Senator Eliot Shapleigh - El Paso, Texas

AUSTIN – In a sharp rebuff of Gov. Rick Perry, the Senate on Thursday tentatively voted to accept $555 million in unemployment aid from the federal economic stimulus plan.

Senators voted 22-9 in favor of a bill by Sen. Kevin Eltife, R-Tyler, that would authorize state officials to receive the stimulus money to shore up Texas' trust fund for unemployed workers.

The Texas Workforce Commission has estimated that the fund will drop $839 million below its minimum required level by Oct. 1 because of the large number of Texans receiving unemployment benefits this year.

If the stimulus funds are not accepted – as the governor has proposed – employers would be called on to make up the difference through a "deficit" unemployment insurance tax next year.

All of the no votes in the GOP-dominated Senate were cast by Republicans, but 10 GOP members joined with Democrats in voting for the bill.

A final vote will be needed before the measure goes to the House, where support is considered strong.

If the measure passes both chambers, Perry could still veto it and block Texas from receiving the stimulus money.

Allison Castle, the governor's press secretary, said Perry maintains his steadfast opposition and suggested the proposal has a long way to go before it could reach the governor's desk.

"The governor has made his position on this issue very clear: He does not support expanding the unemployment insurance program, which will burden employers and hurt job creation in the long run," Castle said.

Eltife told senators that the state will benefit for several years if it agrees to accept the federal aid despite what critics say. In addition, required changes – such as an anti-fraud provision – are likely to result in long-term savings for employers, he predicted.

"I want to make this point very clear: The stimulus money will help fund these changes for over nine years. That is nine years of helping fellow Texans who lose their jobs in these tough economic times," he said.

"I know there are concerns that once these changes are made, they could become permanent. But in this bill we would create a task force ... that would study and make recommendations to the workforce commission as to whether continuation of the changes is warranted."

Eltife said the balance of the unemployment trust fund will dip to $19 million by October at its current rate of payments – $839 million below the minimum level.

That means the Texas Workforce Commission will have to borrow $2 billion next year to handle claims and shore up the fund.

Acceptance of the stimulus funds will lower the amount needed to $1.5 billion, according to Eltife, who noted that will reduce the amount businesses are required to pay into the fund.

"It will lessen the burden on businesses significantly," he said.

But leading business groups have joined the governor and urged the state not to accept the federal unemployment aid because of strings attached that could make more people eligible for benefits in the future.

Castle acknowledged there could be some early benefit in accepting the stimulus money, such as reducing employers' taxes or borrowing by the state to make up the deficit.

"But any short-term relief is going to be far outweighed by the long-term burden on employers and the negative impact on job creation," she argued.

U.S. Department of Labor rules on the stimulus money mandate that any changes made in the state's unemployment program would have to be permanent and could not be repealed through legislation.

Sen. Rodney Ellis, D-Houston, applauded Eltife for carrying the bill and called the governor's opposition "penny-wise and pound-foolish."

"I doubt most Texans think sending a half-billion of our tax dollars to other states while doing nothing to save the state's faltering unemployment trust fund is the best way to pull ourselves from this recession," he said.

The Senate bill would make several changes required for Texas to qualify for the stimulus funds, such as ordering the workforce commission to consider more recent wages in calculating a laid-off worker's income.

The state's current wage calculation can go back nearly 18 months.

The measure also would make workers eligible for benefits even if they are only seeking part-time work – a current disqualification. And it would cover people who quit their jobs to take care of a sick family member or to follow a spouse to a new location.

Under the Senate bill, the nine-member task force would be appointed by the governor, lieutenant governor and speaker of the House to study the unemployment insurance system's finances and eligibility rules. It would be required to report its findings to the workforce commission by 2012.