A Review of the Texas Economy from the Office of Susan Combs, Texas Comptroller of Public Accounts • July 2 011

JUNE REVENUE (in millions): SALES TAX: $1,731.0 OIL PRODUCTION: $155.3 NATURAL GAS: $71.2 MOTOR FUELS: $264.6 MOTOR VEHICLE SALES: $272.0 TOBACCO: $137.4 An Interview with Pundit Glenn Reynolds SEE PAGE 10 A Bubble in Higher Education?

Inside Stories Obesity spells trouble for business 3 Livestock shows fund kids’ education 6 New presidential museum for Texas 12 By Mark Wangrin Letter From the Comptroller Across Texas But Texas, unfortunately, suffers disproportionately. In 2009, more than two-thirds fat Envelope. It’s what high school seniors › Exxon Mobil has announced plans for a new campus near (66.7 percent) of Texans were A across Texas hope to find in the mailbox from their college The Woodlands. The 385- overweight or clinically obese, of choice. If it’s the dreaded thin envelope, a rejection, parents can acre site, which should be compared with 63.2 percent expect to spend the dinner hour trying to convince their son or completed by 2015, will feature nationally. About 29.5 percent of office space, a laboratory, Texans were clinically obese. And daughter that life’s blessings sometimes come well-disguised. conference rooms, training the prevalence of obesity among Texas But if it’s an acceptance, it may be the happy young person who’s facilities, restaurants, a child- adults more than doubled in the trying to cheer up the parents, with assurances that he or she will care facility and an employee last two decades, from wellness center. 12.3 percent in 1990. apply for every available grant and take a part-time job to help pitch The resulting costs in on the tab for their education. › Houston-based Redstone to Texas employers Because no matter how much money mom and dad set aside to Companies will build a reached $9.5 billion in 318,000-square-foot office 2009, due to direct pay for college, these days it seems like it’s never enough. facility as well as a “lifestyle” health insurance Whether they’re staring at four years of tuition or just searching for hotel, complete with spa and expenditures as “An obese and ways to pay monthly bills on one less paycheck, a lot of families have fitness facilities, in Houston’s well as absenteeism, unhealthy work force may reduced productivity at been having serious supper-table discussions about finances lately. Galleria area. work and disability. be viewed as a huge negative In the wake of the recent recession, citizens all over the state and › Texas’ H-E-B grocery chain is The next generation of when businesses consider the country are weighing their options, cutting back and making do. building new stores in Pharr, Texas workers will be pros and cons of moving their And they expect their governments at all levels to be doing Granbury and Bryan. All are affected as well. Today, expected to open in the latter 20.4 percent of Texas operations to Texas.” the same. They’re demanding a business-like, bottom-line focus half of 2011; total construction children aged 10 to 17 are —Comptroller Susan Combs that ensures maximum efficiency and effectiveness. In short, they costs for the three projects are obese, 4 percent more than the want to know that their dollars are being spent with discipline estimated at $34.4 million. national average. If current trends continue unchecked, by 2030 an and forethought. › In the next few years, San estimated 36.4 percent of Texans will That’s the challenge facing Texas colleges and universities as well. Antonio IT hosting and storage be overweight and 36.7 percent will They must find new and better ways to operate efficiently and pro- firm Rackspace Hosting Inc. Gaining Costs, be clinically obese. The effects on plans to triple its work force in worker health could cost the state’s duce graduates fully prepared for the workplace of tomorrow. Austin, from about 300 to 900. businesses $32.5 billion annually. In this issue of Fiscal Notes, we speak with Glenn Reynolds, L o si n g Tıme Excessive weight also carries distinguished educator and commentator, on the spiraling costs significant costs for the individual. Children who stay obese through of getting a college degree — and some of the causes of this Visit FiscalNotes.com adulthood can expect the condition daunting increase. We also look at some of the tools and resources to get email alerts on Costs Growing Along with Waistlines to cost them thousands over their life- available to Texans of all ages who are our publications and times for obesity-related reasons such considering starting businesses of their own. up-to-the-minute news on Obesity continues to cost Texas Like the previous report, Gaining Continued on page 4 billions of dollars annually, and the Costs, Losing Time focuses on the cost There will never be a shortage of dreamers the Texas economy. tab is skyrocketing, according to a of obesity to Texas employers. And the who want to test themselves in the market- recent follow-up to a landmark 2007 updated data show that the crisis is place of ideas or commerce. The decisions report from the Comptroller’s office. gaining momentum. Gaining Costs, Losing Time: The we’re making today will help give the next Obesity Costs Obesity Crisis in Texas, issued in generation of Texas innovators and entrepre- February 2011, builds on the research Obesity is a national crisis, of course. neurs the chance to live their dreams. reported in Counting Costs and U.S. health care costs related to Calories, which first drew national obesity have doubled in less than a attention to the potentially crippling decade and account for 9.1 percent of economic effects of unchecked obesity. annual health costs, or $147 billion.

2 July 2011 • Fiscal Notes Fiscal Notes • July 2011 3 the Cost to A Child

Continued from page 3 Obesity costs to Texas as disease, lower wages, diet plans Combs says. “An obese and unhealthy SLIMMING Down In 2009, employers reached and the wage loss inherent in work force may be viewed as a huge shorter lifespans. negative when businesses consider And an unfit work force ultimately the pros and cons of moving their hile Gaining Costs, Losing Time details problems $9.5 may harm Texas’ reputation as a great operations to Texas.” FN and costs, it also offers a series of policy recom- Billion in 2009 place to do business, according to W mendations as solutions, including: Comptroller Susan Combs. To read Gaining Costs, Losing Time: 2 “Today, businesses want to come The Obesity Crisis in Texas, please visit returning physical education as a high school gradua- 3 to Texas because we’re seen as a great www.window.state.tx.us/specialrpt/ Portion Sizes tion requirement and making it mandatory in all semesters of place for them to operate and grow,” obesitycost/. of middle school; (66.7 percent) Obesity is rising faster of Texans were 1982 2002 in children than adults. Overweight Nation adding nutrition courses to the public school curriculum; overweight 8 ounces 16 ounces According to the U.S. Cen- ata from the Centers for Disease Control and Prevention (CDC) show that, while or clinically 45 calories 350 calories ters for Disease Control D limiting or eliminating the eligibility of soft drinks, (with sugar) (with mocha syrup) OBESE. and Prevention, the rate of obesity is a nationwide problem, its incidence varies considerably from state to candy, cookies and ice cream from the Supplemental Nutrition Portion sizes for many common obesity among U.S. children state. In 2009, Texas fell into CDC’s second-worst category, for states with obesity food and drink purchases have Assistance Program (formerly known as “food stamps”); aged six to 11 tripled from rates of 25 to 29 percent. Nine states (those in dark red) fared even worse, with increased greatly in recent years. 1980 to 2008, from 6.5 per- 30 percent or more of their residents clinically obese. offering a $1,000 federal tax credit to Americans who cent to 19.6 percent. Among pass an annual wellness exam and physical; and adolescents aged 12 to 2009 No Data Obesity imposes costs on business ranging from direct health care 19, obesity rates rose even encouraging restaurants to list nutrition information faster, from 5.0 percent to expenditures to the more subtle effect of reduced efficiency while at <10% on menus. 18.1 percent. work, or “presenteeism.” The Comptroller estimates that these direct 10%-14% • The report also includes sections on the demographics of Texas and indirect costs totaled nearly $9.5 billion in 2009. Excessive weight puts 15%-19% Business costs children at risk of type 2 dia- obesity in Texas, factors contributing to obesity and the value Area of Costs Estimated Costs Percent (by area) 20%-24% of worksite wellness programs, which can reduce business heath betes, high blood pressure, Attributable health care $4,022,324,929 42.5% gallbladder disease, depres- care expenditures and absenteeism costs by 25 to 30 percent. 25%-29% to Obesity, Absenteeism 1,643,955,363 17.4 sion, anxiety and lower 2009 ≥30% • Presenteeism 3,469,229,333 36.7 self-esteem, while increasing their risk Disability 321,813,719 3.4 of chronic disease in Obesity Prevalence Trends In Texas Adults, 1990 to 2009 Total Costs $9,457,323,345 100.0% adulthood. Obesity Prevalence Trends in Texas Adults, 1990-2009 Total Projected Obesity Costs to Texas Businesses, 2009-2030 (in billions) • 60% The 2007 National Survey In Texas, our share of adults who 57.1% of Children’s Health (NSCH) Normal Weight f obesity rates and the Texas work force continue to increase as expected, are obese more than doubled I found that 20.4 percent of Overweight 50% EXHIBIT 9 these direct costs could reach nearly $32.5 billion in 2030. The total estimate includes Texas children aged 10 to from 12.3 percent to 29.5 Obese Total Projected Obesity Costs to Texas Businesses, 2009-2030 (in billions) 42.0% decline in cost burdens beyond just direct health care costs. 17 were obese, compared percent. According to the CDC, normal-weight people $35 $32.5 with 16.4 percent for all U.S. U.S. adult obesity rates rose from 40% 37.2% $30 children. 11.6 percent in 1990 to 27.1 30.6% 33.1% 21.6% increase in percent in 2009. $25 • 30% overweight people According to succes- 29.5% $20 sive editions of the NSCH, 139.8% increase between 2003 and 2007 in obese people $15 20% the number of states with $9.5 12.3% $10 childhood obesity rates at or above 18 percent doubled, 10% $5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 from six states to 12 in 2007.

