Texas Border Business

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Texas voters recently passed a variety of amendments to the state’s constitution, most by a significant margin. Several of these enactments will play a pivotal role in long-term economic development, helping ensure the state is well-positioned going forward. 

One crucial measure involved setting aside significant funds for the Texas State Technical College (TSTC) System for capital needs. TSTC provides training for numerous in-demand fields such as cybersecurity, welding, advanced manufacturing, automotive maintenance and repair, HVAC and other construction-related areas, and a variety of health care occupations. Many of these categories of workers are facing shortages which could constrain growth, and an expanding population and economy will only increase needs. Providing a meaningful endowment for current and future resource requirements (TSTC does not levy property taxes) is a key catalyst for growth.

Voters also approved setting aside $1 billion per year from sales tax revenue for the Texas Water Fund to invest in much needed water and wastewater infrastructure. Reliable water supplies are essential to growth in population, housing, expanding industry segments, and utilities. Strengthening water resilience helps support economic expansion, urban development, and quality of life. This amount represents only a small fraction of requirements but will undergird ongoing local and private-sector initiatives.

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Funds were also allocated for the Dementia Prevention and Research Institute of Texas, which is modeled after the state’s cancer research institute. Investing in medical research not only addresses major public-health challenges, but it also fosters biotech, life-sciences, and research jobs in Texas. These industries, in turn, lead to significant multiplier effects throughout the economy. This measure addresses an enormous need and supports the ongoing expansion of the life sciences sector across the state.

Several measures will work to reduce tax burdens related to property taxes, though some will necessitate State support to make up for the reductions (including the increase in the school homestead tax exemption). By freeing up additional resources, these provisions will generate additional consumer spending (although maintaining them may pose fiscal challenges down the road). 

Other amendments ensure that state-level capital gains and inheritance taxes will not be implemented. Taxes on stock- or securities-trading entities and related transactions are also prohibited. These measures are highly significant for the burgeoning finance industry in Texas and for investment more broadly. The state has a highly favorable environment for investors, startups, venture capital, and asset managers, and these policies strengthen the capital markets ecosystem by structurally securing a favorable climate for capital-intensive and finance-driven enterprises. 

As always, there are tradeoffs, including reducing future fiscal flexibility and unencumbered receipts. On balance, however, voters have decidedly improved long-term prospects. By increasing emerging industry competitiveness, workforce preparedness, and infrastructure resources, these policies will facilitate future prosperity. Stay safe!

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Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.