February 26, 2009
Will we or won't we fix unemployment insurance?

There's a lot of money riding on the answer to that question.

The lure of $555 million in federal stimulus money for additional unemployment insurance has Texas legislators mulling whether to expand unemployment benefits to more workers.

To get that money, Texas would have to implement some key changes to state law -- including modifying some eligibility requirements to include tens of thousands of low-wage workers. Such changes have been considered but not enacted in previous sessions.


Gov. Rick Perry is reviewing the American Recovery and Reinvestment Act signed by President Barack Obama this month and the strings attached to all the money, a spokeswoman said.

The unemployment money would be the mostly likely candidate if Perry were to reject anything from the stimulus package.

Perry has said the stimulus money should be used only for one-time projects, not ongoing expenses.

"The hardest thing to remove from government is a temporary program," Ken Armbrister, Perry's legislative director, said at a Wednesday hearing.


The federal money could lessen the need for new taxes on business, said state Rep. Mark Strama, D-Austin, who is chairman of the Technology, Economic Development and Workforce Committee.

"Failure to adopt the policy changes ... would result in a higher burden on business taxpayers in the immediate and near term during the recession" than would expanding the benefits, Strama said.

I can understand the reluctance to taking one-time money for potentially ongoing expenditures. But sometimes these are things you should have been doing anyway, and will at worst take on a relatively small expense while getting a worthwhile return on it. A little more analysis and a little less sloganeering would go a long way here.

The Workforce Commission is still determining how much the change would cost.

But an analysis of a similar 2007 bill put the price tag at about $35 million to $45 million a year as 74,000 additional workers would become eligible for benefits, according to the Legislative Budget Board.

The number, however, would probably be somewhat higher given today's higher unemployment rates.

That change alone would open the door to Texas receiving $185 million of the stimulus money.

The Legislature has some options for how to tap the remaining $370 million. Lawmakers would need to enact two of four policy changes, such as allowing people to get benefits while searching for part-time work.

The Center for Public Policy Priorities, which advocates for low-income Texans, estimates that all of the reforms combined would cost $55 million to $75 million a year, so the federal money could cover the costs for seven years or more.

No one knows the true cost because that would be driven by how many more people took advantage of the benefits, said Talmadge Heflin of the Texas Public Policy Foundation, which advocates for limited government.

"The upside is all short-term," Heflin said. "The downside in future years will greatly outweigh any upside."

Funny, you could say the exact same thing about those big property tax cuts we enacted last session when we had some extra cash lying around. I don't recall there being a whole lot of angst from certain quarters about how we were going to pay for it going forward - there may have been something about the beauty of the free market, or the Laffer curve, or magic pixie dust, I'm not sure. You want to talk about something that's tough to get rid of, try repealing an irresponsible tax cut. In contrast, this would cost about $150 million per biennium - likely less in the future when the economy improves and more people are working again - which is about 0.2% of the total state revenue we have for this period. It would also help a lot of people who could really use it, and would be quite economically stimulative, as the recipients would be spending all that money on frivolities like food and housing. Seems like an easy decision to make, if you ask me. Patricia Kilday Hart sums up the hearings, in which Texas Workforce Commission Chair (and former chair of the Republican Party of Texas) Tom Pauken spoke in favor of getting stimulus money, as follows:

So, to review:

1. An escalating unemployment rate means the trust fund is paying out 120 percent more than it did this time last year and

2. At current rates, the trust fund will be broke by fall and

3. Bill Hammond [of the Texas Association of Business] doesn't want to take any federal stimulus money to fix it because somebody might have to pay higher taxes in the future.

Like I said, seems like an easy call to me. Press releases from the AFL-CIO of Texas and Senators Rodney Ellis, Eddie Lucio, Leticia Van de Putte, and Representative Joe Deshotel, who are urging Governor Perry to declare this a legislative emergency, are beneath the fold.

Senator Rodney Ellis (D-Houston), Senator Eddie Lucio (D-Brownsville), Senator Leticia Van de Putte (D-San Antonio) and Representative Joe Deshotel (D-Beaumont) have sent a letter to Governor Rick Perry urging him to designate reform of the Texas Unemployment Insurance System an emergency for the 81st Texas Legislature. Each legislator has filed legislation to improve Texas' unemployment insurance system.

While Texas does not yet face double digit unemployment, as Michigan does, the economic forecast is not rosy. According to the Texas Comptroller of Public Accounts, the Texas economy will lose 111,000 jobs in 2009, and the unemployment rate is expected to rise from 6 to 8.2 percent. The recently passed Economic Recovery Act offers $555.7 million to Texas to shore up its shaky unemployment fund, but the state must first pass a series of reforms to be eligible. Unfortunately, even as Texas accepts stimulus funds, some continue to say the state should reject unemployment funding, simply because it requires small changes to the program.

