Texas Lyceum: Stimulus Funds Debate Reverberates

The harsh truth: Austinites are losing their jobs, just like other Texans and just like workers in the rest of the U.S. And in this dire economy, lawmakers are working on legislation to shore up the unemployment-insurance system – including mechanisms to receive the $555 million in federal stimulus cash that Gov. Rick Perry says he won't accept.

The statistics are straightforward. In Feb­ru­ary 2008, 3.8% of the civilian labor force in the Austin-Round Rock area was unemployed. By February 2009, that figure had soared to 6.3%. That's better than both the state and national figures (6.6% and 8.9% respectively, according to the Texas Workforce Com­mis­sion) but still means 54,900 people in Austin and 780,800 statewide are without a job and looking. That means more people claiming benefits and more pressure on the state's Unemployment Trust Fund. In Febru­ary, staff for the state House Select Committee on Federal Economic Stabilization Funding forecast the fund will run a $447 million deficit by October. In March, they increased that dire estimate to $812 million.

The $555 million for unemployment insurance contained in the federal stimulus sounds likes a solution, but on March 12, Perry said he would reject that portion of the $16 billion package. Like the statistics, Per­ry's argument is simple: The unemployment stimulus comes with too many strings attached and will increase the tax burden on employers.

Yet if Texas hits the projected unemployment fund imbalance, a deficit tax will be triggered automatically, raising the unemployment rate on employers from 0.99% to 1.94%. The federal cash won't prevent that burden, but it can delay it. House Appropri­a­tions Committee Chair Jim Pitts, R-Waxahachie, explained, "It's either an increase in tax today or an increase in tax tomorrow, and the business community will pay a whole lot more if we don't take the UI money."

That argument came to a head at an April 3 panel discussion held by the Texas Lyceum. Joining Pitts from the Lege were House Select Committee on Federal Economic Stabilization Funding Chair Jim Dunnam, D-Waco, and Senate Democratic Caucus Chair Leticia Van de Putte, D-San Antonio. For the governor, his legislative director, Ken Armbrister, said Perry had looked earnestly at the offer ("Who wouldn't look at $500 million?" he said), but complying with the new federal requirements would mean changing Texas law, making this "government by fiat." Perry remained committed to his principle of not expanding government, and, Armbrister noted, "The governor has to sign off, and he's accountable."

But Van de Putte, Pitts, and Dunnam, all of whom support taking the money, remain unconvinced. Dunnam issued a bleak prognosis ("If we lost over 100,000 jobs in the last six months, God help us, what's going to happen in the next six?"), while Van de Putte was baffled by Perry's decision, especially since Texans would pay taxes to pay off the stimulus eventually. "Why would we treat unemployed families in North Dakota better than Texas families?" she pondered.

Even if Perry reverses his position, Texas would still need to pass reforms. The core change necessary for receiving the federal money is changing the base period used to calculate eligibility to include the most recent quarter of employment – which is currently excluded in Texas. The state would also have to adopt two further standards from a list of options to ensure compliance. Scott McCown, executive director for progressive think tank Center for Public Policy Priorities, said the changes would "modestly expand the proportion of people who are eligible" – by 45,000 people. That's less than the 55,900 Texas jobs that disappeared in January, but, McCown added, "it would help."

There's a battery of compliance legislation pending, led by House Business & Industry Com­mit­tee Chair Joe Deshotel, D-Port Arthur, and Senate Economic Development Committee Vice Chair Kevin Eltife, R-Tyler. Most of Deshotel's bills are still in committee, but Eltife's omnibus Senate Bill 1569 is heading to the floor. It would enact the necessary base-period reform and would allow people eligibility if they had to quit their jobs for compelling family reasons or if they are looking for either full- or part-time jobs. That last one is a significant step for women, who are more likely than men to hold part-time jobs and more likely to be rejected for unemployment benefits. Deshotel has filed bills on these issues, including base-period reform, "for the last four or five sessions, but the way the situation exists today," he said, "with the stimulus package out there as a carrot, these really need to be done."

If Perry digs his heels in, Pitts said, there are resolutions pending in Appropriations that can override his decision. But if Perry vetoes the reform bills, then the state would not be in compliance, so no money. To avoid that, said McCown, "We're going to have to persuade the governor that, if you look at the numbers, this is the right thing to do."