Unemployment Fund situation dire
At yesterday’s hearing of the Texas Senate Nominations Committee, Texas Workforce Commission Chairman Tom Pauken didn’t mince words about the dire situation facing the state’s unemployment rate — and the fund the state relies upon to pay unemployment benefits. The Unemployment Compensation Trust Fund will be flat broke sometime next fall if current unemployment trends continue. Pauken was forthright, but not alarmist: he has reasonable-sounding plans in mind for borrowing money to keep the system running. But his remarks certainly put in perspective the on-going argument over whether the state should take $555 million in federal economic stimulus money. As you know, Gov. Rick Perry is suspicious of the “strings” attached to the federal dollars — which include using a more timely data that would help unemployed workers get assistance faster. According to the Austin American-Statesman, Texas “disregards the most recent quarter and uses the previous four quarters.” Some people believe this particularly affects low-wage workers who go in and out of the workforce.
Here’s a report from Texas Monthly intern Abby Rapaport, who covered yesterday’s hearing:
At the Senate Committee on Nominations yesterday, there was a sight to see: A Reagan Republican working hard to ensure that stimulus dollars came to Texas. In the testimony of the Texas Workforce Commission, Thomas Pauken, former GOP chair of Texas, explained that the situation was dire. “This is the toughest economic situation I’ve seen in my life time,” he said, before explaining that unemployment benefit payments are over 120 percent of what they were this time last year. Pauken explained that the Unemployment Compensation Trust Fund would undoubtedly go below its floor spending, and may well be at a zero balance by September or October.
Pauken explained his eagerness to get people their unemployment payments, a program he described as decidedly not welfare. “Anyone who seeks benefits and is entitled to benefits should receive them,” he said.
To pay for this, Pauken seeks a compromise to the stimulus package, in which the state pays back interest free loans with modest tax increases and a seven year blended-bond. In his view, once the state is no longer using the stimulus dollars, it should not be bound to stimulus’ restrictions.
“It’s our money,” he said. “Let’s find a way to get it back…that doesn’t impose a burden on us once it’s gone.”
Pauken’s strong position stood in stark contrast to Andres Alcantar, who refused to comment on his personal position regarding the package. “For those matters in front of the legislature, I have to remain a neutral provider of information,” he said.
Sen. Kirk Watson, who actively questioned Pauken, disagreed, telling Alcantar, “I believe that your job as representative of the public is to make a decision.” Sen. Kevin Eltife and Sen. Robert Nichols seemed glad of Pauken’s efforts, thanking him profusely. But Jane Nelson pointedly thanked Alcantar for his work. “I agree that the stimulus is a decision that needs to be made by the legislature,” she said.
There have been some experts who have opined that Texas, once it takes the stimulus money, is locked into how it operates its Unemployment Insurance Fund. Pauken’s remarks sound more reasonable to me: how could the feds dictate the actions of future Legislatures?
Meanwhile, the debate continues to rage before Rep. Jim Dunnam’s select committee. Dunnam has taken umbrage to remarks from Texas Association of Business president Bill Hammond, who, concerned that businesses might have to pay higher unemployment insurance in future years, compares the stimulus money to free drugs dispensed by a dealer in hopes of creating new addicts.
And over at the Texas Workforce Commission, a special alert has been issued on its website, telling unemployed workers seeking assistance that their phones have been inundated, and advising new ways to file for benefits.
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 doesn’t want to take any federal stimulus money to fix it because somebody might have to pay higher taxes in the future.
Tagged: texas senate nominations, texas workforce commission, tom pauken, unemployment compensation trust fund
anon says:
Ms. Intern … you didn’t tell folks that Andres Alcantar is one of three appointed members of the TWC, which includes the chairman, Tom Pauken. Where was the other appointee?
To Sen. Nelson …most appointed members of a commission take their job seriously, and once they have been on the job for awhile are much more up to speed on any given subject than you elected folks are. I know … I watch many of your hearings. It would appear to me that Mr. Pauken had studied the situation enough to form an opinion and share it with you. You would do well to listen.
As for Mr. Alcantar …it would appear that he was not as up to speed on the subject as he could have been. That’s always a good reason for not venturing an opinion. Did he, indeed, offer any pertinent info in the hearing, Ms. Rapaport, or was he just responding to the question, “What do you think should be done?”
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Anonymous says:
Tom Pauken wanting to borrow money for the government or eager to take federal dollars: this is either the second coming of Christ or we have all entered the Twilight Zone.
Has anyone see Rod Serling’s ghost around the Capitol?
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Mo Charlo says:
Another large part of unemployment is linked to the preparation and workforce readiness of the high school graduates that Texas public school systems produce. The one-year in college/technical/vocational school plan won’t fix it, but it’s a start.
Statistically, Texas high school graduates are more than prepared for the oldest profession.
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anon says:
Politician?