"I've heard the concerns that the unemployment funding in the federal stimulus package come with 'strings attached', and I don't care," said Ellis. "To a Texan who has lost a job and worries how they are going to keep their home and pay their bills, that aid isn't a string, it's a lifeline -- one which will help their family get through hard times."

"It's unfair and unnecessary to burden families and businesses with hundreds of millions of dollars in extra taxes and bond debt," said Lucio. "The unemployment legislation I've proposed with my colleagues Senators Van de Putte and Ellis is a quick and smart way to energize the economy and to help Texans struggling to support themselves. The fact is, fixing our unemployment insurance system helps fix our economy."

"The number of unemployed Texans has risen by 132.2% since last year, these Texans are hurting now, this isn't an abstract ideological debate for them," said Van de Putte. "The unemployment stimulus money can make a real difference in their daily lives. We owe it to them to pass this legislation, they can not wait and neither should we."

"Texas can ill afford to turn down over one-half billion dollars targeted to bring relief to the tens of thousand Texas families negatively impacted by this global economic crisis," said Deshotel.

Texas' unemployment insurance fund faces a massive shortfall which, without swift action, could lead to an automatic tax increase on Texas businesses. Under Texas law, the insurance trust fund has to maintain a certain balance -- today, approximately $850 million. If the fund falls below that threshold, a "deficit" tax is levied on nearly all Texas businesses.

According to the latest estimates, by September 2009 Texas unemployment trust fund will have reserves of only $100 million -- about $750 million below the floor. In addition to the tax increase, the shortfall could mean an end to important economic development programs, including Governor Perry's Enterprise Fund.

To take advantage of the federal stimulus aid, Texas must:

* Join 21 other states -- including New Mexico, Oklahoma, Georgia, North Carolina, and Virginia -- in modernizing the way it calculates unemployment benefits. Texas currently disregards the most recent three to six months of a worker's earnings when calculating eligibility - a practice only needed when claims were processed manually.

* Allow those seeking part-time work to be eligible for pro-rated benefits. When the economy bounces back, many of the new jobs may begin as part-time employment and eventually become full-time. Nearly half of the states currently award benefits to part-time workers.

* Pass family-friendly legislation to allow benefits for spouses who quit their jobs because their wife/husband is transferred to another part of the state. The Legislature already made this change for military spouses.

Texas AFL-CIO President Becky Moeller today sided with legislators who want to make an increase in Unemployment Insurance benefits an emergency item in the 2009 legislative session.

"Almost every day so far this year has brought news of mass layoffs. People are hurting," Moeller said. "It doesn't do to tell the thousands of workers who are wondering how they will earn a livelihood that Texas isn't yet doing as badly as other states. The time to take action is now."

Moeller praised Sen. Rodney Ellis, D-Houston, Sen. Eddie Lucio Jr., D-Brownsville, and Sen. Leticia Van de Putte, D-San Antonio, along with Rep. Joe Deshotel, D-Beaumont, who asked Gov. Rick Perry to give legislative priority to help for jobless Texans.

"These and other legislators get that the crisis we face now in our economy calls for decisive action," Moeller said.

"The growing legions of jobless Texas workers who have earned access to the subsistence funds provided by Unemployment Insurance take offense when some ideologues liken lawmakers who supported the economic stimulus package to drug dealers. This is needed medicine for working families who are afraid for their futures."

Moeller said the stimulus package is good for workers, but it is also good for businesses that will benefit from the ability of jobless Texans to spend money in their local communities. Moreover, employers will pay much higher UI taxes in the coming months to cover a growing deficit in the jobless fund if nothing is done.

The changes in law required to get the money clearly fit within the premise that unemployment benefits go to those who lose their jobs through no fault of their own, Moeller said.

"Texas is at the bottom of the heap among the states in serving workers who lose their jobs. Four out of five unemployed workers are ineligible for benefits under the current system," Moeller said. "Texas must act quickly and boldly to send a message that it stands ready to help more workers who are down on their luck."

"Texans know the difference between 'thrifty' and 'mean.' Improving the Unemployment Insurance system is an essential step toward economic security for all Texas working families."

Posted by Charles Kuffner on February 26, 2009 to Budget ballyhoo

This is why I advise all of my clients to become self employed and establish multiple streams of income.

Posted by: J. Michael Warner on February 27, 2009 10:48 AM
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