Texas is Big on Economic Growth - and Has the Numbers to Prove It

Even during a recession, Texas is a force to be reckoned with. It is one of the few states in the country that has more jobs today than before the recession began three years ago; it also has the lowest unemployment rate among the 10 largest states.

According to the Texas Workforce Commission, Texas has also created more private-sector jobs than any other state over the last decade.

Then there is Texas' robust economic performance - as the eleventh-largest economy in the world, Texas generated a gross state product (GSP) for fiscal year 2009 of approximately $1.25 trillion and continues to diversify aggressively into high-growth, knowledge-based industries. Texas has also led the nation in export revenue for the last eight years (2002-2009), shipping a total of $163 billion in products in 2009 alone.

With this kind of economic performance, it's no wonder people and businesses are flocking to this land of opportunity. Texas gained more people (478,000) than any other state between July 2008 and July 2009. And, according to the U.S. Census, six Texas counties are among the 25-fastest growing counties in the United States.

"Texas, so far, is the big winner," says William Frey, demographer at the Brookings Institution. "Big Texas metros are doing well because they avoided a lot of the pitfalls of the housing boom and bust."

Austin, Dallas, San Antonio, and Houston are all high-growth cities with expanding energy, technology, government, and education sectors. Like Austin and Dallas, Houston is expected to experience a three-year, 7 percent rise in jobs. The hottest projected job growth, however, is in San Antonio, where four military bases and several big development projects should support an 8.32 percent increase in jobs.

Quick Recovery
A well founded, diversified economy - underpinned by low taxes, a reasonable regulatory framework, targeted government incentives and funding, and a skilled and educated work force - helped sustain the Texan economy through the recession.

Texan exports totaled more than $163 billion in 2009, led by computers and electronics, chemicals, machinery, petroleum and coal, and transportation equipment. Texas' largest export markets continue to be its NAFTA trading partners: Mexico purchased $56 billion in Texas-manufactured goods and Canada $13.7 billion. China ($8.9 billion), the Netherlands ($6 billion), and Korea ($5.3 billion) rounded out the top-five export destinations.

Texas has the geographic location and transportation infrastructure to support its top-ranked export economy. International border crossings between Texas and Mexico (Brownsville, McAllen, Laredo, El Paso) are among the busiest in the nation. Modern air, rail, highway, and water transportation infrastructure provides timely access to national and international markets. Texas boasts 13 deepwater ports with channels at least 30 feet deep along the Gulf Coast, including the Port of Houston, which ranks second in the nation and 15th in the world for cargo volume.

Open for Business
Committed to creating good-paying jobs and new business opportunities, Texas provides one of the lowest tax burdens in the United States, including no personal income tax. The state also has no state tax on equipment used for pollution control, machinery/equipment utilized in manufacturing, and goods in transit.

The 80th Texas legislative session recently passed several bills designed to enhance economic development, including an additional $200 million for the Texas Enterprise Fund (TEF) and $203 million for the Texas Emerging Technology Fund (TETF).

The Texas Enterprise Fund - the largest "deal-closing" fund of its kind in the nation - provides critical funding for selected economic development projects, including infrastructure and community development, job training programs, and business incentives. Projects must be unanimously approved by the governor, lieutenant governor, and speaker before TEF funds can be awarded. About $1.1 million in TEF funds were recently used to close a deal with Allstate Insurance Company, which plans to open an $11.6 million, bilingual customer information center in San Antonio. The nation's second-largest insurance company, Allstate will hire 600 employees to operate the state-of-the-art center.

The Texas Emerging Technology Fund was originally a $200 million initiative passed by the Texas legislature in 2005 to support high-tech start-up companies. The fund was reauthorized in 2007 and again in 2009 ($203 million infusion) for the 2010-2011 biennium. Over its short history, the TETF has allocated more than $128 million for nearly 100 early-stage companies and $153 million in grant-matching and research and development funds to Texas universities.

