Unemployment: Gov. Perry Ask the Feds for a Loan After Refusing the Free Money

[Update: The Austin-American Statesman gives its take on the situation and forecasts tax hikes for businesses as a result of Governor Perry's decision.]


 

The unemployment rate in Texas continued to rise in July, hitting 7.5 percent statewide, according to the Texas Workforce Commission (TWC). The losses came as the national unemployment rate reached a 26-year high, and they were concentrated primarily in four economic sectors in Texas: Construction, Trade/Transportation/Utilities, Manufacturing, and Professional/Business Services.

The release of the new data coincided with news that Governor Rick Perry requested an initial loan of $170 million—with the option to borrow an additional $500 million later in the year—from the federal government to help pay unemployment benefits despite having rejected $555 million in Recovery Act funds meant to help states cover shortfalls in their unemployment funds. Those funds that were made available to Texas under the Recovery Act were in the form of grants that the state would not have had to pay back, while the current line of credit that Governor Perry has requested will leave the state with an obligation to repay the federal government.

Continue reading below for a full analysis of the unemployment numbers and how the state is planning to provide benefits to jobless Texans.

The rise in unemployment was most pronounced in South Texas, as jobless rates surpassed 10 percent in the Brownsville-Harlingen and Beaumont-Port Arthur areas and over 11 percent in the McAllen-Edinburg-Mission area. Other areas in the state being hit hard by the recession include Houston, which has lost 69,600 jobs in the last year and seen its unemployment rate hit 8 percent.

 

Metropolitan Statistical Area (MSA) Unemployment Rate # of People Unemployed Poverty Rate
McAllen-Edinburg-Mission 11.1% 33,100 37.5%
Brownsville-Harlingen 10.4% 15,700 37.1%
Beaumont-Port Arthur 10.2% 18,700 16.5%
El Paso 9.6% 29,300 28.2%
United States 9.5% 15,095,000 13.3%

 

As those numbers continue to rise, the state's unemployment trust fund is being pushed beyond its limits. The fund, which was already forecasted to be depleted later this year, has approached insolvency faster than state officials estimated, prompting the request from Governor Perry for federal loans. And as Representative Mark Strama pointed out last week, the decision to turn down federal stimulus grants will cost taxpayers large sums, since these new loans will have to be repaid. Another larger concern for the state should be the fact that the unemployment trust fund has been exhausted despite Texas providing benefits to only 28 percent of its unemployed. That number is the lowest among all states, with only the District of Columbia having a lower rate. In fact, one of the stipulations tied to the Recovery Act unemployment funds was aimed at increasing that percentage, something Governor Perry was unwilling to do.  The low rate means that while 285,000 unemployed Texans were receiving benefits as of last month, hundreds of thousands more were going without.

The state has borrowed federal funds for this purpose before—in 2003, the state was authorized to borrow $500 million.  After borrowing $280 million of that total, the state was forced to issue $1.4 billion in bonds to repay the debt and refill the unemployment trust fund.

Delving deeper into the unemployment numbers reveals troubling trends in important industries. One quarter of job losses over the last year have come in the Trade/Transportation/Utilities sector, and that sector combines with the Construction, Manufacturing, and Professional/Business Services sectors to make up almost 90 percent of all job losses in the state since June 2008. That means the state has lost a large number of well-paying jobs over the last year, as the average hourly wage in those sectors ranged from $17.28 to $22.52. [To search for statewide wage and employment data in any sector, click here and scroll down to the "Wages by Profession" link.] The TWC release neglected to mention any anticipated impact of Recovery Act funds on those key sectors, and without stringent reporting requirements it could prove difficult to gather any specific data regarding their impact on the quantity and quality of jobs.

Unemployed Texans got one piece of good news, at least, when TWC reported they would in fact be able to release additional employment benefits on time. The 13-week extension of benefits for jobless Americans was included in the Recovery Act, but TWC had said it was having trouble figuring out how to process the funds, leaving many to fear a delay that could have been disastrous for many households that are depending on those funds. In all, the federally funded extension could provide up to $380 million in benefits to Texans.