How well is your state helping you succeed?
istorians in Texas mark January 10, 1901, as the day modern Texas began—the day when the Lucas No. 1 well struck oil at the Spindletop field near Beaumont. As the authors of the Texas Almanac write, “The gusher spewed oil more than 100 feet into the air until it was capped nine days later. With that dramatic fanfare, Texas’ economy was wrenched from its rural, agricultural roots and flung headlong into the petroleum and industrial age.”
Since that fateful day at Spindletop, the mystique of Texas—as the land of big dreams, big wealth, and unlimited opportunity—has become as outsized as the state itself. As a mecca for corporate America, Texas is now home to more than fifty Fortune 500 companies, including such corporate behemoths as ExxonMobil, AT&T, Dell, Lockheed Martin, Hewlett-Packard, and, of course, Texas Instruments. The state also boasts an outsized share of the nation’s millionaires, trailing only California, New York, and Florida in the share of residents whose net worth tops $2 million or more. In the exclusive Houston neighborhood of River Oaks, where the median home price is $3.5 million, sprawling colonnaded estates fit for J. R. Ewing average more than 7,500 square feet of living space.
Without doubt, Texas is doing great by its corporate citizens and their executive elite. Texas Brags, a Web site run by the office of Governor Rick Perry, puts it with typical Texas swagger: “Texas is a land of ongoing success and endless opportunity.”
But when it comes to the people of Texas versus its companies, the promise of opportunity rings hollow for many.
Right off I-45 in Houston—across the freeway from the Lamborghini dealership—is Remington Ranch, a subdivision of cookie-cutter tract homes built mostly in 2005 and 2006 and now a casualty of the housing crash. Of the thirty properties for sale one day this fall, fifteen were in foreclosure. The schools that service this neighborhood—Ralph Eickenroht Elementary, Bammel Middle School, and Andy Dekaney High—receive among the worst possible ratings from GreatSchools.org. At Eickenroht, for example, third-grade math scores in 2011 were 24 percentage points below the state average.
In the rest of Harris County, where Houston is situated, neighborhoods like Remington Ranch are much more typical than ones like River Oaks. With a population of more than four million, Harris is the largest county in Texas and the third-largest county in the United States. The Houston-based nonprofit Children at Risk says that as many as 27 percent of children in Harris County were living in poverty in 2010, while more than 19 percent lacked health insurance. Statewide, the Kaiser Family Foundation says 24 percent of Texans were uninsured in 2011, which is worse than in Mississippi. Education is a problem too. In 2011, 24 percent of Harris County schools failed to meet federal standards for Adequate Yearly Progress under the No Child Left Behind Act. Only 19 percent of Texas students go on to finish college.
Nevertheless, it’s the state’s business-friendly image that has garnered the lion’s share of public accolades and fueled the state’s reputation for opportunity and economic growth.
Chief Executive magazine, for example, has ranked Texas the nation’s “best state for business” nine years running. Texas has also dominated CNBC’s “America’s Top States for Business” ranking since its launch in 2007, placing first in three of the last seven years and second in 2013. According to the running tally of these accolades maintained by the state, Texas also won the 2012 “Governors Cup” from Site Selection, “the magazine of corporate real estate strategy and area economic development.”
It’s certainly possible to overstate the impact these rankings and public recognition have had on the public policy choices Texas has made. But it’s also likely no coincidence that the “winning mix of low taxes, reasonable regulatory structure, fair court system and world-class workforce” that Texas Brags credits for the state’s success tracks almost precisely with the factors most praised by CNBC and other business-oriented press. Indeed, the most heavily weighted factor in CNBC’s rankings is the “cost of doing business”—that is, the rate of state and local taxes, as well as the cost of utilities and worker wages. As one CEO told Chief Executive, “The regulatory and tax environment in Texas makes it my first pick.”
But imagine if Texas—and every other state—got the spotlight not just for their success in growing business but for their ability to grow opportunities for their citizens, and at all levels of the income ladder. If states were graded not just on the basis of their corporate tax rates but also on the strength of their investments in education, how would Texas—and neighborhoods like Remington Ranch—be different?