Roger Baker : Can TxDOT Avoid Financial Disaster? / 2

Is a change of direction in order? Image from Cypress Creek Mirror.
Agency in denial:
Can TxDOT avoid financial disaster? / 2

By Roger Baker / The Rag Blog / February 1, 2013

"Denial isn't just a river in Egypt." -- Mark Twain

Second of a two-part series.

A glaring example of the Texas Department of Transportation's (TxDOT) denial of financial reality is that they view their roads in a way that confuses their assets with their financial position. This is made clear from TxDOT's 2012 Annual Financial Report (AFR), p 15, where we see this key statement.

Over time, increases and decreases in net assets measures whether TxDOT’s financial position is improving or deteriorating. Overall, the net assets of governmental activities increased by $710.7 million or 1.1 percent from fiscal 2011, primarily due to TxDOT’s continued efforts to maintain, improve and expand the state’s infrastructure network.

This characterizes TxDOT's financial viewpoint of highways as being financially beneficial assets, rather than as maintenance-demanding liabilities. By using construction costs to evaluate TxDOT's financial condition, the more it costs to build a road, the sounder TxDOT's finances are said to be. As we can see elsewhere in the AFR, TxDOT is claiming that the value of all its roads as assets is now about $64 billion, based on construction costs. They are public assets only so long as the public can afford to keep driving; otherwise they become a growing public maintenance burden.

TxDOT's roads are not marketable goods; few if any of its roads are marketable assets. This means that TxDOT appears to have nothing much to offer as collateral, to backstop its growing debt burden, to shield TxDOT against default on their $14 billion accumulation of road bond debt.

Is it possible to regard TxDOT's most traveled roads as collateral; as assets that TxDOT could plausibly sell to someone or some group willing to take them over and to manage them as private toll roads? We know that this is probably not the case because of TxDOT's inability to find a buyer for its CTTP group of Austin area toll roads, which are big money losers.

It is true that a few years back, TxDOT managed to sell the future tolling rights for the southern extension of their SH 130 toll road to a Spanish toll road operator named CINTRA, but those days are past. Freeways have become "costways."


TxDOT's toll roads are big money losers

Under Gov. Rick Perry's first appointee and close political ally, TxDOT Chairman Ric Williamson, TxDOT's philosophy was to try to attract money to build state roads supplemented with private funding as toll roads whenever possible. Williamson's slogan was that henceforth it was to be "toll roads, slow roads, or no roads."

This reflected an early approach to dealing with TxDOT's financial problems, stemming from the refusal of an anti-tax Texas Legislature to raise gas taxes. A decade ago, it was relatively easy to get private bond investors to supplement TxDOT's limited revenues by tolling and collecting fees; it was then anticipated that state toll roads could be profitable when operated as toll roads partially funded with gas taxes.

TxDOT first got into the toll road business with an initial group of toll roads, called the Central Texas Turnpike Project or CTTP. This was subsidized not only with direct TxDOT contributions, but also with a lot of Austin city money for ROW. The latter was demanded by the road lobby as the price to pay for the failure of Austin's 2000 light rail election.

Later on, after TxDOT became aware that its own toll roads were becoming management headaches, TxDOT and the Texas road lobby started actively promoting the establishment of newly authorized outside agencies termed "regional mobility authorities," such as the Austin area's CTRMA. These governmental bodies are able to wheel and deal and promote "public-private partnerships," partially supplemented with TxDOT contributions, but operating with fewer legal restrictions than TxDOT itself. They offer the additional benefit that TxDOT can't be held responsible whenever a RMA's toll road bonds default.

A July 2011 article by Austin American Statesman transportation reporter Ben Wear, reveals that TxDOT's own CTTP toll roads are big money losers, ones that TxDOT would like to sell if they could find a buyer. TxDOT's rather far-fetched selling point is to maintain that better marketing might somehow turn around their toll roads' current losses. TxDOT's "assets," if converted into toll roads, will probably always be money-losing liabilities.

Tolls and other revenue have fallen more than $100 million short of covering debt and operating costs of the state's three-road Central Texas Turnpike System since the highways opened about four years ago. Texas Department of Transportation subsidies almost 70 percent more than originally predicted have made up the difference. Those subsidies, covered primarily by state gasoline taxes that otherwise would be available for other road spending, should average about $38 million a year over the next decade and total about $750 million by 2042, according to TxDOT documents...

"Any dollar that we support that system with is a dollar that is taken out of the state of Texas to build and support other roads," said [TxDOT] Commissioner Ted Houghton of El Paso, who has served on the commission since 2003 and has long advocated such agreements with toll road companies. "We need to get out of that business. Find someone who knows how to market those roads, to operate them and collect the tolls. We do it as a sort of side business."

