The sequel to the 85th Texas Legislature – in the form of a Special Session – starts this week in Austin to address unfinished business.

And.. much like the 1st session ended, there will almost certainly be drama.

First, Governor Greg Abbott wants a bill to continue operations of the Texas Medical Board which licenses and regulates our doctors, nurses and other medical professionals.

If and when that gets done, the Governor has outlined 19 other issues he wants addressed.

The most high-profile of those issues is the so-called ‘bathroom bill’ to require people to use the bathroom associated with their birth gender.

The business community is rallying against the bill for economic reasons.

The perceived discriminatory nature of the legislation could result in Texas losing major sporting and other professional events as North Carolina did before they reversed their policy.  State tourism officials have projected the economic impact in the billions of dollars.

The technology industry – which has made major investments in Texas in recent years — thinks they’ll have a harder time recruiting the diverse and skilled workforce they need.

It’s an issue that has gotten much too much attention.

Speaking of a skilled workforce..

The Legislature recently authorized using the Skills Development Fund to help companies expanding in Texas or re-locating from another state if they offer high-skilled jobs.

The Fund has about $ 48,000,000M available.

And remember, the Texas Enterprise Fund – the Governor’s deal-closing fund for major job projects — will have about $90M to spend over the next 2 years.

Just this week the Governor announced a $6M deal with Merck, the pharmaceutical  giant, to develop a technology hub around the Dell Medical School campus in Austin. Merck is expected to create 600 high-wage jobs.

So, while short of the $ 200 Million the business community wanted — Texas hasn’t completely disarmed when it comes to business recruitment.

And finally, Governor Abbott has said that addressing rising property taxes is the “number one issue” of the special session.

The Governor fears that rising valuations are taxing people out of their homes and wants to reign them in.  These big increases can also hamper business expansion, particularly in the capital-intensive industries.

The rub is that property taxes – which are taxed locally – pay for core community services like public schools, roads, emergency services, police and fire protection.

And, naturally, rising populations around the state put a strain on those services.

It’s a difficult issue to be sure with large and powerful competing interests.

Given the political tension in Austin right now, whether the Legislature even gets to that issue – on the list of 20 – is far from clear.

Craig Casselberry

cc@quorumpublicaffairs.com

(512) 762-7366

 

 

 

House Bill 108 recently passed by the 85th Texas Legislature and signed by Governor Abbott on June 1 authorizes the Texas Workforce Commission (TWC) to use the state’s Skills Development Fund to provide support services for employers expanding in or relocating their operations to Texas, effective September 1, 2017.

The money can be used for expansion in Texas or re-location from another state to Texas for employers offering complex or high-skilled employment opportunities.

It’s estimated the Fund has about $ 48,000,000M available.

The Fund will provide leadership and direction to out-of-state employers, economic development organizations, local workforce development boards, public junior colleges, and public technical institutes to address the employers’ needs for recruitment and hiring for complex or high-skilled employment positions to facilitate employers’ relocation to or expansion of operations in Texas.

The funds can also be used to award grants to a public junior college or public technical institute providing workforce training and related support services to employers who commit to establishing a place of business in Texas.

The executive director of the TWC is responsible for the distribution of grant money.

The TWC can solicit and accept gifts, grants, and donations from any public or private source for the purposes of the bill’s provisions.

The TWC can require that a recipient repay the amount received and any related interest if TWC determines that the money was not used for the purposes for which the money was awarded.

http://www.twc.state.tx.us/partners/skills-development-fund

 

 

 

The 85th Legislature adjourned after passing a $ 217 B budget to fund state government for the next 2 years.

While a lot of attention was given to the A-F rating system for public schools, the session ended with about a C grade for Texas business.

Important incentive programs to allow Texas to remain competitive came under fire.

The Texas Enterprise Fund – the Governor’s deal-closing fund for major job projects — will have about $90M to spend over the next 2 years, far short of the $ 200 Million the business community wanted.

The Film Incentive program received $ 22M, nowhere near the $ 72M Governor Abbott requested.

