NCPA - National Center for Policy Analysis


March 16, 2009

As money from the economic "stimulus" package begins flowing, some Republican governors are rejecting their states' share of $7 billion for enhanced unemployment benefits, saying the strings Congress attached would lead to higher business taxes.  To get the money, states must expand unemployment benefits, such as covering part-time workers who lose their jobs.  

Texas Gov. Rick Perry said he doesn't want the stimulus money because his state would have to raise taxes on businesses or cut back on benefits once the federal funding runs out.  Texas, which had an unemployment rate of 6.4 percent in January, was entitled to $555 million.

"It seems really unreasonable that the federal government would require a change in state law as a condition of accepting these funds," Perry spokeswoman Katherine Cesinger said.  "The governor's main message is Texans who hire Texans drive our state's economic engine, and the last thing we need to do is burden them with higher taxes."

  • Led by Republican Governors Association chairman Mark Sanford of South Carolina, a group of conservative GOP governors has rejected or considered rejecting the unemployment money or other funding from the $787 billion stimulus package.
  • Bobby Jindal of Louisiana, Haley Barbour of Mississippi, and Bob Riley of Alabama also have rejected the unemployment money.

Joel Sawyer, a spokesman for Sanford, said it's politically difficult to take away benefits once they're extended.  Increasing the number of people eligible for unemployment would exacerbate the long-term problem the state has meeting its benefit obligations.

A study by the Nelson A. Rockefeller Institute of Government suggests states will have to make difficult decisions once stimulus money runs out.  States should use the breathing room provided by the stimulus to look for long-term budget solutions, the report says.

Source: Matt Kelley and John Fritze, "Governors reject stimulus money for unemployment," USA Today, March 16, 2009.

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