In March 2010, Texas awarded $1.8 million from TETF to 1st Detect Corp. in Austin for the development and commercialization of a portable mass spectrometer for identifying residues and vapors from harmful substances. Wide-ranging applications include detecting explosives, chemical warfare agents, toxic chemicals, and volatile organic compounds in industries such as defense, security, healthcare, and manufacturing. The company is also collaborating with University of North Texas and Baylor College of Medicine to design and test a next-generation medical diagnostic device.

"With this investment from the Texas Emerging Technology Fund, we will be able to continue developing a technology that has the potential to make a great impact on the safety of our troops and our nation," states 1st Detect Corp.'s CEO John Porter. "This technology has the potential to greatly enhance the ability of law enforcement and the military to detect chemical and explosive threats by increasing the accuracy of chemical detection by orders of magnitude."

"We understand that high-tech companies don't just happen overnight but are a product of forethought, sound vision and planning, and strategic investments by both the public and private sectors," adds Texas Governor Rick Perry. "Through the Texas Emerging Technology Fund we are bringing the best scientists and researchers to Texas, attracting high-tech jobs, and helping start-up companies get off the ground faster."

Other important legislation passed includes $100 million in private activity bond volume cap for economic development projects, $51 million for the Skills Development Fund to provide customized job training, and $145 million in various grants to 16,000 more students to afford college, creating more highly educated future workers.

Industry Clusters
With the urging of Governor Perry, the 78th Texas legislature passed SB 275: legislation focused on developing long-term strategies for strengthening the global competitiveness of the state's key industry clusters, including advanced technology and manufacturing, aerospace and defense, biotech and life sciences, information and computer technology, and energy.

• Advanced Manufacturing - Advanced technology and manufacturing consists of three important sectors: nanotechnology, semiconductors, and automotive manufacturing.

Some of the biggest semiconductor companies in the world have large operations in Texas. Austin alone is home to nearly 100 semiconductor-related companies, as well as research consortia MCC and SEMATECH. Related R&D is carried out at Texas universities and research facilities; for example, the University of Texas-Dallas just purchased an atomic-resolution transmission electron microscope to advance its role as a major player in the development of next-generation semiconductor devices.

But it's not just international, billion-dollar companies that attract the state's attention. Through the Texas Enterprise Fund, Texas will invest $300,000 in SIPCO to open a manufacturing facility in Cuero. The investment will create more than 100 jobs for Texans and more than $6 million in capital investment for this rural community. SIPCO produces custom-engineered, high-precision gear products for motion control, power transmission equipment, and hydraulic systems for various industries.

"SIPCO looked for a community with access to a wealth of resources essential for attaining our goals of providing customers with a quality stream of supply," says SIPCO Mechanical Linkage Solutions CEO Raul A. Martinez. "In doing so, we found the city of Cuero in Dewitt County, whose populace is diverse, talented, and resourceful. The Texas Enterprise Fund played a significant role and was a determining factor in our decision to locate our manufacturing expansion to Texas."

• Aerospace and Defense - Texas has a long history of aviation and aerospace design and manufacturing - more than 1,700 companies provide approximately 200,000 jobs throughout the state. Major companies with operations in Texas include BAE Systems, Boeing, Gulfstream, Raytheon, Bell Helicopter Textron, Cessna Aircraft Company, and Vought Aircraft Industries (which was purchased by the Triumph Group in March).

San Antonio's highly diversified manufacturing sector, including a cluster of aircraft- and defense-related companies, was a key factor in the city being ranked as one of the top-20 metro areas in the country that showed the strongest overall performance during the recession, according to the Brookings Institution's MetroMonitor.

In late 2009, the United States Air Force announced San Antonio would be the site for the first-ever unit designated for the sole purpose of cyberspace operations. Officially titled the "24th Air Force," the cyber-security division initiated activities in January 2010 (see "San Antonio Secures Air Force Cyberspace Center" in the December 2009/January 2010 issue).

• Biotech and Life Sciences - The biotechnology and life science/biomedical sectors in Texas continue to thrive. Texas ranks tenth in the nation for the greatest number of biotechnology companies - over 1,000 private-sector biotechnology firms, private-sector and government partnerships, medical manufacturing companies, and university research facilities are located throughout the state, with clusters in Houston, Dallas-Fort Worth, Austin, and San Antonio.

