that these state programs are overly generous, contributing to fraud, tax insolvency and delayed job recovery. However, Minnesota, along with some of its Midwestern and Northwest neighbors, has demonstrated that it is possible to provide generous support to unemployed workers while maintaining strong program integrity.

A healthy unemployment insurance system should cover about half of unemployed workers—those who have eligible occupations and have been involuntarily separated—with benefits that replace about 50 percent of their previous wages. Minnesota Program meets these benchmarks closer than that of California or New York, with 59 percent of unemployed workers temporarily receiving benefits that this year, on average, replaced 44 percent of previous wages. However, despite its relatively high level of support, Minnesota managed to avoid the fiscal and administrative pitfalls that plagued too many other states. Between July 2020 and 2023, Minnesota maintained one of the lowest rates in the nation. improper payments and fraud.

Minnesota’s success in accuracy has not come at the expense News during the pandemic. During that period, the state consistently delivered at least 80 percent of first payments to applicants within 21 days of eligibility. California and New York left behindby up to 50 percentage points. This defies the common narrative that fraud protection inevitably slows down the process. If there is confidence that benefits are being distributed to the right people, approval can happen more quickly.

A key to Minnesota’s success is its program’s strong fiscal base, which allows the state to run a generous, affordable and efficient program. Regular UI benefits are funded by employer-level payroll taxes, with each state setting its own rates and taxable wage bases. Broad taxable wage bases provide stability and allow states to keep contribution rates relatively low compared to states with narrower bases. In 1983, Minnesota proactively indexed his taxable wage basepreventing the erosion driven by inflation that has plagued most states. Other states in the region, including Idaho, Iowa, Montana, Nevada, North Dakota, Utah, and Wyoming, made similar reforms during the same period. This more balanced approach allows these states to provide higher average weekly benefits than California and New York, which rely on higher rates to compensate for their narrow wage bases.

The pandemic has underscored the importance of maintaining fiscal discipline – or the consequences of failure. By the end of 2023, California and New York accounted for 99% of the remaining $27 billion in federal loan debtwho has severely limited their ability to expand their programs. While Minnesota also borrowed from the federal government, it was prudent on using available resources to pay down its remaining debt in 2022. This strategy allowed Minnesota to provide robust unemployment insurance benefits and recover more quickly from the unprecedented economic strain caused by the pandemic.

Calls for sweeping reform — whether to combat poverty or reduce widespread fraud — are common, but Minnesota’s approach offers a practical road map for policymakers in other states. Generous and affordable UI programs need not be synonymous with insolvency or integrity issues, provided states prioritize sound governance and responsible administration. Minnesota’s longstanding commitment to protecting the fiscal and administrative underpinnings of its UI program should not be overlooked by states seeking to establish unemployment systems that protect workers and their families.

Will Raderman is an employment policy analyst Niskanen Center. Joshua McCabe is Niskanen’s Director of Social Policy.

GovernanceHis opinion columns reflect the views of their authors and not necessarily his own Governanceits editors or management.