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The 86th Texas Legislature will likely serve up a large helping of Meat and Potatoes.

The agenda is fundamental, it’s basic, and may be sans gravy.

And the kids are hungry.

With school finance a top legislative priority, a conversation about taxes, the state budget, and how to pay for it all is guaranteed.

That conversation might even lead to a more equitable way to pay for our schools and improve student achievement so Texas students are equipped to fill the jobs the state is creating and recruiting.  We can dream.

In fact the issue is of high enough importance that an interim committee studied the issue and Governor Greg Abbott has proposed a solution: “Improving Student Outcomes and Maintaining Affordability through Comprehensive Education and Tax Reforms.” Historically, only a court order has moved state officials to act on this hot potato topic. Kudos to the Governor, Lt. Governor Patrick, and outgoing Speaker, Joe Straus, and interim committee chair, Sen. Bettencourt, for prioritizing the issue.

According to Ross Ramsey at the Texas Tribune, in the state’s 2019 fiscal year the local share of school finance spending is estimated to be 55.5 percent of the total, while the state’s share is expected to be 35 percent, according to the Legislative Budget Board. The rest comes from the federal government. The last time the Texas Legislature tackled school finance, the local and state shares matched; years of rising property values and with them, rising local property tax revenue, have allowed the state to lower its share.  If you do some quick arithmetic on those 2019 estimates, it would take a $5.7 billion increase in annual state spending to rebalance the state and local shares of public education spending. Doing that would put them both back where they were in 2008 — each covering about 45 percent of the load.

Texas property owners have made it clear to their representatives that they want lower property taxes. Cutting everyone’s current most-hated tax is the only way to explain so many conservative legislators making serious noises about increasing state revenue.  Given the way the state pays for public education — with a combination of local property taxes, and state and federal funding — the only ways to lower property taxes are to cut public education spending or to find money elsewhere to offset property tax cuts.

As a backdrop, the politics at the Texas State Capitol have changed.  Even with Democrat gains in last month’s elections (Democrats gained 1 net State Senate seat and 12 House seats), Texas still has a Republican-dominated state government, with GOP majorities in both the House and Senate, and Republicans in every statewide office.

So, the idea of new revenue remains anathema to the large majority of Texas legislators.

The 2-year state budget will be tight. The Legislature has to pass a “supplemental appropriations bill” to take care of shortages in the current budget, Hurricane Harvey recovery costs, and others.  Early projections are that they’ll start more than $5 billion short of what they need for the next budget — and that’s before they consider the expensive school finance problem.

Threading the political needle for Republicans will be tricky.  How do you lower property taxes to keep constituents happy and accomplish that expensive task without raising taxes or fees or removing certain tax exemptions.  New money could come from eliminating exemptions, from property appraisal reforms, from raising existing tax rates or creating new taxes like (and don’t bet on this one) legalizing sports gambling and taxing it (SCOTUS now says you can).

The plot thickened further this week when legislative leaders announced they want no less than $7.5 Billion dollars to stay in the state’s Rainy Day Fund and it’s $12.5 Billion dollar current balance.  Theoretically, there’s your $5B to fund the aforementioned supplemental bill (which includes, appropriately, Hurricane Harvey recovery) to  ‘true-up’ the current budget but does nothing to fix school finance.

On the economic development front, the Governor is expected to ask for a sizable chunk of change for the Texas Enterprise Fund to attract large jobs projects and the local tax abatement program – known as “Chapter 312” – that allows communities to abate property taxes will be hotly debated.

Legislators from rural districts are looking for ways to attract capital to their communities to retain jobs and expand facilities.

All in all, it’s a big plate and lots of mouths to feed.  Don’t be late to supper.

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Is Beto Barney reincarnate?

The year 1992 saw the emergence of a popular TV series featuring a purple dinosaur named “Barney,” created and produced right here in the great state of Texas.  The producers said Barney “conveys educational messages through songs and small dance routines with a friendly, optimistic attitude.”

The show was hugely popular with the 1-8 year old demographic.  It left the air in 2009 but there has been talk of a return.

Around that time – 1994 to be exact – Texas Democrats began their slow decline to dinosaur-like status.  That was, after all, the last year Democrats won a statewide race in Texas.

