Austin City Limits?

Austin City Limits?

Here’s hoping business leaders remember what made us strong.

The idea of scheduling a breakfast on the lawn in November may at first strike one as foolhardy. But this was Austin, Texas. Three hundred days of sunshine a year. Average temperature: 70 degrees. Think about that right now.

So there we were—74 Minnesotans: four mayors, any number of councilmen and -women, county commissioners, business leaders, chamber of commerce and business lobbyist types, and a smattering of journalists and PR people—arrayed at tables outside our hotel, sharing a wonderful breakfast under a crisp blue sky, the grackles (a jet fighter version of a crow, considered a pest in Texas) screeching about, dive-bombing the fruit plates. Things were green. The grass was wet with dew. And the talk was all about jobs, roads, and business activism as a major force in economic development.

We were on something called the InterCity Leadership Visit—an annual affair, well organized and extremely well attended by the sort of policy experts and political leaders who, as Twin Cities Business editor-in-chief Dale Kurschner wrote in the January issue, can actually make things happen. Key among them: Kathy Schmidlkofer, a vice president of finance for General Mills and the transition director of the Minneapolis–St. Paul Regional Economic Development Partnership—which, by the time you’re reading this, ideally will have hired a CEO to try to replicate, over a period of years, what Austin has accomplished since roughly 2004.

Without a doubt, Austin has emerged as a great pitchman for new business—the Cliff Lee of job creation. Its “Opportunity Austin” initiative has played a major role in turning a moribund employment market into a beehive of growth and activity. Since it was launched in January 2004, this Chamber of Commerce–driven program has generated an estimated 123,400 new jobs and $5.6 billion in new payroll, wildly exceeding its original, ambitious goal of 72,000 jobs and $2.9 billion in payroll. Moreover, in the next five years, Opportunity Austin 2.0 is committed to creating another 117,000 jobs and a $10.8 billion increase in greater Austin’s total payroll.

Austin clearly has what you’d call a “business-friendly” climate, and I’m not talking weather. On just about any tour of the city, you’ll learn that the Texas State Legislature meets only every two years—because, as I heard at least once, “that’s about as often as the people here want them to meet.” There’s no state income tax (they have oil!) and a de minimis corporate tax. Regulations are the antithesis of Texans’ existence. Hence, they pride themselves on their raids of heavily regulated and heavily taxed California. (One recent trophy: The first outside-of-California office of Silicon Valley–based Facebook, which we heard about a lot.)

But all the growth—500,000 people in the past 10 years, to 1.7 million in the metropolitan area, and another million projected by 2030—comes with a price: choking congestion, troubled schools, underfunded social services, and pressure on just about every other touch point of growth.

Ironically, the State of Texas is nowhere to be found when it comes to easing the strain right in its own capital. Texas’ low-tax, get-government-out-of-the-way ethos brings with it serious weakness in virtually every measure of governmental effectiveness.

“Compared to other states, Texas ranks near the bottom in spending for education (37th), percentage of the population without health insurance (first), environmental protection (46th), work force development (43rd), public safety (49th), and other services and protections,” writes Eliot Shapleigh, a Democratic state senator from El Paso in a report called “Texas on the Brink.”

The state ranks first in the amount of toxic chemicals emitted from its industries and 47th in its spending on water quality; first in executions, the number of adults in the criminal justice system, number of registered machine guns, and number of traffic fatalities; second in the number of road rage–related traffic fatalities—and that with the state’s sprawling 10-lane highways. Despite Austin’s impressive record for adding jobs, the state’s work force ranks 44th in average hourly earnings.

One needs to pay particular attention to a category near and dear to the business community: education. Here, Texas ranks 46th in the U.S. in the percentage of its population with high school degrees, 41st in state aid per pupil, and 47th in SAT scores. And given its work force development ranking, it’s not surprising the state has to import workers to run all those new, high-tech businesses it’s attracting.

Most telling, Texas ranks dead last in state spending per capita, shelling out a mere $3,831 per person versus Minnesota’s 15th-ranked $6,159. To make matters worse, Texas now faces a $25 billion budget shortfall, brought about in part by a decision in 2005 to cut school property taxes 33 percent and expand the business tax, which has proven a poor proxy for the property tax. That means the budget hole just keeps getting bigger.

Given all this, one can perhaps understand why in 2006, the Austin Chamber of Commerce raised $300,000 for an ad campaign to rally support to deal with the region’s congestion. The chamber then led a ballot proposition this past November to issue $90 million in bonds for road, bike path, and walkway improvements—a precursor to an $800 million effort planned for 2012. (Texas’s highway spending rank: 42nd.)

The chamber also has been active in working with the Austin school district and has funded the E³ Alliance (Education Equals Economics) to produce research and analysis about education, and to create ways “to help thousands of students reach higher educational goals.”

All this is not to beat up on our gracious hosts—I can’t emphasize that enough. And to be sure, it’s not to suggest that government spending is the answer to everything. But throughout our visit, I couldn’t escape the notion that some things in Austin had reached a crisis point—and that the business community, in so many words, has said, “This is so bad that we need to do something, or it will hurt the business climate we’ve worked so hard to build.”

Is that a situation the Minnesota business community wants to face? And is this a role our business community wants to take on? In our most recent election, the Coalition of Minnesota Businesses, headed by Minnesota Chamber of Commerce President David Olson, applied $365,750—a significant sum by state legislature standards—to the task of defeating a dozen DFL incumbents in the Legislature, using mostly negative attack ads.

Now the chamber has its Republican-controlled Legislature, and we’re already hearing the refrain of “no new taxes,” which, translated, means a continuation of TPaw’s policy of starving our schools, shifting the tax burden to already strapped cities and counties, and perpetuating a regressive state income tax structure that favors the rich and worsens our deficit problems.

Tom Emmer remained vague until the end about how he’d dig us out of this deficit problem without raising taxes. Now we have a Legislature with a similar bent. Let’s see how far down the road toward Texas we all go.

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