Layoffs draining Texas unemployment

Low taxes on employers leave just six months worth of reserves to cover the jobless claims

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 recessionlevel 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

“It’s really devastating,” Khali said.

The average weekly unemployment insurance benefit in Texas is $246 or the wage one would be paid on a roughly $12,800 annual salary.

Benefits range from a minimum payment of $69 per week (about $3,600 annually) to a maximum of $521 per week (about $27,100 annually).

Dwindling reserves

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.”

That means that several states with very low reserves — including California, New York and Texas — will likely have to borrow money from the federal government to pay for the scores of people who need unemployment assistance.

“The Texas Workforce Commission is committed to helping Texans in need,” said Cisco Gamez, spokesperson for the TWC, in a response to whether the low reserves would impact the state’s ability to pay for the huge increase in unemployment benefits.

“People that qualify for unemployment insurance will receive benefits,” he said.

To pay the money back, most states with low reserves, including Texas, will likely be forced to raise the unemployment insurance tax on employers in the next few years.

The first stimulus package passed by Congress and signed by the president Wednesday allocated $1 billion to state unemployment programs to start, but members are debating sending more aid, a move that could help remedy the potentially disastrous situation in which many state funds find themselves.

Qualifying for benefits

The state’s unemployment insurance program does not cover all the people who find themselves out of work during the pandemic. Independent contractors and those who are selfemployed don’t qualify for benefits.

The only way those Texans will be able to apply for benefits is if Gov. Greg Abbott requests a disaster declaration from President Donald Trump that includes a request for disaster unemployment assistance, a federal program funded by FEMA that is typically used for instances such as major storms.

For the time being, those workers, among them construction workers, artists, writers and small business owners, cannot get unemployment benefits. That’s a big problem in Texas, where misclassification of employees as contractors is common.

A 2017 survey of more than 1,400 construction workers in the South by the Workers Defense Project found than one in three are misclassified as an independent contractor, meaning employers don’t have to pay minimum wage, overtime or payroll taxes, and workers can’t apply for benefits if they are laid off.

“A lot of people fall through the cracks,” said Rick Levy, president of the Texas AFL-CIO.

While Trump has declared an emergency for all 50 states, that declaration does not cover disaster unemployment benefits, which are only available to states that request it and have a major disaster declaration for individual assistance.

John Wittman, a spokesperson for Abbott’s office, said the governor has not yet requested the declaration that would trigger disaster unemployment assistance, but is pursuing the option.

Labor advocates implored the governor to try. Since many people currently don’t qualify for unemployment benefits at this time, when they are laid off, they are left with no income. They won’t be able to pay rent, spend on groceries or generally contribute to the economy, advocates point out.

“The whole point is to keep money flowing into the system,” Levy said. “Unemployed workers don’t spend money. It takes those people out of the realm of being part of the solution.”

“The whole point is to keep money flowing into the system. Unemployed workers don’t spend money. It takes those people out of the realm of being part of the solution.”

Rick Levy, president of the Texas AFL-CIO