Rick Perry - The Stimulus
Summary
Governor Perry strongly opposed President Obama's 2009 stimulus on numerous grounds. He stated that the plan placed an unprecedented amount of debt on the next generation, that it placed requirements on the states for issues such as welfare and education, and that it was the wrong model for economic growth.
Although he opposed the stimulus program, Governor Perry stated that Texas has historically paid in more in taxes to the federal government than it receives in return and that he would pursue stimulus funds in an effort to get back Texas's share of the money.
Opposition to the Stimulus - Letter to the President
the day after President Obama signed the stimulus package into law, Governor Perry sent a letter to him stating that he opposed the legislation and that it burdened future generations with debt and expanded the government.
February 18, 2009
The Honorable Barack Obama
President of the United States
The White House
1600 Pennsylvania Avenue, NW
Washington, D.C. 20500Dear Mr. President:
I'm writing you today in response to stipulations set forth in H.R. 1, the $787 billion stimulus package you signed into law yesterday. As you know, I have been vocal in my opposition to this legislation because I believe there are better ways to reinvigorate our economy and believe H.R. 1 will burden future generations with unprecedented levels of debt.
Throughout the years, Texas taxpayers have sent substantially more dollars to Washington than we receive on issues ranging from transportation to border security and hurricane relief. As I have said during the debate on H.R. 1, should Congress pass stimulus legislation using Texas tax dollars, I would work to ensure that our citizens receive their fair share.
On behalf of the people of Texas, please allow this letter to certify that we will accept the funds in H.R. 1 and use them to promote economic growth and create jobs in a fiscally responsible manner that is in the best interest of Texas taxpayers. I remain opposed to using these funds to expand existing government programs, burdening the state with ongoing expenditures long after the funding has dried up.
I continue to believe that the best way to stimulate the economy is the approach we are taking here in Texas. As a result of low taxes, controlled government spending and a predictable regulatory climate, nearly 80 percent of all jobs created last year in the United States were created in Texas; the vast majority of these were private sector jobs. Just last week, Texas was ranked the top exporting state in the nation for the seventh year in a row.
It was a pleasure meeting you in Philadelphia, and I appreciate your concern for the Texans displaced by Hurricane Ike. While we differ on solutions to the ongoing economic crisis facing our country, I believe we both share a desire to see our great nation endure as a beacon of freedom and economic vitality to the world.
Sincerely,
Rick Perry
Governor
Opposition to the Stimulus - Unemployment
In July of 2009, Governor Perry denied unemployment funds originating in the stimulus package. Governor Perry has released a press statement noting the requirements set forth in the stimulus on unemployment insurance. He notes that the stimulus requires states to expand unemployment benefits and require the state to cover additional people and for extended times.
Texas making right decisions on unemployment insurance, without federal strings
Friday, July 24, 2009 • EditorialTexas is standing strong to protect and maintain unemployment insurance (UI) benefits for workers suffering the effects of the national recession. Our UI trust fund will be sustained, individuals and families in need will receive the benefits they are entitled to, and Texas job-creators and taxpayers will be protected from federal mischief.
The Texas economy is the strongest in the nation. Our unemployment rate is 2 percent lower than the national average, and employers continue to relocate and expand in Texas.
However, I am fully aware that because of the national recession, too many Texans are out of work or uncertain about their economic future. That’s why I, state lawmakers and leaders at the Texas Workforce Commission, have worked hard to keep our unemployment trust fund sound, adequately funded and safe from the meddling of Congress, the Obama Administration and federal bureaucrats.
Recent weeks have seen a flurry of news stories regarding unemployment benefits in Texas. Taken as a whole, they have painted a confusing and incomplete picture of unemployment insurance in our state. Here are the facts:
Texas unemployment benefits are safe. Unemployed Texans are and will continue to be covered thanks to a combination of additional contributions from Texas businesses in the form of unemployment taxes, bond financing and borrowing of federal funds. As in previous recession years, these tools will be used to keep the trust fund financed.
