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Politics : The Donkey's Inn -- Ignore unavailable to you. Want to Upgrade?

To: Mephisto who wrote (2175)	1/20/2002 1:01:49 AM
From: Karen Lawrence	Read Replies (2) \| Respond to of 15516

Jan. 19, 2002, 11:27PM Taxes to go up in Texas. Perry aide sought to conceal fund woes Deficit brings tax hike to employers By R.G. RATCLIFFE Copyright 2002 Houston Chronicle Austin Bureau AUSTIN -- One of Gov. Rick Perry's key aides last fall attempted to quash news coverage of a growing deficit in the state's unemployment insurance fund -- a shortfall that will trigger at least an $800 million tax increase for Texas employers next year. Documents obtained by the Houston Chronicle under the state's public information act show Perry's deputy chief of staff, Ray Sullivan, asked the Texas Workforce Commission to excise any reference to this year's projected unemployment fund deficit from a news release about an $84 million tax increase that will hit employers this month. The documents also indicate that Sullivan was aware the commission had asked Attorney General John Cornyn to block the release of any documents about the 2002 deficit under an open records request from the Chronicle. Sullivan's role in downplaying the growing unemployment fund deficit was revealed in an Oct. 5 e-mail written by work force commission communications director Larry Jones. The e-mail to work force commissioners and the governor's office said he would be putting out a news release on this year's relatively small tax increase. "I spoke extensively with Ray Sullivan and Paul Hudson (Perry's director of business affairs) regarding the UI Tax Increase Press Release and the Open Records Request from the Houston Chronicle reporter," Jones wrote. "Ray recommended we not discuss any projection beyond 2001 in the press release," Jones wrote. "I have cleaned up the press release and have eliminated any projection beyond 2001." The projected deficit for 2002 at that time was $660 million. The fund's estimated deficit by December had grown to more than $769 million, which will have to be covered by state employers through an unemployment tax increase. Commission Chairwoman Diane Rath last week said the deficit may grow to as much as $1 billion this week when the agency recalculates benefit payouts from the fund to an annual 5.6 percent unemployment rate instead of the 4.6 percent currently being used. Sullivan said he didn't think the 2002 deficit should have been mentioned in the October news release because the state at the time was trying to get a $600 million rebate from the federal government that would have erased the unemployment fund's deficit. Legislation to make that rebate to the states died in December before Congress. Sullivan said he also thought nothing was being kept secret because work force commissioners discuss the unemployment fund at their public meetings. "I don't think there was anyone in Texas or the country who didn't know unemployment was rising," Sullivan said. Even before the annual unemployment rate is adjusted upward this week, commission documents indicate the average unemployment tax on companies with a history of layoffs will jump from about $67 paid for each employee in 2001 to $134 in 2003. More than a third of the state's companies fall into this category. And for those businesses paying the maximum tax rate because of multiple layoffs, the taxes will increase from about $561 per worker in 2001 to more than $747 in 2003. Only a small percentage of the state's companies -- mostly in the construction industry -- will pay the maximum tax. State and federal laws require the fund to keep a balance of at least 1 percent of the state's taxable wages, which means the fund should have a balance of at least $793 million this year. When the fund is below that level on Oct. 1 each year, it is in a technical state of deficit, triggering a deficit tax increase. The deficit is made up over three years of deficit taxes. But Texas Workforce Commission projections show the fund also may face a real cash flow problem this year. The commission in December estimated the unemployment fund will end the year with only $24 million cash on hand at a time when the fund is paying out more than $30 million a week in benefits to unemployed workers. If the fund becomes insolvent, Texas will be forced to borrow from the federal government to cover benefits for the unemployed. That money must be repaid with interest, a cost that Texas employers will have to pick up. Texas has not had to borrow money from the federal government to pay unemployment benefits since 1988. The Chronicle has been battling with the work force commission since last September to obtain records that would disclose the fund's true financial health. Cornyn ruled in the Chronicle's favor last month, saying the agency was withholding records based on a "hyper-technical reading" of the Chronicle's public records request. Rath said the agency had been initially reluctant to give the Chronicle information on the deficit because the situation was still in flux last September. "It was very speculative. Before Sept. 11, we were headed toward recovery," Rath said. The records released to the Chronicle under Cornyn's ruling include documents prepared by the work force commission staff for Perry and House Speaker Pete Laney, transcripts of commission public meetings and internal e-mails as well as ones sent to Perry's office. The involvement of Perry's staff in keeping the growing deficit secret last fall marks the third time his office has tried to block the release of information potentially embarrassing to the governor. Perry's office last month under questioning from the news media dropped a lawsuit against Cornyn over his ruling that the governor's office had to make public documents about the eligibility of three of his appointees to serve in office. Perry's staff also had to admit that it had altered the appointment application of former Public Utility Commissioner Max Yzaguirre, hiding his conviction for accidentally shooting a whooping crane to death during a goose hunting trip. The application had been requested under the state's open government law by a Democratic gubernatorial campaign. Yzaguirre resigned from the Public Utility Commission last week. The work force commission records given to the Chronicle show at the time of the newspaper's original Sept. 21 public records request, the commission was in constant contact with the staffs of Perry and Laney as well as House Appropriations Committee Chairman Rob Junell and Senate Finance Chairman Rodney Ellis in an effort to lessen the impact of a tax increase this year. The commission wanted to transfer $109 million into the unemployment fund from the Smart Jobs worker training program. A transfer of $84 million into the unemployment fund in late September ultimately lessened this year's tax increase. Texas has been criticized nationally for keeping its unemployment insurance rate low so that the fund is not prepared to deal with sudden jumps in unemployment. Under the Texas system, economists say, employers always face tax increases at a time when they are least able to pay them. "There's a debate over whether you build up the fund in advance and let the money sit there, or whether you rebuild the fund after you've needed it," Rath said. She said the Texas Association of Business & Chambers of Commerce has favored keeping the tax rate low in times of prosperity so the money can be invested in growth.