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Seeking Higher Ground: Texas Economics and Politics in a Post-Harvey World
Seeking Higher Ground: Texas Economics and Politics in a Post-Harvey World
Houston Public Sector CPE DaySeptember 19th, 2018
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Good afternoon!
Adam JonesSenior AdvisorWeaver
• City? • County?• School District? • Regional Authority?• Higher Education?• Non-Profit? • State or Federal Government? • Private Sector?
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Faces in the Crowd…
Today’s Presentation
Economy– The Texas LIFO Experience– What feeds Texas growth?– Harvey and its economic aftermath– The Caveats of the Texas economy
Politics– How purple is Texas?– Demographic Change and the red/blue divide– The post-Harvey Legislature and what it means for cities
and school districts
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Today’s Sources
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The Indomitable Texas Economy
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The Indomitable Texas Economy
Amazon is running the greatest corporate competition since Willy Wonka put Golden Tickets in chocolate bars.
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The Indomitable Texas Economy
Amazon is running the greatest corporate competition since Willy Wonka put Golden Tickets in chocolate bars.
According to CNBC’s data analysis, only twoof the 20 finalist cities score an “A” in their selection metrics…
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The Economy
Dallas and Austin*
* There is an open question whether or not Austin actually wants Amazon.
CNBC released the Amazon analysis on the heels of proclaiming Texas the #1 state for business in the United States.
In late 2016, Texas did something it had never done before.
We survived an oil collapse, without a major recession.
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A look back…
What happened next…the shortest recession ever.
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The Economy
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The Economy
Real GDP Growth (Year‐over‐Year Percentage Change)
Here’s current data.
Texas has a LIFO economy. We are:
Last
In (to recession)
First
Out (of recession)14
The Economy
Real GDP Growth (Year‐over‐Year Percentage Change)
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LIFO Economy
Texas often separates from the national economy
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LIFO Economy
Real GDP Growth (Year‐over‐Year Percentage Change)
The Texas SURGE!
The Surge Line
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The Economy
Southwest Economy, Federal Reserve Bank of Dallas
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What feeds Texas growth?
The Texas economy remains in a broad‐based expansion. The state’s energy sector continues to boom, and areas of the state tied to oil and gas are growing at their strongest pace since 2014. –
Christopher Slijk and Jason Saving, Dallas Federal Reserve economists
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What feeds Texas growth?
The oilfield isn’t big enough.
Three enormous job‐creating engines
NAFTA!
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Texas Job Creation
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Texas Job Creation
Moody’s Analytics: estimated population growth for 2017 and 2018, year‐over‐year job growth for 2017, and 2017 gross metro product growth federal unemployment data, median annual pay for college‐educated workers in each area, using data from Payscale.com.
Rank 2015 2016 2017 20181 Houston Austin Fort Myers, FL Boise, ID2 Dallas San Francisco Orlando Seattle3 Austin Dallas Provo, UT Dallas4 Raleigh, NC Seattle Daytona Beach, FL Orlando5 Seattle Salt Lake City Jacksonville Fort Worth6 Denver Ogden, UT Sarasota, FL Las Vegas7 San Francisco Orlando Seattle Nashville8 Fort Worth San Jose Tampa/St Petersburg Fort Myers, FL9 Charlotte Raleigh, NC Portland Austin10 San Antonio Fort Myers, FL Salt Lake City Tacoma, WA
A history of the Forbes top ten cities list…
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Three Engines
24.75% of all Texas jobs are in Harris, Montgomery and Fort Bend Counties
54.2% of all Texas jobs are in the Houston MSA or the DFW Metroplex
71.1% of all Texas jobs are in Houston/DFW/San Antonio/Austin
Dallas and Austin NEVER Stop Producing Jobs
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Texas Job Creation
…but when Houston is on the same page. Forget about it.
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Texas Unemployment
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Texas Labor Force Participation
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Energy
Feeding the Texas economy $70 oil is like feeding Popeye spinach.
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Energy
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Energy
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Rig CountTexas Active Drilling Rigs
• August 2014 = 904
• August 2015 = 375
• May 20, 2016 = 173*
• August 2016 = 217
• August 2017 = 466
• Today = 528 (US = 1044)
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Where the rigs are…
Companies, needing Permian workers, find West Texas a hard sellBy Jordan Blum, Houston ChronicleJune 1, 2018
The Midland-Odessa metro population has grown more than 20 percent since 2010 to nearly 350,000 people. But at any given time, Midland may only have 200 homes for sale.