Source: U.S. Centers for Disease Control and Prevention Source: Texas Comptroller of Public Accounts.

4 July 2011 • Fiscal Notes Unless noted otherwise, source for data on pages 4 and 5 is the Texas Comptroller of Public Accounts Fiscal Notes • July 2011 5 Major Loot for Grand Champions by Gerard Maccrossan At Texas’ largest junior livestock shows, kids show animals to earn big prize money, typically for In 2011, scholarships. In 2011, top prizes ranged from $2,200 to a whopping $350,000. at the Houston Livestock show and rodeo, The Grand Champion tock Shows Steers Barrows Goats Lambs Turkeys Broilers Roasters Rabbits Steer sold for S San Angelo $19,600 $8,750 $15,000 $12,200 Star of Texas 60,000 10,000 10,300 10,000 $3,500 $4,500 $4,500 $2,200 $350,000 Fort Worth 185,000 110,000 35,000 100,000 The Winning exhibitor Receives: Fund Futures San Antonio 85,250 48,100 50,000 39,500 16,300 17,100 Houston 350,000 177,000 140,000 190,000 88,000 120,000 $85,000 Sources: San Angelo Stock Show and Rodeo, Star of Texas Fair and Rodeo, Fort Worth Stock Show and Rodeo, San The Remaining Texas Kids Earn College Dollars by Raising Top Livestock Antonio Stock Show and Rodeo and Houston Livestock Show and Rodeo , Somerville says. “We help to set those While the sums are huge, the Running costs are covered by $265000 As the auctioneer concluded, raucous generates almost half a million dollars goals for young people in the ag cash any child can take home from a ticket sales and 24,000 volunteers Is shared among applause for KST Electric President annually. Austin’s Star of Texas Fair and business. All these kids want to come stock show is capped. In Houston, the provide most of the event’s labor. scholarships for Well, KST came today to play! Kenneth Tumlinson echoed around the Rodeo, which expanded to become out and win the top prize.” grand champion steer cap is $85,000. “It rewards kids who maybe don’t other youths They just bought the Reserve Grand marble foyer of the Bob Bullock Texas a statewide show during the past For Somerville, the value of Although the sale price was more than have the same opportunities [as • State History Museum in Austin, decade, raised about $800,000 at the supporting youth through the stock four times that amount, the amount those raising animals]. The distri- More than Champion Barrow for $6,000! signaling the end of Tanner Gerngross’s 2011 youth auction. Fort Worth’s stock show is extremely personal. Five years over the cap is shared with other par- bution means all those kids get to 2011 livestock show season. show raises about $2.8 million, and ago, while his late wife was under- ticipants through a scholarship fund participate. 300,000 Sir, we cannot appreciate you being The 14-year-old Wall FFA member San Antonio’s about $3.5 million. going treatment at MD Anderson maintained by the Houston Livestock “As far as I am concerned, was just one place shy of the top spot The biggest money, though, is Cancer Center he learned firsthand Show and Rodeo. More than 300,000 every kid is a winner,” Somer- Texas Youths have here enough. Grand Champion Lamb. at the Star of Texas Fair and Rodeo at Houston’s livestock show, which how huge an impact the stock show Texas youths have received scholar- ville adds. “Whatever the child received scholarships Reserve Grand Champion Lamb. Junior Barrow Show. (A barrow, for in 2011 generated an estimated $4.5 could have. ships through the fund. does, they take on a task that through a fund those of us who generally encounter maintained by the Grand Champion Barrow and million, reaching pre-recession levels “A doctor came Somerville says that, as an execu- means they have to get up in the pork only at the supermarket, is a male of success. up to me and tive committee member of the morning to work at it. They’ve Houston Show Reserve Grand Champion Barrow pig.) Gerngross’s Hampshire pig won It’s the ability to benefit kids who introduced Houston show, he knows exactly learned to set a goal and com- best of breed and took the Reserve where the money goes. plete a task.” to KST Electric. are working hard for their success that Paul Somerville, Grand Champion Barrow spot, second- spurs bidders to contribute so much at Former Houston “No overhead is taken out, it all highest honor at the Star of Texas Fair junior livestock show auctions. Livestock Show and goes directly to education,” he says. Continued on page 8 and Rodeo. Former Houston Livestock Show Rodeo Chairman of Gerngross was delighted with his and Rodeo Chairman of the Board the Board 2011 Star of Texas Fair and Rodeo Barrow Judge Keith Anderson watches as Tanner Gerngross shows his breed champion Hampshire. achievement. Paul Somerville describes the The barrow earned Tanner the reserve grand champion buckle for overall second place among all swine breeds at the show. “I knew he was good — good Houston Livestock Show as “the Super himself. His name is Dr. Garth Beinart,” enough to win his class, but not reserve Bowl” of such events. Each year, the Somerville recalls. “He said to me, ‘17 champion overall,” Tanner says. grand champion animals sell for years ago, you took my mother and me six-figure sums. to dinner and gave me a Houston Live- Raise Animals, Earn A College Fund Houston’s Grand Champion Steer, stock Show and Rodeo scholarship. And Raising animals for show is a way of for instance, sold for $600,001 in 2002. now I am your doctor.’” connecting to Texas’ rural past, par- In 2011, a Charolais raised by 17-year- Somerville says the effect of the ticularly the local shows that draw old Koby Long of Collingsworth scholarship to Dr. Beinart goes far hundreds of kids to compete against County commanded a $350,000 beyond just his family. their neighbors. Texas’ modern major premium; it was bought by a partner- “He’ll treat thousands of people,” stock shows and rodeos, however, ship of Somerville, chairman and CEO Somerville adds. have become massive enterprises that of Associated Pipeline Contractors, The same goes for the hundreds Top: Tanner Gerngross of Wall FFA in Tom Green County, right, displays his allow wealthy Texans and companies and Tilman Fertitta, president, CEO of other youths that earn scholarships Reserve Grand Champion Barrow and Champion Hampshire banners at to share their good fortune with the and principal shareholder of Landry’s from Houston every year. the Star of Texas Fair and Rodeo during the Junior Livestock Auction in youths they see as the state’s future. Restaurants. “The show helps kids at the far February 2011. Bottom: Kenneth Tumlinson, president of KST Electric, left, The auction at the smallest major “Every young person has some reaches of the state and sends them to pictured with the Gerngross family after paying $6,000 for Tanner’s barrow Texas stock show, San Angelo’s, at the Star of Texas Fair and Rodeo auction. kind of a dream to achieve a goal,” close to 100 colleges,” he says.