More recently, TxDOT's refusal to publicly reveal the revenue data on SH 130 , the most prominent of the CTTP toll roads, indicates that the lack of ridership is probably seen by TxDOT as a source of public embarrassment and an impediment to privatization. TURF, an active San Antonio-based anti-tolling group, has publicly announced a boycott of SH 130.


Total Texas and U.S. driving are both in decline, 
with little prospect for recovery

TxDOT doesn't want to admit it, but another important aspect of their institutional denial is the assumption that driving on Texas roads will someday resume its past growth. The reality is that Texans are driving less than they did just a few years ago. The author has already documented this problem and the link to rising energy costs in considerable detail.

Global oil prices have recently been rising rapidly, with little relief in sight. Despite the recent spate of publicity about increasing U.S.energy independence, the reality is that rising oil prices continue to haunt both the U.S. and global economies.

Nationally, an important factor leading to less driving is that the lower income third of the population is struggling to afford to drive at all because of rising fuel prices. We see this from a recent Brooking Institute study showing a strong correlation between car ownership and income level. Likewise, the U.S. population is aging, and older drivers drive less. Meanwhile, the young have become less interested in owning and driving cars.

When driving declines, so do Texas state and federal fuel tax revenues. Fuel taxes are TxDOT's major stable source of road funds, akin to TxDOT's financial oxygen supply. In his introduction to the 2012 AFR, TxDOT Director Wilson, notes that fuel taxes are up: "Motor fuel taxes, TxDOT's primary state funding source, shows a slight increase in fiscal year 2012 over 2011."

However, even this 2.8% increase in TxDOT's fuel tax revenue looks smaller when compared to TxDOT's total budget.

We know that Texas driving is currently decreasing because the FHWA documents total driving on roads in every state. Here are the final revised travel numbers in millions of vehicle miles on all Texas roads for the past six Septembers (the latest month available in 2012).

• 2007.....19,422
• 2008.....18,838
• 2009.....19,730
• 2010.....20,023
• 2011.....19,386
• 2012.....19,377

It is true that driving in Texas has decreased somewhat less than in the rest of the country recently. This is quite likely due to the hydrofracturing (or fracking) boom to the southeast of San Antonio. While the fracking may increase fuel revenue slightly, it is tearing up Texas state and county roads, and these damages on its state roads are being greatly underfunded by TxDOT.

The truck traffic needed to deliver water to a single fracking well causes as much damage to local roads as nearly 3.5 million car trips. The state of Texas has approved $40 million in funding for road repairs in the Barnett Shale region, while Pennsylvania estimated in 2010 that $265 million would be needed to repair damaged roads in the Marcellus Shale region.

And this from an NPR State Impact statement:

“With all the traffic, it’s destroying our roads. Some are already completely destroyed,” says Frio County Judge Carlos Garcia in South Texas. It’s in the heart of the Eagle Ford Shale formation, where oil production from hydraulic fracturing, or “fracking,” in nearby Karnes County now leads the state.

Public roads, especially those a few decades old, are by nature money losers which require a rising level of maintenance over time to remain useful. Asphalt and diesel costs for road maintenance have risen sharply during the past decade, along with rising oil prices; the crude oil used for making gasoline and diesel has more than tripled in price over the last decade.

Nationwide, driving decreased by about 1.6% in the last year, according to the FHWA TVT data for September 2012, as compared to September 2011; see lower right of this chart. We see that total U.S. driving peaked in 2007, and has fallen roughly 3% over the last five years. This bumpy downward trend line is largely due to a combination of a poor economy and rising fuel costs. Rising fuel costs contributed to the poor economy.

Over the same last five years, U.S. population has been increasing by about .75 % per year, which means a 3.75% U.S. population increase over this time. If you add both trends, per capita U.S. driving decreased nearly 7% in the last five years. People are driving less, while using transit more, except that U.S. urban transit typically isn't very efficiently matched to existing land uses and work trips.

Whither fuel prices? Globally, total liquid fuel supply has been flat since conventional (the old cheap stuff) oil production peaked worldwide about five years ago, and seems unlikely to rise much above 90 million barrels a day. Looking ahead, this implies a continuing recession and higher driving costs.


The rising long-term price of TxDOT's denial

TxDOT's current planning is in denial by being geared toward handling a most unlikely continuation of the rising car and road travel seen in past decades. Any shift away from road building is guaranteed to upset the Texas road lobby; a constellation of the big road contractors, land developers, and engineering firms. Together these comprise some of the most politically powerful interests in Texas, whereas TxDOT is one of the most politicized state agencies in terms of its policies and priorities.

Low density suburban sprawl growth encouraged and subsidized by publicly funded roads is beginning to be recognized as a type of Ponzi scheme. Whenever the rate of new growth slows down, the fact that this kind of growth doesn't pay for itself is revealed by the sorts of funding shortfalls that TxDOT is experiencing now.