Texas employers know that state officials work to keep UI taxes low to encourage job creation. But when the need arises, businesses are required to pay more into the unemployment compensation system. Borrowing from the federal unemployment fund – which employers pay taxes to maintain – is also routine. Texas borrowed such funds during the 2003 national recession and in prior economic downturns. At least 15 other states are doing or preparing to implement similar federal borrowing.
We are also utilizing some “no-strings” funding available in the federal stimulus package. This allows Texas to provide an additional $25 per week in benefits to qualified unemployed Texans, resulting in an additional $161 million for the program and weeks of extended benefits for Texas workers.
I did reject $555 million in federal stimulus dollars that would have mandated the State of Texas to pay costlier benefits and put higher taxes on Texas employers indefinitely. Even if we had accepted these stimulus funds, Texas would have still seen higher unemployment taxes, bond financing and federal borrowing to keep benefits from the UI Trust Fund flowing.
But in return for less than seven weeks of unemployment benefits, this $555 million stimulus payment would have required Texas to permanently expand its unemployment program and burden Texas job creators with higher taxes for the long haul. Those stimulus dollars would have done more harm than good for Texas workers, employers and taxpayers, which is precisely why the Texas Association of Business and National Federation of Independent Business urged and supported my decision to reject the federal unemployment stimulus funds.
If Washington really wanted to help Texans, they would have sent us this money without strings attached like the Bush Administration did in 2002.
I have heard from thousands of Texans, both employed and unemployed, who agree that rejecting the unemployment stimulus funds was the right move for Texas. Sam from Dallas wrote, “I have been out of work because of this economy and I implore you, please do not accept the stimulus money…This is a short-term tactical fix that has major flaws if viewed strategically.”
Michelle from Tyler wrote, “I have been a recipient of unemployment within the past two years and our laws and requirements are more than adequate…to further burden our employers with more unemployment tax at some point in the future would be a huge mistake.”
These Texans represent a few of many who understand that our current unemployment system provides sufficient benefits to help unemployed Texans as they pursue employment.
The fact remains that qualified Texans who lose their jobs through no fault of their own will continue to receive unemployment benefits and job search assistance from a Texas Workforce Commission that stands ready to help.
My decision to reject strings-attached federal stimulus funds was the right choice for Texas. Most Texans know the best solution for unemployment is job creation, not government mandates. We will utilize all of the traditional financing tools necessary to ensure eligible Texans continue to receive the unemployment benefits they need while minimizing the burden on workers and employers, freeing them to create new jobs and lead our country into a more prosperous future.
Facts: Unemployment Insurance Stimulus Funds
Four Facts About Unemployment Insurance
1. The federal stimulus package requires the state to change its laws and expand unemployment benefits in a way that the Legislature and Governor have not previously embraced in order to receive federal stimulus funding for unemployment.
Congress was so intent on forcing states to change their laws that they require states to make the changes permanent and certify that "the provision is permanent (that is, not temporary) and is not subject to discontinuation under any circumstances other than repeal by the legislature." (Unemployment Insurance Program Letter No 14-09, Department of Labor, Feb 26, 2009)
2. Governor Perry has committed to reviewing all requirements on states related to stimulus funding and said he will reject funds that come with too many strings attached. Under the requirements for this stimulus funding, employers will bear the burden of higher taxes to pay benefits to more people.
Had Congress merely wanted to help states in the face of higher unemployment, Congress could have provided the funds to the state without strings attached just as it did in 2002 (Texas received almost $600 million in a Reed Act Distribution in 2002).
Texas already accepted unemployment funds in the stimulus package that increased unemployment benefits by $25 a week for most of 2009. These funds did not come with strings attached.
What changes are required for Texas to receive federal stimulus funding?
The federal stimulus funds distributed to the states come from the Federal Unemployment Account based on the state's share of the federal unemployment taxes paid. In order to get $555 million in federal stimulus funds, the state must change the state law.
