NELP National Employment Law Project
Strengthening the Texas
Unemployment Insurance System
Maurice Emsellem, Policy Co-Director
National Employment Law Project
• Economists predict a prolonged “U” shape recession
lasting two years (versus 10 months average post-WWII).
• Deep recession, with unemployment rates of 8.0% to
8.5% (or over 10% if the auto industry, employing over
130,000 Texans, collapses).
• Unemployment rates may not peak until two years after
the recession ends, which was the case during the last
• Significant decline in the share of families with enough
resources to cover a spell of unemployment (down from
51% to 44% in just three years).
• By the end of 2009, the percent of the population in
poverty will increase from 12.5% to at least 14.3%.
Major Increase in
• Texas unemployment rate up 30% in the past
year, to 5.6% (657,000 Texans unemployed,
• Texans collecting unemployment insurance in
the past year increased by 30% (360,000, up
• 69,000 Texans exhausted their state benefits
during the last six months, up 30% compared
to last year.
The Critical Role of
• Stimulates the economy in those communities hardest hit
by joblessness ($2.15 for every dollar circulating in the
• From July to November, Texans already collected $215
million in federal Emergency Unemployment
Compensation benefits (before the new EUC expansion)
• Stabilizes housing (46% of housing delinquencies are now
due to unemployment, and 40% of benefits spent on
• Alleviates economic hardship (without the help of
unemployment benefits, poverty increases by 50% for the
• Maintains quality jobs (e.g., UI benefits increase earnings
and increases access to jobs with health care).
One in Five Unemployed Texans
Collects UI Benefits (Ranking 50th)
Major Gaps in Texas UI Benefits
Limit Economic Stimulus
• Outdated Work-History Requirement: Latest 3-6 months of
earnings not counted toward eligibility for UI in Texas, denying
benefits to large numbers of low-wage workers. GAO finds low-
wage workers twice as likely to be unemployed and one-third as
likely to collect UI benefits.
• Full-Time Work-Search Requirement: Once qualified, Texans
have to seek full-time employment to keep collecting UI benefits,
denying benefits to large numbers of women workers with
families looking for part-time employment. GAO finds part-time
workers about half as likely as full-time workers to collect UI
• Compelling Family Reasons for Leaving Work: Texas law
recognizes verified medical conditions and domestic violence as
valid reasons for leaving work, but not separations that result
from workers having to leave work to follow their spouse to a
new job (except military families).
21 States Adopt the
“Alternative Base Period” (ABP)
ABP Critical to Low-Wage Workers
(Michigan Case Study)
Percent Collecting UI Due • In 2003, there were
to Michigan's ABP (2003) 26,219 ABP
• ABP payments
averaged $232 a
week ($4,600 a
with $90 in TANF
averaged per week.
1.6% • ABP benefits totaled
$86 million in 2003
(equal to 25% of
Low-Wage Higher-Wage TANF payments).
Major Increase in Coverage
Outweighs Increased ABP Costs
Percent of UI
Share of State Total
5% 4.7% 4.7%
Percent of UI Costs
Michigan Maine New Jersey Georgia Virginia North
www.nelp.org Carolina 9
Nearly Half the States Extend
UI Benefits to Part-Time Workers
Part-Time Benefits Critical to
Women Workers (Maine Case Study)
• Maine’s work-search rule
permits history of part-
Worker UI Reform (2004)
time work or “good
cause” related to child
70.5% care or dependent care.
• 886 workers collected UI
under Maine’s part-time
UI law (2.7% of all UI
• Collected $1.8 million in
$2,078 per worker.
• Another 920 part-time
Women Men workers were paid UI
after looking for full-time
www.nelp.org work. 11
Economic Recovery Legislation
Modernizes the UI Program
• The Unemployment Insurance Modernization Act (UIMA) provides
$7 billion in “Reed Act” funds to states that qualify for incentive
payments to modernize their UI programs.
• All states qualify for $500 million in supplemental funding to pay for
administration of the program, responding to prior cuts in federal
funds and rising caseloads.
• Program improvements would help an estimated 500,000 workers,
targeting the long-term unemployed and the gaps that deny UI to
low-wage, part-time and women workers.
-One-third share requires “alternative base period.”
-Remaining two-thirds share requires two of the following: Part-
time provision, family-friendly voluntary quit provisions, extra UI
for workers in training (Senate bill also includes dependent
allowances and 26-week uniform duration of state benefits).
UIMA Generates Significant
Funding for Texas to Modernize UI
• Texas automatically collects $38 million in federal
administrative funding under the UIMA (36% of the
Texas 2008 federal grant).
• Texas receives $530 million in total incentive funds,
which would cover more than 6.5 years of key UI
reforms (including the alternative base period, part-
time worker benefits and “trailing spouse”).
• Texas receives $177 million in incentive funds to
adopt the ABP, covering more than three years of
benefits and helping 28,000 workers a year (CPPP
estimates these workers will collect an average of
10 weeks of benefits in Texas at $136 per week).
Texas UI Funding Driven by Tax
Cuts, Not Responsible Financing
• Texas has consistently suffered from insolvency well before the
recessions produced major increase in benefits.
• Major tax cuts in Texas undermine need to raise revenue in
good times to pay benefits during recessions (“forward
-$300 million in rebates in 2007
-average tax rate declined from 1.74% in 2004 to .98% in 2008
-74% of employers paid the minimum tax rate of .26% (nationally,
28% of employers pay the minimum state tax).
• The $9,000 taxable wage base in Texas has not been increased
• TWC projects an October 2009 trust fund balance of $730
million (or half the current balance), triggering a tax increase to
fill a $141 million gap required by state law.
Insufficient Texas Reserves to Pay
Benefits for One Year at Recession Levels
Source: U.S. Department of Labor Office of Workforce Security Division of Fiscal and Actuarial Services. UI Data Summary, Third Quarter 2008
Insolvency in Texas & U.S.
Predates the Recession
Texas Fails to Expand Contributions
During Good Economic Times
Expansion, But No
Increase in Contributions
Record Low UI Taxes In Texas
Source: U.S. Department of Labor Employment and Training Administration. Unemployment Insurance Financial Data Handbook
Texas Trust Funds Reserves
Fail to Keep Pace with Benefits Paid
*2008 figures reflect revenues and benefits for the 12-month period ending September 2008. 2008 Trust Fund Balance as of Oct. 2008
Source: US DOL Employment and Training Administration, Unemployment Insurance Financial Data Handbook.
Time for Texas to Increase
the Taxable Wage Base
• The Texas taxable wage base of $9,000 was last
increased 20 years ago.
• If the Texas taxable wage base had kept pace with
inflation since 1989, it would be over $15,000.
• Texas’s especially low taxable wage base places a
disproportionate tax burden on small businesses and
• Texas only taxes 20% of the state’s average annual
wage, well below most of the neighboring states:
Oklahoma (37%), New Mexico (53%), Arkansas
• Oklahoma and New Mexico also index their taxable