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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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