Off the Kuff Rotating Header Image

replenishment tax

Playing politics: Not just for the Forensic Science commission

Hey, you know that two billion dollars of federal funds we need to borrow to shore up the unemployment insurance trust fund? I’m sure you’ll be shocked to hear that Rick Perry’s appointees on the Texas Workforce Commission are thinking about delaying the inevitable tax hike to pay for all that until after the 2010 elections.

A plan to delay the worst of tax increases until 2012 is circulating at the Texas Workforce Commission, which is expected to set next year’s rates on Nov. 3.

Commissioners face an unappealing choice: Hammer businesses next year or spread the pain out over several years. Some experts say that while it’s understandable the commission would want to defer pain as long as possible, a blow that comes just as the recession wanes could crimp job creation in the state.

“It’s a big gamble in many ways,” said Don E. Baylor Jr., senior policy analyst at the Center for Public Policy Priorities, which advocates for low- and middle-income Texans. “We’re basically saying, ‘Hey, we’ll get out of this the same way we got out of it the last time, which was just gangbuster economic growth.’ And I don’t think anyone’s forecasting that.”

Bill Hammond, president of the Texas Association of Business, the state’s largest business organization, also expressed caution.

If commissioners try to postpone heavy tax increases for two or more years, “they might be overdoing it a little bit,” said Hammond, a former Dallas state representative who was the commission’s chairman under Gov. George W. Bush.

“Employers know that we’ve got to pay the piper” after a severe recession, he said.

When even Bill Hammond says that putting off a tax increase might not be such a hot idea, you know it’s a really risky idea.

No decision has been made, but commissioners could suspend for two years an assessment that makes up for shortfalls in the fund, which has been tapped out and living on federal loans since July.

They’d also issue $2 billion in bonds at the end of next year, to pay off the feds before any interest kicks in, triggering bond repayment taxes that could last until 2019.

Even with the extended delay of taxes, most employers would pay about 50 percent more next year than this year, according to a Dallas Morning News analysis of historical tax yields and recent commission documents. This year, nearly 75 percent of Texas businesses paid $23.40 per worker into the fund.

If the commissioners don’t issue the bonds and don’t suspend a “deficit assessment,” then employers probably would be squeezed harder next year than they have been in 21 years. The tax paid by most employers could go up fourfold, and maybe even more than that, the newspaper’s analysis indicates.

[…]

Earlier this year, Perry and lawmakers rejected $556 million in federal stimulus money that would have eased the state fund’s shortfall. Perry said the money would have come with too many strings attached, such as liberalized treatment of people quitting their job to follow a spouse to a new location or unemployed workers seeking only part-time work.

Last year, Perry pushed the three workforce commissioners, who are his appointees, to suspend collection of part of the tax, saving employers $90 million. He also trumpeted $148 million of refunds to employers, required by law when the fund balance passes $1.7 billion.

This year, just over $1 billion was collected from employers, while the state’s on track to pay out some $3.5 billion.

Just so we’re all clear on who we can thank for this.

So about all those stimulus funds

Remember how Governor Perry had argued against states receiving federal stimulus dollars? Well, he still doesn’t want them, though he’s giving himself some waffle room.

Gov. Rick Perry said Tuesday he’s not sure the state should accept all of its projected share of federal stimulus money — $16.9 billion and counting by preliminary estimates — because of the “mile-long” strings that might be attached.

“In Texas, we actually know it is a good idea to look a gift horse in the mouth. If we don’t, we may end up with an old nag,” said Perry, who has been critical of such federal spending and voiced concern over whether the state could afford federal strings.

“One thing that concerns me is that dollars are going to come into Texas that require us to match those dollars, and then two years from now, those federal dollars won’t be there, but we will be on the hook to pay for those programs going forward,” Perry said.

Funny, I don’t recall that being a condition for property tax cuts. But that’s Totally Different, because, well, it just is.

According to a preliminary legislative analysis, economic stimulus provisions that affect the Texas budget could total about $16.9 billion.

Perry didn’t say which programs he was referring to, and spokeswoman Katherine Cesinger said his staff still is looking over potential allocations to Texas.

One program that raised concern early on was funding for unemployment insurance that would be contingent on state changes allowing more jobless people to become eligible, Cesinger said.

That would be the unemployment insurance fund that we stopped fully funding awhile ago.

Rep. Jim Dunnam, D-Waco, who heads the state House’s Select Committee on Federal Economic Stabilization Funding, said it’s hard to understand the GOP governor being reluctant to take stimulus funding.

“The governor every year comes in and wants half a billion dollars for the (state) enterprise fund to create jobs and stimulate economic growth and he’s going to say we don’t want $20 billion?” Dunnam said. “I find it difficult to understand.”

Perry said he welcomes federal dollars for one-time infrastructure improvements, such as transportation.

“You’ve got plenty of roads and re-doing some things down in Galveston County and that part of the state hurt by the hurricane. We’ll gladly accept those dollars. But we need to say, ‘No, thanks,’ if they’re trying to stick a bill on the state of Texas to expand government,” Perry said.

And what, road and reconstruction projects always come in under budget? Anything we undertake now might wind up costing more later. That doesn’t mean they’re not worth doing. Heck, some things turn out to be sufficiently worthwhile that we decide to spend more on them later. What are we afraid of?

I accept that sometimes federal monies come with unpalatable requirements. I don’t mind having a debate over those things, as long as the Lege gets to express an opinion as well. These decisions need to be made on a larger basis than Rick Perry’s primary campaign. We can always include a sunset provision on anything we’re not sure we want to keep funding two years from now. BOR has more.

UPDATE: In the end, Governor Perry has decided to take the cash. Since that’s what I wanted him to do, I’ll spare the snark about being against it before he was for it. But that doesn’t mean you have to! Here would be a fine place to express your sarcasm. Just be careful about what email address you use.

When you look up “short-sighted” in the dictionary, this will be cited as an example

That’s our Governor, for whom the expression “penny-wise and pound-foolish” is a way of life.

Nearly a year ago, Gov. Rick Perry trumpeted $90 million in savings to businesses by temporarily suspending some of the burden of paying unemployment insurance taxes — money meant to replenish the unemployment compensation trust fund.

The suspended tax was reinstated this month, but officials said it won’t be enough to bridge the gap between the $414 million the state expects to be in the fund Oct. 1 and the $861 million it’s supposed to have.

By law, the fund must keep an amount equal to 1 percent of all taxable wages in Texas.

Now the Texas Workforce Commission must decide whether to raise the tax, issue bonds to meet the shortfall or see if the state could use an interest-free federal loan, said commission Chairman Tom Pauken, a Perry appointee who took office after the tax was suspended by the commission last year.

Pauken said jobless claims will be paid, and that last year’s suspension of the tax didn’t cause the problem.

“We will have the money to pay for the claims,” Pauken said Wednesday. “Here would be my concern: You don’t want to raise taxes substantially on employers at a time when it’s really tough to keep the doors open and keep people employed.

“So we want to try to — if taxes have to go up — make it as modest as possible to fund the system and look at other alternatives first,” he said.

[…]

The replenishment tax is just one part of the unemployment insurance tax. Last March, Perry directed the state to “bring that (replenishment) tax to a screeching halt for this year” when the fund stood at $1.6 billion.

By the end of 2008, the trust fund balance had fallen to $1.3 billion, Pauken said.

So we’d have still had a deficit, but it would have been $300 million less had it not been for Perry’s profligacy, the consequences of which no one could have possibly foreseen last year, when the economy was still peachy. Yeah, that’s the ticket.