Texas Today 2011: The Lone Star State Leads U.S. Economic Recovery
The Lone Star State has galloped out of recession and is leading the nation in economic growth.
Mark Crawford, Staff Editor, Area Development (March 2011)
It's hard to slow Texas down, even in a bad economy.

The Lone Star State is unquestionably leading U.S. recovery. More than half of U.S. net new jobs created from August 2009-2010 were in Texas, according to the Bureau of Labor Statistics. In November 2010, Texas had the lowest unemployment rate (8.2 percent) among the 10 largest states. And over the past year, Texas led the nation in energy, manufacturing, aerospace, professional and business services, and financial sector job growth.

Manufacturing in Texas is especially rebounding and driving job creation. Texas added more new manufacturing jobs (28,000) than any other state in 2010 (the next-closest state added 13,400). The pharmaceutical, biomedical, automotive, and heavy machinery sectors continue to expand steadily. Caterpillar will build a $122 million, 600,000-square-foot hydraulic excavator facility in Victoria that will employ more than 500 new workers and be operational in 2012. The facility will triple the company's current production of hydraulic excavators in the United States. Six Texas metro areas - Austin, Dallas, El Paso, Houston, McAllen, and San Antonio - were among the 20 strongest-performing cities in the country, according to the Brookings Institute's "Tracking Economic Recession and Recovery in America's 100 Largest Metropolitan Areas" from December 2010. Newsweek placed "Texaplex" (Austin, Dallas, San Antonio, and Houston) first in its "Top 10 American Cities Best Situated for Recovery" poll.

It's no surprise, then, that Texas is home to more Fortune 1000 companies than any other state. So why is the economy here hotter than a bottle of Texas Pete?

It's just Texas doing what it usually does: keeping corporate taxes down (Texas has one of the 10 lowest tax rates in the country), streamlining regulations and permitting, and supporting business through the Texas Enterprise Fund (TEF), which has helped create more than 56,000 new jobs and generated $14.7 billion in capital investment. Additionally, the Texas Emerging Technology Fund (TETF) supports cutting-edge, high-tech innovation that generates partnerships and attracts top researchers from around the world.

The state government also plans to make permanent the small business tax cut that was passed during the recession, as well as to implement stronger protections against frivolous lawsuits. Governor Richard Perry has proposed requiring plaintiffs who file frivolous lawsuits to pay the defendant's legal bills, establishing early dismissal options for frivolous lawsuits, expediting trials and limiting discovery for lawsuits up to $100,000, and ensuring that new laws cannot create causes of action unless expressly established by the legislature.

2010: A Good Year
The Texas gross state product (GSP) totaled more than $1.3 billion in fiscal year 2010 and continues to diversify, according to the Texas Comptroller of Public Accounts (CPA). If Texas were a nation, it would be the world's eleventh-largest economy.

Texas continues to lead in the global marketplace. For the ninth consecutive year, Texas ranked as the top state for export revenues. Texas' 2010 exports totaled $206.6 billion, up 26.7 percent from $162.9 billion in 2009. The state's exports outperformed overall U.S. exports, which grew about 21 percent. Top Texas exports are computer and electrical products, chemicals, petroleum and coal products, machinery, and transportation equipment. Texas ranked first nationwide in exports of communications equipment ($8 billion) and electronic components ($3 billion), and second in exports of computers and peripheral equipment ($8.7 billion). In fact, technology exports comprised more than 20 percent of all goods the state exported last year.

Petroleum refining and chemical products, information and computer technology, biotechnology, and advanced technology and manufacturing drive the Texas economy. Within these markets, renewable energy, life sciences, and aerospace/aviation are some of the highest-performing clusters leading Texas out of the recession.

Renewable Energy
Texas has been the nation's top wind producer for the past five years, according to the American Wind Energy Association. In 2010, Texas added 9,707 MW of new capacity. (Iowa, the second-closest state, only added 3,670 MW.) If Texas were a nation, it would rank sixth in the world for installed wind power capacity. Recent state legislation has also laid the groundwork for large transmission lines, which will further accelerate in-state wind power use.

Solar power is also rising, especially in Central Texas. "For example, Austin has a renewable energy RFP (request for proposal) out right now that is calling for 200 MW of renewable energy," says Angelos Angelou, principal with Angelou Economics, a technology-based economic development and site selection firm in Austin. "Supported by modern infrastructure and smart grid technologies, Central Texas is emerging as a hotbed for solar energy and other alternative technologies."

Responding to this strong demand, SolarBridge Technologies, a leading developer of solar industry power conversion products, expanded into a new Austin location in August 2010 that more than triples its space. Additional lab space for research and development was needed after the company secured $15 million in series B funding, which was preceded by $1.5 million of support from TETF.

"SolarBridge's expansion reflects the growth of Austin's solar industry and clean tech as a whole," said Susan Davenport, vice president of business, retention, and expansion for the Austin Chamber of Commerce. "We hope their success will encourage other solar and renewable energy companies to build their businesses in Austin."

