As new laws take effect in Minnesota, small businesses say costs will sting

Minneapolis house renovation firm Abundance Properties planned to hire new workers in 2025, but that may not happen. Keaveny Drug in Winsted may have to cut back or end deliveries.

After a year of inflation and uncertain economic conditions, new Minnesota laws add another layer of expenses that are making some businesses embrace decisions that favor stability over growth, the owners said.

“If anything, [the new laws] definitely make us kind of reassess, to make sure it’s financially feasible to have that new employee on payroll,” said Jordan Crockett, co-owner of Abundance Properties. “We have to really make sure it makes sense.”

A higher minimum wage, new health insurance mandates, higher unemployment insurance costs and an inflation-adjusted gas tax all took effect Jan. 1 in Minnesota.

Business experts say the laws will hit small businesses the most, especially outstate. And they worry about the collective punch of so many changes at once.

“The cumulative impact of these measures, from increased taxes to stricter regulations, poses significant challenges for Minnesota employers and employees,” said Laura Bordelon, senior vice president of advocacy at the Minnesota Chamber of Commerce.

The higher unemployment tax stings, “but we’ll just smile and pay it. It’s just an extra expense for us without any benefit,” said Deb Keaveny, owner of Keaveny pharmacy. She noted that some of her 14 employees worked at Keaveny Drug in Winsted for 30 years.

The higher gas tax and other costs come at a tough time for independent pharmacies. Hundreds have closed in the last five years as they struggle to compete with large pharmacy chains and with pharmacy benefit management firms that set the co-payments for patients and simultaneously set the prescription reimbursement rates for pharmacists. The latter rates often fall below their operating costs, pharmacists complain.