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Energy
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Energy
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Energy
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Trade
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Trade
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Trade
Port Laredo’s trade with the world rose 7.13 percent, from $283.18 billion to $303.37 billion in 2017 when compared to the same period the previous year. Laredo’s trade with the world rose 11.43 percent, from $104.64 billion to $116.6 billion through the first six months of 2018, according to WorldCity analysis of the latest U.S. Census Bureau data. WorldCity
2018 USTradeNumbers.com, WorldCity, Inc.
Trade with Mexico 2018 YTD: 10 Largest United States Ports of Entry
Rank Port YTD1 Port Laredo $74.05 billion2 El Paso Border Crossing, Texas $25.36 billion3 Otay Mesa Freeway Border Crossing, Calif. $14.11 billion4 Pharr Border Crossing, Texas $11.3 billion5 Eagle Pass‐Piedras Negras International Bridge, Border Crossing, $9.38 billion6 Nogales Border Crossing, Ariz. $8.32 billion7 Santa Teresa Border Crossing, N.M. $7.95 billion8 Brownsville International Bridges $5.65 billion9 Calexico/Mexicali (East) Border Crossing, Calif. $5.47 billion10 Port of Houston $5.32 billion
Top Exports to Mexico 2018 YTD
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Trade
2018 USTradeNumbers.com, WorldCity, Inc.
Top Imports from Mexico 2018 YTD
Rank Commodity YTD1 Gasoline, other fuels $8.9 billion2 Motor vehicle parts $5.46 billion3 Computer parts $3.52 billion4 Computer chips $2.42 billion5 Low value shipments $2.41 billion6 Computers $1.73 billion7 Petroleum gases, other gaseous hydrocarbons $1.66 billion8 Electrical supplies, apparatus, less than 1000V $1.46 billion9 Cell phones, related equipment $1.42 billion10 Diesel engines $1.28 billion
Rank Commodity YTD1 Motor vehicles for transporting people $10.87 billion2 Motor vehicle parts $8.17 billion3 Computers $8.07 billion4 Commercial vehicles $6.35 billion5 Oil $4.25 billion6 Insulated wire, cable $3.67 billion7 Cell phones, related equipment $3.47 billion8 Seats, excluding barber, dental $2.41 billion9 Tractors $2.35 billion10 TVs, computer monitors $2.05 billion
Top Exports to Mexico 2018 YTD
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Trade
2018 USTradeNumbers.com, WorldCity, Inc.
Top Imports from Mexico 2018 YTD
Rank Commodity YTD1 Gasoline, other fuels $8.9 billion2 Motor vehicle parts $5.46 billion3 Computer parts $3.52 billion4 Computer chips $2.42 billion5 Low value shipments $2.41 billion6 Computers $1.73 billion7 Petroleum gases, other gaseous hydrocarbons $1.66 billion8 Electrical supplies, apparatus, less than 1000V $1.46 billion9 Cell phones, related equipment $1.42 billion10 Diesel engines $1.28 billion
Rank Commodity YTD1 Motor vehicles for transporting people $10.87 billion2 Motor vehicle parts $8.17 billion3 Computers $8.07 billion4 Commercial vehicles $6.35 billion5 Oil $4.25 billion6 Insulated wire, cable $3.67 billion7 Cell phones, related equipment $3.47 billion8 Seats, excluding barber, dental $2.41 billion9 Tractors $2.35 billion10 TVs, computer monitors $2.05 billion
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Trade
Question of the Day:
Where does Port Laredo rank among all United States Ports of Entry?
Ten Largest United States Ports of Entry (2018 YTD)
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Trade
Port ValuePort of Los Angeles 91,690,073,140Port Laredo 76,060,712,835John F. Kennedy International Airport 64,902,710,159Chicago O'Hare International Airport 63,727,539,218Port of Newark 63,000,308,940Detroit Ambassador Bridge, Mich. 51,940,240,193Port of Houston 49,574,172,050Port of New Orleans 45,233,307,453Los Angeles International Airport 38,618,635,558
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Harvey…
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Harvey
Map by Episcopal Health Foundation
Moody Analytics estimates $81.5 billion* in property loss from flooding related to Hurricane Harvey
890,000 households applied for FEMA aid in almost 50 counties.
*NOAA puts the number at $125.7B
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Comparable Storms
H‐Town: Houston and Hurricanes, Robert W. Gilmer, May 24, 2018Real Estate Center, Texas A&M University
Harvey Federal Recovery$5.02 Billion Recovery Appropriation
• $1.15 Billion for Houston Housing• $1.15 Billion for Harris County
$4.70 Billion in Federal flood mitigation$9.72 Billion
$5.00 Billion in Federal Housing Aid• $2.3 Billion for Houston and Harris County• $2.7 Billion for distribution through GLO
$14.72 Billion Total Federal Aid Package44
Harvey Aid
On August 26th, Harris County voters approved a $2.5 billion referendum for infrastructure and flood mitigation projects.
…it passed with 85.6% support.
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Harris County Referendum
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Texas Optimism
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WTI Projection
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Economic Impact
H‐Town: Houston and Hurricanes, Robert W. Gilmer, May 24, 2018Real Estate Center, Texas A&M University
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Texas Resilience…
Texas is the nation’s “stickiest” state (Dallas FED).
• HIGH in‐migration (domestic and foreign)
• LOW out‐migration
• HIGH employment
82% of those born in Texas, stay in Texas.
