Healthy Citizens and a Healthy Economy During what now appears to be an agonizingly brief respite from the legislative process, I have often been asked about the best and worst of the recent session. There were a lot of good things—economic development initiatives and judicial reforms will pay dividends for years to come. Greater flexibility in funding highway construction can greatly facilitate infrastructure development. To the extent that a stage was set for meaningful school finance reform, there is also much to be gained.
On the worst list, I would have to rate the cuts in higher education (which are the exact intellectual equivalent of a farmer eating his seed corn) and the reductions in medical programs. I’m sure I will have more to say about the former in the future. For now, let’s focus on healthcare.
The next biennium will see a reduction of almost $1 billion in State funding for Medicaid and the Children’s Health Insurance Program (CHIP) relative to the costs of maintaining current benefits. This decrease means foregoing more than $1.6 billion in Federal money. The end result, from an economic standpoint, is just plain ugly. The State will see a “dynamic” revenue loss of almost $500 million, while local taxes will go up by about the same amount (so much for the $1 billion “savings” to taxpayers). Insurance costs will rise by some $1.3 billion, healthcare providers will lose $500 million, and emergency facilities will become even more taxed than they already are.
On an aggregate level, the economy will suffer net losses as a result of these cuts totaling $5.2 billion per year in overall spending, $2.6 billion in gross state product, $1.7 billion in personal income, and $900 million in retail sales. Texas will lose in excess of 45,000 permanent jobs. Unfortunately, the economic malaise is only part of the story. More than 330,000 Texans (many of them children and the elderly) lose Medicaid coverage and almost 170,000 kids are removed from CHIP coverage. The significance of this decision is highlighted even further by a recent report stating that Texans ranked dead last among the 50 states in the percentage of children with health insurance protection—and that was before these cuts! When combined with the growing likelihood that physicians will not accept Medicaid patients and the greater inefficiency in healthcare delivery caused by decreased access for 500,000 citizens, the overall effects are not a pretty sight.
In all fairness, the legislature restructured about 70% of the Draconian cuts that were originally proposed, and lawmakers were faced with an extremely difficult budget dilemma. The poorest of the poor were generally provided for after much anguish and debate. By the same token, rational mechanisms were available to retrieve hundreds of millions of dollars in revenues now leaving the state without resorting to new taxation. These funds, leveraged with the resulting infusion of Federal dollars, could have gone a long way toward improving the fiscal situation. There is also clearly some level of inefficiency in the Medicaid and CHIP systems, and legitimate mechanisms exist to achieve savings without sacrificing quality. Texas would be a stronger state if these options had been more vigorously pursued.
In the final analysis, the elimination of healthcare benefits and access for some of the least advantaged among us has a multitude of harmful effects. It compromises the medical delivery system not only for those who are directly impacted, but also for all Texans. Cuts in Medicaid and CHIP further erode the financial integrity of providers, cause notable and measurable economic losses, and adversely affect our overall business climate.
The result is bad for us and our economy, both physically and fiscally.
posted @ 08:37 AM CST [link]
Friday, June 13, 2003
Moving Around During the course of our recent forecasting effort, I spent some time looking at growth patterns among cities in the Lone Star State. The past decade was one of strong economic performance and we enticed many companies—and therefore employees and their families—to move this way. We also experienced marked increases in some areas as a result of higher-than-average fertility rates—in other words, larger families—and a relatively young population.
In a nutshell, the largest metropolitan statistical areas (MSAs—generally a sizable core city and the surrounding counties) are growing ever more dominant in terms of their proportion of the state’s population. The smaller metro areas are also generally increasing at a steady pace, with some regions such as the border expanding at a more rapid clip. Here’s a look at a few key trends in where we live.
From 1992 to 2002, the population of Texas grew by almost four million persons to reach 21.7 million. This overall growth pace of just over 2.0% per year was exceeded by many areas within the state, although other regions remained virtually unchanged. (All growth rates here are compound annual growth rates—meaning they reflect changes in the size of the base from which growth is calculated—unless otherwise noted.)
As of 2002, about two-thirds of all Texans lived in the state’s six largest metro areas (Austin-San Marcos, Dallas, Fort Worth, El Paso, Houston, and San Antonio). These areas were responsible for about 71.7% of the population gain since 1992. The state’s 21 other metro areas, where 22.7% of Texans resided in 2002, contributed another 18.53% to the total expansion over the decade.
The annual growth rates and the number of people added in the metro areas during the 1992-2002 decade varied from less than 1% to almost 4%. The slowest changes were generally concentrated in the mid-sized metro areas such as Abilene, Beaumont-Port Arthur, Odessa-Midland, and San Angelo; many of these areas were hampered by weakness in the petroleum and refining segments of their economies. The most rapid growth rates occurred in one of two basic categories of places: the large cities with a heavy technology component to their economies (Austin-San Marcos and Dallas) or the border region (Laredo and McAllen-Edinburg-Mission).