In America, we have a ticking time bomb of unfunded liability for infrastructure maintenance. The American Society of Civil Engineers (ASCE) estimates the cost at $5 trillion -- but that's just for major infrastructure, not the minor streets, curbs, walks, and pipes that serve our homes. The reason we have this gap is because the public yield from the suburban development pattern -- the amount of tax revenue obtained per increment of liability assumed -- is ridiculously low.

Over a life cycle, a city frequently receives just a dime or two of revenue for each dollar of liability. The engineering profession will argue, as ASCE does, that we're simply not making the investments necessary to maintain this infrastructure. This is nonsense. We've simply built in a way that is not financially productive.

Arguably, the wisest mode of damage control to remedy its looming fundings shortfalls would be for TxDOT to shift its priorities toward preserving and maintaining at least the most important of its existing roads, including the interstates, non-interstate highways, and toll roads.

TxDOT needs to shift its focus away from planning roads it can no longer afford to maintain, and in the direction of public mobility by increasing the current minimal level of state funding for transit (the feds prefer to fund transit much more than TxDOT does).

Because of budget constraints, people increasingly need to live where TxDOT can still afford to fund and maintain transportation infrastructure and mobility and not a future overwhelmingly based on more cars and roads.

In the future, TxDOT's planning should be geared toward discouraging private vehicle travel. In fact, TxDOT really doesn't have much alternative to moving in that direction, either willingly or unwillingly. To try to continue their current denial of financial and travel demand trends can only make TxDOT's future problems worse.

Bottom line: If you have trouble driving to work, you shouldn't expect much help from TxDOT.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

The Rag Blog

[+/-] Read More...

[+/-] Summary only...

Roger Baker : Can TxDOT Avoid Financial Disaster?

Maybe TxDOT should heed its own sign.
Warning sign:
Can TxDOT avoid financial disaster?

By Roger Baker / The Rag Blog / January 24, 2013

"Things can become complicated when you actually try to understand them." -- Richard Vodra

This is the first of a two-part series.

AUSTIN -- The funding shortfall at the Texas Department of Transportation (TxDOT) is about 50% of its entire budget. How did it ever come to this? TxDOT's roads are now at war with our schools, nursing homes, and health clinics in the Texas legislature, all fighting for survival level funding.

There is great pressure to use an official increase in state revenue to restore the big cuts made to education, health, and human services in the last Texas budget. Every sort of social and governmentally funded need is competing for a piece of the budget increase since Texas Comptroller Susan Combs recently declared a substantial increase in available state revenues compared to the last budget two years ago.

This coming budget battle leads us to an important policy question concerning TxDOT and its roads. How could anyone even hope to manage a state agency that, according to it own management, falls 50% short of its needs? Yet this is the situation described by TxDOT Director Phil Wilson as the Texas Legislature prepares to meet, wheel and deal, and eventually to hammer out TxDOT's two year budget allotment.

One way to lobby for road money, although they can't call it that, is by inflating future hypothetical travel and road construction needs. TxDOT director Phil Wilson describes the situation this way:

TxDOT needs an additional $1 billion-a-year alone to shore up its maintenance budget, he said. And going forward, the agency will likely need another $3 billion-a-year infusion to its current $10 billion annual budget to “address congestion long-term with a sustainable method.”

The reality is that TxDOT's proclaimed road construction needs of $3 billion a year are utterly unfundable pipe dreams appealing to road builders and land developers. By contrast, the estimate of $1 billion a year in maintenance shortfalls is probably way short, but maintenance lacks political sex appeal. In fact, Texas road maintenance has been underfunded to such a degree that "Texas received a 'D' in roads, ranking Texas from 17th in 2008 to now 43rd for highway spending per capita."

Lets take TxDOT Director Phil Wilson's claim at face value. If TxDOT's current budget is $10 billion and needs an added $1 billion in maintenance, and another $3 billion to deal with congestion, that means that TxDOT is already about 40% short. This picture of a dire need for money for new roads does not even consider the fact that TxDOT already spent a billion dollars more than it took in last year.

Once you add the $1 billion net deficit for this year, the claimed gap between the available cash and current spending plus claimed needs rises to about 50%! Further complicating this situation is the fact that TxDOT is now about $14.6 billion in debt, and the debt service alone required nearly a billion dollars in 2012. (See pages 13 and 28 of TxDOT's Annual Financial Report.)

Meanwhile, for accounting purposes, TxDOT is claiming its state roads as assets, all together worth about $64 billion. The reality is that TxDOT's roads should be seen as constantly growing maintenance liabilities. In the context of high oil prices, a stagnant economy, and reduced driving, TxDOT's roads are like an oil-addicted, tax money-starved monkey solidly chained to the back of Texas taxpayers for the foreseeable future.