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Anonymous Reply:
February 26th, 2009 at 2:08 pm
Republican.
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Antonio says:
Uh Paul, I believe you’ve made a mistake. The quote from the story: “unemployment benefit payments are over 120 percent of what they were this time last year”. You then say that “the trust fund is paying out 120 percent more than it did this time last year”.
Maybe what you meant to say is that the trust fund is paying out 20 percent more than it did last year. 120 percent “of… last year” equals 20 percent higher than last year.
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David Siegel says:
It’s hard to think of any other part of the recovery money coming to the state that would get into the economy faster than unemployment benefits. What are these people messing around for? Take the money and get it to the folks who need it.
Don’t forget — to qualify for UI you must have lost your job through no fault of your own. It’s not welfare. It’s insurance.
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Bill Hammond says:
The reality is that today’s “free money” is tomorrow’s tax on jobs. Our state is facing some very difficult times. As the voice for Texas business, it is the TAB’s charge to do everything we can to promote good government that helps employers create and retain good jobs with good wages and benefits for all Texans.
The federal money could dry up in as little as three years, which means employers could be left holding the bag unless the changes instituted as a result of accepting federal dollars are reversed. As a former member of the Texas Legislature, I know this is highly improbable.
By accepting this portion of the federal stimulus, Texas employers will be left to make up the gap when the money from Washington is gone. This plan would require changing Texas law and leaving businesses on the hook for the UI deficit that could soar to hundreds of millions of dollars in just a few short years.
If Texas were serious about tightening its belt, it could easily put a stop to the abuses and exploitation of current unemployment laws that could save up to $478 million per biennium. Unfortunately, many want to take the “free money” in lieu of making tough decisions like closing our current unemployment loopholes.
Rep. Dunnam’s plan will effectively be a tax on Texas jobs, and will ultimately drive more Texans toward unemployment. The Dunnam Job Tax Plan could put many small businesses – which provide an overwhelming majority of Texas jobs – at risk.
Texas is by no means immune to the financial downturn, but we have fared better than other states because we aren’t hasty with our economic decisions.
Each of the strings attached to accepting federal money have been repeatedly introduced and shot down by the Texas Legislature. The people of Texas have spoken. We hope that the Texas Legislature can recognize the detriment that will come by accepting this money.
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Ed Sills says:
Of course, Bill Hammond is correct in asserting that past Legislatures have not acted on a variety of Unemployment Insurance issues, but just as this Legislature may not bind future Legislatures, past Legislatures do not bind this one.
And, Lord knows, we need a precedent. Can anyone reading this remember the last day in which a major company didn’t announce mass layoffs? Just in my ever-shrinking former field of journalism, only in the last 24 hours the San Antonio Express-News laid off 75 capable newsroom employees and the Rocky Mountain News announced it would cease publication. High-tech friends in my neighborhood are falling by the wayside. Industry after industry, company after company, worker after worker are in crisis.
This isn’t like past years when Texas was riding high. Our state is not immune from the layoff scourge and to say we can afford to leave half a billion dollars on the table to satisfy ideologues makes no sense at all in this economic environment. People are hurting. Texans are hurting.
In past decades, Texas faced a series of situations in which the federal government tied highway funds to the passage of legislation mandating auto safety. The libertarian strain in our Legislature rebelled, but ultimately, lawmakers held their noses and passed the laws because improving our roads was in the best interest of Texas.
The real test of whether this Legislature has returned to the days of bipartisanship will be whether on the issues that truly matter it can stand up and say that lawmakers did what was best for this state.
Yes, the laws Texas needs to pass to obtain the Unemployment Insurance money will cost employers an estimated $80 million a year. That’s a small fraction of the $2 billion to $3 billion that the system will pay out next year. The first seven years of the added cost to employers will be paid for by the stimulus funding. Maybe we can manage a recovery in that time and reduce UI taxes as a result.
But if, as Bill Hammond suggests, the Legislature does nothing for the sake of ideological purity, two things will happen: First, workers will get the message that this state, which has an eligibility rate so low that four out of five unemployed workers don’t qualify for benefits, still believes in its heart of hearts that Unemployment Insurance is welfare rather than an earned benefit and that taking UI benefits that one has earned is often a form of fraud (a point not backed up by prosecutorial statistics.) Second, employers will pay hundreds of millions of dollars in higher taxes just to maintain the lousy system we have because next October’s UI deficit will reflect that we let half a billion dollars sit on the table. It’s like the reverse of the old air filter commercial: you can pay me later or you can pay me now.
Anyone who thinks that refusing to accept a half-billion dollars intended for jobless Texans is good for Texas should first have a chat with some of the thousands of workers who are being laid off day by day in this, the meanest recession of our lifetimes.