To receive one third of the funding (approximately $185 million), the state must have an alternate base period for purposes of calculating eligibility that includes using the most recent quarter of wage credits in the calculation. Under current state law, the state provides unemployment benefits to individuals who have wages in two of the first four of the last five quarters, thereby excluding any wages earned in the most recent quarter.
TWC estimated impact:
CY2010: $43.8 million
CY2011: $43.4 million
CY2012: $40.9 million
CY2013: $39.7 million
CY2014: $39.4 million
Admin Costs: $5.2 millionTo receive the additional two-thirds of the funding, the state must make the change to the alternate period (above) and also change state statutes to extend benefits to two of the following four groups:
- Provide benefits to individuals seeking only part-time work when they previously worked part-time. Currently, individuals must seek full-time work regardless of whether they worked full-time or part-time. TWC estimated impact CY2010-2014: $137.4 million in benefits, $9.6 million in administrative costs.
- Provide benefits to individuals who voluntarily left employment for a compelling family reason, including: domestic violence (already provided under Texas law); illness or disability of an immediately family member (federal requirements require more than state provisions that already include illness of minor child or terminally ill spouse); and accompanying a spouse when moving for the spouse’s job (Texas currently covers military families). TWC estimated impact CY2010-2014: $46.2 million in benefits, negligible administrative costs.
- Provide 26 weeks of additional compensation to unemployed individuals that have exhausted their unemployment benefits and are participating in state-approved or WIA funded training programs. TWC estimated impact CY2010-2014: $161.8 million in benefits, $230,000 in administrative costs
- Increase payments by at least $15 per dependent, per week capped at lesser of $50 or 50% of the individual’s weekly benefit amount. TWC estimated impact CY2010-2014: $1.4 billion in benefits, $10 million in administrative costs
Are there other federal stimulus funds available for Unemployment Insurance?
The Texas Workforce Commission announced on February 24, 2009 that eligible claimants will receive an additional $25 a week in unemployment benefits. This increase in benefits applies to benefits paid from February 22, 2009 to initial claims made by December 26, 2009. This increase in benefits is federally funded and applies to all unemployment benefits paid. Employers will not be charged additional funds.
Opposition to the Stimulus - State Spending
Governor Perry released a campaign statement in January of 2010, noting that the spending items in the stimulus would cause problems in 2010 when states attempted to adjust spending without the stimulus.
The States and the Stimulus
January 2, 2010
The Wall Street Journal
How a supposed boon has become a fiscal burden.
Remember how $200 billion in federal stimulus cash was supposed to save the states from fiscal calamity? Well, hold on to your paychecks, because a big story of 2010 will be how all that free money has set the states up for an even bigger mess this year and into the future.
The combined deficits of the states for 2010 and 2011 could hit $260 billion, according to a survey by the liberal Center on Budget and Policy Priorities. Ten states have a deficit, relative to the size of their expenditures, as bleak as that of near-bankrupt California. The Golden State starts the year another $6 billion in arrears despite a large income and sales tax hike last year. New York is literally down to its last dollar. Revenues are down, to be sure, but in several ways the stimulus has also made things worse.
First, in most state capitals the stimulus enticed state lawmakers to spend on new programs rather than adjusting to lean times. They added health and welfare benefits and child care programs. Now they have to pay for those additions with their own state's money.
For example, the stimulus offered $80 billion for Medicaid to cover health-care costs for unemployed workers and single workers without kids. But in 2011 most of that extra federal Medicaid money vanishes. Then states will have one million more people on Medicaid with no money to pay for it.
A few governors, such as Mitch Daniels of Indiana and Rick Perry of Texas, had the foresight to turn down their share of the $7 billion for unemployment insurance, realizing that once the federal funds run out, benefits would be unpayable. "One of the smartest decisions we made," says Mr. Daniels. Many governors now probably wish they had done the same.
Second, stimulus dollars came with strings attached that are now causing enormous budget headaches. Many environmental grants have matching requirements, so to get a federal dollar, states and cities had to spend a dollar even when they were facing huge deficits. The new construction projects built with federal funds also have federal Davis-Bacon wage requirements that raise state building costs to pay inflated union salaries.
