The Texas House released the first batch of interim reports from House committees on Thursday. Reports from nine committees were posted online. In the days and weeks to come, the House will post reports from other committees as the reports are completed.
One of those reports came from the House Committee on Economic and Small Business Development. Their interim report to the 85th Legislature includes background, analysis, a letter to the Chair, and recommendations. Below is a spotlight on the recommendations directly from the report; however, for complete details please refer to the report.
Findings and Overall Recommendations
which includes a low regulatory environment, favorable tax policy, and innovative economic
incentive programs. Texas has managed to weather the decline in oil prices well compared to
other "oil states" as a result of these policies. It is important that we continue looking forward to
ensure our policies are competitive with the ever changing economy.
Throughout the interim hearings, a skilled workforce was identified as a key economic
development tool. A skilled workforce is a major factor in a company's decision to locate to a
region. The Committee encourages more collaboration between the state, institutions of
education, and private industry to meet the needs of potential employers.
As a result of technology, business models are constantly evolving. It is important that the state
do the same in developing policies and guidelines that allow for the growth of these markets
while protecting the consumer and not encroaching too far on local control. While licensing and
regulation are important in order to protect Texas consumers, they can also prove to be
burdensome especially to small and medium-sized businesses. The Legislature should keep these
small and medium-sized employers in mind when examining the potential consequences of any
new policy adopted.
While the state does offer resources to rural and small businesses, and the Office of the Governor
has taken important steps toward helping these businesses grow and flourish in Texas, this area
has been identified as one that can use improvement. The Committee recommends increased
outreach and use of the tools available to small businesses and possible increased coordination
with organizations that can help disseminate information on the available resources.
Additionally, the Committee recommends examining available economic incentive programs for
their potential to better meet the needs of rural and small businesses.
Recommendations – Declining Oil Prices
Continue examining ways to diversify our economy in order to weather fluctuations in any one industry. Maintain and potentially expand programs that offer job retraining. Maintain business friendly environment in Texas including favorable regulatory environment, a low tax burden, and current economic development programs in order to continue to bring jobs to Texas.
Recommendations – Local Economic Development Programs
During the 84th legislature, HB 26 passed creating the Economic Incentive Oversight (EIO) Board. This Board was tasked with examining our state's economic incentive programs and to recommend further study or audit if deemed necessary. The Committee recommends tasking the EIO Board with examining Chapter 313 agreements and with making recommendations on how the program can be improved without hindering the role these agreements play in the overall landscape of economic incentives in Texas. While a valuable economic development tool, overall accountability and transparency of agreements could be strengthened in the following areas as recommended in the November 2014 Audit Report No. 15-009 and the August 2015 Audit Report No. 15-042 conducted by the State Auditor's Office:
- Require an independent verification of the information that businesses with agreements submit to school districts.
- Require school district board members, employees, and consultants to disclose on an annual basis any business, professional, and personal relationships that could create potential conflicts of interest with agreements.
Since originally authorized, Type A and Type B agreements have seen Texas go through great growth. Many cities that originally adopted these programs have grown from small "rural" communities to large powerhouses in the economic development arena. The Committee recommends a closer look at Type A and Type B agreements to ensure that all Texas communities that choose to use this tool, are able to do so in the most effective manner possible. Additionally, the committee recommends Type A and Type B agreements be examined by the EIO Board to better allow the Board to take a comprehensive look at economic development in Texas.
Recommendations – Small Business
Allow for a supplemental award out of the Texas Enterprise Fund for recipients who can demonstrate an investment in Texas businesses. Continue programs such as Product Development and Small Business Incubator (PDSBI) fund and Small Business Forums. While the OOG has opportunities available to small businesses, many business owners do not utilize these resources. We recommend the OOG work to disperse information on available resources to small businesses. The state should also explore ways to increase access to capital and enhance the venture capital climate for small businesses in Texas.
Regulation has a large impact on small business owners and their ability to function and plan for future growth. The Legislature should approach any new regulations or licensing with caution and examine ways to remove some of the regulatory burden on small businesses.
Finding skilled workers remains a challenge to small businesses. Many jobs are available however skilled workers can be difficult to find in some areas. By offering students additional workforce training options at all levels of education, graduates can immediately enter the workforce.
Recommendations – Implementation of HB 26
Currently GURI can only be used to recruit "distinguished researchers" which is defined as a researcher who is:
- A Nobel Laureate or the recipient of an equivalent honor; or
- A member of a national honorific society, such as the National Academy of Sciences, the National Academy of Engineering, the National Academy of Medicine or an equivalent honorific organization.
The Committee recommends expanding the definition to include rising stars who, although have not yet reached the specific designations in the current definition of "distinguished researchers," are well on their way and can bring their expertise and future accomplishments to Texas.
HB 26 created the Economic Incentive Oversight Board that was tasked with reviewing the effectiveness and efficiency of state incentive programs and funds administered by the offices of the Governor, the Comptroller, and the Department of Agriculture. Remaining vacancies on the Board should be filled. Additionally, Chapter 313 agreements and Type A and B agreements should be evaluated by the Board because of their large, statewide impact on economic development in Texas.
Recommendations – Evaluate Texas' High-Growth, High-Tech Industries
The Research and Development (R&D) tax credit has been beneficial and should be continued. The state is still lacking in bridging the gap between innovation and commercialization and should explore ways to increase access to capital and enhance the venture capital climate in Texas.
The Governor's University Research Initiative (GURI) should be available for universities to use to help recruit "rising stars." Additionally, as the education and healthcare industry have been identified as high-growth, the Legislature should consider methods to adequately fund all institutions engaging in these areas.
Recommendations- Diversification of State Economy
Continue using all of the tools we currently have to bring jobs to Texas. Regularly examine job readiness at all levels to ensure we are meeting the ever changing demands of the job market. Also, we recommend proactively marketing workforce programs and resources available to our state's veterans.
The Committee recommends using the Enterprise Fund to reward large companies doing business with Texas based companies to potentially provide additional support for smaller businesses and those located in rural areas.
The Committee also recommends investigating ways to make existing “second chance” employer incentives more robust and examine the guidance given to employers on hiring formerly incarcerated individuals, particularly those employers who benefit from tax credits and workforce development boards.
Recommendations – The "Sharing Economy"
The sharing economy is here to stay and will continue to grow and change. Sharing economy businesses and jobs will go to states with policies that foster innovation rather than states that are not thoughtful in their approach and enact regulations that stifle competition.
The Committee recommends developing state-wide policies to provide a stable environment for these emerging industries to flourish while providing adequate consumer protections.
Recommendations – Workforce Partnerships
It is important that we are educating our students to enter the workforce upon the completion of their education. Whether that completion is from a high school, technical school, or a four-year university, students should be able to obtain a job when they graduate. When developing programs toward this goal, it is imperative that we allow for flexibility and local control so that educators can adapt to the changing needs of their local economy.
Texas must work to bridge the "tech skills gap." Infrastructure is an important component in achieving this goal. By providing sufficient infrastructure and network connectivity with the necessary speed, capacity, and reliability to support technology in the classroom, we can take an important step toward bridging the gap. Additionally, we should take steps to increase staff expertise at all levels in the realm of digital learning initiatives.
The Legislature should consider ways to foster relationships with Texas business and institutions of public education. Currently, in schools' accountability ratings (A-F), one of the domains they are graded on is Community & Student Engagement. This area should be explored for the potential to encourage schools to develop partnerships with local businesses. Additionally, updating the state's career readiness standards in communication with business could prove valuable.
Recommendations – Agency Oversight
Ease the process to apply for economic incentive programs in Texas by creating one uniform application.