The Texas economy has been turning in impressive results, winning major corporate locations, and expansions and adding jobs at a notable pace. This success is no accident, though we do have substantial advantages to work with, but rather the result of decades of purposeful and strategic efforts to develop the economy in ways that enhance prosperity.
Economic performance is essential in order to provide opportunity for Texans and the state’s businesses. Growth is also crucial to generating the tax revenue needed to fund everything from education to roads to social services. While past results have been impressive, they’re no guarantee of future expansion. Without careful attention, Texas will lose out over time to other areas and the pace of growth will suffer.
In recognition of this inescapable fact, Texas House Speaker Joe Straus appointed a select committee (the House Select Committee on Economic Competitiveness) to study the “most effective ways for Texas to compete for jobs, investments and highly skilled workers.” Given that the legislature only meets for 140 days every two years (unless the Governor calls a special session), time is tight and committees can often accomplish significant legwork and thoughtful reflection more easily during the interim break. Dozens of witnesses testified (including me and the likes of Ross Perot, Jr., Tom Luce, and Mark Cuban), data was collected, meetings were held, and opinions were solicited regarding the keys to Texas’ future success. The Select Committee on Economic Competitiveness recently released its interim report including recommendations for the next session, which begins on Jan. 8, 2019.
The report focuses on barriers to business attraction including social policy such as the “bathroom bill” which was considered in the last regular and special sessions. I studied the potential economic costs and found that if the Texas Legislature passes a law viewed as discriminatory against lesbian, gay, bisexual, or transgender persons, it is likely that some meetings and events would be canceled and that some leisure travelers would also avoid the state. The reduction in travel and tourism would involve substantial economic costs, which we estimated to include the loss of over 35,600 full-time equivalent (FTE) jobs (based on 2016 levels of activity), which could be expected to rise to almost 59,600 jobs over time. The State and local governments would also lose substantial revenue, with annual losses of $176.4 million in State revenue and $84.3 million in local fiscal resources (rising to $295.2 million and $141.1 million, respectively, over time).
Worse, these numbers are only one aspect of the potential losses of a bathroom bill. They exclude major sports events, concerts, and similar large attractions. Worse, they don’t even begin to address the potential effects on corporate locations, retentions, and expansions. The kinds of businesses we need for ongoing prosperity will look with disfavor on discriminatory social policies, and their employees (many of whom are young and forward thinking) will be disinclined to move to a state where such laws are in place. With economic development so competitive, losing out on one factor can be enough to tip the scales. The stakes are very high on this one, and coming out with a clear statement that a bathroom bill or similar policy is off the table (and sticking to that course of action) is one of the recommendations of the Select Committee (which I agree with wholeheartedly).
Another recommendation is to prioritize funding for public education, regularly adjusting it to account for growth in population and inflation. When increases in population and inflation are taken into account, state spending on public education has decreased significantly over the past decade. Schools are strained for resources, with little or no room in the budget for programs which could increase student achievement. With less State support for public education, the burden falls increasingly on local property taxes, which not only increases costs for families across the state but also affects competitiveness for current and potential businesses. The Select Committee recommends that the legislature increase funding at public schools as well as workforce and technical training programs at community colleges and state technical colleges.
Another focus area is infrastructure. While there has been some additional funding made available for transportation, it’s not enough to make progress toward lessening congestion, and more needs to be invested. Other aspects of infrastructure such as fresh water supplies, flood mitigation, and rail and port systems are also in need of funding to keep pace with future requirements.
The Select Committee also recommends review of tax and economic development incentives to ensure they are being applied consistently across the state and that they can be accessed by businesses of all sizes. While any outlay of State funds is worthy of periodic review and adjustment if needed, incentives are crucial to future development, and Texas must have effective programs in place in order to compete.
The fact that the Texas economy has benefited from a state government that consistently values a strong business climate was acknowledged. The need to avoid legislation that distracts from critical priorities and is viewed by many as enabling discrimination against certain groups or classes of Texans is also emphasized. In addition to the bathroom bill, the last session included a bill that prohibits local governments from enacting policies that prohibit the enforcement of state and federal immigration law. The bill as passed was seen as problematic by law enforcement as well as discriminatory.
One comment which sums up the findings of the Select Committee points out that because of “the seriousness of the challenges ahead in this fast-growing state, policymakers should prioritize issues that can directly and positively impact private-sector growth and economic competitiveness, such as workforce development, education, transportation and property-tax relief.” I couldn’t agree more. Economic growth and the resulting opportunities and resources will enable us to get where we need to be, providing funds to meet the needs of the future and opportunities for an ever-expanding and more diverse group of Texans.