6 July 2011 • Fiscal Notes Fiscal Notes • July 2011 7 Continued from page 7

Junior Livestock: Texas’ Top Five Hard Work Pays Off All across Texas, thousands of spend $800,125, the second-highest proceeds mean to Tanner and the All across Texas, Tanner Gerngross’ path to Star of Texas kids save livestock auction proceeds, total in the event’s history. These youths other kids whose animals KST bought. success began during the sweaty 100- most often for college scholarships were the most successful of thousands “I showed when I was growing up. thousands of kids degree days of August outside San or expenses. who came to the annual show during And my son [now 28] showed and won save livestock Angelo, where his family farms cotton, “My dad has a bank account for the the previous two weeks. champion with hogs and broilers,” he milo and wheat on about 3,000 acres. auction money,” Tanner says. “I have Walking to the auction podium says. “We think it is a very good cause auction proceeds, For the past seven years, show animals three siblings and we’ll split it up four under the dome of the Bob Bullock and we continue to support it.” most often for ways. If one does well, we all do well.” museum was the final step in a seven- He used the proceeds from his have had a place on the farm, too — college barrows the Gerngross children have Marcus and Jennifer Gerngross month journey for Tanner Gerngross. own stock show endeavors to attend raised to show at local and statewide ensure that each of their children While his reserve grand champion college before he entered the con- scholarships junior livestock shows in Tom Green works with the pig herd and all share barrow snoozed in a pen outside, struction business. or expenses. County and across the state. in the family’s success. When the Gern- Tanner nervously clutched his win- “I think that money helped to Feeding before dawn, showman- gross family started with 20 barrows ner’s banner and looked out across position me to go into business for ship practice after school and evenings last August, it was impossible to know the tables of buyers as the auctioneer myself,” he says. spent mucking out barns are everyday who’d end up as pick of the pen. coaxed bids from them. Having a successful company means life for thousands of Texas kids. “We never know who’s going to And in a minute it was over, and Tumlinson can afford to support live- The Hampshire showed promise do best. That’s why we split it up,” Tanner headed down to offer his thanks, stock shows in a very meaningful way. early on, winning his class at the county Tanner says. handing over a gift basket his mom “Many major buyers spend a tre- The largest junior livestock shows Jennifer brought for buyer Kenneth Tum- mendous amount of money every show. The judge’s comments and the On the Auction Block draw thousands of Texas FFA and 4-H pig’s performance there told Tanner linson, a Star of Texas board member. year,” he says. “It is something they members from points all over Texas’ where he needed to sharpen up. At the Star of Texas Fair and Rodeo The $6,000 premium bid by Tum- like and something they compass. Their aim is to raise top-quality “We work with the pigs at our youth auction on March 25, 384 kids, linson on behalf of his company, KST feel is a good cause animals and help generous Texans invest house a lot,” Tanner says. “When you including the top 20 placing in the Electric, will benefit all four children in because it puts money in In the last decade, huge sums in the state’s future. work with them more, they know what Western Art Show, saw their efforts the Gerngross family. the hands of kids.” FN Texas’ Major junior stock shows have raised more than the stick means and where to go.” rewarded by buyers who combined to Tumlinson knows what the auction Many of the kids don’t live on farms or ranches, but they’re still working $110 MILLION Millions for education for education. hard at raising goats or lambs, poultry Texas’ junior livestock shows draw hopeful 4-H and FFA members from around the state, who hope to earn a place in the auction East About 24,000 or cattle, swine or rabbits in their yards, — and a hefty check. The biggest shows raise millions of dollars to support educational scholarships. In the last decade, junior volunteers ensure that the Houston Lives- FFA barns or wherever they can. Their stock shows have raised more than $110 million for education. tock Show and Rodeo, the state’s largest, parents invest in young animals and feed so their kids can focus on the Houston runs smoothly each year. For almost 80 years, MONEY auction sales and scholarships that San Antonio Houston’s has been the pinnacle of junior South San Antonio has been holding FOR will fund future college tuition, their Fort Worth livestock shows, drawing more than 7,000 agricultural shows since 1854. The modern SCHOLARSHIPS reward for raising top-quality animals. Star of Texas exhibitors. In all, 1,850 livestock entries San Antonio Stock Show and Rodeo began in Star of Texas Barrow Judge Brian San Angelo qualified for the 2011 livestock auction, which 1950 and has grown to become a multi-week Anderson recognizes the discipline raised $4.5 million. event. The 2011 show saw 983 youth junior and character learned through raising livestock projects auctioned. Recent auctions animals. Just before he announced the West The San Angelo Stock Show and have raised about $3.5 million annually to 2011 grand champion, he had a few Rodeo brings together about 3,500 junior benefit participating youths. entrants from all around Texas to compete for words of praise for all participants. 194 auction places. Its 2011 auction generated Central Although its roots date back to “The depth of quality of the animals record revenue of $453,000. 1938, Austin’s Star of Texas Fair and Rodeo is up in 2010, but the quality of kids has the state’s newest junior livestock show, never changes,” he says. “The best North Since its 1896 founding, the Fort welcoming kids from across Texas since 2007. kids in the country are 4-H and FFA.” Worth Stock Show and Rodeo has grown to in- The Star gets bigger each year. More than 400 For most kids, a big payout is a clude many events and thousands of livestock youths earned a place in the 2011 auction, few hundred dollars at their county entries. In 2004, its record year, livestock sales show. By the time they graduate high which generated about $800,000. * totaled more than $4.3 million. In 2011, 1,827 school, they can build their savings up livestock entries were auctioned, generating to several thousand dollars. For the more than $3.4 million in prize money for most successful at one of the “majors,” * Estimated totals. Texas kids. though, the check can reach tens of thousands of dollars. Sources: San Angelo Stock Show and Rodeo, Star of Texas Fair and Rodeo, Fort Worth Stock Show and Rodeo, San Antonio Stock Show and Rodeo and Houston Livestock Show and Rodeo 8 July 2011 • Fiscal Notes Fiscal Notes • July 2011 9 By Bruce Wright