In both cases, the House and Senate included virtually no new money for these programs but the Governor stepped in to salvage some funding.

On the issue of infrastructure, we did not take pass a bill to extend local government authority to create public-private partnerships, which some see as a means to get roads, bridges, pipelines and other infrastructure built more quickly.

https://texasbusinessradio.com/blog/legislative-update-5/

Some positive news..

The Texas Economic Development Act, or Chapter 313,  that allows local governments to abate property taxes to attract jobs to their communities DID survive opposition from some lawmakers.

The fast-growing biotechnology industry passed some important innovation and patient protection measures and helped continue the Texas Cancer Institute for at least 2 more years.

The Texas Workforce Commission (TWC) was authorized to use the Skills Development Fund to help employers expanding or relocating their operations to Texas if they’re offering high-skilled jobs.

In K-12 education.. several bills will promote more intensive computer science training for our students in specialized fields like cybersecurity.

P-Tech, an innovative program that partners K-12, higher education and the business community (companies like Dell are partnering with Austin schools, e.g.) has been approved and signed by Governor Abbott.

A Telemedicine billed passed that will give Texas patients more options for care and should attract medical technology companies to the state.

Oh, and the Legislature created a statewide regulatory framework for ride-sharing companies.  Yes Austin – Uber and Lyft are back.

And finally, for more summer fun, Governor Abbott just called the Legislature into special session starting July 18.   They will work on property tax relief for homeowners, among a possible 20 total issues.

In the dramatic conclusion to the 85th session, lawmakers almost came to blows on the floor of the House over the issue of immigration.  When they return, the Texas business community hopes the fight will be to keep Texas the best place in America for business.

With the 85th Texas Legislative Session winding down, there are lots of bills dead or dying.

Most of the action during the last 2 weeks will revolve around the state budget.

The Senate and the House have named 5 of their members as ‘conferees’ to work out differences.

They started about $ 2 billion apart.

A big part of the difference is whether to use the state’s so-called “Rainy Day” fund (the current balance is about $ 11 B) to fund state government in 2018 – 2019.  The House says yes, the Senate says no.

Keep in mind – about 1/3  of the budget goes to Medicaid, the health insurer of last resort.  And another 1/4 of the budget funds public education.

On the subject of health care costs, there is some good news.  The Legislature has passed a bill to allow telemedicine, which is direct-to- consumer healthcare starting on June 1.  Texas was one of only 2 states that didn’t allow it.   That bill is on its way to Gov. Abbott.

And, there are several digital education bills supported by the Texas technology industry to modernize how we train our kids.  They would allow our students access to the technology they use outside the classroom.   These bills are still pending but championed by Sen. Larry Taylor and supported by Lt. Gov. Dan Patrick so the outlook is good.

If the budget isn’t settled by May 29, Governor Greg Abbott will have to keep them in special session.  Those sessions run for 30 days at a time and the Governor solely controls that agenda.

There’s also speculation that the Governor could call them back if they don’t settle on a long-term solution to fund public schools; the current system is commonly referred to as “Robin Hood” and seems to work for just about nobody.

It’s been an interesting and some would say dramatic session, particularly in the Texas House.  As an example, University of Texas Exes are rallying to stop a bill that would take several hundred acres of land donated by a prominent alumnus, Col. George Brackenridge, in the 1900’s and give it to the Texas Parks and Wildlife Department.  UT calls it a land grab that could put a chill on future donations.   It would be interesting to see how Gov. Abbott, a Longhorn, would view that bill if it reaches his desk.

So, if you’re looking for free entertainment these next 2 weeks, stop by the Texas State Capitol.   It will not be dull.

Catch us also on Texas Business Radio: https://texasbusinessradio.com/

The Kentucky Derby won’t run until May but the 85th Texas Legislature is in their own version of the home stretch.

The only thing they must do in the final 50 days, per the Texas Constitution, is pass a state budget to fund state government for the next 2 years, and it must be balanced. I.e. no spending outside what projected revenue (State Comptroller, Glen Hegar, does the projecting) will allow.