Flash forward to 2018, and purple may be returning to vogue. The question: Is Beto Barney reincarnate? They share some attributes, like optimism. And can he drag Texas Democrats with him?

Whether Election Day 2018 in Texas was a Blue Puddle, a Purple Wave, or as Lt. Governor Dan Patrick put it, “a win for conservative principles in Texas” may be subject to interpretation.

It may also involve an aberration or several, including the $80,000,000 Democrats spent on an upstart political star nicknamed “Beto” and a get-out-the-vote campaign that boosted the whole Democrat ticket and skewed the result.

In fact, Texas saw record turnout of 8.2M voters, more than 50% of eligible voters, a mid-term election record in the state. (Sidebar: this is the last year for straight ticket voting in Texas, for which some credit the Democrats’ down-ballot success.)

It may include the fact that this was, arguably, a national election as well as a Texas one. Democrats across the country were committed to a blue wave; they didn’t get one, but they spent almost 50% more than Republicans did trying.

Or it could include the fact that Texas Republicans got too hung up on unpopular social issues like the “bathroom bill” that turned off suburban women and young voters; and the influence of transplants from the coast (most notably California),

A combination of all of these factors may have manifested at the ballot box last week.

Yes – there are a lot of wild cards in play.

Make no mistake: Democrats made strides in Texas last Tuesday, knocking off 2 incumbent Texas Senators; 2 U.S. Congressmen; gaining 12 Texas House seats; and narrowing margins in most statewide races (with widely popular Governor Greg Abbott a notable exception).

Democrats won the major metros of Austin and El Paso (no surprise) but also Dallas, Houston, San Antonio and, for the first time in many years, Fort Worth.

And they won GOP suburban strongholds of Williamson, Fort Bend and others.

Despite it all, Republicans still hold all statewide offices in Texas and strong majorities in the Texas House (83-67) and Senate (19-11; 1 “D”-leaning race pending). And – despite the hype – Robert Francis “Beto” O’Rourke still received fewer votes than any the top 8 statewide Republican candidates. Or, for the math-challenged, he was just 9th in total votes statewide.

But let’s face it: Rural Texas was the Republican savior; GOP candidates got about 75% of the votes on average in the 224 counties outside the 30 most populous.

Voting by Hispanics, a vitally important constituency given their fast growing population, broke anywhere from 70-30 to 60-40 in favor of Democrats depending on whether you believe exit polling or the Pew Research Center.  (The margin was higher for Democrats among Latina women). Hispanic influence will grow: over the next 10 years, 2 million Latinos will turn 18 in Texas and about 95% of them will be eligible to vote, according to a “We Are Texas” study. Whichever party does the best job over the next two years connecting with Hispanic voters may tell the tale in 2020.

Texas top two courts – the Texas Supreme Court and the Court of Criminal Appeals –  remain in Republican hands. But Democrats flipped four influential state appeals courts that serve Austin, Houston and Dallas. Democrats now hold majorities on seven of the state’s 14 appeals courts. Before Tuesday, they held the majority on just three.

All told, if 2018 election results didn’t get the attention of Texas Republicans, they should have.

Barney is happy, he’s optimistic, he’s seemingly friendly, and he’s lurking.

 

 

The Texas economic model of no personal income taxes, a balanced regulation environment, and a predictable civil justice system has made Texas the nation’s leader in job creation for the last decade.

These are important policy achievements, but what else can be done for Texas to stay competitive over the long term?

Other states are aggressive in offering incentives for corporate expansion and re-location and Texas must keep up, with a close eye on the return on investment (ROI) for such incentives.

Business taxes and in particular ad-valorem property taxes remain too high compared to other states.   In Texas, companies pay 62% of all taxes versus an average of 42% in other states.

Granted, Texas has inherent policy advantages, BUT this ‘cost of doing business’ issue should be addressed if we’re serious about long-term economic competitiveness.

What other tools does Texas have to stay the best place in America for business?

Chapters 312 and 313 of our tax code have helped Texas remain a destination for major industrial facilities.

The Texas Enterprise Fund allows Governor Abbott to recruit major job creators like Caterpillar, Chevron, Toyota, Home Depot, and Samsung  (and, just maybe, Amazon’s HQ 2)

https://businessintexas.com/

Access to private capital is also critical.  What role can the state and our Universities play in this regard and bringing our most innovative technologies to market, a la Silicon Valley?