University of Tennessee College of Law. As “Instapundit,” FN: And what do you see as the outcomes if the freezes. And several states are looking at closing marginal Between 1999 higher-ed bubble bursts? public institutions or laying off faculty. “Bubble” in Reynolds is one of the nation’s most widely read and influ- and 2010, A ential political bloggers, and a leading voice in the ongoing Reynolds: Well, when bubbles burst there’s always pain. FN: Is there anything colleges can do to keep their costs average Tuition debate over college costs. People who have made financial bets on the bubble con- tinuing will lose money. Expectations are unsettled, and down, and exert some control over these continuous and FEES at price increases? Higher Education? FN: Everyone agrees that the cost of college is soaring, there’s disruption until a new equilibrium is reached. the state’s but in what sense would you define the present situa- Reynolds: Well, there’s some conspicuous waste. Today, I predict strong financial pressure on colleges and uni- 10 largest tion as a “bubble?” versities that aren’t a good investment for students — par- lots of colleges have expensive “sustainability offices” — universities Glenn Reynolds: Definitions of bubbles vary, but this is ticularly lower-tier private schools that are nonetheless very clear evidence of an approach to spending that is in itself An Interview with Glenn Reynolds an economically unsustainable run-up in prices, fueled by expensive. In addition, majors that don’t promise reasonable unsustainable. rose by cheap credit. As economist Herb Stein once said, something earnings will cease to attract students, except for those with But more seriously, many introductory courses could be that can’t go on forever, won’t. What we’ve been seeing in indulgent parents or trust funds. done online, and at least two-thirds of administrators [don’t There was a time in our nation’s history when college was terms of costs and tuition can’t go on forever, so it won’t. affect] the students’ actual education at all. 120% . reserved for a privileged and well-heeled few. And today FN: Which raises the issue of what some call “the value FN: Here in Texas, our governor has called for the creation Weathering the Storm: many worry that those days may be returning, given the FN: There’s a lot of press bemoaning the fact of skyrock- proposition” — the relation between college costs and A Series of Reports spiraling cost of tuition. eting tuition and fees, but relatively little that attempt graduates’ earnings. Is college simply overpriced? of a “$10,000 bachelor’s degree,” despite considerable on the Texas According to the National Center for Public Policy and to pinpoint why the cost is rising so fast. Various causes Reynolds: Well, it depends on the major. “College” is not skepticism from academia. Is this a fruitful approach? Economic Climate Higher Education, average U.S. college tuition and fees rose have been cited, such as overambitious building pro- a single product. A major in business or engineering is Reynolds: I think it’s entirely possible. It would require a by an astonishing 439 percent between 1982 and 2007 — grams, administrative “bloat” and an emphasis on “star” probably a better value proposition than a major in program that was focused very narrowly on educational To see our entire series of more than four times as much as the inflation rate for that scholars and research programs. What do you see as the women’s studies or anthropology, yet the tuition is the value to the students, at the expense of other, more powerful “Weathering the Storm” articles, major factors driving the sharp increase in college costs? stakeholders in the university. But it could certainly be done. visit www.FiscalNotes.com. period (106 percent), and about three times the increase in same. Here’s a thought experiment: what would happen if median family income (147 percent). Reynolds: There are a lot of factors, but the biggest is that student loan interest rates, or eligibility, were based on the FN: So, in general, can colleges cut their costs meaning- Texas hasn’t been immune. Between 1999 and 2010, there are no real constraints on running up costs. Most of earnings prospects offered by the different majors? fully? And is anything likely to force them to do so? average tuition and fees at the state’s 10 largest public uni- the people buying the service — students — aren’t paying Reynolds: Yes, they can. And economic pressures will force versities rose by about 120 percent, to nearly $8,000 annually. for it, at least not right away, and as a result they’re not very FN: And if the bubble bursts, what about the colleges and universities themselves? How would they react? them to. The only question is how soon and how painful the Such increases are forcing recession-battered students sensitive to prices. adjustment will be. FN and their families to assume increasing amounts of long- Reynolds: Some schools are already responding. The FN: Because they’re relying on family resources and University of the South at Sewanee has cut tuition by term debt. According to the Institute for College Access Texas parents saving for college should investigate the state’s student loans, right? 10 percent. Several law schools have announced tuition and Success, 58 percent of Texas’ 2009 college graduates prepaid tuition plan, the Texas Tuition Promise Fund. were carrying student loan debt — an average of $20,015 Reynolds: Right. And this means that there’s not much each. And debt can range much higher, of course, par- constraint on them. If students had to come up with cash to Ever Upward ticularly for those attending private schools and pursuing enroll, tuition would be lower and colleges would be more sensitive to costs, as they used to be. advanced degrees. The cost of a year’s tuition at Texas’ 10 largest universities $9,418 $8,997 Such debt can be daunting for families and crippling for FN: You’ve written about the “trap” of student loans. has risen by an average of 120 percent since 1999. $8,387 $8,410 $8,500 young people just entering the job market, particularly one What are the likely effects of soaring college debt? $8,260 $7,838 $7,954 as rocky as today’s. Reynolds: If for-profit corporations operated by getting $7,496 So where does it end? College costs can’t continue 18-year-olds to sign on to ruinous debt loads based on $6,537 climbing indefinitely, can they? And what happens if our often-fraudulent promises of employment, they’d be treated universities price themselves out of their market? as virtual slavers, particularly if the debt was not discharge- $5,699 Such speculation has led many observers to begin IN-STATE TUITION AND FEES able in bankruptcy. Universities, however, get a pass on this. (All Amounts in 2010 Dollars) describing higher $4,569 The flood of cheap credit has encouraged an explosion 2010 “I predict strong education costs as a $4,155 $4,128 $4,020 in tuition. Meanwhile, the high debt loads facing graduating $3,928 $3,822 $3,621 1999 financial pressure classic “bubble” — and students will make things worse for the economic recovery. $3,408 $3,000 one that may even- Graduates with $50,000 to $150,000 in student loan debt are $2,870 on colleges and tually give way, with $2,310 in a poor position to buy houses, for example, because in potentially disastrous universities that aren’t effect they already have a mortgage. a good investment effects on our schools and society at large. FN: Given the present economy, do you think that student for students.” — One such loans will continue to be available in sufficient amounts? THE UNIVERSITY OF TEXAS AT ARLINGTON THE UNIVERSITY OF TEXAS AT AUSTIN THE UNIVERSITY OF TEXAS-PANTHE UNIVERSITY AMERICAN OF TEXASUNIVERSITY AT EL PASO OF NORTH TEXAS STATE UNIVERSITY-SANAVERAGE MARCOS TEXAS TECH UNIVERSITYTEXAS A&M-COLLEGE STATIONTHE UNIVERSITY OF TEXAS AT SAN ANTONIO UNIVERSITY OF HOUSTON commentator is Glenn Reynolds: The loans are likely to be available, but there’s Glenn Reynolds, Reynolds, Beauchamp University of Tennessee evidence that students are already growing more reluctant College of Law Brogan Distinguished to take them out. This will start to put pressure on colleges Professor of Law at the and universities to lower prices.

10 July 2011 • Fiscal Notes Source: Texas Higher Education Coordinating Board, the College Board and The Chronicle of Higher Education Fiscal Notes • July 2011 11 By David Bloom