The Dallas Fed predicts a cooling of the Texas economy in the second half of 2018.
United States Trade Policy…although that benefits Texas…for the moment
(warning: steel tariffs)Geo‐political Pressures on Energy Real Wage Growth lagsHarvey: a temporary stimulus? Educational Attainment and long term growth
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The Caveats…
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Educational Attainment
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Educational Attainment
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Texas Politics
How purple is Texas, really?
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DISCLAIMER
The Texas GOP has a 24‐year winning streak in statewide elections – by far the longest in the nation.
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Texas Politics
But that’s not the whole story…
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Texas Politics20th Most Republican State
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Texas Politics19th Most Conservative State
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State Government
“Generally speaking, the way state government runs in Texas serves as a good model for other states to follow.”
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How are we doing?
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National Optimism
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Divisions?
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K-12 Education
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A Civics Problem
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Millenial Engagement
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The Divide
McCain 56Obama 44
Romney 57Obama 41
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2016 Presidential
Donald J. Trump 52.2%Hillary Clinton 43.2%
Similar map, but with one interesting switch…
Right here
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Fort Bend County
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Fort Bend County
Fort Bend County is the future of America…America just hasn’t caught up yet.
By Ali Zifan - Own work; Raw Data:[1], CC BY-SA 4.0,
https://commons.wikimedia.org/w/index.php?curid=56761205 69
Where the Votes Are
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Blue Islands, Red Sea
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Another Perspective
GIS Mapping by ProximityOne
The 15 Cities With the Largest Numeric Increase Between July 1, 2016, and July 1, 2017 (Populations of 50,000 or more in 2016)
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Demographics
Rank City StatePopulation Increase
2017 Population
1 San Antonio Texas 24,208 1,511,9462 Phoenix Arizona 24,036 1,626,0783 Dallas Texas 18,935 1,341,0754 Fort Worth Texas 18,664 874,1685 Los Angeles California 18,643 3,999,7596 Seattle Washington 17,490 724,7457 Charlotte North Carolina 15,551 859,0358 Columbus Ohio 15,429 879,1709 Frisco Texas 13,470 177,28610 Atlanta Georgia 13,323 486,29011 San Diego California 12,834 1,419,51612 Austin Texas 12,515 950,71513 Jacksonville Florida 11,169 892,06214 Irvine California 11,068 277,45315 Henderson Nevada 10,534 302,539
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Demographics
Rank City State Increase2017
Population
1 Frisco Texas 8.2 177,2862 New Braunfels Texas 8.0 79,1523 Pflugerville Texas 6.5 63,3594 Ankeny Iowa 6.4 62,4165 Buckeye Arizona 5.9 68,4536 Georgetown Texas 5.4 70,6857 Castle Rock Colorado 5.1 62,2768 Franklin Tennessee 4.9 78,3219 McKinney Texas 4.8 181,33010 Meridian Idaho 4.7 99,92611 Flower Mound Texas 4.3 76,68112 Bend Oregon 4.3 94,52013 Cedar Park Texas 4.2 75,70414 Doral Florida 4.2 61,13015 Fort Myers Florida 4.2 79,943
The 15 Fastest‐Growing Large Cities and Towns Between July 1, 2016, and July 1, 2017 (Populations of 50,000 or more in 2016)
Poll Date Sample MOE Cruz (R) O'Rourke (D) Spread
NBC News/Marist
8/12 ‐ 8/16
759 RV +/‐ 3.8% 49 45 Cruz +4
Quinnipiac7/26 ‐ 7/31
1138 RV +/‐ 3.5% 49 43 Cruz +6
2018 Texas Senate Race Polling
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The Red/Blue Test Case
Regardless of the Cruz/O’Rourke outcome, the R/D make‐up of this Legislature will not change significantly.
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The Post-Harvey Legislature
The legislature will elect a new Speaker of the House.
They will also be under significant budgetary pressures that will impact all of you.
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The Post Harvey Legislature
If Republican statewide officeholders are unbeatable and the economy is thriving…then why wasn’t this man smiling last spring?
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The Post Harvey Legislature
2015 2017 2019
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The Post Harvey Legislature
2015 2017 2019
How does the Texas government not benefit from the Texas economy?
The Legislature’s supplemental appropriation for Hurricane Ike was $312 million. Total damages (estimated) for that 2009 storm were $35 billion.
• Medicaid $2.0 B• Sales tax deferral $3.6 B• School Finance state share $3.3 B• Texas Tomorrow Fund $ 240 M• Internet Tax Freedom Act $ 440 M• Retirement Systems ? $ 200 M• Harvey Expenditures $1.5 B
$11.28 Billion
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State Obligations
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Cautious Optimism…
The July revised revenue projection shows some improvement for the Legislature.
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The Post Harvey Legislature
201920172015
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Rainy Day Fund
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The next budget session…
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Closing thought…
The legislature has a complicated relationship with cities and school districts, both financially and with regard to policy.
The 2019 Legislature will be high stakes for local government.
Thank you!
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