Even In A Recession Texas Beckons

Tuesday, September 1, 2009 - 01:00

The Editor interviews David Dewhurst, Lt. Governor of the State of Texas.

Editor: Texas remains a perennial powerhouse for business growth despite the economic crisis. As the energy sector leader, it has not only survived a slash in oil prices, but retained its edge as a leader in employment. What do you attribute to Texas' success while other states continue to decline?

Dewhurst: Obviously no state, including Texas, is immune from the current recession. But since my first day in office, we have been focused on growing Texas' economy, creating new jobs and passing legislation that improves the lives of all Texans. When I took office in January 2003, Texas had a $10 billion deficit. Rather than raise taxes, Governor Rick Perry, Speaker Tom Craddick and I balanced the budget by making strategic cuts and making state government work more efficiently. I have focused on empowering businesses and individuals to make new investments and create new jobs by reducing taxes and providing incentives for job creation. We reduced net taxes in Texas by $4.1 billion per year. This year, for example, we permanently increased the exemption for all businesses paying the state business tax to $600,000 in gross revenues. Originally, businesses with revenues up to $300,000 were exempt. For the next two years the exemption extends to businesses with revenues up to $1 million. This exemption alone will save small businesses $172 million over the next two years.

Another key element of Texas' success is our focus on attracting new businesses, while growing those already contributing to our economy. In 2003, we launched the Texas Enterprise Fund, which has resulted in deals generating 55,000 jobs and capital investment of more than $14 billion through grant awards totaling $383 million through July 2009. In 2005, we created the Emerging Technology Fund which is used to encourage development in new technologies that can be commercialized; to date, we have made commitments totaling $325 million.

Editor: What part has the energy and petroleum business played in cushioning the slide in the economy of Texas?

Dewhurst: Historically, the oil and gas industry provided a large portion of the state budget, but that's no longer true today. Still, the increase in oil and gas prices the last several years has helped generate additional severance tax revenues and create more jobs. New drilling in the Barnett and Haynesville shale has benefited oil and gas exploration companies, drilling companies, and the service industry.

While higher oil and gas prices increased the balance in our state's Rainy Day Fund, prudent fiscal management decisions have kept us in the black. In April 2007 I insisted the Texas legislature save $7 to $9 billion and they agreed. This provided the needed cushion to avoid a deficit when our comptroller cut our revenue estimate by $9 billion in January 2009.

The 2007 savings ensured that Texas remained one of six states without a budget deficit. This year the Governor, Speaker and I agreed not to touch the "Rainy Day Fund," so that as we go into our next legislative session in January 2011, we'll have the funds to balance our budget and stay in the black through 2012 and 2013. In short, we're doing what every family and business should be doing in Texas - we're saving money to pay our bills and ensure that we can continue to provide needed resources to public education, higher education and public works, while our friends in California and New York are forced to cut funding in these areas.

Editor: Please tell us something about the Texas workforce. As other states struggle against rising unemployment, Texas has been able to contain its unemployment rate.

Dewhurst: I know Texans take great pride in working hard and doing a good job. In 2008, according to the Department of Labor, Texas created 59 percent of all the new jobs in the country, and our unemployment rate today remains about two-percent lower than the national average. That is why many business magazines rate Texas as one of the best places to do business in America. Earlier this year, Forbes.com rated the best cities in America for jobs, and not only were eight of the top 20 cities located here in Texas, but four of the top five. Still, because I'm concerned about Texans who get laid off, this year I led a legislative effort to appropriate over $500 million in state and federal funds for job training. These programs assist Texans who lose their jobs in this recession by providing the retraining necessary to get them back to work.

Editor: I understand that the 2010-2011 state budget recently passed, SB 1, included $3.2 billion earmarked for public education. Please tell us how the Texas educational system feeds into the workforce.

Dewhurst: As the only traditional business person elected among 29 state-wide elected officials in Texas, I understand as well as anyone that job growth and economic stability depends largely on a highly educated workforce. I know the future of Texas is being forged in the classrooms of today. My father died when I was only three years old and my mother had to go to work to support us. Growing up I was blessed to have received a great public school education.

That's why today, I am as determined as ever to continue to improve our Texas public schools and institutions of higher education. Since 2005, the state has increased spending on public education by approximately $6 billion. During that same period, we increased funding for higher education by almost $6 billion in state and federal funds. Texas stands in stark contrast to many other states that cut spending in public education.

This year, we made even more progress in improving public education. I helped pass landmark legislation establishing accountability baselines so we can measure for the first time growth in public schools across school districts as well as individual schools and classrooms. That same legislation makes Texas the first state in the nation to incorporate college readiness into its public school accountability system.

Long a champion of higher education in Texas, I made it a priority to create more Tier 1 Texas universities. And we increased funding for student loan programs such as our innovative grant program, "B-On Time." This program provides interest-free loans to students for college tuition, books, and associated fees. If the student graduates in four years with at least a B average, then every penny is forgiven.