of electronic information, including nearly 210 million Photo courtesy of the George Bush Presidential Library and Museum. ll the emails, according to Alan Lowe, director of the library. By A contrast, the first administration of the Internet era, Presi- dent Clinton’s, produced just four terabytes of electronic data, says Lowe. President’s And just as the digital era has changed the type of information presidents generate, so too has it altered the expectations of museum visitors. The challenge for Memories presidential libraries is to make the experience fun and About 150,000 engaging to younger Americans raised on video games people visit and computer networks. “People today are used to being the Bush library From the Oval Office to Texas in control of their learning experiences,” says Updegrove. Above: The George Bush Presidential Library and The elder George Bush's library recently revamped its in College Station Photo courtesy of the George W. Bush Presidential Library. Museum in College Station. When the George W. Bush Presidential Library opens core collection, going from just four interactive exhibits its doors in spring 2013, Texas will have a brand-new annually, The megaphone (above) President George W. Bush used to to 99. At present, its most popular interactive exhibit is bragging right. The state will be home to three of the while the address New York City firefighters and rescue workers after the Situation Room, where touch screens allow visitors to facsimile of the original at the White House. nation’s 13 presidential libraries — the most of any state. the 9/11 attacks (below). meet and learn about the various players in the Gulf War. The three library directors, all close friends from years of Johnson library Under the Presidential Libraries Act of 1955, the But it doesn’t stop there. “It’s a multi-layered working in the presidential library system, are excited about attracts National Archives and Records Administration operates experience,” reports Warren Finch, director of the George the possibilities of collaborative exhibits, lectures and edu- all presidential libraries. The law codified a tradition that Bush library. “Visitors are confronted with various global cational programming. Finch notes that the George Bush upwards of began with President Franklin D. Roosevelt, who raised scenarios and can compare their responses to how Presi- and Johnson libraries joined forces a few years ago to mark 250,000 visitors. private funds to build the first presidential library and dent Bush handled the same situations.” Library guests the 50th anniversary of NASA. then gave it to the U.S. government to operate through also can access video news for every day of the war to Education is an important mission for of all presidential the National Archives. see how it was reported to the country and around the libraries, and the new library at SMU will be no exception. world. “We’re spending a lot of time thinking about how to best Presidential libraries are Similarly, the George W. Bush library will feature a serve the community and the state, providing educators treasure troves for researchers, checking them off their list. Here in Texas, they’ll have Decision Theatre, which will challenge visitors to put with interesting lesson plans they can use and we plan to an opportunity to experience more than 20 years of themselves in presidential shoes and consider various offer an array of educational events at the museum,” says history buffs, political junkies American presidential history.” options to the issues the president confronted. When Lowe. “President Bush and the First Lady have a long-term and educators. Today, about 150,000 people visit the Bush library guests want a break from the rigors of executive branch vision and want the museum to be relevant for students and in College Station annually, while the Johnson library decision-making, they can stop at a Texas Rose Garden, a teachers both today and 50 years from now.” FN Presidential libraries aren’t libraries in the traditional attracts more than 250,000 visitors. Since Texas’ latest sense — they’re repositories for papers, records and presidential library will be located in a city three times other artifacts that document the many events and Austin’s size, and considerably more accessible than Col- decisions of a presidential administration. The libraries lege Station — the largest U.S. city not served by a major of the George courtesy Artwork W. Bush Presidential Library. are treasure troves for researchers, history buffs, political highway — it’s a good bet the new library will meet or junkies and educators. exceed those attendance figures. The new Bush library, to be located on the Southern At present, the materials of the George W. Bush Methodist University (SMU) campus in Dallas, joins the library are being stored in Lewisville. Archivists and Lyndon Baines Johnson Library and Museum in Austin library staff are poring and the George Bush Presidential Library and Museum through and readying a in College Station, giving our state a unique trifecta in mammoth collection of American history. some 43,000 artifacts, Visitors will be able to see items such as the bullhorn nearly 4 million photo- “W” used at the World Trade Center site on September graphs and 80 terabytes 14, 2001; the parachute his father used in his 85th birthday jump with the Golden Knights; and the love letters a young Lyndon Johnson penned while courting Lady Bird. “There are people who collect trips to presidential Alan Lowe libraries like others collect stamps,” says Mark Upde- Director, George W. Bush grove, LBJ Library director. “They enjoy visiting them and Presidential Library Artist’s conception of the new George W. Bush Presidential Library planned for Dallas.

12 July 2011 • Fiscal Notes Fiscal Notes • July 2011 13 percent owned by a minority member or a woman, with their principal place About of business in Texas and at least one owner residing in the state. Texas’ statewide HUB Program is A n Early intended to encourage HUB involve- ment in the state procurement process Start for Entrepreneurialism101 and to ensure that they receive a fair 4 share of state business. Registered HUBs 5 Getting Started in the Best State for Business also are urged to participate in the Cen- Entrepreneurs tralized Master Bidders List (CMBL), a 0f the list of pre-approved vendors that state By Michael Castellon purchasers must consult before con- Texas Jobs lost during the recession tracting for goods and services. by Clint Shields Starting a small business in a turbu- The state’s official website, “The Centralized Master Bid- have already been lent global economy can test even the Texas.gov, offers a wealth of infor- ders List is essentially a master list of Recovered strongest of characters. But it’s this mation on unemployment insur- reliable vendors,” says Rachel Snell, Entrepreneurship often starts with participants and provides more funds spirit of determination and drive for ance, labor laws, available incentives marketing coordinator for the Comp- • a single moment’s inspiration. But for selected student businesses at the success that has made Texas a favored and other topics of interest. A troller’s Statewide HUB Program. In fiscal2010, certified HUBs turning that moment into success in school year’s end. destination for businesses looking section called “MyTexasBiz” tells “Our goal is to create access, and give Received business requires certain knowledge In addition to the regular curric- for a strong environment in which to prospective business owners the registrants the ability to receive bids more than and skills. And a 2010 study by Cam- ulum, NFTE-Greater Dallas offers two- thrive and prosper. permits and licenses they need based on products or services they bridge, Mass.-based Monitor found week “BizCamps” — crash courses Despite the bad news nationwide, to get started in Texas. can provide the state. State purchasers that Texas lags behind other states in in entrepreneurialism — to students including an uncertain housing market The Comptroller’s own Texas are required to go here first to develop and flat employment data, there’s Business Advisor also provides a mailing list to send notifications of $2.1 entrepreneurial education. from all school districts in the region. optimism in Texas, where the lack of helpful information, serving as a con- their needs.” billion Teaching these skills is the mission Students who successfully complete a state income tax, healthy export venient “one-stop shop” for informa- In addition, contractors often In state spending, including of the Network for Teaching Entrepre- the camp can enter business-plan com- volume and rapid population growth tion on starting a business in Texas. use the state’s HUB Directory to neurship (NFTE). NFTE’s Greater Dallas petitions in the ensuing school year. has made the state a relatively safe The Texas Governor’s Small identify HUBs for subcontracting chapter, the only one in Texas, partners NFTE-Greater Dallas trains DISD environment for starting and growing Business Advocacy group provides opportunities. with the Dallas Independent School teachers to offer the program, which a small business. numerous links to state and federal In fiscal 2010, certified HUBs $987 Texas’ economic data buttresses resources, information on exporting received more than $2.1 billion in Million District (DISD) to offer entrepreneur- currently has about 2,000 ship education to students at 27 middle participants. In addi- that optimism. About four-fifths of the and a detailed “Guide to Starting a state spending, including more than In subcontracts. “Ultimately, Texas jobs lost during the recession have Business” that introduces beginning $987 million in subcontracts awarded and high school campuses. Ninety-two tion to its educational already been recovered. And at this entrepreneurs to the major mileposts by other state contractors. While the percent of the kids in the NFTE-Greater goals, Maczka says we’d like to see these kids writing, the state’s unemployment num- facing any new business, including: state’s total expenditures fell by more Dallas program are from low-income NFTE-Greater go on to college and complete bers have remained below the national than $260 million in fiscal 2010, its More Online families. Dallas wants the average for 52 consecutive months. defining a legal structure for the spending with HUBs rose by more than this path of entrepreneurial • To apply for HUB certification or to “Going to work for a company for class offerings to new business and properly filing a $148 million, a 7 percent increase. The register as a state vendor for the CMBL, education.” Getting Off the Ground the rest of your life is pretty much not become part of the business name; percentage of dollars spent with HUBs get started at www.window.state. —Laura Maczka a reality anymore,” says Laura Maczka, student culture at Our state offers a number of resources • determining its potential federal, rose from 14.5 percent to 15.9 percent. tx.us/procurement/registration. NFTE-Greater Dallas Director for Texans hoping to turn their dreams state and local tax responsibilities; “The CMBL and the HUB certifica- The U.S. Small Business Adminis- NFTE-Greater Dallas director. “Our DISD campuses. into a profitable enterprise. tion are two separate databases but entire purpose is to show kids the rel- “We’re trying to obtaining needed licenses, per- tration offers an online Small Business • together increase your exposure to Training Network — a virtual class- evance of graduating from high school become that sought-after class mits, certifications, registrations or the state government,” says Snell. room that offers courses in finance and and changing your living situation that people know about, and create authorizations; and “Networking is another important accounting, business planning, and through education and work.” a pathway for those kids, starting in • understanding federal and state step. You are the best voice for your marketing and advertising at no cost. In the NFTE-Greater Dallas cur- middle school,” she says. “Ultimately, employer requirements. company.” For more information, visit www.sba. HUB certification is free of charge gov/category/navigation-structure/ riculum, every student must develop a we’d like to see these kids go on to col- Rachel Snell The Comptroller’s office offers and inclusion on the CMBL costs counseling-training. FN business idea and write and defend a lege and complete this path of entre- Marketing Coordinator assistance to the state’s historically $70 annually. business plan. The organization preneurial education.” FN Comptroller’s Statewide underutilized businesses (HUBs). provides seed capital to some HUB Program HUBs are businesses that are least 51

