Office of the Governor - Greg Abbott

Unemployment Insurance Fact Sheet
What is Unemployment Insurance?
Unemployment benefits are paid to eligible individuals from taxes paid by employers.
  • The federal government collects an unemployment tax under the Federal Unemployment Tax Act, which primarily finances administrative costs, loans to states, and extended benefits.
  • The state collects payroll taxes from employers to cover benefits, which are deposited to the state's Unemployment Trust Fund.
  • Unemployment Insurance truly functions like an insurance policy. In Texas, employers pay into the system to insure their employees against loss of wages, and the system will provide financial assistance to eligible individuals who lose their job through no fault of their own while they look for a full-time job for a fixed period of time.
How is the Unemployment Trust Fund structured and funded?
The Trust Fund's floor is set equal to 1% of payroll, currently around $860 million, and its' ceiling is equal to 2% of payroll.

The Trust Fund is supported by taxes on employers based on employee wages.

  • The general tax is paid by all employers and varies across employers. The general tax includes experience ratings that reflect each individual employer's unemployment claims.
  • The replenishment tax is a flat rate paid by all employers. The Texas Workforce Commission (TWC) has discretion in setting rates and may suspend the collection of the replenishment tax when the Trust Fund is above the ceiling, as occurred for Calendar Year 2008.
  • The deficit tax is applied to all employers when the Trust Fund falls below the floor, in an aggressive effort to bring the Fund back above the floor.
  • An obligation assessment is an experience-rated assessment against employers for the purposes of retiring debt when the state must borrow to make the Fund solvent.

This tax structure is intended to strike a balance between having enough money in the fund to fulfill the obligation to pay unemployment benefits to eligible Texans, while allowing employers to keep as much money in the economy to support their business and create jobs.

What changes are required for Texas to receive federal stimulus funding?

The federal stimulus funds distributed to the states come from the Federal Unemployment Account based on the state's share of the federal unemployment taxes paid. In order to get $555 million in federal stimulus funds, the state must change the state law.

  • To receive one third of the funding (approximately $185 million), the state must have an alternate base period for purposes of calculating eligibility that includes using the most recent quarter of wage credits in the calculation.

    Under current state law, the state provides unemployment benefits to individuals who have wages in two of the first four of the last five quarters, thereby excluding any wages earned in the most recent quarter.

TWC estimated impact:

CY2010: $43.8 million
CY2011: $43.4 million
CY2012: $40.9 million
CY2013: $39.7 million
CY2014: $39.4 million
Admin Costs: $5.2 million


  • To receive the additional two-thirds of the funding, the state must make the change to the alternate period (above) and also change state statutes to extend benefits to two of the following four groups:
  • Provide benefits to individuals seeking only part-time work when they previously worked part-time. Currently, individuals must seek full-time work regardless of whether they worked full-time or part-time.
TWC estimated impact CY2010-2014: $137.4 million in benefits, $9.6 million in administrative costs
  • Provide benefits to individuals who voluntarily left employment for a compelling family reason, including:
    • domestic violence (already provided under Texas law);
    • illness or disability of an immediately family member (federal requirements require more than state provisions that already include illness of minor child or terminally ill spouse); and
    • accompanying a spouse when moving for the spouse's job (Texas currently covers military families).
TWC estimated impact CY2010-2014: $46.2 million in benefits, negligible administrative costs
    • Provide 26 weeks of additional compensation to unemployed individuals that have exhausted their unemployment benefits and are participating in state-approved or WIA funded training programs.

TWC estimated impact CY2010-2014: $161.8 million in benefits, $230,000 in administrative costs

    • Increase payments by at least $15 per dependent, per week capped at lesser of $50 or 50% of the individual's weekly benefit amount.

TWC estimated impact CY2010-2014: $1.4 billion in benefits, $10 million in administrative costs


Are there other federal stimulus funds available for Unemployment Insurance?
The Texas Workforce Commission announced on February 24, 2009 that eligible claimants will receive an additional $25 a week in unemployment benefits. This increase in benefits applies to benefits paid from February 22, 2009 to initial claims made by December 26, 2009. This increase in benefits is federally funded and applies to all unemployment benefits paid. Employers will not be charged additional funds.

(Note TWC estimates provided in testimony to the House Select Committee on Federal Economic Stabilization Funding on March 10, 2009)

Gov. Perry Stands With Employers

After careful review of the federal government's stimulus package, Gov. Perry opted against the required expansion of the state's unemployment insurance program, due to its long-term negative impact on the Texas economy.

Download Audio from Gov. Perry

Unemployment Insurance News

Commentary & Interviews

Dr. Laffer
Dr. Arthur Laffer
Click on the linked title to play audio.

If Texas Accepts the UI Funds

If Texas were to accept these funds from Obama, my view is that it would make Texas less competitive than the other states, and it would hurt the prosperity and employment prospects for the citizens of the state of Texas.

Texas Will Benefit from This Decision

I just want to say that I support Gov. Perry's decision to not accept the stimulus funds for the state of Texas. It's going to be a very good thing for Texas, meaning lower taxes, more job growth, less welfare, more employment, and more prosperity for the state of Texas. Texas will get jobs that would have otherwise gone to other states because Texas is far more competitive than other states.

Best Form of Welfare'Wrong Thing To Do

The best form of welfare is still a good, high paying job- and I've never seen anyone spend themselves into prosperity. And that is exactly what these Obama stimulus programs are doing. While he is a very fine man, he won the election and all of that, I respectfully disagree with his programs, which are nothing but increasing the tax burden on workers here in America and paying people and business for not working. It is just the wrong thing to do.

California vs. Texas

Now as you all know, I've done a great study, a big study, on Texas versus California- my former home state. Texas outperforms California in virtually every single way of economic results, because they have focused on market solutions rather than on government solutions.

States Compete for Jobs

States are in a competition with all the other states. It shouldn't come as any surprise if you have two locations, A and B, if you raise taxes in A and lower them in B, producers, manufacturers and people are going to move from A to B. The exact case in point is Texas and California. California has been racing Texas for years on workers and producers and employers, and Texas has kept a solid, rational tax code that has been very pro growth. Look at what's happened to the unemployment rates in the two states, look at what's happened with job growth- Texas is clearly the winner.