Come January, the 86th Texas Legislature, business leaders, and entrepreneurs will be considering all of these questions.

Find this report on KXAN (NBC Austin) here:

https://vimeo.com/295211186/684a02ee50

Contact Craig Casselberry at cc@quorumpublicaffairs.com or (512) 762-7366.

 

Austin skyline

Today, Austin’s population is approaching one million people.

Austin hit a population milestone of 10,000 residents in the year 1885.

Today, our population is approaching one million people—two million if you include the five-county MSA.

Other Texas metropolitan areas have seen similar growth.

Why are about 160 people coming to Austin and almost 1,000 people coming to Texas—substantially more than any other state—EVERY DAY?

They come for jobs, low taxes, and a reasonable cost of living.

In Texas, entrepreneurs are free to innovate without undue government interference.

Texas Capitol

It’s a Golden Age in Texas!

But how do we keep those companies and those jobs in our state?

More investment capital would help, but there’s more…

The Texas 2050 Coalition is working with lawmakers on five core policy areas of focus, the most important of which is education and workforce development.

Skills training in high-growth, high-paying knowledge jobs in science, technology, engineering and math (STEM) fields will be critical to a prepared workforce.

To get there, Gov. Greg Abbott launched the 60×30 Texas plan in 2015 with a goal that 60 percent of Texans 25 or older have a certificate or degree from an institution of higher education.

Today, just 31% of Texans 25 years of age or older have a bachelor’s degree or higher.

Career Launch partners

Programs like Career Launch will allow students to earn an associate’s degree in high school.

Innovative programs like Career Launch, a partnership between Dell and the Austin school district, will advance that goal too.

The program allows students to earn an associate’s degree during their four years in high school.

It’s a Golden Age in Austin and in Texas too. To stay there, policymakers must focus on these areas so we can prepare the next generation of Texans to fill the jobs we’re attracting and keep Texas the best place in America for business and families.

Governor Greg Abbott recently announced that CNBC named Texas the top state for business in America for 2018.

He made the announcement from the iconic Enchanted Rock in Fredericksburg, a state park so popular they have to shut it down from time to time for capacity reasons (if you get turned away just make the short 6 hour drive to Big Bend National Park, you won’t regret it). Take a look at the Governor’s remarks below.

The Governor said that Texas offers a blueprint for business success.

And, Wallet Hub just announced that Texas is the best state to start a business due to factors like access to capital, skilled workers and affordable office space.

Year to date, state employment has grown at a 3.6 percent annualized rate,  with broad based growth across Texas’ major metro areas, with Houston leading the way and Austin and Dallas–Fort Worth also showing solid gains.

According to the Dallas Federal Reserve, this is “mainly due to strong labor force growth.”

A few recent announcements that underscore the strength of the Texas economy.

Coca-Cola is building a $250 million production and distribution facility in Houston—it’s first one in the U.S. in a decade.

And… a new #ArmyFutures Command center will be located in #Austin, enabling the Army to partner with academia, industry, and innovators as it leads modernization efforts.

These successes are due in part to the #GoBigInTexas campaign and the #Texas Enterprise Fund, which has awarded more than 140 “deal-closing” grants totaling nearly $600 million since 2004.

On the policy front… The 86th session of the Texas Legislature is expected to include topics like school finance and school safety, workforce skills training, and infrastructure to keep up with population growth.

To pay for it, Comptroller Glen Hegar said last week that the state is projected to have an extra $2.67 billion to spend in the coming fiscal year.  Oil and natural gas production tax collections are up almost 12 percent compared to last year.

Finally. Leading national CEO’s have expressed alarm about potential “higher costs of imports for U.S. consumers” due to federal tariffs.  Since Texas leads the nation in exports – particularly technology – it will be interesting to see if tariffs become a drag on the Texas economy in the coming months.

To stay up to date, contact me at cc@quorumpublicaffairs.com.

Texas has won the Gold Shovel Award for the 6th year in a row.

Governor Greg Abbott recently announced that Texas was awarded the Gold Shovel Award by Area Development Magazine for new job growth and business investments.

The annual award recognizes states that drive job creation and investment through business-friendly policies and improvements in infrastructure that attract new employers, as well as additional investments in expanding current operations.

This is the sixth time Texas has won the Gold Shovel.