Worst of all, at the behest of the public employee unions, Congress imposed "maintenance of effort" spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs, from road building to welfare, if the state took even a dollar of stimulus cash for these purposes.
One provision prohibits states from cutting Medicaid benefits or eligibility below levels in effect on July 1, 2008. That date, not coincidentally, was the peak of the last economic cycle when states were awash in revenue. State spending soared at a nearly 8% annual rate from 2004-2008, far faster than inflation and population growth, and liberals want to keep funding at that level.
A study by the Evergreen Freedom Foundation in Seattle found that "because Washington state lawmakers accepted $820 million in education stimulus dollars, only 9 percent of the state's $6.8 billion K-12 budget is eligible for reductions in fiscal year 2010 or 2011." More than 85% of Washington state's Medicaid budget is exempt from cuts and nearly 75% of college funding is off the table. It's bad enough that Congress can't balance its own budget, but now it is making it nearly impossible for states to balance theirs.
These spending requirements come when state revenues are on a downward spiral. State revenues declined by more than 10% in 2009, and tax collections are expected to be flat at best in 2010. In Indiana, nominal revenues in 2011 may be lower than in 2006. Arizona's revenues are expected to be lower this year than they were in 2004. Some states don't expect to regain their 2007 revenue peak until 2012.
So when states should be reducing outlays to match a new normal of lower revenue collections, federal stimulus rules mean many states will have little choice but to raise taxes to meet their constitutional balanced budget requirements. Thank you, Nancy Pelosi.
This is the opposite of what the White House and Congress claimed when they said the stimulus funds would prevent economically harmful state tax increases. In 2009, 10 states raised income or sales taxes, and another 15 introduced new fees on everything from beer to cellphone ringers to hunting and fishing. The states pocketed the federal money and raised taxes anyway.
Now, in an election year, Congress wants to pass another $100 billion aid package for ailing states to sustain the mess the first stimulus helped to create. Governors would be smarter to unite and tell Congress to keep the money and mandates, and let the states adjust to the new reality of lower revenues. Meanwhile, Mr. Perry and other governors who warned that the stimulus would have precisely this effect can consider themselves vindicated.
Train Wreck
In June of 2010, Governor Perry was interviewed at the Texas GOP Convention and stated that his state was practicing good fiscal discipline by not spending all the stimulus funds. He stated that he and others saw the coming storm of the stimulus and planned appropriately. He referred to the legislation as a train wreck.
Stimulus and Education Spending
In August of 2010, the Perry campaign released a press statement which contained an article by the National Review Online that detailed the relationship between stimulus funds and education spending.
State-Bailout Trap: Gov. Rick Perry fights to preserve the fiscal autonomy of Texas.
August 9, 2010
National Review Online
Stephen Spruiell
When the House convenes today in a special session to vote on a $26 billion package of aid funds for state and local governments, it will have to decide whether to single out one state — Texas — for special treatment. This is not the kind of special treatment that we’re used to seeing in Washington, where senators often secure extra benefits for their states in return for their votes. Instead, Democrats are trying to punish Texas for its fiscal responsibility, above and beyond the punishment inherent in a “state bailout” that is intended mostly to help spendthrift states such as California, but that Texas taxpayers must help pay for nevertheless.
The provision in question, an amendment authored by Rep. Lloyd Doggett, an Austin Democrat, would deny Texas its share of the bill’s education funds unless its governor “provides an assurance” that it will not reduce the percentage of total revenues it spends on education at any time in the next three years. Gov. Rick Perry argues that this is impossible: The state legislature controls education funding in Texas, not the governor, and the governor cannot bind future legislatures to any level of spending. Because Perry cannot provide the kind of assurance the Doggett amendment appears to require, he argues that it would deny Texas, and only Texas, over $800 million in education funds.
