Texas’ Economic, Labor Market,

and Fiscal Situation

Vance Ginn, Ph.D.
Director, Center for Economic Prosperity
& Senior Economist at the
Texas Public Policy Foundation

Updated Monthly – July 2018

Email: vginn@texaspolicy.com
Website: www.texaspolicy.com
Twitter: @vanceginn
 Outline
Information on Texas’ economy, labor market, and
fiscal situation.

Updated monthly with latest jobs data and

periodically with other economic and fiscal data.

Conservative Texas Budget priorities for prosperity.

 Economic & Fiscal Situation
 Texas is 10th largest world economy, excluding CA:
Economy grew faster in 2017 after slower 2015 & 2016
Federal tax & regulatory reforms likely boost growth
Federal Reserve tightening credit: rates too low for too long
Higher oil prices (~10% of real private economy/+20% in 80s)

 2015 Texas Legislature:

Passed 2016-17 conservative budget
Left billions of dollars on table & $10 B in Rainy Day Fund
Passed $4 B in tax and fee relief

 2017 Texas Legislature:

Sustained 2016-17 conservative budget with supplemental
Passed 2018-19 conservative budget
Spent $1 B in RDF & Delayed $1.8 B transportation funds
Did not raise major taxes or fees
 Institutions Matter: Texas Model Works
New
Measure U.S. Texas Florida California
York

Economic Freedom of North America (2017) 11th (World) 2nd 2nd 49th 50th

State Business Tax Climate Index (2017) -- 13th 4th 48th 49th
State-Local Spending Burden (2016) -- 37th 48th 6th 3rd
State-Local Tax Burden (2016) -- 46th 34th 6th 1st
Exports to Foreign Countries (2017) -- 1st 8th 6th 4th
Avg. U-3 Unemployment Rate (2000-17) 6.4% 5.8% 6.3% 7.7% 6.2%
Avg. U-6 Underutilization Rate (2003-17) 11.6% 10.5% 12.0% 14.3% 11.1%
Avg. Labor Force Participation Rate (2000-17) 65.0% 66.1% 61.7% 64.6% 62.1%
Avg. Employment-Population Ratio (2000-17) 61.0% 62.3% 58.0% 59.9% 58.3%
Avg. Emp-Pop 25-54 year old Ratio (2000-17) 77.6% 77.3% 77.5% 75.2% 76.1%
Total Civilian Emp (12/07-12/17), exclude TX +5,723,000 +2,024,000 +979,000 +1,564,000 +132,000
Total Nonfarm Emp (12/07-12/17), exclude TX +7,424,000 +1,790,000 +728,000 +1,523,000 +804,000
Avg. Top 10% Income Shares (2000-15) 47.8% 47.0% 55.0% 50.2% 57.1%
Supplemental Poverty Measure (2014-16) 14.7% 14.7% 18.7% 20.4% 16.0%
Source: TPPF, A Labor Market Comparison: Why the Texas Model
Supports Prosperity (updated)
U.S. Labor Market Sends Mixed Signals

Source: BLS, https://www.bls.gov/news.release/empsit.nr0.htm

 Texas, America’s Jobs Engine
Texas has created 24% of total U.S. employment increase since pre-Great Recession

DATA ARE CUMULATIVE MONTHLY TOTAL CIVILIAN EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 6/2018.
Texas has Created 19% of All Nonfarm
Jobs Since Great Recession Started

DATA ARE CUMULATIVE MONTHLY TOTAL NONFARM EMPLOYMENT FROM

THE U.S. BUREAU OF LABOR STATISTICS FROM 12/2007 TO 6/2018.
Texas Created 359,500 Net Nonfarm Jobs
In the Last 12 Months

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
Texas' Unemployment Rate At or Below
5% for 47 Straight Months

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
 Mostly Lower Unemployment Rates
in Texas Since Great Recession

Source: Dallas Fed, Texas Economy Starts 2018 Firing on All Cylinders
 Texas’ Labor Force Participation Rate
Remains Above Others Since 2009

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
 Texas' Employed Population Rate
Remains Above Others Since 2008

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
Texas' Prime-Age Employed Population
Higher than Others Since 2009

SEASONALLY ADJUSTED NONFARM EMPLOYMENT DATA ARE FROM

THE BUREAU OF LABOR STATISTICS.
Diversified Texas Economy Continues
Creating Jobs in Most Sectors

Source: Dallas Fed, Your Texas Economy.

Texas’ Metros Continue Positive Job Growth

Source: Dallas Fed, Your Texas Economy.

Job Growth Across Wage Quartiles, 2000–14

Source: TPPF, A Labor Market Comparison: Why the

Texas Model Supports Prosperity
 Not Just Low Wage Jobs: Job Growth
Across Wage Quartiles from 2005–2014

Source: Dallas Fed, Annual Report 2015

Real Average Hourly Wages Increase in 2017

Source: Dallas Fed, Texas Economy Finishes the Year

Firing On All Cylinders
Income Inequality Lower in Texas than Other
Large States and U.S. Average

Source: Mark Frank, Sam Houston State University

 Texas Economic Challenges
 Mining industry 1980s:
21% of real private economy; 5% of labor force
Mining industry today:
~10% of real private economy; ~2% of labor force
More diversification from market activity, NAFTA,
pro-growth policies
Still, slower global growth & federal government
policies may be impediments, like trade & debt
But federal cuts in taxes and regulation boost
growth
4.2 million barrels of oil/day is highest
since at least 1981

Source: Dallas Fed, Your Texas Economy.

