Texas vs. California: Is the Lone Star State’s economy really that much better off than the Golden State’s?

by on July 12, 2011 · 19 comments

in California, Economy, Education

A preliminary look at the numbers may say yes, but they’re largely misleading, and they don’t tell us the whole story about what’s actually going on in Texas.  That’s not to say that California’s got it going on, though……..

Part 1 of a multi-part series

Texas Governor Rick Perry’s flirtation with a run for the White House in 2012 has generated a lot of talk about his state’s economic record during his tenure.  And the numbers cited with his sales pitch are quite impressive, if only at first glance.  In other words, they sure sound good, but really, things aren’t quite as rosy in Texas as Perry and national Republicans want everyone to think.

By now everyone who’s been paying attention has heard or read about the numbers; that Texas has created more jobs than all other states combined in the last five years (an assertion that Politifact rated as only half true).  That out of all of the jobs created in the United States since the official end of the recession in 2009 45% of them have been created in Texas.  Conservatives tell us that Texas’ low tax rates (Texas has no state income taxes, and a 6.25% state sales tax rate), and its business friendly regulatory environment (i.e. there practically are none) have led to a boom of economic growth unparalleled in the rest of the United States.

Texas is doing so well, Republicans tell us, that it should be the model for economic growth for the rest of the country.  Texas is doing it right, they say, and the proof is the number of businesses that have relocated to Texas and the number of jobs created.  And don’t forget that Texas can boast a balanced budget, right?  No economic woes on that front.

California, in comparison, is a mess.  High unemployment.  High state taxes.  Businesses fleeing California in record numbers to escape the regulatory quagmire that supposedly stifles business growth along with those high business taxes.  The long term prospects for California are bleak, whereas the sun shines on Texas every day.

Given all of the assertions above, the California economic model is a disaster and the Texas model is a shining beacon to all.  And taken at face value without any look at the underlying contributing facts, those assertions would probably be right.  The problem is that things are never quite as simple as they seem.  Sure, Texas has some nice statistics to tout, but statistics rarely tell us the full story.  The devil is in the details, and it’s those details that have rained on Texas’ glory parade.

The truth behind the numbers

The numbers cited sure look impressive, but a closer look tells a slightly different story, and even in comparison to the rest of the economy, it’s far from impressive.

According to the Bureau of Labor Statistics, overall nonfarm employment in April of 2009 in Texas stood at roughly 10,343,000 Texans employed.  Two years later in April of 2011, that number increased to 10,554,000, for an increase of just 2%.  Unemployment in the state in April 2009 stood at 7.2%.  The current unemployment rate has risen to 8%.

Even more damning, though, are the wage figures.  As noted by a story in The American Independent, the figures are not adjusted for the differences in the cost of living, so there is some leeway in the interpretation, but still the facts are not in Texas’ favor:  The average wage in Texas in December of 2007 was $790 per week, or $41,000 per year.  California, in comparison, had an average weekly wage of $850 or $45,000 per year.  The national average at the time was $750 and $39,000, respectively.

Fast forward to today and in Texas nothing has changed.  Average wages are $790 and $41,000, equal to the current national average.  In California the average wage has risen to $930 and $48,000.

Even worse, according to The American Independent story, in 2010 550,000 workers in Texas were working at jobs that paid at or below the minimum wage, or 9.5% of the state’s hourly workforce, tying them with Mississippi for the largest percentage of minimum wage workers in the U.S.  In California the minimum wage workforce tallied in at less than 2%.

Since what economists dubbed the end of the recession in 2009, California has seen its average wage increase by 9.3%, as opposed to a 0.6% increase in Texas.  From 2007 to present, Texas saw a 150% increase in the minimum wage workforce, and 16% since 2010.

Massive budget problems

Despite all of this alleged growth and expansion of jobs and the Texas economy, the state is still facing massive budget shortfalls.  Sure, they tout a “balanced budget,” but they relied on parlor tricks and a lot of help to get there.