As the Governor said, the Lone Star State has flourished because we allow innovation to take root and give businesses the opportunity to succeed.

Texas wrapped up the 1st quarter of 2018 with the fastest-growing economy in the U.S., boosted by a strong resurgence in the oil and gas space.

While the oil and gas industry rebounds, wind energy and other sources of clean and renewable energy are increasing.

While the oil and gas industry rebounds, wind energy and other sources of clean and renewable energy are increasing. Texas has more capacity to generate electricity from wind than any other state and leads in capacity under development.  Wind now provides almost 15% of the state’s total power needs on average, with a much higher proportion at some points in time.

That kind of economic diversity is critical for Texas’ future.

Another example. Texas has become a global life science and biotechnology powerhouse, employing more than 90,000 Texans in related fields and spawning leading health care institutions like the Dell Medical School right here at UT-Austin. The industry has seen about 10% annual employment growth since 2014.

On the subject of infrastructure, the high speed rail line connecting Dallas and Houston remains on track. Incredibly, it would be the first “bullet train” in the U.S. so it makes sense that Texas lead the way. The project will be built with private capital, not government money, and provide much-need additional mobility. When completed, you can make that 240 mile trip between our two largest metro areas in a mere 90 minutes.

Texas is leading the way with plans for the first “bullet train” in the country.

Finally, uncertainly remains around the impact of tariffs on U.S. and Texas companies. Some companies are making contingency plans to move certain manufacturing to places like Mexico and Panama since they have components on the US tariff list.

We’ll continue to watch closely the impact of tariffs on Texas business.

As we approach the 86th Texas legislative session starting in January of 2019, the Legislature will face the challenge of crafting a balanced budget that maintains our low tax policy, invests in roads and other infrastructure, and funds social services like our rapidly expanding Medicaid program.

An economy that continues to grow will be important to generate the necessary revenue.

I welcome your comments on our business climate and public policy priorities.  Find me anywhere online at Quorum Public Affairs.

 

 

More than 300,000 jobs were created in Texas in 2017—the Texas jobs train rolls on!

Governor Greg Abbott recently released a “Report to the People of Texas” and there is good news.

More than 300,000 jobs were created in Texas in 2017.

And the hits keep coming. We led the nation job growth in February of this year, adding 40,500 jobs, continuing a 20-month growth streak, according to the Texas Workforce Commission. New York and Florida were a distant 2nd and 3rd.

Further, driven by a recovery in the energy sector, the Federal Reserve Bank of Dallas projected a statewide job growth rate of 3.4 percent for the year, up from 2.1 percent last year.

Gov. Greg Abbott recently released a “Report to the People of Texas.”

We are the top exporting state by far – our exports of $264 BILLION last year surpassed runner-up California by more than 50%!

Think about this.. The Texas economy is now the 10th largest in the world and we’ve had 92 consecutive months  — 7 ½ years — of job growth.

So how do we keep the train on track?

The Texas 2050 Coalition of major business, economic development groups and Chambers of Commerce has been working closely with state leaders like the Select Committee on Economic Competitiveness to keep our eye on the long-term.

The Committee released their report recently and had a primary theme: with global economic leadership at stake, education and workforce development are more critical than ever.  We must stress innovation in education for our Texas students, across multiple disciplines.

Other topics covered in the report that deserve emphasis include supporting our small businesses and entrepreneurs, “smart cities,” and incentives to compete.

We must stress innovation in education for our Texas students, across multiple disciplines.

Since we were also # 1 in population growth in 2017, we’ll need more infrastructure like roads but also broadband technology.  Any action by Congress for public-private partnerships to accelerate infrastructure development will likely require corresponding action by the Texas Legislature in 2019.

Austin, Dallas and other cities STILL anxiously await the decision by Amazon on HQ2.

Finally, Austin, Dallas and other cities STILL anxiously await the decision by Amazon on HQ2 – their second North American headquarters. While odds makers initially had Austin and Dallas in the top 5, Texas’ job just got tougher.  Get this.. the state of Maryland has offered Amazon 6.5BILLION in tax incentives and $2BILLION for transit improvements.  That may be hard to beat.

For more on the Committee’s findings or other policy matters find me online at Quorum Public Affairs; cc@quorumpublicaffairs.com; or 512-762-7366.