Senator Eliot Shapleigh - El Paso, Texas

AUSTIN – Texas' jobless-benefits fund is empty, and the state will probably borrow $1.5 billion from the federal government to pay benefits through December, a state official said Tuesday.

But it's unclear when Texas employers will have to pay a much higher tax to repay the loan and rebuild a required $863 million cushion in the unemployment compensation trust fund.

A second Texas Workforce Commission official and an outside expert said the brunt of expected higher taxes might not sock employers until 2011, after the worst of the recession passes and well past the March primary for Gov. Rick Perry.

A key driver of higher tax bills for employers – though not the only one – in the next few years will be a "deficit assessment" to restore the fund to fiscal health.

"The commission can use its discretion in minimizing the tax impact to Texas employers," said Workforce Commission spokeswoman Ann Hatchitt.

Texas has some of the nation's lowest unemployment insurance taxes on employers – and one of the stingiest relief systems. In the first quarter, the state paid benefits to only 35 percent of its jobless residents, a lower percentage than any other state except South Dakota, U.S. Department of Labor statistics show. The national average was 58 percent.

Perry has defended keeping employer taxes low. His critics say the state's system needs bigger reserves so businesses don't get hammered by higher taxes during economic downturns.

Hatchitt said some time this fall, the state will decide whether to postpone a deficit assessment until 2011. Commissioners will probably decide at the same time their schedule for issuing bonds, possibly next year, she said. Bond proceeds — a figure of $2 billion has been widely mentioned — would repay funds Texas is borrowing from the federal government.

At Tuesday's monthly meeting of the three-member commission, chairman Tom Pauken of Dallas pressed the agency's chief financial officer, Randy Townsend, for an estimate of how much the state will borrow from the feds by Dec. 31. Townsend indicated it would be about $1.5 billion.

Texas won't have to pay interest on the federal loans until January 2011.

Don Baylor Jr., an employment policy expert, said that if the commission postpones a deficit assessment until 2011, that will force more borrowing from the federal government next year, just to pay ongoing benefits to laid-off workers.

And in 2011, employers would pay not only a deficit assessment but also the first installment of a "bond obligation assessment" lasting several years, said Baylor, who works for the Center for Public Policy Priorities, which advocates for low- and middle-income Texans.

"You can run away from the problem, but you're going to have to pay the piper at some point," he said.