Recall that in 2009 Rick Perry had some choice words for the Obama administration about the stimulus program and the “bailouts” to Wall St. and to the states.  He pledged that over his dead body would his state seek a handout from the federal government, and he would not accept any stimulus money from Washington.

But the state was facing down a $6.6 billion shortfall in the 2010-2011 budget, so at the same moment that he denounced the stimulus, he held his hand out and snatched $6.4 billion in stimulus funds, allowing the state to close its budget hole.  The state didn’t raise taxes, and it didn’t have to raid its “rainy day fund” that had $9.1 billion in cash sitting there.  Crisis averted thanks to the American Recovery and Reinvestment Act.

With no stimulus dollars to lean on for the 2012-2013 budget, Texas faced a $27 billion shortfall according to the state comptroller.  And with tax revenues expected to be down by over $15 billion from the last budget term (the Texas legislature meets every two years, and the budget is done in two year cycles), things don’t look to be getting any better.  The legislature already had to dip into that rainy day fund to the tune of over $3 billion to cover an unexpected gap in the 2009-2010 budget.

The remaining $6 billion in the rainy day fund, according to even Republican state lawmakers, is already accounted for in the new budget.

Sure Texas lawmakers will tell us that the 2012-13 budget is balanced, but it took a series of parlor and accounting tricks to get there (and for the record, California Governor Jerry Brown vetoed a budget approved by California Democrats that included similar such gimmicks).

Gone is $4 billion in funding for k-12 education.  There are also massive funding cuts to higher education and public services.  Gone is $10 billion for child support services, even with 25% of the state’s children living in poverty.  The legislature also pushed a due date back by one day of over $2 billion in education funding, rolling that bill over onto the 2014-15 budget cycle.

It is expected that some 50,000 teachers statewide will lose their jobs due to this new budget.  This despite an expected increase in school enrollment by 80,000 students.  Texas is already one of the least educated states, ranking dead last in the nation in the percentage of the population over age 25 who have earned a high school diploma.

The coup de grace, though, is the deliberate underfunding of state Medicaid programs to the tune of $4.8 billion.  It’s a program that Republicans want to do away with anyway, and with a hard right wing Republican dominated state government, why should they fund it?

Texas, by the way, leads the nation in the percentage of its population without any healthcare coverage at all, with 26.8% of the state uninsured.  Not good for the second largest state in the Union.

In Part 2:  A look at California’s problems in comparison

{ 17 comments… read them below or add one }

avatar Eva DeLuna July 12, 2011 at 4:38 pm

The reference to “$10 billion for child support services” probably needs some clarification. It’s not child support enforcement, in case anyone’s wondering; rather, it’s the estimated biennial drop in TX state government spending on programs primarily serving children (such as preK-12 schools, Medicaid and CHIP, child protective services). And it includes the already-mentioned $4 billion cut to schools [state aid formulas] and another $1.4 billion cut from grants to schools for preK, dropout prevention, etc.

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avatar scott July 12, 2011 at 5:41 pm

Also, it is important to put Texas economic growth in context of the US. Texas is not actually “creating” jobs instead due to lower taxes and less regulation businesses are moving to Texas from other states. This means Texas is actually stealing jobs business is essentially being outsourced to Texas (interestingly similar to outsourcing problems many border folks complain about).

This job movement (not job creation) ultimately makes the other places worse off. Businesses move to Texas because they can pollute more, pay workers less, pay fewer taxes (and by extension provide fewer services); thus quality of life in the state with the economic boom may not be as good as promised.

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avatar John P. Falchi July 12, 2011 at 7:36 pm

This is a fine article and shows that life in Texas is not nearly as good as they tout it as. The fact that they use smoke and mirrors to cover up the huge deficit in their budget is further evidence of the falsity of the claim of how good things are t here.
Andy Cohen indicates that: “…businesses move to Texas because they can pollute more, pay workers less, pay fewer taxes (and by extension provide fewer services); thus quality of life in the state with the economic boom may not be as good as promised.” I have a business and much prefer to live in CA, pay my taxes, and live better than I would in Texas.

