Wednesday, March 18, 2009

Rick's rejection of half a billion bailout dollars: wise or big goof?

I have received a lot of emails from people I assume to be Kay supporters or advisers telling me that Rick's decision on the unemployment stimulus money will backfire once people look into it more. People have been sending Paul Burka's back of the napkin numbers as proof (link). Also, a direct message on Twitter with the Perryman analysis.They say that Rick's decision was basically a short run tax hike for small businesses, although they concede it will result in lower taxes over the long run.

I am not so sure.


I can't imagine NFIB, TAB, TPPF, TCC, AFP, TFR, ATR, and all the other right leaning or pro business groups supporting a tax hike, yet they and many other right leaning groups groups are all behind Rick on this issue. Just yesterday, TPPF put out some ideas (link) shooting down the idea that Rick's decision is a tax hike and providing alternative courses of action. Excerpt follows:

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.

In other words, it looks like there are other ways to cover the shortage in the unemployment insurance fund. Raising taxes is not the only way... a "super-low interest rate" (whatever that means) is an option, and it's been done before, saving Texas a lot of money in the process.

From what I gather, Rick will have a portion of money he can do whatever he wants with. I've seen 700 million dollars reported in media outlets. I honestly have no idea whether this is true or not, but I find it hard to believe that Rick would make such a bold move without having his bases covered.

Paul Burka may have jumped the gun on his first round of math. It looks like David Guenthner of TPPF has convinced him that there are other ways that don't involve tax hikes (link). Excerpt follows:
Two alternatives to shore up the trust fund balance without relying on that set of funds (and strings):

* A separate provision of the stimulus package provides zero-interest loans to states that need to shore up their UI trust fund balances.

* In 2003, the Legislature gave TWC the authority to issue bonds to shore up its trust fund balance. It’s been a while since I looked at the testimony I wrote for Chair Rath, but I recall the interest rate being below 3%. (1.8% maybe?) Anyway, we prepaid those bonds ahead of schedule and saved $270 million as compared to other alternatives.

This is all, as President Obama would say, "above my pay grade," but I really can't imagine Rick's decision meaning a net tax hike for businesses in the short run or long run based on what I have read in the news and from think tanks. And this issue is not above the pay grade of Bill Hammond and the think tank people. This is their pay grade. This is what they do. They all seem to support the move. I think Kay's going to have to find something else to criticize Rick on than this. I just don't think she can score any points on this one, but we shall see won't we?


  1. don't think I would call NFIB "rightwing" they support dems all the time and their press person worked for kinky

  2. Paul Burka doesn't think for himself anymore. He has lost his edge. I unsubscribed to Texas Monthly almost ten years ago, and I am not sad about it at all.


Hey now, campaign characters. Be nice. I know a lot of you on both sides, so I don't want any overly foul language, personal attacks on anyone other than the candidates themselves, or other party fouls. I will moderate the heck out of you if you start breaking the bounds of civility.