Flushing Future Fortune
By: Dr. M. Ray Perryman
Published in syndication August 02, 2017
Growing an economy and encouraging prosperity is difficult work, and the last thing Texas needs is to shoot itself in the foot over a bathroom bill. The state has a lot of things going for it - a large and growing workforce, abundant natural resources (particularly oil and natural gas), a central location, a competitive cost of living, and excellent incentive programs. We also have good things going on in a number of industries ranging from technology to biosciences. We're improving infrastructure, adding top-tier research facilities and medical schools, and emerging as a center for desirable industrial growth and corporate locations and expansions.
However, things are not all "peaches and cream." Texas is also investing far too little in education at all levels, which will not serve us well in the future. Although a low-tax environment is certainly desirable, fiscal resources must be sufficient to maintain the basic ingredients for growth.
In other words, the state economy is not invulnerable and optimal growth is not guaranteed. Texas faces intense competition from all sides. Given this situation, enacting a bathroom bill that would cost tens of thousands of jobs and billions of dollars in business activity and tax receipts over time makes no economic sense.
One immediate effect, which will only get worse over time, is that Texas will lose massively in travel and tourism. Millions of people visit the state every year and spend billions of dollars. Hundreds of thousands of Texas work directly in the industry, and when you include the multiplier effects, I estimate that the total benefits of travel and tourism are more than $128.9 billion in gross product each year and 1.4 million permanent jobs in Texas. Any economic activity generates tax revenue through various channels (retail sales and property taxes, among others), and I estimate that travel and tourism and the associated multiplier effects generate $7.0 billion to the State and $3.3 billion to local government entities (including cities, counties, and school districts) each year.
For some tourism-intensive places, such as San Antonio, this source of business activity is particularly important. Other cities regularly host major conventions which bring in substantial numbers of visitors and dollars. A bathroom bill jeopardizes this major industry, and communities across the state have already begun to see the fallout from even the discussion of a potential bill.
A recent estimate places the amount already lost at more than $66 million from specific events. Moreover, sponsors of over $1.1 billion in direct travel and tourism events have already indicated that they plan to cancel if the bill passes. That estimate is obtained from events which were otherwise headed to Texas, and, if a bill passes, the total losses will be much higher as event planners and groups avoid the state. Another factor is that some states (such as California) are not allowing state non-essential travel to areas with restrictive laws, which event planners will certainly take into consideration in selecting a location.
Earlier this spring, we estimated the potential effects of a bathroom bill in Texas based on results in areas which had passed restrictive social policy such as bathroom bills (adjusted for the size of the tourism and travel market in Texas) and surveys of travelers and event planners. We found that reductions in travel and tourism activity would likely initially result in a gross product loss of almost $3.3 billion per year and the loss of over 35,600 full-time equivalent (FTE) jobs (based on 2016 levels of activity), with annual losses of $176.4 million in State revenue and $84.3 million in local fiscal resources. With the law in effect for a period of time, these losses could be expected to rise to $5.5 billion in annual gross product and almost 59,600 jobs. The yearly losses in State revenue are estimated to be $295.2 million, with a $141.1 million yearly decrease in local fiscal resources. (The study is available for viewing or download at www.perrymangroup.com.)
The negative economic effects of a bathroom bill would go far beyond travel and tourism. Business leaders have come out in opposition to the bill, including CEOs of major employers in the state. A recent letter to the Governor expressing concern about the bill reads like a who's who of Dallas-based firms (American Airlines, Atmos Energy Corporation, AT&T, The Beck Group, BNSF Railway, Celanese, Crow Holdings, Dallas/Fort Worth International Airport, and EJ Smith Enterprises). These companies run the spectrum from real estate to energy to communications. The CEOs are concerned that the bill "would seriously hurt the state's ability to attract new businesses, investment, and jobs" and that it could harm their ability to compete for the brightest and best talent. I couldn't have said it better myself. Another group opposed to the bill are policemen, who are concerned that it would lead to a diversion of scarce resources (among other things).
Regardless of their stated purpose, controversial laws such as bathroom bills can have substantial negative economic effects. Travel and tourism losses would be billions per year, with an associated loss in revenue to the State and local governments. Companies may avoid expanding or locating here, particularly in industries with a large number of knowledge workers (such as technology intensive advanced industries). There would likely be other costs such as additional law enforcement and litigation costs. Although there are certainly very real and important considerations beyond the economy, these effects cannot be ignored.
The Texas economy has long been a growth leader, and even with a major industry (energy) recently in a lull, has performed remarkably well. As we look ahead, however, there are sizable hurdles to be overcome in the form of workforce preparedness, water and infrastructure, and demographic changes. Passing a law that demonstrably and significantly harms important segments of the state business complex while providing no meaningful benefits is flushing future fortune.