The following report focuses on testimony regarding the general state of the Texas economy.
John Helleman, Chief Revenue Estimator, Office of the Comptroller
- The Texas economy is $1.3 trillion per year; about $50,000 for every Texan
- One of every $12 in the US economy is from Texas
- The Texas economy is larger than North Carolina, Georgia and Michigan added together
- The economy is on the same trajectory it has been on since the recession ended and expansion began
- Texas lost about 1 of 25 employees during the recession; all those jobs have now been added back with an additional 700,000 jobs
- The US economy is just now getting back to pre-recession levels
- Texas and New York are the only states that have begun to add jobs above pre-recession levels
- During the worst part of the recession the US unemployment levels were around 10%, Texas was around 8%; Texas is now down to 5.7% unemployment rate, about 1% better than the US rate
- Single family homes being built has seen a dramatic recovery since the recession; Texas is building around 80-90,000 new single family homes per year, the same amount being built in the mid 1990s
- Texas is building around 50,000 new apartment/condo units per year and prices are moving upward
- Rep. Eddie Rodriguez asked how jobs lost versus jobs gained are being compared; are the jobs paying the same
- The calculations do not take pay level into account
- Chairman Rene Oliveira asked about population growth
- It appears that population has been growing at a rate of 1.8% for a while; about 400,000 people per year
- Texas sells around 4 times more existing homes than new ones each year
- In 2010 and 2011 Texas was slightly over 200,000 homes being sold each year, last year almost 280,000 homes were sold
- In Texas there is about 4 months’ worth of inventory on the market at all times
- Consumer confidence regarding the Texas economy is average or better where other states have much lower levels currently
- Auto sales tax revenue went down 22% in one year of the recession; 2012 saw a 22% growth in auto sales tax revenue, 2013 showed 9% growth
- Texas oil production peaked in the 1980s at 1.2 billion barrels; just before the recession and before fracking began Texas was around 315 million; since then, oil production has doubled
- Daily oil production in Texas is moving upward very steadily
- Oliveira asked what projections for the Rainy Day Fund are
- It should end at around $8 billion at the end of the biennium assuming voters approve the TxDOT funding later this year
- Vice-chair Dwayne Bohac asked about the business cycle
- Probably somewhere in the middle of the business cycle right now; saw a bit of a recession in the mid-2000s
- Bohac asked if Texas and the US are seeing the 5-6% unemployment rate as a new norm
- Probably seeing a flat line in that rate for a while; this is not a new norm, just reaching old levels again
Ray Perryman, The Perryman Group
- The Texas economy relative to the country is doing very well right now
- Texas lost around 400,000 jobs in the recession compared to 9.5 million in the national economy
- Oil and gas prices helped Texas through the recession
- About half of Texas’ population growth of 400,000 is attributed to migration and the other half is the normal death versus birth rate
- Texas’ recent recession was not as bad as the 1980s recession whereas most other states saw the recent recession as their worst since the depression
- Texas has a very strong banking industry which helped us through the recession
- Texas had very low sub-prime lending and very few sales of mortgage-backed securities
- The federal reserve just performed a study that shows as jobs are coming back the wage structures are about the same as they were before
- The Texas benefit derived from oil and gas is realized through increases in production and not just increases in price as it was in the 1980s
- Texas is also doing very well in capturing new industries such as nanotechnology and video gaming
- In order to sustain growth Texas must have adequate water, transportation and education systems
- If graduation rates stay the same as they are now, by ethnic group, there will be $1.3 billion less in revenue and $700 million more in social service utilization per year for the next 15 years; those numbers are derived before considering the negative impact that would have on business growth
- Rodriguez asked about the possibility of people coming in to fill new jobs in the state because of a lack of a trained workforce
- Texas will not be able to fill the workforce needs with migration alone, the state will have to train its workforce
- Bohac noted that in the late 90s there was a corporate debt bubble that burst and a few years ago there was a consumer debt bubble that burst; the current sovereign debt bubble dwarfs both of the others and it will burst
- Credit cycles are very important to study; there have been 5 or 6 in recent history starting with the conglomerate debt bubble; as long as there is a system that rewards short term gains, bubbles like this will burst; as systems become larger and more chaotic they become more volatile; transparency is a good mediating factor to this trend
- Rep. Rob Orr asked about natural gas production
- Not seeing as much natural gas production right now because there is too much of it; the market is out of balance right now in a way that favors oil; when gas comes back around, Texas will be in a good position because of the makeup and quality of gas that comes from Texas shales
James LeBas, Texas Oil and Gas Association
- 2013 ended with around 416,000 oil and gas jobs in Texas earning an average of $120,000 per year each
- Around $11.5 billion in royalties were paid to around 570,000 families in 2013
- There are more jobs in the upstream sector of the industry but that section is more volatile and jobs aren’t as level as in the downstream sector
- Olveira asked what percent of production now comes from fracking
- Not sure; almost all of the growth is from fracking
- Oil and gas industry tax revenue has almost doubled in the last three years
- Orr asked why the cost of oil has gone up so much
- Demand; severance taxes move in lock step with production, property taxes move much more slowly, sales tax moves much more quickly
- Texas is now at the highest point in the history of the upstream sector index regarding production
- There is also an investment boom underway in the pipeline industry
- Refinery outputs have not been rising; Texas still refines more than it produces
- The biggest economic multipliers are seen in the downstream sector
- Texas sees $464 billion per year in gross output which is around 1/3 of the total Texas economy
- The oil and gas industry pays around $30,000 per employee in taxes to the state each year
Jorge Pinon, Director of Latin American and Caribbean Studies, Jackson School at the University of Texas
- The energy reform in Mexico is a major policy change for the country and the oil and gas industry as a whole
- The Mexican oil industry will see changes across the entire industry, both upstream and downstream
- Most of the reserves are coming from deep water production and most of the capitalization is going toward this area
- Small Texas businesses can grow across the border but these companies need to understand that when working with Mexico in the oil and gas industry, it is not like going to Oklahoma, there are other factors that they need to be aware of when working with foreign countries
- For the first time in 60 years, the US is now a net exporter of refined products; mostly coming from gulf coast refineries
- Mexico imports around 600,000 barrels of gas and diesel per day
- Oliveira noted that the profound impact the Mexican oil and gas industry will have on Texas business should be looked into further
- Rodriguez asked if there are incentives for private refineries to open in Mexico
- The ones making money are US gulf coast refineries; it is very expensive to build large refineries and many companies are getting out of it; there is only one refinery being built in the entire southern hemisphere and it is in Brazil, it is the state oil company in Brazil so they have an interest in refining