Texas vs. California: Is the Lone Star State’s economy really that much better off than the Golden State’s?

A preliminary look at the numbers may say yes, but they’re largely misleading, and they don’t tell us the whole story about what’s actually going on in Texas.  That’s not to say that California’s got it going on, though……..

Texas Governor Rick Perry’s flirtation with a run for the White House in 2012 has generated a lot of talk about his state’s economic record during his tenure.  And the numbers cited with his sales pitch are quite impressive, if only at first glance.  In other words, they sure sound good, but really, things aren’t quite as rosy in Texas as Perry and national Republicans want everyone to think.

By now everyone who’s been paying attention has heard or read about the numbers; that Texas has created more jobs than all other states combined in the last five years (an assertion that Politifact rated as only half true).  That out of all of the jobs created in the United States since the official end of the recession in 2009 45% of them have been created in Texas.  Conservatives tell us that Texas’ low tax rates (Texas has no state income taxes, and a 6.25% state sales tax rate), and its business friendly regulatory environment (i.e. there practically are none) have led to a boom of economic growth unparalleled in the rest of the United States.

Texas is doing so well, Republicans tell us, that it should be the model for economic growth for the rest of the country.  Texas is doing it right, they say, and the proof is the number of businesses that have relocated to Texas and the number of jobs created.  And don’t forget that Texas can boast a balanced budget, right?  No economic woes on that front.

California, in comparison, is a mess.  High unemployment.  High state taxes.  Businesses fleeing California in record numbers to escape the regulatory quagmire that supposedly stifles business growth along with those high business taxes.  The long term prospects for California are bleak, whereas the sun shines on Texas every day.

Given all of the assertions above, the California economic model is a disaster and the Texas model is a shining beacon to all.  And taken at face value without any look at the underlying contributing facts, those assertions would probably be right.  The problem is that things are never quite as simple as they seem.  Sure, Texas has some nice statistics to tout, but statistics rarely tell us the full story.  The devil is in the details, and it’s those details that have rained on Texas’ glory parade.

The truth behind the numbers……

The numbers cited sure look impressive, but a closer look tells a slightly different story, and even in comparison to the rest of the economy, it’s far from impressive.

According to the Bureau of Labor Statistics, overall nonfarm employment in April of 2009 in Texas stood at roughly 10,343,000 Texans employed.  Two years later in April of 2011, that number increased to 10,554,000, for an increase of just 2%.  Unemployment in the state in April 2009 stood at 7.2%.  The current unemployment rate has risen to 8%.

Even more damning, though, are the wage figures.  As noted by a story in The American Independent, the figures are not adjusted for the differences in the cost of living, so there is some leeway in the interpretation, but still the facts are not in Texas’ favor:  The average wage in Texas in December of 2007 was $790 per week, or $41,000 per year.  California, in comparison, had an average weekly wage of $850 or $45,000 per year.  The national average at the time was $750 and $39,000, respectively.

Fast forward to today and in Texas nothing has changed.  Average wages are $790 and $41,000, equal to the current national average.  In California the average wage has risen to $930 and $48,000.

Even worse, according to The American Independent story, in 2010 550,000 workers in Texas were working at jobs that paid at or below the minimum wage, or 9.5% of the state’s hourly workforce, tying them with Mississippi for the largest percentage of minimum wage workers in the U.S.  In California the minimum wage workforce tallied in at less than 2%.

Since what economists dubbed the end of the recession in 2009, California has seen its average wage increase by 9.3%, as opposed to a 0.6% increase in Texas.  From 2007 to present, Texas saw a 150% increase in the minimum wage workforce, and 16% since 2010.

Massive budget problems

Despite all of this alleged growth and expansion of jobs and the Texas economy, the state is still facing massive budget shortfalls.  Sure, they tout a “balanced budget,” but they relied on parlor tricks and a lot of help to get there.

Recall that in 2009 Rick Perry had some choice words for the Obama administration about the stimulus program and the “bailouts” to Wall St. and to the states.  He pledged that over his dead body would his state seek a handout from the federal government, and he would not accept any stimulus money from Washington.

But the state was facing down a $6.6 billion shortfall in the 2010-2011 budget, so at the same moment that he denounced the stimulus, he held his hand out and snatched $6.4 billion in stimulus funds, allowing the state to close its budget hole.  The state didn’t raise taxes, and it didn’t have to raid its “rainy day fund” that had $9.1 billion in cash sitting there.  Crisis averted thanks to the American Recovery and Reinvestment Act.

With no stimulus dollars to lean on for the 2012-2013 budget, Texas faced a $27 billion shortfall according to the state comptroller.  And with tax revenues expected to be down by over $15 billion from the last budget term (the Texas legislature meets every two years, and the budget is done in two year cycles), things don’t look to be getting any better.  The legislature already had to dip into that rainy day fund to the tune of over $3 billion to cover an unexpected gap in the 2009-2010 budget.

The remaining $6 billion in the rainy day fund, according to even Republican state lawmakers, is already accounted for in the new budget.

Sure Texas lawmakers will tell us that the 2012-13 budget is balanced, but it took a series of parlor and accounting tricks to get there (and for the record, California Governor Jerry Brown vetoed a budget approved by California Democrats that included similar such gimmicks).

Gone is $4 billion in funding for k-12 education.  There are also massive funding cuts to higher education and public services.  Gone is $10 billion for child support services, even with 25% of the state’s children living in poverty.  The legislature also pushed a due date back by one day of over $2 billion in education funding, rolling that bill over onto the 2014-15 budget cycle.

It is expected that some 50,000 teachers statewide will lose their jobs due to this new budget.  This despite an expected increase in school enrollment by 80,000 students.  Texas is already one of the least educated states, ranking dead last in the nation in the percentage of the population over age 25 who have earned a high school diploma.

The coup de grace, though, is the deliberate underfunding of state Medicaid programs to the tune of $4.8 billion.  It’s a program that Republicans want to do away with anyway, and with a hard right wing Republican dominated state government, why should they fund it?

Texas, by the way, leads the nation in the percentage of its population without any healthcare coverage at all, with 26.8% of the state uninsured.  Not good for the second largest state in the Union.


1 comment so far

  1. california state politics on

    I think there has to be more transparency along with any type of reform enacted.  The government of California as well know is in a deficit.  The politics of the

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