Recognizing these advantages, SunPower Corporation, a manufacturer of high-performance solar technology solutions, recently decided to build a new, $10 million operations center in Austin. The project, which will create 450 jobs, will benefit from city incentives and a $2.5 million TEF grant.

"Texas has great potential to become a significant solar market," says SunPower CEO Tom Werner. "If policies creating a stable solar market across Texas are enacted, this commitment by SunPower could be the start of significantly more investment and job creation in the state by the rapidly growing solar industry."

Life Sciences/Biotechnology
Texas is home to more than 4,000 biotechnology, biomedical research, and medical manufacturing companies, as well as world-class universities and research facilities. These companies and institutions employ more than 100,000 workers at an average annual salary of over $67,300. The state's biotechnology marketplace is estimated to have an annual state economic impact of $75 billion, according to a 2009 Texas Healthcare and Bioscience Institute report.

Numerous global biotech and pharmaceutical companies have operations in Texas, with key clusters in Houston, Dallas-Fort Worth, Austin, and San Antonio. TETF and TEF have made possible many of the state's early-stage biotech achievements: combined TETF-TEF funding for biotech projects through March 2010 totaled over $250 million.

This dedication to state innovation is having a big impact. Texas showed a 35 percent increase in biotech-related facilities and an 11 percent increase in total bioscience employment, according to the 2010 Battelle/BIO State Bioscience Initiatives report.

Austin is particularly enjoying a surge in biotech and medical device research and development. Newcomer XBiotech, a fully integrated biopharmaceutical company, established its Austin headquarters last year. "What has helped many local companies succeed is funding from TETF, as well as Emergent Technologies, an Austin-based venture capital/private equity firm that commercializes technologies from universities," Angelou says.

The state continues to finance promising projects through TEF and TETF. Houston-based RadioMedix was recently awarded $2.8 million for developing a new process to manufacture radiopharmaceuticals, tracers used to diagnose and treat diseases with positron emission tomography. The company is collaborating with the University of Texas MD Anderson Cancer Center to develop this technology. BD, a global medical technology company, recently received $1.56 million from TEF to establish its worldwide professional services headquarters in San Antonio. This investment will create 296 jobs and generate $6.35 million in capital investment.

"San Antonio met all of the criteria that we were seeking in order to meet our business requirements," says BD Chairman and CEO Edward J. Ludwig. "The excellent pool of potential employees and skilled labor, along with proximity to academic institutions, were significant draws, as well as the support we received from local officials and the Texas Enterprise Fund."

Texas has been on the leading edge of aerospace and defense from the beginning of manned flight. Its aerospace and defense industries comprise about 1,700 companies and 200,000 employees who earn an average salary of $50,000 per year. American Eurocopter, BAE Systems, Bell Helicopter, Textron, Boeing Company, Gulfstream, Aerospace Corporation, L-3 Communications, Lockheed Martin, Raytheon, and NASA's Johnson Space Center are major employers.

Both TEF and TETF have supported new aerospace research and development. In El Paso, the University of Texas recently received $3 million from TETF to establish the Structural and Printed Emerging Technologies Center (SPEC). This research and development facility for aerospace and defense integrated 3D systems technologies will partner with Lockheed Martin Aeronautics to build on existing world-class, rapid-prototyping or additive manufacturing equipment and research.

TapcoEnpro - a subsidiary of the Curtiss-Wright Corporation and a designer and manufacturer of highly engineered, advanced mission-critical technologies for the defense, energy, commercial aerospace, and general industrial markets - will construct a $26 million manufacturing facility in Baytown. This new facility will build large vessels for the refining and petrochemical industries, as well as support the production of large-valve products. This expansion, which will create 100 new jobs, is partly financed by a $675,000 TEF award.

"The state's investment through the Texas Enterprise Fund has helped bring us to the start of construction for Curtiss-Wright's new manufacturing facility at Cedar Crossing," says flow control Vice President and General Manager Cliff Jacobs. "We have set a target to improve our competitive position significantly. When completed, our new heavy fabrication facility will provide the flexibility to grow into new markets, offer new products, increase our ability to bid competitively on large-scale refinery projects, and increase our global market share."

Great Expectations
In October 2010, The Wall Street Journal described Texas as a "mecca for high tech, venture capital, aeronautics, health care, and even industrial manufacturing like the building of cars and trucks." The article highlighted Texas' job-creating success and acknowledged its low corporate tax rates and streamlined regulatory climate as key factors to its economic success.

"Texas' ranking as the nation's top exporter for nine years running is a testament to our strong economy and the importance of upholding low taxes, reasonable regulations, a fair legal system, and an equipped work force," Governor Perry says. "Although Texas has not been immune to the global recession, our commitment to these priorities has helped make us the best place to live, work, and raise a family, and businesses looking to escape over-taxation and over-regulation know they can come to Texas for a better chance at success."