TPPF COMMENTARY: Correct call to reject federal UI strings

By James Quintero

The sharp increase in the number of Texans losing their jobs has many wondering whether Gov. Rick Perry made a correct choice to reject the $555 million in unemployment insurance (UI) assistance offered by the federal government.

On the surface, bringing home an extra half-billion dollars for Texans who've lost their jobs through no fault of their own seems like a no-brainer. But peel away the veneer of "free money" and you see flawed public policy.

To draw down these one-time funds, Texas would be forced to make permanent changes in its unemployment eligibility system.

For the first $185 million, Texas would have to allow the use of an "alternative base period" for unemployment eligibility. Under current law, Texas reviews an applicant’s last four calendar quarters of wages to determine if the applicant worked enough to be eligible. The Obama Administration wants states to provide a bypass, allowing applicants to qualify if their wages would have been sufficient in the last one quarter.

The Texas Workforce Commission's cost estimate of this change: $212.4 million over five years.

That's not all. The rest of the money would hinge on the adoption of at least two of the following four benefit expansions:

* Allowing benefits to people seeking part-time work, not just full-time employment.

* Providing an allowance of at least $15 per week for each dependent living in a recipient’s household.

* Extending unemployment benefits past the current 26-week limit for persons enrolled in a state-approved job training program.

* Granting immediate eligibility for people who have quit their job for "compelling family reasons" or to move with a spouse.

The five-year cost of these individual changes ranges from $23.1 million to more than $1.4 billion.

Despite efforts from several legislators to craft legislation that automatically end those provisions as soon as they perceive the federal money to have been spent, the stimulus legislation makes clear that dog won’t hunt. The U.S. Secretary of Labor is directed to "disregard any State law provisions which are not then currently in effect as permanent law or which are subject to discontinuation."

Although many of the details are still being debated in Washington, this paragraph has many governors of both parties concerned about losing state autonomy and being shackled with higher costs imposed at Washington’s decree. The fallacy promoted by advocates of these eligibility changes is that the federal funds will "pay" for several years of the expanded benefits. In fact, those dollars will be used immediately to partially shore up the UI trust fund, and employers will foot the cost of the expanded benefits from Day One.

There are better options to address the projected trust fund deficit that control the level of taxes paid by Texas employers and preserve Texas' ability to manage our unemployment system as we see fit.

The federal government has a separate program that provides zero-interest loans to states that need help covering short-term UI trust fund deficits.

Additionally, the Texas Legislature in 2003 authorized the Texas Workforce Commission to issue bonds to cover such deficits. TWC has accessed this provision before – borrowing funds at a super-low interest rate thanks to the state’s strong credit rating, paying them off early, and saving Texas employers $270 million.

Both of these would address the short-term issue of shoring up our UI trust fund and continuing to pay benefits to jobless workers in a way that maintains a more predictable tax burden on Texas employers.

It is beyond dispute that people are losing their jobs, families are struggling financially and emotionally, and many well-intentioned legislators want to help.

But legislators must keep in mind that every additional dollar that Texas employers have to pay for people who aren't working is one less dollar available for job creation and economic recovery. And ultimately, the best way to help people who have lost their jobs is to foster an economy that creates jobs.

James Quintero is a fiscal policy analyst at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin.

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TPPF commentary: Employment statistics highlight need for more pro-growth policies

By James Quintero

Finding a job in Texas just got harder.

Last month, the Texas Workforce Commission reported that the state’s economy shed 25,700 jobs in December 2008. Among the hardest hit industries were manufacturing and trade, transportation, and utilities which lost a combined 16,100 jobs.

The state’s unemployment rate rose to 6 percent, its highest level since July 2004, and is projected to reach 6.6 percent later this year.

December’s sour employment figures mark the second consecutive month that seasonally adjusted non-farm employment fell. The national recession and falling oil and gas prices, it seems, have finally begun to take their toll on the Texas economy with more trouble on the way.

Comptroller Susan Combs’ recent assessment of the Texas economy warns that 111,000 jobs will disappear over the first two quarters of this year before the job market begins to rebound in the fourth quarter. The economic recovery, however, hinges on whether or not businesses have the confidence to begin hiring again in the months ahead. Based on the results of one recent survey, things aren’t looking too good.

The Federal Reserve Bank of Dallas’s Texas Manufacturing Outlook Survey, which polled over 100 Texas manufacturers, found that 47 percent of business executives felt their companies faced a “dismal outlook” moving forward while 55 percent of respondents were concerned about “worsening market conditions.”

With employers skittish and unemployment certain to rise over the next few months, the need for more pro-growth policies couldn’t be more real. The economy is going to need smart public policy that frees Texas businesses, workers, and families from the costs of big government.

Fortunately, a number of promising bills are working their way through the Legislature.

Several legislators have already filed proposals to increase the exemption for the state’s new margin tax from $300,000 to $1 million, allowing more small businesses and entrepreneurs – the heart of the state’s economy – to keep more of what they had earned. The timing of this bill couldn’t be better as many small businesses are just trying to keep their doors open.

Another encouraging piece of legislation is House Bill 508, authored by Representative Lois Kolkhorst. The bill would authorize the Comptroller’s office to investigate the effects of replacing Texas’ property taxes with a broad-based sales tax. Although the bill would only authorize a study and does not guarantee any future tax relief, alternatives to the property tax system need to be reviewed.

Texas businesses and homeowners pay some of the highest property taxes in the nation – the state ranked 13th nationally in per capita property tax collections for fiscal year 2006, according to the Tax Foundation. If Texas is going to successfully attract businesses and jobs, we must address the issue of ever-escalating property taxes.

One of the most important bills in the upcoming session is House Bill 994 by Representative Ken Paxton, which would change the state’s constitutional spending limit away from the growth in personal income to the sum of population growth plus inflation.

This measure is important because it effectively caps the cost of state government per person. Growth in the state’s budget must be closely guarded to avoid higher taxes in the future, and let businesses who are looking to relocate or expand know they are welcome in Texas.

Bringing jobs back to Texas is going to require smart, forward-thinking public policy that emphasizes low taxes, fiscal discipline, and limited government. How closely lawmakers choose to follow that model will dictate much of the coming economic recovery and how quickly all of us see an improved job market.

James Quintero is a fiscal policy analyst at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin.

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Texas PolicyCast: 2008 in review

This week, we are pleased to bring you a roundtable discussion featuring the policy team at the Texas Public Policy Foundation looking back at 2008 and previewing the 81st Texas Legislature.

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Texas PolicyCast: The Dallas ISD debacle

The problems afflicting our public schools are well chronicled - dropout rates are staggering and much higher than officially reported, and of the students who do get their diplomas, a growing number of them require remedial education before they can start their college coursework. Unfortunately, there's another problem you can add to the list - financial mismanagement of taxpayer dollars. The latest and highest profile example is Dallas ISD, which is struggling to remedy a $64 million cost overrun from last year and an $84 million budget deficit this year - both of which were just discovered. To talk about the situation and what needs to be done to fix it and prevent it from happening in other districts, we have James Quintero and The Honorable Talmadge Heflin from the Center for Fiscal Policy at the Texas Public Policy Foundation.

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