The Texas Senate passed their version of the budget 10 days ago; the House of Representatives, late last week.  The House budget spends just under $ 1B more than the Senate.  The difference will be negotiated.

Here’s what’s important.  Because we have less money to spend than 2 years ago, lawmakers have a difficult task in deciding where to allocate the money from among those things a government needs to function — education, social and other public services, infrastructure, and maintaining a healthy economy, to name a few.

The business community is generally agreed on a few key areas:

  • There can be no better investment in our future than making sure our students are prepared to enter the job market.  Cuts to public and higher education are short-sighted and damaging to our long-term economic health. Right now, funding for higher education has been cut by 6-10%.  Hopefully cooler heads will prevail and education becomes a priority funding item.
  • The same is true in workforce skills training; our increasingly diverse economy requires training our citizens in high-growth STEM areas, graduate careers and college-readiness programs.  A tax credit for employers who hire apprentices so they can learn a trade or a specialized skill is also being considered.

What else needs to happen?

  • The Texas Enterprise Fund attracts big job-creating projects like Toyota, Apple, Chevron, and Samsung and needs $ 100M, as Governor Abbott has requested.
  • The Governor’s University Research Initiative attracts top-flight academic talent to our state; it needs $ 40M.  Stanford University was a catalyst for what we now know as Silicon Valley. Texas needs the brightest minds and innovators to replicate that dynamic job-creating machine right here at home.
  • Our Film Incentive Program needs $ 60M.  Texas directors are filming big budget movies in neighboring states that are out-competing us.  That needs to change. The return on that investment is estimated at 5:1.

And remember. We have about $ 10B in our so-called ‘Rainy Day’ fund, more than 3x the amount held by any other state.  With the price of oil being where it’s been the last few years, state revenue has suffered.  It’s time to spend some — not all – of that money on important programs, starting with education.

The House budget does spend $ 2.5B of Rainy Day money.  The Senate budget doesn’t touch that fund.

The corresponding radio broadcast on this topic is here, sponsored by Dell: https://texasbusinessradio.com/blog/texas-legislative-update-3/

The Legislature adjourns ‘sine die’ — a Latin term that literally translates to ‘without a day’ or, if you’re more layman than Latin “we’re done” — on Memorial Day.

Call your State Representative and Senator today and let them know where you stand.  If you don’t know who they are, go here to find out http://www.capitol.state.tx.us/.

It may be a photo finish:

Business leaders agree that to keep our economy strong over the long-term,  we must educate and teach our young students the skills they’ll need to fill the jobs spectrum – from the technical fields to manufacturing and all points in between.

In fact the Texas 2050 Coalition thinks it’s so important that “education and workforce development” are # 1 on our list of legislative priorities.  It’s a near-term priority with long-term benefit.

Today, the “high tech” sector does as much recruiting from other states and countries as it does training Texas students to fill these high-paying jobs.

The Central Texas/Austin area, for example, produces only about ½ of the computer science graduates needed to fill the open jobs in 19 of Austin’s key high-tech occupations, according to the Austin Technology Council.

The Texas Legislature is considering ways to change that so that the technology industries – present and future – that will drive the new economy are created right here in Texas.

One proposal would establish a Pathways in Technology Early College High School Program – or P-Tech.   This program got its start through a partnership between IBM and New York City schools and Texas could be next.  A bill by Sen. Larry Taylor would provide $ 5 M to help school districts set up their own program.

P-Tech is a six -year program that starts in high school and combines academic learning with practical application in a business environment.  In this case, IBM provides students a first-in-line interview for a full-time job with the company.  The students can also choose to pursue a four-year degree instead.

There’s a similar program already in place.  Dell and Austin ISD have started Career Launch, a workforce training program at two Austin high schools.  Dell employees will help train students in fields like cyber security, date mining, and applied science.   The students are working toward not only a high school diploma but an associate college degree.

The Austin American Statesman reported on this recently: http://www.statesman.com/news/austin-manor-districts-launch-workforce-training-academies/u6DfHXvqLdMdOFpw2gvQ8M/

This type of innovation in education is proving popular with students.