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Can't tell if I'm a slacker or an addict or just someone laid off through no fault of my own says:
Anyone who is unemployed in our state needs to fax a resume to Bill Hammond for assistance in finding a job. He is, after all, a powerful and important businessman who has connections across Texas. Surely he’ll help since he’s so concerned about the current unemployment situation and its future. The fax numbers for the Texas Business Association are 512-477-0836 and 512-320-0280. Or if you’d rather call, that number is 512-477-6721.
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texun says:
If the lege takes Hammond’s advice, he’ll find himself with a Democratic governor and House in 2011. Then we’ll see how TAB fares. Talk about shooting oneself in the foot!
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Chill out, kids says:
Mr. Hammond, if you’re still with us, I’d appreciate a response, because your statement doesn’t seem to make sense.
Please (sincerely) correct me where I’m wrong:
1. The unemployment trust fund is about to be in a deep, deep hole.
2. Legally, the hole must be filled; the fund cannot go into default.
3. There are three sources of revenue to fill the hole: assessments on businesses, federal loans, and bonds — but really just one source, since the loans and bonds must eventually be repaid by assessments on business.
4. Texas has just stumbled into a huge new revenue source that would help fill this hole right now: a half-billion dollars that we’re going to have to send to Washington in taxes anyway.
5. Should we take the money, we’d get it up-front, and the policy changes it pays for would be spread over a number of years. Furthermore, the legislature can choose at some point down the road to rescind the policy changes, meaning we’d be exactly where we are now, except businesses wouldn’t have had to pay a half-billion dollars in assessments in 2009-10.
6. But if we don’t take the money, then businesses will have to come up with a half-billion dollars very quickly to help balance the unemployment trust fund.
So, from a business standpoint, how on earth does your argument make any sense? You want your members to eat a half-billion dollars worth of assessments right now because, politically, it’s impossible to shrink government down the line? Doesn’t your blow-the-doors-off experience in the 78th indicate otherwise? Why on earth would Tom Pauken, of all people, disagree with your free-market position if he didn’t think it were sort-sighted at best?
And really, when one does the math, isn’t your position, not Rep. Dunnam’s, the Job Tax Plan?
All of that said, if Mr. Hammond was somehow put off by the freaks who never graduated from phone number-specific bathroom graffiti, I’d genuinely appreciate someone setting me straight if any of the above is off-base.
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B/CS Observer says:
Paul, you need to put more time into looking into this issue, both at Pauken’s motives and at what the changes proposed would do to the long term fiscal health of the state.
I don’t know how much attention ya’ll have been paying to Pauken lately, but he has been issuing press releases left and right on stuff that is way outside his purview. I think he is angling for a statewide run in 2010. And he is telling the members just what they want to hear- “If we take this money everything will be butterflies and rainbows, and no one will ever have to make a real decision ever again.”
The changes the stimulus would require the state to make to accept the money would raise the cost of the program forever. Part time workers have no business being covered by unemployment insurance, and the stimulus drastically reduces the period you have to work to be eligible for benefits. Sorry, to get benefits your boss should have been paying taxes on your salary for a while. The cost in the next biennium alone, when the stimulus goes away, might be more than the help being offered.
And unless the economy improves a lot, the 2011 biennium may have a 2003 revenue estimate. The last thing we should do this biennium is expand obligations like CHIP and UI only to cut them in two years because there is no money.
I think Armbrister is a pretty astute observer of the Lege. I think his characterization of how temporary the “temporary” eligibility changes will be is spot on.
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Anonymous says:
Paul – it is not appropriate for this blog comment stream to be used to encourage people to harrass someone at their home.
I don’t care for Bill Hammond and frankly think he is a dishonest a**hole. But he has a family and they are not part of this and are entitled to their security & privacy.
And before some clown out there says “this is public information” – there is a big difference between personal information that is public and publicizing personal information and encouraging crackpots to drive by and harrass a family in their home.
Please remove that post. Thank you.
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Eileen Smith Reply:
February 27th, 2009 at 10:21 am
It’s been removed. Please, people, home addresses? Cease and desist. Those comments will be deleted and we don’t want to have to blacklist you.
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Eileen Smith Reply:
February 27th, 2009 at 10:27 am
But if anyone wants Burka’s home address, they should know he sleeps in his office. Murphy bed.
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John Ask says:
Politicians should already have compromised on current Texas policies. Whatever it takes for the stimulus money to get to the unemployed (through no fault of their own) and back into the Economy is simply what needs to be done. I worked 23 years straight without missing a single paycheck before losing my job and need the stimulus money/extended benefits desperately. My benefits ran out 7 weeks ago and my wife and I are living off her $690/mo. Disability. I’ve reduced my acceptable starting wage from suggested 90% of previous job down to 25% and applying everywhere. I finally got our mortgage loan modification approved and now can’t come up with the one-time $988.14 down payment required before our monthly payments get reduced from $680/mo. to $288/mo. Dianna & I need the available help, not a dogmatic debate. Someone please help. -John Ask age 51.
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