AUSTIN – Most Texas employers should plan for their unemployment insurance taxes to increase significantly next year, Texas Workforce Commission Chairman Tom Pauken of Dallas said Tuesday.

While tax rates won't be set until December, Pauken said that mounting layoffs are close to exhausting a state trust fund, forcing him and two fellow commissioners recently to authorize what they expect to be $2 billion of interest-free borrowing from the federal government.

That's just so the commission can pay Texans' unemployment benefits into next year, when Pauken said he anticipates issuing $2 billion of bonds to repay the feds.

The borrow-now, bond-later approach would protect employers from a huge tax increase on Jan. 1, but the increase still will be stout, he said.

"What I'd like to do is spread it out over a number of years, rather than hit them all at once in 2010 in a tough economic climate," he said.

Pauken's projections came nearly three months after Gov. Rick Perry, with the backing of many business groups, rejected $556 million in federal stimulus money for unemployed Texans. He said President Barack Obama and the Democratic Congress attached too many strings to the money and that Texas would have had to expand eligibility for benefits.

Pauken said that though things could still change, it's probable that the commission next year will need to raise an amount from employers comparable to the amount raised in 2003 – or 2.4 percent of all taxable wages.

In 2003, the "minimum tax" paid by nearly 278,000 employers was 0.67 percent of the first $9,000 of an employee's wages, or $60.30 per worker. This year's minimum tax rate is only 0.26 percent, or $23.40 a head.

For all 448,000 employers, the average tax rate in 2003 was 1.67 percent, compared with 0.99 percent this year. If next year's rates mirror those from six years ago, the average employer would pay about $150 per employee, up from just under $90 this year.

If the commission doesn't issue bonds to defer the pain into future years, he said, the commission next year would have to slap an even bigger "deficit tax" on employers.

Under that scenario, Pauken said, the commission would have to squeeze from employers an amount approaching 2.9 percent of all taxable wages – a level not seen in the last decade or so.

Texas won't have to start paying any interest on the federal loan until 2011, Pauken said, so he plans to recommend issuing bonds "toward the end of next year." They would be repaid over seven to 10 years, and would be "as much as possible tax-exempt in order to get a lower rate."

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