Agenda Texas: Revisiting the Texas Miracle

President Obama will visit Austin on Thursday as part of his "Middle Class Jobs and Opportunity Tour.”

Gov. Rick Perry thinks any tour on jobs and opportunity should start and probably end in Texas. In a quick news release, Perry welcomed Obama, telling the president he’ll "find a state that has been very successful in creating jobs and a healthy state economy."

That’s another reference to the so-called Texas Miracle, the state’s huge population growth over the last decade and its economy’s ability to survive and thrive during the recent global recession.

But the Texas unemployment rate has ticked up a bit this year. And last month the state lost jobs. Not many: 4,100 nonagricultural. But keeping the Texas economy strong has been a big discussion during the current legislative session. The governor thinks one way to keep the engine chugging is to offer businesses $1.8 billion in tax cuts. That includes making it as inexpensive as possible for a company to move to Texas.

“I’m also proposing to make Texas even more appealing to outside businesses by allowing firms to deduct the cost of moving to the Lone Star State," the governor said.

Lawmakers haven’t yet approved the deduction for moving here, but on Tuesday the Texas House passed a bill by Rep. Harvey Hilderbran, R-Kerrville, that cut business taxes by more than $600 million.

“If you don’t do the things to give relief to those folks who are treated the most unfair under the provisions of the margins franchise tax, then you have people who quit investing, quit opening businesses and even close the businesses they have," Hilderbran said.

But the "Texas Miracle" cannot be sustained by tax cuts alone, according the House Speaker Joe Straus, who told reporters in January that there’s nothing wrong with tax cuts, "but there’s more of a call this time and more of an agenda that I’ve been trying to push to make sure that Texas can accommodate the enormous and profound growth that we’ve seen in recent years that will go on unabated, unless we fail to meet some of these challenges.”

What are those challenges? If you’ve been following the session, you already know.

CEOs probably won’t move to a state that can’t provide water. And without new roads, more and more traffic makes it hard to get to work. CEOs probably also want their workers to be well educated. That’s something Texas Association of Business President Bill Hammond says could be in jeopardy as lawmakers appear set to cut accountability testing and lower high school graduation standards.

“You have to be able to pass these courses in college. You have to be able to pass tests in real life. And we’re simply not graduating enough kids career or college ready in Texas today," Hammond has said while trying to stop bills that limit testing and lower graduation requirements.

Graduation standards aside, there is a push to spend billions on transportation and water infrastructure — although there’s still plenty that needs to get done for any money to find its way to either of those projects.

But maybe that’s to be expected. The Texas Legislature is trying out a new muscle, after all. In Texas Monthly Senior Editor Erica Grieder’s new book Big, Hot, Cheap, and Right, she says the state’s low tax-low service model made it a business magnet. But now it’s time to pay the bill.

“I think there’ll be some shift to more spending continuously I think because of the youth of the state and the growth of the state," she said. "We’re going to have to fund schools and have to fund roads in a way that sustainable for a growing state."

No matter what side you’re on in the debate over what keeps the Texas economic engine going, you’re probably not pleased with legislative results so far. Perry wants more than a billion dollars of additional tax cuts or, as he said Wednesday morning, he’ll call a special session.

So critics say graduation standards are being lowered. And water and roads have no new money. It may take a whole other kind of Texas miracle to pull this one off.