As anyone who has been around economic development more than 10 minutes is well aware, Texas lacks the flexibility and funding to be competitive in attracting the type of new activity that can keep us growing and prosperous for the next few generations. This point has been made a lot lately. The “Texas, Our Texas” report that my firm prepared said it a few dozen times. The Governor’s Task Force on Economic Growth toured the state last fall and had everybody who was warm stand up and tell war stories about it. During the Toyota negotiations, our leaders discovered that it took months of wrangling and an act by both houses of the Texas Legislature to handle a simple infrastructure matter that should have taken five minutes and a “thumbs up” from the Governor. And, in case you hadn’t noticed, that was the first big one we’ve landed since 1996!
These factors, combined with a sluggish economy and not enough fiscal revenue, created a sense of urgency regarding economic development in this legislative session. Despite the budget malaise, the House passed by a 3-to1 margin a measure which centralizes economic development in the Governor’s office (where it belongs) and provides almost $300 million in funding to do what is necessary over the next biennium to bring desirable activity to Texas. Unfortunately, the Senate did not go along. The bill passed in the upper house also moves everything to the Governor’s office, but provides no money at all apart from the ability to take a few much-needed dollars from our tourism activities. The horse trading now begins.
Quite frankly, the $300 million is not enough. Moreover, it comes from the Rainy Day Fund and, thus, is only a temporary fix. Nonetheless, it is a critical start. To provide a perspective, many states that we regularly compete with have renewable war chests of $1 billion or more and frequently come up with even more if the stakes are high enough. I don’t like this process; if I could live in a philosopher’s world, it wouldn’t exist. As a practical matter, however, incentives for new jobs and investments are a fact of life.
To add yet more fuel to the fire, there are several major (and I do mean “major”) locations in play at the moment, as well as some essential investments to keep what we have. These projects have the potential to bring billions of dollars and thousands of high-paying positions to the state, not to mention cementing our ability to be a center of production for key emerging sectors (such as nanotechnology, biotechnology, and materials science). Even the House version of economic development will not allow us to win everything that comes along. We will have to be prudent, wise, and strategic, but we can accomplish much. If we are somehow expected to compete with fewer resources than we have at present, we are doomed to failure.
As we look beyond the immediate crisis in Austin, there are two things which must happen to assure that we don’t repeat this situation over and over. First, we have to fix a broken revenue system that is structurally incapable of meeting our needs on an ongoing basis. Second, we need consistent, high-quality economic growth. The former is likely to be improved at least to some extent in the coming months as the Legislature tackles the thorny issue of public school finance. The latter requires that we have an intelligent and focused program with enough funding to have an impact. We have the knowledge, experience, basic desirable characteristics, and capacity to be successful. It is imperative that we also have the last essential element to make it happen. The rules of this game are incredibly simple—No Pay, No Play!