Looking at the total number of additional residents instead of growth rates, the largest gains were naturally in the largest cities. Dallas experienced a gain of 870,000 persons, while Houston added 832,700 during the 1992-2002 period. At the other end of the spectrum, Abilene, Odessa-Midland, San Angelo, Texarkana, and Victoria changed by fewer than 10,000 residents over the ten-year span.
In the future, Texans will likely continue to gravitate to the six major metro areas during the next three decades. Houston and Dallas alone will be home to more than 39.7% of Lone Star State residents.
Following the patterns of the recent past, the largest MSAs are forecast to contribute the lion’s share of population growth in the decades to come, accounting for almost three-fourths of the total gain. Austin-San Marcos is expected to lead the growth pace with 2.2% per annum expansion; El Paso’s 1.2% annual clip represents the slowest rate of change. The other large metro areas fall in the 1.6%-1.9% range.
Approximately 21.4% of Texas’ population is likely to live in the state’s 21 other metro areas in 2030. Growth in these areas is expected to range from 0.6% to above 2.1% per annum over the 28-year timeframe. As with the past decade, the border region is projected to see faster-than-average growth. Moderate population expansion is forecast for a number of smaller cities offering economic opportunities for new residents.
In the decades to come, the Texas population will continue to move toward a metropolitan emphasis, with the largest cities leading the way. Some areas will face challenges in providing sufficient infrastructure, particularly education, for their burgeoning populations. Others will struggle to channel economic development in the direction of increasing desirable job growth or face losing ground. The largest MSAs are forecast to continue to serve as the economic (and, thus, population) growth engines of the future.
While rural Texas is certainly a vital part of the state economy, future generations are expected to continue to migrate toward the metropolitan areas. The educational, cultural, social, and career opportunities available in the cities will draw not only young Texans, but also those from around the nation and, in fact, the world.
posted @ 08:29 AM CST [link]
Friday, June 6, 2003
The Gorilla Awakens The legislative session was certainly one for the books. Dramatic changes in political dynamics, a massive budget shortfall, and the seemingly perpetual cycle of death and resurrection for several high-profile bills made for more than a few headlines. There were some difficult choices, and some decisions that will bring hardships and challenges to a lot of Texans. I’m sure I will have many occasions in multiple forums in the coming months to wax philosophically about the things I liked and disliked about the process and the outcomes. For now, however, I want to focus on what I believe history will ultimately remember as the most significant outcome of this always entertaining process (and it has absolutely nothing to do with stimulating tourism spending in Ardmore).
The 78th Texas Legislature marked a truly historic renaissance in our economic development programs. We have very quickly awakened the 800-pound gorilla that dominated site selections in the early 1990s and unleashed it on the world with a vengeance. New enactments: (1) combined a number of the existing, little-known, under-utilized support programs into an “Economic Development Bank,” that is more flexible and can be effectively marketed, (2) simplified our Enterprise Zone program to improve accessibility of tax incentives to communities and companies alike seeking to stimulate activity in economically disadvantaged areas, and (3) reformed the local economic development sales tax (without screwing it up) to make sure that the funds are used more efficiently for area job creation programs. We also kept intact the provisions of the Texas Economic Development Act (approved in the previous session) which allow us to overcome much of our current disadvantage in taxing capital intensive firms.
While these measures in and of themselves are important, the real action occurs in the two most critical areas for success in attracting and retaining major facilities—money and flexibility. The key economic development functions have been moved to the Governor’s office, following a pattern that has been established by virtually all of the states that have been big winners in recent years. This shift allows for real time negotiations and decision making, a critical component in contemporary site selection. The State now has, for the first time, the ability to cut a deal that is in our best interest without having anticipated every last detail of the structure in a prior statute (a practical impossibility in today’s dynamic environment).
The legislature also created an “Enterprise Fund” of $295 million to provide the resources necessary to market Texas for economic development and provide needed incentives for key initiatives. While other states certainly have more, we now have enough to be competitive. We have to be prudent, but that is as it should be. We can now leverage our considerable assets in other areas in a way that can be effective and keeps us from getting knocked out of the running before the race begins.
There are several large locations in play at the moment, and the benefits of the new framework will likely be felt very soon. Over an extended time horizon, these provisions will foster notably higher economic growth and fiscal soundness. Given the incredibly difficult circumstances surrounding this session, this change is a remarkable accomplishment indeed.
Like any session, this one brought much to criticize and much to praise. I am always grateful for and impressed with the very hard work of a group of dedicated and capable citizen-legislators. Whatever else may be said, it will long be remembered as one in which Texas emerged as a leader in economic development in a manner that will pay dividends for generations to come.
posted @ 08:31 AM CST [link]