ECONOMIC OPPORTUNITY

Payday lending, sometimes known as a cash advance, is a small, short-term, high interest loan that is intended to bridge the borrower's cash flow gap between pay periods. High-cost payday loans are considered among the most destructive financial products in the marketplace. With increasingly high lending volume in Texasâ€"well over 2 million loans per yearâ€" and exorbitant interest rates (often higher than 500% APR), payday lending products drain over $280 million in earnings from Texas workers each year and pitch many borrowers into an endless cycle of debt. Across the country, consumer advocates have partnered with religious groups, military organizations, and mainstream financial institutions in an effort to push state regulators and lawmakers to curb payday lending abuses. Can Texas regulate the industry in a way that protects borrowers from the dangers of payday loans?

Hundreds of thousands of Texas workers earn the minimum wage ($5.15 an hour) or just slightly above. The minimum wage is a poverty wage. Someone working full time on the minimum wage and supporting just himself would only earn a pre-tax income of $10,712 a year. A minimum-wage worker trying to support his family would need to work multiple jobs and rely on significant public assistance, and even then probably wouldn’t make ends meet.

Every year around Labor Day, CPPP issues a report on the status of the Texas economy in conjunction with the national Economic Policy Institute. This report finds that nearly five years since the 2001-02 recession, the economy has yet to rebound with advances in household income or real wages. In fact, Texas has shown a 6.2% decline in real median household income since 2002. Virtually all demographic groups have experienced this trend, with younger workers and African-Americans especially hard hit. On a positive note, although still above the national average, Texas' unemployment rate continues to decline and Texas is adding jobs at a faster rate than the U.S. as a whole.

Just in time for Labor Day, CPPP is proud to release Moving Forward: Common Sense Policies to Promote Prosperity for Working Texans. The report analyzes the barriers facing low-income Texans and provides nine recommendations to promote prosperity and move the economy forward.

Earlier this year Congress reauthorized the TANF block grant and in June the U.S. Department of Health and Human Services released interim rules for the program. CPPP issued Texas-specific comments to improve the new regulations.

Unless Congress acts this week, about 80,000 Katrina and Rita evacuees will lose their unemployment benefits in June. Of these, more than 26,000 are currently living in Texas. We urge you to contact your Senator and Congressional Representative to pass H.R. 5392, a measure to extend Disaster Unemployment Assistance (DUA) for an additional 13 weeks.

The fiscal notes for the tax and school-finance bills passed during the special session reveal a gap of $10.5 billion between the expected costs of HB 1 and anticipated revenues from HB 3, 4, and 5 in 2008-09. This deficit will place tremendous pressure on the next state budget, which could cause severe budget cutbacks, an increase in the state sales tax or other state taxes, an expansion of gambling as a source of revenue, or all of the above.

As part of budget reconciliation, Congress recently reauthorized Temporary Assistance for Needy Families (TANF) after numerous short-term extensions. The reauthorization makes several programmatic changes while providing a minimal increase in child care funding. TANF reauthorization provides an opportunity for states to upgrade their TANF work-based programs to deliver better workforce services, engage more recipients in education and training, and improve outcomes. The question is what Texas can do to help families acquire skills and attain self-sufficiency.

On Monday, the President signed legislation extending disaster unemployment assistance (DUA) at least 13 weeks for workers who lost their jobs as a result of hurricanes Katrina and Rita. For those left jobless as a result of Hurricane Katrina, their benefits expired on Saturday, March 4. Most Rita-related unemployment benefits are set to expire on March 25. Thousands of Texans could qualify for these extended benefits.

The Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the Child and Dependent Care Credit are federally funded anti-poverty initiatives that help low-income individuals and families meet their basic needs. Households in poverty and those surviving on meager budgets can significantly benefit from these opportunities to increase their net income.

More than two million Texas workers claimed over $4 billion in federal dollars for tax year 2003 through the federal Earned Income Tax Credit (EITC), ranking ahead of the more populous California. The EITC not only boosts the earnings of low-wage workers and stimulates the Texas economy; it also provides an excellent opportunity for working families to save for the future. Although outreach and free income tax assistance have improved awareness of the program, the Texas economy and working families lost out on nearly $1.2 billion in unclaimed EITC payments last year.

In Texas, approximately $1.2 billon dollars of tax credits went unclaimed last year in the form of the Earned Income Tax Credit (EITC). EITC is one of the nation’s most successful anti-poverty programs, helping low-income workers and families earning up to $38,000 receive a rebate of federal income taxes. In 2003, EITC lifted 440,000 Texans, including 240,000 children, out of poverty while pumping billions of dollars into the economy.

For years, there have been reports about the widening gaps between the rich and the poor, but few include a detailed look at income inequality trends in Texas. The study, Pulling Apart, put out by the Center on Budget and Policy Priorities and the Economic Policy Institute, finds that Texas leads the nation in the income inequality between its richest and middle-income families, and has the second widest gap between its wealthiest and poorest.