 Texas’ Manufacturing Sector
Continues to Expand

Source: Dallas Fed, Your Texas Economy.

 Texas’ Service Sector
Continues to Expand

Source: Dallas Fed, Your Texas Economy.

Record High Texas Median Home Price

Source: Dallas Fed, Your Texas Economy.

 Texas is America’s Export Leader
for 16 Consecutive Years

Source: Dallas Fed, Your Texas Economy.

 Fiscal Prospects Support Opportunity
 No recent examples of consecutive conservative
budgets, defined as growth less than pop+inf:
2003 dealt with a $10 billion shortfall and passed a
conservative budget but massive spending increase in 2005
2011 passed a budget below pop+inf but delayed payments
for Medicaid & education led to a large increase in 2013

 2015: Passed potential 2016-17 conservative budget,

provided tax relief, and left money on the table

 2017: Sustained 2016-17 conservative budget, passed

potential 2018-19 conservative budget, and did not
raise major taxes or fees
 2018-19 Total Approps: $218.4 B
with $1.8 B transportation fund delay
(4.46% increase)
$58.5 B,
$71.8 B, Other $79.5 B,
Federal Health &
Funds $106.6 B, Human
General Services
Revenue

$6.4 B, GR- $80.4 B,

Dedicated $33.6 B, Education
Other
 Rainy Day Fund: CRE $11.9 billion
85th Legislature Appropriated $990 M

Source: Texas Comptroller, Legislative Budget Board, and TPPF

Revised July CRE Estimates 2018-19
Available Fund Balance of $2.7 Billion

Source: Texas Comptroller, Certification Revenue Estimate

 Texas Comptroller’s
Revised 2018-19 CRE
FY2016 (CRE) FY2017 (CRE) FY2018 (CRE) FY2019 (CRE)
$ in Thousands
Actual Actual Estimated Estimated
Real GDP 0.0% 1.5% 4.5% 4.2%
Nonfarm Employment 1.3% 1.6% 2.4% 2.5%
Unemployment Rate 4.6% 4.5% 4.0% 3.5%
Taxable Oil Price $41.40 $48.77 $60.00 $64.00
Sales Tax $28,245,801 $28,900,035 $31,724,257 $33,506,194
Franchise Tax $3,881,176 $3,242,219 $3,621,406 $3,840,610
Total Tax Collections $48,476,226 $49,643,422 $55,280,645 $58,267,570
Total Net Revenue $111,280,871 $111,195,221 $111,468,208 $113,080,421

 2018-19: $2.7 B expected ending balance

 “economic expansion exceeding our expectations”
 8% Official Spending Limit by LBB
 BUT…Texas has Challenges
 TPPF’s Texas Prosperity Promise

Fiscal: Spending, Taxes, Corporate Welfare

Education: Funding, Choice, TRS, Teacher Pay
Regulation: Occupational Licensing, Local Zoning
Energy: Oil & Gas, Resilient but Not Immune
Federal: Debt, Regulation, Trade
State Spending Problem
How Education Funding Works
 Education Spending Up Over Time

Source: TPPF, Texans Need More Education for Their Money & TEA
 State Share of Education Spending Up

Source: TEA
 Texas Should Spend More Wisely

Source: TPPF, Texans Need More Education for Their Money

Too Many Abuses of Funds Across State
 Texas Property Taxes are Too High

Source: Tax Foundation, State-Local Tax Burden Rankings

Past Failed Property Tax Relief Attempts:
Need at least 2.5% auto rollback election

Source: TPPF, Abolishing the “Robin Hood” School Property Tax

 Eliminate Property Taxes
1) Limit Spending: State 4% biennial & Local 2.5% annual
2) Buydown School M&O Property Taxes

Source: TPPF, Abolishing the “Robin Hood” School Property Tax

 Prosperity Priorities in 2019 Session
• Pass another conservative budget
• Strengthen tax and expenditure limit
• Eliminate property taxes—Start with school M&O
• Eliminate business margin tax
• Create the Sales Tax Reduction (STaR) Fund
• Increase budget transparency
• Review and eliminate occupational licenses
Gov’t spending is ultimately paid for by taxation,
so we must control spending to have the best
opportunity for Texans to prosper.
Taking these steps now and in the future will
secure that the American Dream is not dead
– it has simply moved to the Lone Star State.
Texas’ Economic, Labor Market,
and Fiscal Situation
Vance Ginn, Ph.D.
Director, Center for Economic Prosperity
& Senior Economist at the
Texas Public Policy Foundation

Email: vginn@texaspolicy.com
Website: www.texaspolicy.com
Twitter: @vanceginn