Promising biotech start-up companies have been awarded more than $133 million from the Texas Emerging Technology Fund, which supports some of the most innovative and cutting-edge biomedical/biotechnical research in the country.

The state's commitment to life sciences is a major reason Hanger Orthopedic Group recently announced it was moving its corporate headquarters from Bethesda, Maryland, to Austin, creating up to 250 new jobs.

"We are impressed with the professionalism and the support afforded to us by the state of Texas and the city of Austin in facilitating our decision-making process," says Tom Kirk, president and CEO of Hanger Orthopedic Group. "Their outstanding assistance packages were a key element of this support. We would also like to recognize the helpful role played by the Austin Chamber of Commerce."

• Information and Computer Technology - The information and computer technology sector includes computers, software, telecommunications, and information technology services.

Greater Austin is well known for its vibrant high-tech economy, with 3,300 technology companies employing more than100,000 workers. Austin continues to be one of the fastest-growing job markets in the United States. Nearly half the city's population is between 18 and 44 years old and has obtained postsecondary education.

The nonprofit Austin Technology Incubator (ATI) is one of the most successful high-tech incubators in the country. ATI has worked with more than 150 teams of entrepreneurs who have collectively raised over $725 million in investor capital. During the last six months, four former ATI start-ups were purchased by larger companies - giving "testimony to the quality of our companies," says Isaac Barchas, director of ATI. "This is especially gratifying to see during what has been an historic down market."

Facebook recently selected Austin for a new $3.1 million online sales and operations office. The first major U.S. expansion away from Facebook's headquarters in Palo Alto, California, the facility will create 200 new jobs.

The state of Texas is providing $1.4 million in support to Facebook from the Texas Enterprise Fund (TEF) upon finalizing the local incentive agreement with the city of Austin. "The TEF continues to be a critical, deal-closing tool for Texas, helping to attract jobs and businesses and grow our state's diverse economy," says Governor Perry.

• Energy - Texas, of course, is known for its oil and gas exploration and production, including the use of innovative new hydro-fracturing technologies to release trapped oil and gas from shale deposits. Texas leads the nation in production and reserves for crude oil and natural gas and boasts one of the most efficient electric markets in the world. Texas companies are also at the forefront of developing new alternative-energy technologies, especially for wind and solar.

The Texas Emerging Technology Fund recently invested $1.5 million in SolarBridge Technologies in Austin to help develop and commercialize a new technology that provides more reliable distribution of solar energy through the energy grid. The company's unique microinverter attaches directly to solar panels, improving energy production efficiency and providing better distribution of electricity. "We have succeeded in creating a module-integrated microinverter like nothing else on the market," says SolarBridge President and CEO Ron Van Dell. "By making this investment in SolarBridge, the state of Texas recognizes the impact that our technology will have on making solar installations significantly more reliable and affordable."

A Strong Economic Future
Experts expect to see economic growth in Texas that continues to exceed the U.S. average, stronger international trade, and a younger and more ethnically diverse population. A pro-business climate, low taxes, strong research incentives, and a talent work force continue to attract new expansions and relocations.

"When people across the nation look at Texas, they're discovering we've fostered an environment that encourages people to pursue their dreams, build businesses, and create jobs," says Governor Perry.

In fact, several Texas metro areas have taken top spots in the 2009 Milken Institute/Greenstreet Real Estate Partners "Best Performing Cities Index." The index ranks U.S. cities according to job creation, short- and long-term measurements of employment and salary growth, and technology output growth. Texas claimed four of the top five spots, including number one (Austin-Round Rock), and nine of the top 16 spots.

"Texas's strong position in this study demonstrates that a favorable business climate, combined with a low-cost/low-tax environment, is highly supportive of job creation," states Ross DeVol, senior economist at the Milken Institute and lead author of the report. "The state has diversified its economy by fostering several key high-tech clusters, and the passage of Proposition 4, allocating $500 million in funding for research universities, will make Texas an even more formidable competitor in the future."