But business groups and conservatives in the Legislature stood behind the Republican governor, saying that Perry's refusal spares Texas from paying a big tab later when the federal dollars run out.
Perry said he would accept most of the roughly $17 billion slated for Texas in the plan.
But accepting the jobless aid would require the state to enlarge its unemployment insurance program, subjecting Texas employers to millions of dollars in debilitating higher taxes, he said.
Perry assured jobless Texans looking for work that they would continue to receive unemployment benefits.
Perry unveiled his decision at a news conference in the middle of Bering’s Hardware store in Houston. Supporters were invited to watch the announcement via a live video stream on his political Web site, RickPerry.org.
"I am here today to stand with Texas employers and the millions of Texans they employ to resist further intrusion into their businesses through an expansion of our state’s unemployment insurance program," Perry said.
Perry has signaled for weeks that he was uncomfortable with taking parts of the stimulus money that would amount to increasing the state’s social-services net, which the state would have to continue funding once the money ran out.
Democrats denounced the decision as brazen political move that endangers thousands of unemployed Texans. An estimated 250,000 Texans have lost jobs since the recession began.
"After declaring his unconscionable decision today to turn away $555 million in unemployment relief meant for a rapidly increasing number of unemployed Texans, Gov. Perry will be resting comfortably tonight in a home paid for by Texas taxpayers," said Sen. Wendy Davis, D-Fort Worth.
"As he does, families throughout this state will be huddling at their kitchen tables, poring through mounting unpaid bills and wondering how they are going to survive."
On Tuesday, House Democratic leader Jim Dunnam, D-Waco, chairman of the House Select Committee on Federal Economic Stabilization Funding, filed a bill to create the State Fiscal Responsibility Office to oversee and investigate spending of stimulus money It would also require monthly status reports on stimulus funds.
On Thursday, the committee voted 5-1 to push ahead with proposed changes in the Texas unemployment insurance law to meet federal criteria for accepting the money.
Rep. Myra Crownover, R-Denton, cast the lone dissenting vote, saying that the decision was rushed and excluded some Republican members who were not aware of the planned resolution. Rep. Jim Pitts, R-Waxahachie, joined four Democrats in supporting the resolution.
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