14 July 2011 • Fiscal Notes Fiscal Notes • July 2011 15 By Editorial Staff

Program Helps Texans Afford Homes Texas Job Growth Outpaces U.S.

The Texas Mortgage Credit Program Qualifying families can deduct Texas continues to generate jobs the highest number of jobs, gaining (TMCP) helps low- and moderate- 30 percent of their annual mortgage more quickly than the nation as a 54,400 additional positions. Brief Bytes income Texans — especially first-time interest, up to a maximum of $2,000 whole, with a 1.9 percent growth rate Texas construction posted solid homebuyers — purchase homes. per year. The benefit lasts for the between May 2010 and May 2011, gains as well, growing by 4.7 percent Program applicants recently received entire life of the mortgage loan. according to the Texas A&M Univer- or about 26,400 jobs. A 3.1 percent a boost when the Texas Department sity Real Estate Center’s most recent increase for education and health ser- of Housing and Community Affairs Monthly Review of the Texas Economy. vices translated into 43,500 additional (TDHCA), which oversees the program,  TMCP is geared toward This growth represents about 198,400 jobs, the second-highest numerical released more than $45 million in Texas families WHO: jobs gained. gain among industry categories. mortgage credit certificate authority • are first-time buyers or who have Texas A&M Generates Over the same period, U.S. nonfarm Texas jobs and employment data to assist homebuyers. not owned a home in the previous $3.7 Billion in Economic employment rose by just 0.7 percent. are available at www.texas This credit authority, essentially a three years; Activity Employment in Texas’ mining and ahead.org. tax credit, reduces a borrower’s tax logging industry — mostly oil and • will use the home they buy as their (Clint Shields) liability. It applies to about $150 mil- According to Texas A&M’s Division gas production — rose most quickly primary residence; and of Finance, the Texas A&M Univer- TEXAS lion in mortgage loans and should during the period, expanding by JOB sity System provided the state with a U.S. JOB help more than a thousand eligible • meet certain income and home 15.6 percent or 31,700 jobs. Profes- WTH GROWTH record-setting $3.7 billion in economic GRO Texas families buy homes, once they purchase requirements, as well as sional and business services added 0.7% 1.9% have completed a certified homebuyer the qualifying requirements of the activity in 2010, $213.4 million more than in 2009. A record high in fall education class. mortgage loan. Job Growth in Texas, MAY 2010 to MAy 2011 “The Texas Mortgage Credit Pro- enrollment, construction activity and gram is another helpful yet respon- new-student conferences helped spur 12-Month Change: the increase. Austin an IT Hot Spot for Employment sible resource that TDHCA can offer The $45 million was split into two rank iNdustry Jobs (MAY 2011) Job Count percent The study showed that Texas A&M to qualifying Texas families who are funds, targeted and non-targeted. and other components of the A&M recent study from online salary compar- prepared to be homeowners,” says The targeted fund is intended to help 1 Mining and Logging 234,900 31,700 15.6% A system in Bryan-College Station had a ison site PayScale.com named Austin among acting TDHCA Executive Director Tim buyers in areas of the state affected direct impact of almost $1.5 billion on the top U.S. cities for information technology Gervin. “This is a terrific program, and by natural disasters, while the non- the local economy, $85.3 million more 2 Construction 591,800 26,400 4.7 (IT) jobs with startup companies. The study we are excited to make it available to targeted is available to the rest of than in the previous year. defined “startup” IT companies as those our fellow Texans.” the state. Student spending also contributed 3 Professional & Business Services 1,319,800 54,400 4.3 having fewer than 75 employees, and ranked The targeted fund expires to the increase in economic activity, cities on the basis of median salaries and on Dec. 12, 2011, while the non- with a $38.6 million increase over a comparison of their ratio of IT workers at targeted authority expires on 4 Education & Health Services 1,430,700 43,500 3.1 2009. startup IT firms to all workers versus the Dec. 31, 2011 — or until are New-student conferences — national ratio. funds are distributed. 5 Trade 1,659,900 36,800 2.3 mandatory two-day sessions held in Austin ranked No. 2 nationally in the IT Program details including the summer — significantly added to Startup Salary Hotspots Report, with fund availability, FAQs and the number of visitors to the Bryan- 6 Other Services 370,600 8,200 2.3 San Francisco claiming the top spot. And locations and providers of College Station area. while Austin’s median pay of $67,400 was homebuyer education and coun- The system’s construction costs for 7 Leisure & Hospitality 1,045,500 19,800 1.9 lower than those in cities such as Seattle, seling classes are available online calendar 2010 totaled almost $273.5 Boston and New York City, the city offered the at www.myfirsttexashome.com. million, an increase of about $133 mil- nation’s second-highest IT employment ratio. 8 Manufacturing 818,600 10,700 1.3 (Clint Shields) lion over 2009. (Tracey Lamphere) (Tracey Lamphere) 9 Transportation, Warehousing, Utilities 419,700 4,500 1.1

10 Financial Activities 625,800 2,700 0.4

11 Government 1,889,600 –31,000 –1.6

12 Information 186,900 –9,300 –4.7

Source: Texas A&M University Real Estate Center

16 July 2011 • Fiscal Notes Fiscal Notes • July 2011 17 For detailed statistics on the Texas economy, check the June Cash Condition1 State Expenditures/All Funds1