Doggett has fired back that this is nonsense: When Perry applied for $3.2 billion in education funds from the stimulus bill that passed last year, he signed a “maintenance of effort” pledge committing Texas to keep education spending above 2006 levels. All Doggett wants, he says, is for Perry to sign a similar pledge this time. But Doggett is ignoring the fact that, along with his state’s application, Perry submitted a letter to Education Secretary Arne Duncan stating: “After a great deal of review and hard work, Texas leaders determined that federal rules pertaining to [the State Fiscal Stabilization Fund] do not commit Texas to future revenue or spending obligations.”
It is important to note that this isn’t just a meaningless line Perry used as cover for taking federal dollars: In areas where he determined that federal rules would commit Texas to future revenue or spending obligations, he turned down federal money. Perry famously rejected over $550 million in increased unemployment-insurance funding because he determined that accepting the aid would require the state to raise benefit levels (and, eventually, taxes). With regard to the education funds in the stimulus, however, Perry concluded that non-binding “assurances” of the kind the stimulus bill required of all states would not interfere with Texas’s autonomy: Saying your state can probably keep nominal levels of education spending above where they were in 2006 is one thing; promising to maintain or raise spending levels as a percentage of total state revenues, as the Doggett amendment requires, is quite another.
Following Perry’s acceptance of stimulus funds for education in 2009, the Texas legislature reduced education spending by $3.2 billion, plugged the hole with federal money, and used the savings to shore up a rainy-day fund. This move infuriated Democrats in the Texas congressional delegation, who wrote an angry letter to the speaker of the Texas house. Their letter gave the game away regarding the true purpose of the education funds in the last stimulus as well as the education funds in the current state-bailout bill. It conceded that Texas did not face a shortfall in its education budget and therefore had no need for federal aid. But it argued that, instead of using the money to prepare for future budget shortfalls, Texas should spend it “as the law directs, ‘to provide local educational agencies in the State with subgrants,’” regardless of whether those agencies were facing shortfalls.
This was an obvious attempt to force Texas into future increases in education spending by juicing the local districts with a temporary influx of federal aid and thus raising the amount they expect to receive every year. In future years, if the federal government ever decides to stop passing stimulus bills, local districts will complain that the state government is forcing them to undertake “massive cuts” because it is either unwilling or unable to pick up where Washington left off.
Meanwhile, the Texas legislature’s decision to save the money from the first stimulus is looking like a wise move. Texas is facing an $18 billion shortfall this year, which its $10 billion rainy-day fund will help it weather. That won’t be enough, of course, and Texas officials are asking agency heads to trim 5 percent from all departments and looking at ways to raise revenue without having adverse effects on economic growth.
But if Texas lawmakers had listened to Doggett, they’d have about $3 billion less to work with, and the cuts local school districts are complaining about would have to be deeper, because they would be coming out of a higher baseline. Nor are those local school districts in as much trouble as they would have you believe; Sara Talbert of Texas Budget Source recently reported that the five largest districts in Texas are sitting on over $550 million in reserve funds. As Perry pointed out in his letter to Duncan last year, total funding for public education in Texas has increased by 66 percent since 2002, with the state’s share of that funding going up by 80 percent.
At a time when Texas and other fiscally responsible states need maximum flexibility to balance their budgets without resorting to growth-killing taxes, Democrats have decided that stronger handcuffs are needed to bring troublemakers such as Perry into line. But Perry has decided that the Doggett amendment, unlike previous “maintenance of effort” requirements, places impossible constraints on Texas’s autonomy, and the state’s lawyers sound prepared to fight back. “The Governor cannot assure the federal government at this time what the 82nd Legislature will do,” said Texas attorney general Greg Abbott in a statement. “The State’s inability to legally comply with the Doggett Amendment means that Texas is the only state that cannot receive federal dollars under this bill, as it is currently written.”
Doggett set out to force Perry to fund education in the state of Texas at the level that Democrats in Washington want it funded. Instead, he’s kicked off a high-stakes game of chicken between the advocates of dependency and the state leaders determined to resist them.