The looming unemployment insurance crisis

Can we please not make the same egregious mistakes as last time?

As businesses across the state close to slow the spread of the coronavirus, the mass layoffs that have followed could quickly drain the state fund that pays unemployment claims.

The state has less than six months of reserves to pay unemployment insurance at recession-level rates, according to U.S. Department of Labor data from the second quarter of 2019, the most recent available. That’s well below the federally recommended level of one year, and the seventh-lowest reserve level among states.

Between Sunday and Wednesday, Texas received more than 61,500 first-time unemployment insurance claims, according to the Texas Workforce Commission, more than four times the filings during a similar period in 2019. The avalanche of claims slowed and crashed the state’s unemployment benefits websites this week, before the workforce commission made upgrades deal with the spike in traffic.

Nearly 30 percent of the unemployment insurance applications, or nearly 18,000, were from the Houston region, according to the TWC data. Shutdowns have hit the local economy hard. People who work at local theaters and event venues were “99 percent unemployed in a matter of days,” said Hany Khalil, the executive director of the Texas Gulf Coast Area Labor Federation, which works with unions across the Houston region.

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The reason Texas has one of the lowest reserves in the nation to pay for unemployment benefits is because the program is funded through taxes on employers, which in Texas, are very low. Texas taxes the employer for the first $9,000 of an employee’s annual wages, compared to the national average of the first $18,900, according to Labor Department data.

“Texas loves their low taxes on employers, so it’s not surprising that the fund is in trouble,” said Maurice Emsellem, a program director at the National Employment Law Project. “A lot of states are not in great shape right now.”

We basically went through the same thing in 2009, during the height of the recession induced by the financial crisis. The cause was the same – nobody in charge, especially not then-Governor Rick Perry, wanted to increase the amount being collected for unemployment insurance. In fact, Perry suspended the collection of unemployment insurance payments as a way to help businesses, at the later expense of helping the workers who lost their jobs. To make matters worse, Perry later declined to take federal stimulus money to help with unemployment insurance, which of course meant that the unemployment insurance tax levied on businesses had to be jacked up later on. Someone should boil this down to a PowerPoint presentation, call it What Not To Do During A Big Unemployment Spike, and make sure Perry’s face is on every slide.

This time around, we have a Republican in the White House, so federal money to the state is not considered dirty by the Republicans in charge, so when we are offered money now to bolster our unemployment insurance program, we’ll probably take it. I’m sure it will still come with ridiculous and insulting strings attached, like drug testing – we can’t get tested for coronavirus, but there’s always room to pee in a cup to see if you’ve been smoking weed – but that will be a fight for another day. In the meantime, there’s still ten billion or so in the Rainy Day Fund, in case anyone thinks it might be a good idea to tap into that as a way to bridge the gap rather than make who knows how many people suffer. Crazy talk, I know. All I’m saying is, we’ve been through this sort of crappy time before. I’m old enough to remember it. Let’s see if we learned anything from the last time.

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