Comptroller’s website at www.TexasAhead.org (Amounts in millions) General Other Total Monthly Fiscal Year-to-Date Texas by the Numbers Revenue Funds Cash Expenditures June 2011 Beginning Balance june 1, 2011 $5,595.1 $25,539.0 $31,134.1 (Amounts in millions) June Expendi- % Change Revenue/Expenditures 2010 tures YTD/YTD Key Texas Economic Indicators - Texas total nonfarm employment increased by 32,000 jobs from May to June. Between June 2010 and June 2011, Texas gained 22,000 jobs. By Object Over the past year, Texas added jobs in most sectors, including construction, manufacturing, mining and logging, leisure and hospitality, financial activities, professional and business Revenue 5,452.7 3,591.2 9,043.9 services, educational and health services, and government. Expenditures 6,873.2 2,900.0 9,773.2 Salaries and Wages $886.4 $9,000.2 0.4% Employee Benefits/ Net Income (outgo) $-1,420.5 $691.2 $-729.3 Teacher Retirement Contribution 912.1 8,683.3 3.9 INDEXES SALES TAX REAL ESTATE Net Interfund Transfers and investment Transactions $1,991.2 $-2,127.6 $-136.4 Supplies and Materials 100.3 828.0 2.2 Other Expenditures 339.4 3,083.4 12.5 Industrial Production Index State Sales Tax Collections, Retail Establishments Housing Permits Total Transactions 570.7 -1,436.4 -865.7 2 Public Assistance Payments 4,036.6 38,944.6 3.0 Index Change from previous year: 0.5% Change from previous year: 4.2% Change from previous year: Single -0.2% Multi -0.1% End Cash Balance june 30, 2011 $6,165.8 $24,102.6 $30,268.4 In millions Units Intergovernmental Payments: 120 $1,200 1 Cash stated is from the Comptroller’s Uniform Statewide Accounting System (USAS) and will vary from the amounts reflected in 10,000 Single Multi foundation School Program Grants 1,426.5 14,397.5 9.5 5,712 the cash accounts of the Treasury Operations Division of the Comptroller’s office due to timing differences. Net amounts shown 93.1 $836.1 (less refunds) exclude funds that are authorized to be held outside the State Treasury and are not processed through USAS. other Public Education Grants 2,208.5 6,695.0 5.2 1,531 Suspense and Trust Funds are included, as are unemployment compensation trust funds collected by the state but held in the Federal Treasury. Totals may not add due to rounding. grants to Higher Education 95.8 1,009.4 3.5 80 0 0 2 The ending General Revenue Fund balance includes $3.9 billion derived from the sale of cash management notes. other Grants 296.0 2,659.0 1.3 6/10 2002 = 100 6/11 6/10 6/11 5/10 5/11 Travel 13.4 124.9 -3.0 Professional Services and Fees 184.8 1,848.3 1.4 Consumer Price Index Existing Single-Family Home Sales 1 EMPLOYMENT State Revenue/All Funds Payment of Interest/Debt Service 99.7 921.5 19.6 Index Change from previous year: Texas 3.3% U.S. 3.6% Units Change from previous year: -1.7% 250 Monthly Fiscal Year-to-Date Highway Construction and Maintenance 350.0 3,056.5 13.8 Unemployment Rate 30,000 Texas U.S. 225.7 21,594 Revenue June 2011 Capital Outlay 57.9 451.4 -2.8 Percent Change from previous year: Texas -0.1 U.S. -0.3 (Amounts in millions) June % Change Repairs and Maintenance 74.3 655.1 3.0 11 2011 Revenue YTD/YTD Communications and Utilities 41.1 419.6 6.2 180 204.9 9.2% 0 Tax Collections by Major Tax Rentals and Leases 23.4 235.8 0.6 6/10 1982-84 average = 100 6/11 6/10 6/11 Sales Tax $1,731.0 $17,663.1 9.3% Claims and Judgments 12.5 90.9 -17.2 Texas U.S. 8.2% Leading Economic Indicators Index 6 Texas Non-Residential Building Construction Contracts Oil Production Tax 155.3 1,184.6 42.7 Cost of Goods Sold 38.1 408.0 17.0 6/10 6/11 Natural Gas Production Tax 71.2 894.3 45.2 Index Change from previous year: Texas 2.3% U.S. 4.7% Value in billions Change from previous year: 16.8% Printing and Reproduction 3.1 33.3 -12.7 Motor Fuel Taxes 264.6 2,580.3 2.6 115 112.5 Nonfarm Employment 3 Total Net Expenditures $9,773.3 $93,545.8 4.7% Texas U.S. Motor Vehicle Sales Tax 272.0 2,418.5 13.7 In millions Change from previous year: 2.0% $1.61 Franchise Tax 19.4 3,753.4 1.5 By Function 108.1 11.0 10.59 Cigarette & Tobacco Taxes 137.4 1,245.2 8.7 General Government 100 0 Alcoholic Beverages Tax 75.8 715.2 6.9 Executive $733.2 $6,628.5 16.0% 1/10 2004 = 100 1/11 6/10 6/11 Insurance Companies Tax 18.8 823.3 1.8 Legislative 12.2 116.1 5.8 9.5 Utility Taxes2 0.2 313.9 -4.5 Judicial 17.1 220.8 -2.0 Consumer Confidence Index 6/10 6/11 Mortgage Foreclosures Inheritance Tax 0.0 0.7 491.2 Subtotal 762.5 6,965.5 15.1 Index Change from previous year: WSC Region* 23.5% U.S. 16.7% Change in Nonfarm Employment In thousands Change from previous year: Texas -23.3% U.S.-29.0% Hotel/Motel Tax 33.7 303.0 14.1 Health and Human Services 3,945.7 37,600.2 2.1 100 WSC* U.S. 81.5 Five Most Populous States 20 350 Other Taxes3 18.1 2,071.0 20.8 Public Safety and Corrections 388.9 3,885.3 -4.6 Rank by population U.S. scale California 1.1% 222.7 Total Tax Collections $2,797.2 $33,966.6 10.0% Transportation 626.4 5,412.5 12.4 59.5 Texas 2.1% Natural Resources/Recreational Services 144.2 1,468.4 -1.5 New York scale Texas 9.3 25 0.5% Texas U.S. Revenue by Receipt Type Florida 0.7% 5/10 7 150 Education 2,906.0 28,520.6 5.8 7/10 1985 = 100 7/11 5/11 6/10 6/11 Tax Collections $2,797.2 $33,966.6 10.0% *Includes Texas, Arkansas, Louisiana & Oklahoma (per source’s data groups) Illinois 1.1% Regulatory Agencies 31.0 283.4 -3.1 0 3 6 9 12 15 (Double axis graph - see Notes on page 15) Federal Income 3,902.7 35,760.0 5.6 Millions of Jobs Employee Benefits 798.5 7,603.4 5.4 Interest and Investment Income 31.4 1,076.5 -5.9 Debt Service—Interest 99.7 921.5 19.6 Licenses, fees, permits, fines, 628.9 6,607.4 16.6 Capital Outlay 57.9 451.4 -2.8 Texas Production and Consumption Indicators Contributions to Employee Benefits 557.3 4,903.1 6.8 Lottery Winnings Paid2 12.3 433.7 12.1 Crude Oil Natural Gas Active Oil & Gas Median Sale Price, Sales of Goods and Services 41.9 213.9 -37.6 Motor Fuels Taxed Auto Sales Cigarettes Taxed Total Net Expenditures $9,773.3 $93,545.8 4.7% Production Production Drilling Rigs Existing Single-family Home Land Income 207.2 1,406.4 128.0 Date Value Value Units Gasoline Diesel Dollars Net Value Packages of 20 1 Excludes expenditures for funds that are au thorized to be held outside the State Treasury and are not processed through Net Lottery Proceeds4 154.9 1,400.2 -0.3 (Millions) (Millions) (Millions of Gallons) (Millions) (Millions) USAS. Totals may not add due to rounding. Other Revenue Sources 722.6 7,601.5 9.4 2 Does not include payments made by retailers. Previously shown as “Other expenditures.” 2009 $18,380.2 $10,021.3 5,178.0 993.0 289.7 $144,792 $34,792.6 949.9 Total Net Revenue $9,044.0 $92,935.6 8.8% 2010 14,309.3 7,283.3 4,994.1 996.6 303.9 146,229 21,955.1 630.3 Some revenue and expenditure items have been reclassified, changing year-to-date totals. The ending cash balance is not affected 1 excludes revenues for funds that are authorized to be held outside the State Treasury and are not processed through USAS. Totals because changes reflected in “total net revenues” and “total net expenditures” offset changes in “net interfund transfers and Jun-10 1,916.3 1,156.4 663 1,060.4 313.5 152,300 3,490.5 81.0 may not add due to rounding. investments transactions” in the cash condition table. Jul-10 2,071.2 1,157.9 676 1,028.3 319.0 154,500 3,460.0 81.2 2 includes the utility, gas utility administration and public utility gross receipts taxes. Revenues and expenditures are reported for the most recent month available and as a running total for the current fiscal year-to- 3 includes the cement and sulphur taxes and other occupation and gross receipt taxes not separately identified. date. In addition, year-to-date figures are compared with the same period in the last fiscal year. These comparisons are reported as aug-10 2,155.7 1,208.2 714 1,034.2 311.4 153,100 3,587.7 81.4 percentage changes, which may be positive or negative (shown by a minus sign). 4 gross sales less retailer commissions and the smaller prizes paid by retailers. sep-10 2,087.5 1,071.2 721 1,053.6 310.2 146,800 3,432.6 87.6 Trust fund transactions are included within revenues and expenditures in the “all funds” presentations. Trust funds are not available to oct-10 2,369.0 1,174.8 717 1,001.6 318.5 144,700 3,325.9 82.4 the state for general spending. nov-10 2,411.3 1,141.1 734 1,031.7 322.2 146,300 3,231.1 79.5 Notes: SOURCes: DEC-10 2,712.8 1,439.1 746 1,044.4 308.8 150,800 3,265.1 71.4 Crude oil and natural gas figures are net taxable values. Gasoline Key Texas Economic Indicators: Contract Value, Non-Residential Building Construction: McGraw-Hill Jan-11 2,751.9 1,448.3 736 962.7 314.8 139,000 3,225.5 66.4 gallons include gasohol. Auto sale values are calculated from Consumer Price Index, Change in Nonfarm Employment: U.S. Bureau of Labor Statistics Mortgage Foreclosures: RealtyTrac motor vehicle taxes collected on new and used vehicle sales. All Consumer Confidence Index: The Conference Board FEB-11 2,294.2 1,290.1 747 965.0 304.3 146,100 3,265.7 73.8 figures are seasonally adjusted, except for sales tax collections; Texas Production and Consumption Indicators: rigs; consumer price; housing permits/sales/prices; and consumer Leading Economic Indicators Index: Texas Comptroller of Public Accounts, The Conference Board Unemployment Rate: Texas Workforce Commission, U.S. Bureau of Labor Statistics Crude Oil, Natural Gas, Motor Fuels, Auto Sales, Cigarettes: Texas Comptroller of Public Accounts Mar-11 3,123.5 1,523.5 748 884.4 284.7 144,000 3,973.8 91.0 confidence. Figures are based on the most recent available data. Active Oil & Gas Drilling Rigs: Baker-Hughes Incorporated Annual figures are for calendar years. [‡ Double axis graphs: Nonfarm Employment: Texas Workforce Commission apr-11 3,384.4 1,538.3 789 1,039.3 336.7 145,400 3,422.1 85.2 Graphs with two vertical axes show values for Texas on the left State Sales Tax Collections, Retail Establishments: Texas Comptroller of Public Accounts Median Sale Price, Existing Single-family Home: The Real Estate Center at Texas A&M University may-11 3,257.2 822 1,006.6 321.3 149,300 3,152.2 85.0 and values for the U.S. on the right. This method shows trends Housing Permits, Existing Single-family Home Sales: The Real Estate Center at Texas A&M University more clearly over the last year when data values are substantially Industrial Production Index: Federal Reserve Bank of Dallas Jun-11 839 155,400 88.7 different at state and national levels.]

