unemployment
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.
Moving Forward With the Recovery Act
Some Texas legislators are going ahead with efforts to implement provisions of the ARRA, despite Gov. Rick Perry's objections to certain portions of the federal bill. At least one state legislator, Representative Sylvester Turner, has filed a resolution that would effectively circumvent the governor and allow the legislature to accept and allocate ARRA money. The resolution takes advantage of a provision in the law that allows state legislatures to accept any and all ARRA funds in the event that they are rejected by the governor, as is now the case here in Texas. (To read the relevant provision, see the highlighted section attached to this post.) Texas legislators are moving forward in other ways, too.
Rep. Turner's resolution came on the heels of a similar motion passed through the Mississippi House of Representatives, and other states are now considering comparable measures. A major sticking point for Gov. Perry and other governors who have considered rejecting ARRA funds is the requirement that states adopt certain minimum regulations with regard to citizens' eligibility for unemployment benefits. For his part, the Governor asserted that an increased burden would have to be shouldered by Texas employers, and that the state would have to take on extra expenses once the $555 million in federal money was exhausted. The announcement came at a time when many Texans are hurting, as more than 75,000 jobs were lost in January of this year, and the outlook for employment in the state is certainly not encouraging.
Legislators in Texas have filed at least ten bills that deal with some or all of the changes that are necessary to draw down the full allotment of ARRA unemployment funds. Four of those bills - Rep. Deshotel's HB 2623, Rep. Parker's HB 3153, Sen. Lucio's SB 1421, and Sen. Eltife's SB 1569 - propose modernizing Texas' unemployment guidelines to fit with the federal regulations. So, if the legislature decides to override the governor's decision to reject $555 million in unemployment benefits, and if it then enacts these changes to current regulations on the state level, then the state could receive the full sum to which it is entitled under the ARRA.
Rep. Turner also filed a bill on March 13th that would establish a "Texas Recovery Accountability and Transparency Board", with the purpose of providing a way to thoroughly track the usage of ARRA funds and measure the results of expenditures. Rep. Jim Dunnam has filed legislation that would give the State Auditor extra oversight and enforcement authority to improve ARRA implementation transparency.
| Attachment | Size |
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| ARRA Provision.pdf | 28.99 KB |
