Texas’ Economic, Labor Market, and Fiscal Situation Vance Ginn, Ph.D. Director, Center for Economic Prosperity & Senior Economist Updated Monthly – December 2018 #LetPeopleProsper vginn@texaspolicy.com | www.texaspolicy.com | @vanceginn
Outline I nformation on Texas’ economy, labor market, and fiscal situation. Updated monthly with latest jobs data and periodically with other economic and fiscal data. 18- group Conservative Texas Budget Coalition’s 2019 legislative priorities for prosperity.
Economic & Fiscal Situation Texas is 10 th largest world economy, excluding CA: Economy grew faster in 2017 after slower 2015 & 2016 Federal tax & regulatory reforms likely support growth Federal Reserve tightening credit: rates too low for too long Falling 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 6 th (World) 3 rd 1 st 50 th 47 th Economic Freedom of North America (2018) 4 th 49 th 15 th 48 th State Business Tax Climate Index (2018) -- -- 37 th 48 th 6 th 3 rd State-Local Spending Burden (2016) 46 th 34 th 6 th 1 st State-Local Tax Burden (2016) -- 1 st 4 th 8 th 6 th Exports to Foreign Countries (2017) -- 5.8% 7.7% Avg. U-3 Unemployment Rate (2000-17) 6.4% 6.3% 6.2% 10.5% 14.3% Avg. U-6 Underutilization Rate (2003-17) 11.6% 12.0% 11.1% 66.1% 61.7% Avg. Labor Force Participation Rate (2000-17) 65.0% 64.6% 62.1% 62.3% 58.0% Avg. Employment-Population Ratio (2000-17) 61.0% 59.9% 58.3% 77.5% 75.2% Avg. Emp-Pop 25-54 year old Ratio (2000-17) 77.6% 77.3% 76.1% +2,024,000 +132,000 Total Civilian Emp (12/07-12/17), exclude TX +5,723,000 +979,000 +1,564,000 +1,790,000 +728,000 Total Nonfarm Emp (12/07-12/17), exclude TX +7,424,000 +1,523,000 +804,000 Avg. Top 10% Income Shares (2000-15) 47.8% 47.0% 55.0% 50.2% 57.1% 14.7% 19.0% Supplemental Poverty Measure (2015-17) 14.1% 18.1% 15.5% Source: TPPF, Do Institutions Matter for Prosperity in Texas and Beyond?
U.S. Labor Market Sends Mixed Signals Source: U.S. Bureau of Labor Statistics
Texas, America’s Jobs Engine Texas has created 22% 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 11/2018.
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 11/2018.
Texas Created 365,400 Net Nonfarm Jobs In the Last 12 Months Seasonally adjusted nonfarm employment data are from the U.S. Bureau of Labor Statistics.
Texas' Unemployment Rate At or Below 5% for 52 Straight Months Seasonally adjusted nonfarm employment data are from the U.S. 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 U.S. Bureau of Labor Statistics.
Texas' Employed Population Rate Remains Above Others Since 2008 Seasonally adjusted nonfarm employment data are from the U.S. Bureau of Labor Statistics.
Texas' Prime-Age Employed Population Higher than Others Since 2009 Seasonally adjusted nonfarm employment data are from the U.S. Bureau of Labor Statistics.
Diversified Texas Economy Continues Robust Job Creation Across 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
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 But mining industry today = falling oil prices: ~10% of real private economy; ~2% of labor force More diversification from market activity, NAFTA, pro-growth policies Federal cuts in taxes & regs support growth But slower global growth & federal government policies may be impediments, like trade & debt
4.7 million barrels of oil/day is highest since at least 1981 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, $79.5 B, Other $71.8 B, Health & Federal Human Funds $106.6 B, Services General Revenue $80.4 B, $6.4 B, GR- Education Dedicated $33.6 B, Other
Rainy Day Fund: CRE $12.5 billion 85 th 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 Eliminate Property Taxes: Start with school M&O Education: Student-centered funding, Freedom Spending: State & local spending limitations Accountability: End tax-funded lobbying & government collection of union dues Self Governance: Prioritizing civics education Other issues 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 Source: TPPF, Real Texas Budget: 2018
How Education Funding Works
Education Spending Up Over Time Source: TPPF, Texans Need More Education for Their Money & TEA
Little Change in State Share Ed Spending 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
Local Spending Problem 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
18 Groups in Conservative Texas Budget Coalition Legislative Priorities for Prosperity • Pass another Conservative Texas Budget • Strengthen tax and expenditure limit • Eliminate property taxes — Start with school M&O • Eliminate business margins tax • Create a Tax Relief Fund • Increase budget transparency • More at conservativetexasbudget.com Excessive taxes and debt are always & everywhere a government spending problem. Limit spending to let people prosper.
Taking these steps 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 Updated Monthly – December 2018 #LetPeopleProsper vginn@texaspolicy.com | www.texaspolicy.com | @vanceginn
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