18 July 2011 • Fiscal Notes Fiscal Notes • July 2011 19 Susan Combs Texas Comptroller of Public Accounts

Fiscal Notes is one of the ways the Comptroller’s office strives to assist taxpayers and the people of Texas. The newsletter is a by-product of the Comptroller’s constitutional responsibilities to monitor the state’s economy and to estimate state government revenues. Fiscal Notes also provides a periodic summary of the financial statements for the state of Texas. Articles and analysis appearing in Fiscal Notes do not necessarily represent the policy or endorsement of the Texas Comptroller of Public Accounts. Space is devoted to a wide variety of topics of Texas interest and general government concern.

Staff Delane Caesar Director of Data Services Division

Creative Directors Editorial Team Leader Beth Hallmark and Dan Lynch Karen Hudgins Editor Graphics Team Leader Bruce Wright Dwain Osborne Staff Writers Art Direction, Layout & Design David Bloom, Michael Castellon, Duana Gill, Brandy Bianco, Tracey Lamphere, Gerard MacCrossan, Clint Shields, Sherryl Orsak Mark Wangrin tay Dry in a Staff Photography Web Team Leader S Raul Santos, Michael Castellon Drew Scherz Photo Retouching & Illustration Web Publications Coordinator Julie Lewis Raul Santos E-communications Coordinator Te x a s H o m e Michael Castellon Field Offices Comptroller field offices are located in Abilene, Amarillo, Austin, The nation is still hurting from the real estate bust. In the first quarter of 2011, more than Beaumont, Brownsville, Bryan, Corpus Christi, Dallas, Denton, El Paso, Fort Worth, Houston, Laredo, Lubbock, Lufkin, McAllen, Odessa, San a fifth of all U.S. homeowners were “under water,” according to the financial and consumer Angelo, San Antonio, Sherman, Tyler, Victoria, Waco and Wichita Falls, as well as Chicago, Los Angeles, New York and Tulsa. information firm CoreLogic, meaning that they owed more on their mortgages than their How to Reach Us homes are worth. Toll-free telephone line: Texas homeowners have fared considerably better, however. Texas’ share of mortgages (800) 531-5441, ext. 3-3116; in Austin, 463-3116. Send questions or comments to [email protected]. “under water” was third-lowest among the 10 largest states and less than half of the Comptroller’s Website national average. Window on State Government is on the World Wide Web at www.window.state.tx.us. Online subscriptions, renewals or cancellations of Fiscal Notes may be entered at www.fiscalnotes.com

Number of The Texas Comptroller of Public Accounts is an equal opportunity employer and does not discriminate on the basis of race, color, religion, sex, national origin, age or disability in Number of Negative-Equity Negative-Equity employment or in the provision of any services, programs or activities. State Mortgages mortgages sHare In compliance with the Americans with Disabilities Act, this document may be requested in alternative formats. Contact the Data Services Division at (512) 463-4900 or (800) 531-5441, ext. 3-4900 (VOICE), (512) 463-4226 (FAX), or visit the LBJ State Office Building, 111 East 17th Street, Room 311, Austin, Texas. New York 1,857,196 114,899 6.2% Texas Comptroller of Public Accounts Publication #96-369, July 2011 Pennsylvania 1,817,020 137,080 7.5

Texas 3,307,047 335,446 10.1

North Carolina 1,540,349 171,910 11.2 A Review of the Texas Economy from the Office of Susan Combs, Texas Comptroller of Public Accounts

Illinois 2,231,895 483,517 21.7 Fiscal Notes is not copyrighted and may be reproduced. The Texas Comptroller of Public Accounts would appreciate Ohio 2,198,069 482,048 21.9 credit for material used and a copy of the reprint. Online subscriptions, renewals or cancellations of Fiscal Notes may be entered at US Total 48,012,368 10,905,978 22.7 fiscalnotes.com Send questions or comments to [email protected]. Georgia 1,604,759 487,118 30.4 Fax: (512) 463-4226 or (800) 252-3620 Or write: California 6,830,925 2,107,984 30.9 Fiscal Notes Texas Comptroller of Public Accounts Michigan 1,378,669 496,403 36.0 Data Services Division 111 E. 17th St., Suite 301, Austin, TX 78774-0100 Florida 4,387,148 2,021,868 46.1 For more information, call (800) 531-5441, ext. 3-3116; or 463-3116 in Austin. Source: CoreLogic Window on State Government is on the World Wide Web at www.window.state.tx.us.