As the Texas Legislature hits the halfway point of its 83rd biennial session, it’s timely to reflect on how our policy environment has supported the economic growth we have seen of late, and the role the next 70 days will play in positioning the state for the long-term.
Today we are a business-friendly state, with low taxes, a balanced regulatory environment, an entrepreneurial culture, and an affordable cost of living.
According to the Tax Foundation, Texas ranks ninth in overall tax burden, lowest among large states other than Florida (we missed their housing bubble) and compared to 48th for California and a dead last 50th for New York. Those states are experiencing an outflow of people and companies, many of whom are coming to Texas. Our low tax burden means that employees and families love it because we have no state personal income tax, real estate is affordable, and our percentage of college-ready students is growing. Since we rely heavily on the sales tax to fund state government we realize the benefit of the 1,000 new citizens a day moving to Texas and consuming here. Our natural resources – and the taxes they generate – also help keep taxes low for other business sectors. Shale-based gas exploration in both north and south Texas is contributing heavily to our healthy budget and most economists expect production to be sustainable for another decade or more.
All of this had led to a multi-billion dollar budget surplus that has the Governor calling for a tax rebate to our citizens (yes, that’s rebate).
That’s all good but given the relative health of the economy and the surplus, how the Legislature addresses issues like infrastructure and education will determine if we maintain the momentum we’re seeing and position the state for long-term economic success.
The Governor has called for spending a total of about $ 5 billion dollars on roads and water infrastructure to keep up with the demand of our accelerated population growth.
Given our reliance on bond financing over the years, Texas leads the nation in transportation debt (about $30 billion dollars worth) and lawmakers are struggling with the funding package; some support raising the gasoline tax to work down the debt and pay for additional construction and it seems likely they will dip into the Rainy Day fund to solve part of the problem.
The cost just to support Texas’ ever-growing energy sector – including the aforementioned shale development – is estimated at $1.6 billion annually.
The primary water legislation would create the State Water Implementation Fund for Texas (SWIFT). House Bill 4 passed a key House committee and will be voted on by the full House of Representatives this week. SWIFT would create a water infrastructure bank that operates a revolving fund for financing projects in the State Water Plan. The Fund is expected to be seeded at around $ 2 billion.
One interesting issue relevant to both roads and water is how – if at all – the state engages private sector resources to get these projects to completion quickly and efficiently. Senate Bill 7 is taking up that issue.
How Texas approaches public and higher education may trump all others when it comes to our long-term economic competitiveness. While Texas has seen improvement in students’ college readiness, most lawmakers agree that developing a skilled workforce to fill the jobs that are being created, and particularly technical and engineering talent, is paramount.
The Legislature is debating both more funding for all levels of education and how to deliver a quality education more efficiently with existing resources – from scholarships that allow parents to choose a public school best suited for their child, to a super University in south Texas that would be the 2nd largest Hispanic-majority campus in the country.
Texas is blessed with a creative and entrepreneurial culture attractive to business and families and natural resources that, at times, drive prosperity. Now, how the Legislature addresses the policy fundamentals may tell the tale on whether Texas keeps its designation as the best place in America to live and work.
Craig Casselberry is founder and CEO of Quorum Public Affairs, Inc. A corporate communications specialist and former aide to two Texas Governors, he has managed legislative issues for public officials or companies of all sizes during the last 14 state legislative sessions.
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