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avatar john July 12, 2011 at 7:37 pm

Hmm, Texas Governor turned Presidential candidate touts his great success in business matters, where have I heard that before…. oh yeah, Dubya making millions for himself and partners in a short term ownership deal over the Rangers MLB franchise.
Of course it wasn’t entirely untrue, but you had to forget about that little matter of the City of Irving, TX, inflating the team’s value by financing a new stadium through sales tax. (a stadium incidentally that killed a fan the other day. )
Perry sure has a Presidential look about him but I can’t believe the GOP would actually field another Texan. Just seems so wrong.
Got to be better than a Eunuch Dwarf from Arizona.

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avatar Goatskull July 13, 2011 at 5:52 pm

The have the distinct pleasure of working with two Texas transplants who like to remind me (and others in the office) that those of us not born in Texas and who are not Republican have less value the toilet water. It sometimes makes for an interesting day.

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avatar Goatskull July 13, 2011 at 5:52 pm

I meant to say “I”.

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avatar doug July 14, 2011 at 6:07 pm

moved to texas in 97,thought it was a good idea………could not make more than 8.85 an hour …less than half what i was making in sd.housing was cheeper,gas was cheaper,food cost the same,every time i called just 20 miles away it was long distance which made the phone bill about $300. amonth.had to work over time-no choice it was forced ,dont like it go work else where.a san antonio police officer at the time made $10 an hr.texas is truley it’s own country and if your not a native texan you are behind the curve right out the gate.stayed for a little over a year and moved back to san diego $36,000.00 in debt with no job.texans are a proud people no doubt about it and parts of the state are realy nice.just keep in mind that it’s a right to work state and there is no doubt you will be paid accordingly.the best thing to do is just try to drive around the state.

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avatar JeffJ July 19, 2011 at 9:30 pm

The problem with pointing out devil in details you can not glaze over your own to try and prove a point. First the U-6 under or unemployment rates through first quarter 2011 stand at 22% for California compared with Texas as 14%. That is a whopping difference. Standard unemployment ratings for CA is a 11.7% and 8% for Texas measured May 2011. These are big differences. Also when you point out per-capita wages you do not factor cost of living differences making the comparisons weak. For example a person who makes $100,000 in San Jose, CA would have the same buying power as somebody making $61,000 in Austin, TX which is a common move for re-locators. Housing is 67% less. Also keep in mind California’s unfunded pension liabilities. It could be up to $2.5 trillion. We don’t really know know where it will land just that it is more than $500 Billion.

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avatar doug July 20, 2011 at 8:27 pm

hey jeff i’m sure you did your homework,and i must admit the numbers you use i’m sure are not that far off,jeff ever live in texas?if not then why are you here if the numbers you state paint a great picture for the great state of texas …..move.why do you see all brick houses in texas?why don’t you see all brick houses in ca.?weather? huricanes?flooding?it’s realy simple economics,brick layers or block masons,in ca are getting about $25.00 an hr.the same guys in texas doing the same work are getting $8.oo an hr.that and texans don’t like stucco.every one always thinks there’s a fat cow to be cut in another state and in some very remote and small instances maybe there could be,but you will pay in one form or another.hey no state tax ….but property taxes are tripple in some states that have no property tax.florida in my mind would be a better choice overall.you could not nor do you have enough money to get me to relocate to florida!i don’t care if every thing was free i still would not move to florida or texas again for that matter.texas is waiting for you and are you in for a rude awakening.

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avatar Patty Jones July 20, 2011 at 8:32 pm

I’m not arguing dollars with you, but brick houses in California? Earthquakes are why bricks are bad here. Brick houses fall down, wood frame and stucco might crack and shift but don’t fall down like a couple of tons of brick.

