The 84th Texas Legislature has come and gone and they didn’t stray far from the playbook that has led to the nation’s strongest state economy.
The good news is that lawmakers took steps to cut business and property taxes, hold down spending, and improve infrastructure, if you’re into that sort of thing.
In contrast to some states, Texas’ is a public policy climate built for growth and apparently entrepreneurs are noticing. The Kauffman Institute just named Austin the best city for start-ups, and 4 Texas cities made the Top 15.
The House and Senate came to agreement on tax cuts totaling $3.8B that includes cutting the state business tax (aka Franchise or Margins tax) by 25% and increases the state homestead exemption on school property taxes from $ 15,000 to $25,000, an average savings of $ 120/year.
Fiscal hawks will like the budget. It’s balanced, the $ 209.4B total increases by just 2% per year, stays $3B under the state’s spending cap and leaves $11B in the state “rainy day” fund.
If Texas voters approve in November, $2.5(B) in state sales tax revenue will be directed to highways beginning in 2017 as long as total sales tax revenue exceeds $ 28B, and 35% of any vehicle sales tax revenue above $ 5B beginning in 2019. They also ended diversion of money from the State Highway Fund, which will add another $ 1.3B for construction.
The state’s Department of Transportation says they need $5B a year to keep up with population growth; the 84th Legislature at least got the ball rolling.
Higher education received $ 3.1B in bonds for renovation and construction projects at 64 campuses, the first round of such funding since 2006, and Governor Abbott won approval of $40(M) for the Governor’s University Research Initiative to award matching grants to Nobel laureates and National Academy members as we work toward more Tier 1 Universities and get our institutions of higher education more involved in economic development.
The Texas Enterprise Fund that provides cash to companies re-locating to the state received $ 90M, less than the $200M the business community requested.
Additionally, the Emerging Technology Fund which has funded numerous early-stage companies fell victim to politics and accusations of ‘crony capitalism’ and is being phased out.
A state contracting reform bill by Sen. Jane Nelson will shine more light on public sector contracts and, it appears, promote more competition among the private sector to provide products and services to state government agencies.
On the short side, school choice failed to pass the House and public education wasn’t funded to a level it needs to be, in the opinion of some.
All told, while many business leaders were disappointed with the cautious approach to economic development, Texas can point to a broader policy climate that remains very attractive to companies of all sizes.