- The Washington Times - Friday, March 13, 2009

AUSTIN, TEXAS (AP) - A day after Texas Gov. Rick Perry rejected more than $500 million in federal money to rescue the state’s foundering unemployment insurance fund, lawmakers fired back, calling the move counterproductive and politically motivated.

The Legislature can still try to accept the money through a provision in the federal law, but risks gubernatorial veto unless they can muster a veto-proof two-thirds majority on a resolution announcing their intentions and legislation for the required expansion of unemployment benefits.

Perry, who plans to seek re-election in 2010, argued that accepting the federal stimulus dollars would require the state to keep funding expanded jobless benefits _ effectively raising unemployment taxes on businesses _ even after the money runs out.

But critics counter that the fund will likely be in deficit by autumn, which will trigger an unemployment tax increase on businesses next year to make up for the deficit.

Economist Ray Perryman testified to a panel of lawmakers earlier this week that “it is unrealistic to assume the system can continue in its current form.”

The federal money would be enough to pay for the increase in benefits, including changes in state law, for a decade, Perryman told the House committee charged with making recommendations to spend the federal stimulus money.

House Democratic Leader Jim Dunnam, D-Waco, who chairs the committee, said the move is so counterproductive it “has to be 100 percent political.”

“What is taking the money going to do to your taxes? Nothing,” Dunnam said. “Put this $555 million up and it will pay for the whole program for a decade. Maybe in a decade there may be some impact … there is no rational basis for it.”

Perry said he would prevent the unemployment compensation fund from falling into insolvency by reinstating the tax paid by businesses during the economic downturn.

“We do not need anymore strings from Washington attached to programs,” Perry said Thursday.

Perry’s office would not say if he would veto legislation aimed at nullifying his refusal to accept the money. But, Perry noted that Texas lawmakers had previously rejected similar proposals to expand unemployment benefits.

Several Democrats immediately spoke out in opposition to Perry’s announcement. Perhaps a more telling moment came Thursday afternoon, when top Republican Rep. Jim Pitts, chairman of the powerful House Appropriations Committee joined with Democrats in a committee vote endorsing acceptance of the funds. And Republican Rep. Tan Parker filed legislation that would temporarily make the changes required to receive the federal money.

Perry has been an outspoken critic of Obama’s $787 billion stimulus bill, but he’s accepted most of the roughly $17 billion slated for Texas.

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