At a high-end hardware store in Houston's ritzy Galleria area — to highlight the dire plight of Texas small businesses, no doubt — Gov. Rick Perry said Thursday he will turn down $555 million of stimulus money that would replenish Texas' dwindling unemployment insurance fund.

Texas, Perry said, would have to change how it defines unemployment, which would raise taxes on such businesses.

“Employers who have to pay more taxes have less money to make their payroll,” he said.

Never mind that this recession has already cost 250,000-plus Texans their jobs, a record 78,000 in January alone. And forget that 26,000 are filing new unemployment claims each week, or that officials expect between 160,000 and 300,000 more Texas jobs to vanish in 2009.

And so what if the state's Unemployment Compensation Trust Fund is expected to be depleted by October?

“Gov. Perry's decision will harm many Texas families,” state Sen. Leticia Van De Putte said. “The unemployment fund is already running low and will reach zero by Oct. 1. Why would Gov. Perry place the burden on already stressed employers to make up the shortfall?”

She's right. To assert that by taking $555 million federal dollars, Texas businesses will get higher tax bills is a bit disingenuous. If anything, if Perry's refusal holds, the opposite will happen, and in January, Texas businesses will start paying higher taxes to make up the money he is turning down.

Texas has never been generous about caring for its workers who lose jobs through no fault of their own. In fact, only 17 percent of Texans can collect unemployment benefits, which are paid out of the trust fund.

Testimony before the special House committee appointed to handle stimulus funding revealed that the trust will have a deficit of $800 million by September, which “will automatically trigger the imposition of the unemployment replenishment tax (or ‘deficit tax') on Texas employers.”

But to get the stimulus money, Texas must make three changes to its unemployment insurance rules.

It must modernize how it calculates unemployment benefits. Currently, Texas does not factor in the latest quarter of workers' earnings in the mix. The Texas Workforce Commission estimates this change will cost $43.7 million more per year.

It must also add family-friendly factors into its “compelling reasons criteria” to authorize benefits for workers who leave their jobs because of things like a disability in the immediate family or because a spouse has to leave to take a job elsewhere, adding another $4.6 million annually to the costs.

Texas must also allow workers to either get benefits while being retrained or prorated benefits while working part time. The cost: $28 million or $34 million, respectively.

If these changes are put off until 2010, Texas will pay nothing now and get $475 million for its trust fund, enough to cover all the added costs through 2017. And the deficit tax on employers will rise to 0.34 percent.

But if Perry's refusal holds, the trust fund gets zilch, and the deficit tax on employers will be raised to 1.09 percent to make up the cash turned down.

Which do you think is better?