Editor: Can you tell us something about the quality of life Texas offers to the employees of Texas-based employers?

Dewhurst: Being born and raised right here in Texas - I'm a little biased - but we do have a great state. Geographically Texas is very diverse, with beautiful coast lines, beaches, deep forests in East Texas, rugged plains and mountains in West Texas, and beautiful rolling hills in Central Texas. Texas has several of the nation's largest cities, with an incredible mix of cultural and social activities.

Our children and young adults have access to some of the finest public schools and universities in the country.

The generosity of our citizens through philanthropy is really impressive. For example, Dallas is in the midst of building a new symphony and opera hall.

We also have great traditions in sports, with pro-football, pro-basketball, and pro-baseball teams. And of course, you can't think of Texas without thinking of high school football. There's even a TV show, "Friday Night Lights," based on that great Texas Friday night tradition.

When businesses relocate to Texas, they want a highly skilled and well-trained workforce, good infrastructure, and a good quality of life, and I'm proud to say that we have it all in Texas.

Editor: Generally speaking, could you describe the impact of Texas' legal climate and regulatory environment on the business community?

Dewhurst: A few years ago, we had a judicial system that was dominated by activist judges, but that's no longer the case. We aim for a fair and just judicial system that protects all Texans, rich or poor, and from any walk of life. In the 2003 legislative session, I was proud to help pass model tort reform legislation for medical malpractice. Since then, the number of frivolous lawsuits in Texas has fallen like a rock. The goal of our regulatory agencies is to protect people and the environment. We're trying to promote the use of the best available technology to reduce emissions, while still growing jobs in Texas.

Editor: What roles do Chambers of Commerce and other business development groups play in attracting business to locales within the state?

Dewhurst: Business organizations help shape a better Texas by promoting a favorable business environment that leads to more jobs for our citizens. All our local chambers of commerce representing both large and small cities, plus the statewide organization, the Texas Association of Business, are influential in not just business issues, but in advocating continuing improvement to public education, higher education, transportation and work force development.

I appreciate our fine chambers of commerce around the state, working tirelessly to showcase our cities and our state, and attracting new businesses to Texas that create jobs and further strengthen our economy.

Editor: What about the attitude and quality of labor Texas offers? There is an ongoing effort in Congress to pass legislation like the Employee Free Choice Act. What is the relevance of this legislation for Texas?

Dewhurst: I think today's employers are more enlightened, and arguably there is less of a need for unions in Texas today, which is a "Right to Work" state. My experience is that most employers want to take care of their workforce by ensuring adequate training and high safety standards. We have been working with small businesses to find new approaches to healthcare coverage for their employees. Although Texas has a higher percentage than the national average of large companies that provide health insurance, since most of our employment in Texas is from smaller businesses, we are looking for ways to help these businesses provide health insurance.

Over the past six years, I have helped pass legislation eliminating all state mandates on insurance. We have passed legislation to permit small employers to pool together to buy cheaper insurance. Senate Bill 10, which I helped write in 2007 with Senator Jane Nelson, provided an insurance pool for the uninsured. In 2009, Senator Nelson and I revisited insurance pooling through Senate Bills 7 and 8, which create pilot programs focusing on clinical integration, secure electronic records, bundling payments for episodes of care, creating scheduled premium payments for new coverage and creating incentives for doctors and hospitals to follow best practices.

Editor: What is being done to spur invention and innovation and the growth of new businesses?

Dewhurst: Our universities and our hospitals are working with the private sector on cutting edge research and development projects that can be commercialized and will result in new businesses and industry for our state, and ultimately, create more jobs.

Also, I think folks realize that Texas historically has had a lower tax rate on businesses and individuals than most states. Said differently, Texans have always insisted that their tax rate as a percentage of disposable income be less than the national average. Whereas some states like California and New York depend heavily on personal income taxes, we don't have this in Texas. We rely on property taxes, which we have reduced by some $7 billion a year, and sales taxes, which are generally considered to provide a more reliable foundation for the state.

Editor: Texas has weathered this economic storm well. What accomplishments from this past year are you most proud of?

Dewhurst: Though not immune to the national recession, Texas hasn't felt it as severely as other states because for the last several years Governor Perry and I have worked hard on growing jobs and building our workforce. Just a couple of months ago, Caterpillar announced in the midst of a national layoff that it was going to add 1,400 new jobs in Seguin, Texas. As other states increased taxes, we cut taxes while also balancing our budget, investing in critical areas like public education that affect workforce development, and saving enough money in our "Rainy Day Fund" so that our budget will be balanced in 2011.

This year we also passed landmark Windstorm Insurance legislation, protecting residents along our long Texas coast, and we passed legislation to improve healthcare through innovative pilot programs that will compensate our doctors fairly, increase the use of best practices, provide patients with choice and portability, and improve outcomes without costing more money.