Unemployment Fund situation dire
Thu February 26, 2009 12:10 pm

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.

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