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avatar Andy Cohen July 20, 2011 at 8:42 pm

Yeah but……..in Texas, even WITH an earthquake problem, the legislature and culture there would not allow for the state to have any construction standards that would conform to the safety guidelines we have here in California. There it’s viewed as govmint interfering with business and over-regulating our lives. But here it’s considered just plain common sense to have building standards that mandate structures that can withstand a certain level earthquake (or, as in the Gulf Coast of Texas, a hurricane). In Texas, if your house crumbles due to an earthquake (if they had earthquakes in Texas), well, that’s just too bad. I hope you had good insurance…….if you could even afford insurance, which you probably couldn’t. In Texas anything goes, and there are practically zero consumer protections from predatory businesses, and no recourse if a consumer (or homeowner, in this case) was wronged.

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avatar kevin January 2, 2013 at 12:04 am

Texas has State of the Art infrastructure especially Its Roadways & Bridges. Emergency & Public safety Agencies. Texas doesn’t have the maze of Zoning regulations that strangle California since there are no shortage of land in TEXAS unlike California with its 2 mountain ranges…Texas upholds to SAFE Housing & Building Construction Regulations of the U.S which is Equal to that of California minus the chronic Zoning fiasco! As far as Natural Disastrous there called Natural for reason. They are outside the control of man. California is plagued with its own set Wildfires. Landslides Occasional flooding in the Valleys & of-course Earthquakes i am sure Insurance Companies aren’t thrilled about those risks…

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avatar RO September 18, 2011 at 7:50 am

There is nothing to do in Texas. I’ll take my vacation in California. Texans are FAT. California chicks are HOT ! Can’t smoke POT in Texas. Texas is very HOT in the summer and freezing in the winter. Weather in Southern Calif is perfect, which is why the HOT chicks walk around in thong bikinis.

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avatar John P. Falchi September 18, 2011 at 1:15 pm

You’re right Mr. Cohen, the devil is in the details, and once you look past the cover of the book on Texas in the recent past you see how badly Texas ranks on most qualities of life . For example, ” Texas is already one of the least educated states, ranking dead last in the nation in the percentage of the population over age 25 who have earned a high school diploma.” A large percentage of the jobs added in Texas are minimum wage jobs, “… according to The American Independent story, in 2010 550,000 workers in Texas were working at jobs that paid at or below the minimum wage, or 9.5% of the state’s hourly workforce, tying them with Mississippi for the largest percentage of minimum wage workers in the U.S. In California the minimum wage workforce tallied in at less than 2%.” Things are not nearly as rosy living in Texas under Gov. Perry as he touts them to be.

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avatar patriot July 24, 2012 at 9:24 am

Blah Blah…I dont live in either state and am from CA, born and raised. Hate to break it to ya but CA is a place of the past in terms of opportunity. Things change in time and we are living in a time when CA is fading. People just dont want to believe its happening, but it is. California is in its sunset years and other aces in the country will absorb its business in time. Im sure itbwill still thrive in a few areas, but for the most part its over.

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avatar Obama-2012 October 7, 2012 at 11:20 am

Seeing as I live in Colorado, I think its fair to get to say my opinion. Texas’s economy is 30 times as sound as Calis. Maybe you Californians should vote in a actual candidate instead of the terminator. only thing he has terminated is profits and jobs. GTFO with this article. To whoever wrote this, your a joke. Anyway, Cali is just a bunch of self righteous douchbags, and texas is just a bunch of steers and queers. Rado is where its at.

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avatar Eric November 12, 2012 at 3:12 pm

Yes, California’s per capita has increased more so than the per capita in Texas. But you seem to be leaving out a HUGE factor. The CPI in California (basically the cost of living) is astronomical. In Texas on the other hand, the cost of living isn’t even close to that of California. Compare the CPI and per capita for both states and that will tell a different story. Who cares that the average Californian gets paid more than those from Texas, because I can assure you that by the end of the day, the Texan will spend more and SAVE more, as the cost of living is lower.

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