A P-Tech program at Seagoville High School in the Dallas area attracted. 5,000 students for 2,700 seats.

Our Texas 2050 business coalition is also supporting Career Technical Education (or CTE) courses; the post-secondary 60x30TX plan; AND, funding for digital learning and classroom connectivity in every district in Texas.

There’s no better investment of taxpayer dollars than educating our children and doing it in a practical, applied way with an eye on skilled training. Innovation in education – it’s something we must do to ensure a prosperous future for our great state.

Catch my commentary on this subject also on Texas Business Radio https://texasbusinessradio.com and these stations:

  • KPRC AM950 Houston – 6PM Saturdays
  • NewsRadio KLBJ, 590AM and 99.7FM – 6AM Central Sundays
  • News Radio 1200 WOAI San Antonio – 10AM Central Sundays
  • NewsRadio 740 KTRH Houston – 11AM Central Sundays
  • NewsRadio 1080 KRLD Dallas / Fort Worth – 8PM Central Sundays
  • iHeartRadio – 6PM Saturdays KPRC, 10AM Sundays WOAI, 11AM Sundays KTRH
  • iTunes – On Demand

Economic growth comes from several sources, including entrepreneurship, expansion of existing businesses, and attraction of new industry.

The state traditionally has led the latter effort, focusing on high-value companies that provide a disproportionate boost to state productivity and wages.

The leading nationwide publication that monitors these activities is Georgia-based Site Selection Magazine, with a readership of 44,000 site selection professionals, along with government and economic development leadership.

In past years, Site Selection Magazine has awarded the “Governor’s Cup” to Texas numerous times for having the most qualified projects of any state.  “Qualified capital projects” are private-sector only and meet one or more of these criteria: $1 million or more in investment, 20 or more new jobs or 20,000 or more square feet of new construction.

However, Texas has begun to slip rapidly in the rankings.  In the last year, Texas has slipped from number 1 in to number 15 in attracting the most new projects.  However, that ranking is based on absolute numbers, and not adjusted for state population, a much more meaningful number relative to economic impact.  For last year’s rankings, Kentucky, Nebraska, Ohio, North Carolina, and Kansas were ranked the top states, and Texas was ranked 11th.  For 2016, Texas slipped to 34th among all states.

The fierce competition between states makes it imperative that the 85th Texas Legislature adequately fund the state’s ‘deal-closing’ fund – the Texas Enterprise Fund – and maintain our local job creating tool, Chapter 313, that provides for property tax abatement.

On a balanced scorecard of objective and subjective measures, Site Selection Magazine ranked Texas 4th (tie with Tennessee) for overall business climate, behind Georgia, North Carolina, and Ohio.  However, in the Executive Survey Rank, the subjective rankings by professional site selectors, Texas continued to receive top marks, and was ranked #1.

  • Source: Site Selection Magazine, November 2016, “The Gold Standard”

However, Texas faces challenges in attracting capital intensive projects.  Based on a combination of all taxes, Texas ranks only 23rd in lowest overall tax burdens.

The recent study “Location Matters — The State Tax Costs of Doing Business” by the Tax Foundation in collaboration with KPMG LLP highlights state differences in tax costs (measured as “Total Effective Tax Rate”) for a variety of hypothetical operations. It compares tax burdens in the 50 US states (plus the District of Columbia), considering seven different types of businesses: corporate headquarters, R&D facilities, retail, capital-intensive manufacturing, labor-intensive manufacturing, call centers and distribution/warehouse operations.

According to the 2014 U.S. Census Bureau statistics, of the $866 billion in annual state tax collections, corporate income taxes represent a relatively small portion (approximately 5 percent). Personal income taxes (36 percent), general sales, use and gross receipts taxes (31 percent), selective sales taxes (16 percent) and state property taxes and license taxes (combined 8 percent) are the main sources of state tax revenue.

  • Source: Site Selection Magazine, November 2015, “Of This You Can Be Certain”, Ulrich Schmidt, managing director in the State and Local Tax practice of KPMG LLP