Perry, a Republican, has agreed to take most of the nearly $17 billion stimulus money earmarked for Texas as part of a bailout for states. But he says there are too many strings attached to the unemployment money and has steadfastly opposed accepting it.
All 12 Senate Democrats and seven of the chamber's 19 Republicans voted to defy Perry and take the last piece of the stimulus pie.
"This is a pro-family thing to do," said Sen. Bob Deuell, R-Greenville. "It's always difficult to go against our friend the governor, but in this case I think there's compelling reasons."
Critics say employers eventually will be stuck with the bill for expanded unemployment benefits. Sen. Florence Shapiro, R-Plano, said the Senate's approval of the legislation could "come back and bite us."
But the sponsor of the bill, Sen. Kevin Eltife, R-Tyler, said the expanded benefits required by the federal regulations are a tiny fraction of the total jobless payouts. Eltife said the federal strings will add about $57 million a year to the cost of unemployment benefits.
With the downturn in the economy, Texas is on track to pay out $2.5 billion in 2009, compared to about $1 billion in 2008, he said.
Eltife also noted that the state's unemployment insurance fund will be nearly $1 billion below required levels by Oct. 1, which will force the state to borrow money to pay benefits regardless. Taking the stimulus money will save the state $80 million in borrowing costs immediately, he added.
"This not only helps the unemployed who have lost work but it will also lessens the burden on businesses," Eltife said.
The Senate rebuke of Perry comes as the governor, facing a re-election challenge from U.S. Sen. Kay Bailey Hutchison, steps up his criticism of Washington bailouts, appearing at numerous anti-tax rallies and taking to the airwaves to bash the federal government.
Perry, the longest serving governor in Texas history, also faced an uprising over the weekend in the House when members voted to strip most of his office budget and redirect the money to help military veterans.
The governor has not said yet if he would veto the unemployment insurance legislation should it ultimately reach his desk.
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