Texas Road Politics 101

TxDOT offers an important window on Texas politics, both because of the large size of the budget and because of the opportunity for political interests to affect the budget, which can change a lot from year to year, depending largely on legislative whim.

How could things be otherwise? Texas has been ruled since its early days primarily by its landed gentry, first those tied to agriculture, then to the oil interests. A strong focus on "property rights" has been basic to Texas politics ever since the Texas constitution was written, soon after the Civil War, after the Yankee "carpetbaggers" were expelled.

Celebrated Texas journalist Molly Ivins used to call TxDOT "the Pentagon of Texas" for good reason. TxDOT roads have been a political pork barrel for many decades, with all that this implies. In the 1920s, soon after the formation of the  Texas Highway Department, as it was then called, Texas Gov. James E. (Pa) Ferguson got caught up in a Texas road contracting scandal, which forced him to resign and have his wife Miriam A. (Ma) Ferguson become a replacement governor. After this, the Highway Department kept its nose clean for a few decades, particularly under director Dewiltt Greer.

In recent decades, Texas road contractors have regained their old clout as key political players, nowadays in alliance with suburban sprawl land developers. The latter have benefited greatly from publicly funded roads that serve new development ringing the urban areas where most Texans now live. During Gov. Rick Perry's first term, the big road contractors gave him more than $1 million in campaign contributions. Texas is the kind of state where it is always possible to bribe a politician, as long as you call it a campaign contribution.

Gov. Rick Perry appointed a fellow Texas Legislature warhorse and friend, Ric Williamson, to chair the Texas Transportation Commission, TxDOT's governing body, when Perry first got elected. TxDOT Chair Williamson pulled out all the stops to promote Perry's hugely unpopular $185 billion Trans-Texas Corridor -- a deluxe road building solution in search of a future problem to solve.

Williamson died in 2007, and Perry appointed another close associate, Deirdre Delisi to chair the Commission. A little over a year ago, in September 2011, Perry appointed Phil Wilson, one of his top advisors, to be director of TxDOT and its budget. He was appointed to solve TxDOT's problems at a time when that agency had become distinctly unpopular with the legislature. With Wilson installed to manage TxDOT policy from the inside, there was no longer the need to control the Commission from the outside. Delisi resigned soon thereafter.

Before Wilson's appointment, TxDOT directors had all been engineers promoted from within TxDOT's own ranks. This had the effect of limiting TxDOT's top management to those good at building roads, but not necessarily those good at politics or balancing budgets. By most accounts, what Wilson brings to the table is smarts and skillful politics. Wilson's approach seems geared to working harder to raise money to build roads or toll roads as usual. This rather than facing the political reality that the traditionally entrenched transportation solutions and trends are so unsustainable that they demand a basic shift in transportation policy away from roads.


TxDOT has embraced a mountain of new road debt, despite deteriorating finances

It was clear that TxDOT was an agency in deep denial even several years ago when Paul Burka quoted a newly released legislative report on TxDOT in this 2010 blog post:

At present, State Highway Fund revenues are not as stable as in previous years, nor are they continuing to increase at the same pace as in the past. In addition, from 2005 through 2007, TxDOT used a combination of State Highway Fund revenues and bond funding for operations and capital investments. During this period their expenditures for these areas outpaced revenues, resulting in TxDOT using approximately $700 million of reserves to pay for operating and project expenses during this period...

First, when TxDOT bumped up spending through the use of bond funding, baseline expectations for TxDOT spending levels in any given year were raised both inside and outside the organization, even though that approach was not sustainable and represented a marked deviation from historical spending levels. Second, TxDOT incurred a significant debt service burden associated with the bonds it issued -- and that servicing reduces the availability of General Revenue and Fund 6 dollars for TxDOT to use for operations and new projects. [In other words, the bondholders had to be paid from the funds -- general revenue and Fund 6 -- that were being used to pay for the projects.]

The end effect is that TxDOT’s available budget (for maintenance, new projects, etc.) is effectively lower than it would have been before the bond funding was issued. At the same time, maintenance requirements are increasing as a result of having increased the size of the highway system (every new road brought into the system must be maintained).

To which Burka responded:

In other words, the Legislature acted in a fiscally irresponsible manner when it issued several billion dollars in bonds to pay for road projects. By going into debt to build roads, TxDOT ended up with less money for new roads than if it had just used gasoline tax money. This is what happens when lawmakers spurn the pay-as-you-go principle. This is not fiscal conservatism. This is spending beyond your means. You can’t blame TxDOT. The blame belongs with the Legislature and in particular the leadership at the time, Dewhurst and Craddick. And with the voters, who approved the bonds...

Since this was written, not a lot has changed. TxDOT still likes the idea of toll roads, just so long as someone else is responsible for managing them. There has been no discernible shift in policy away from trying to build as many roads as fast as possible. Roads are considered urgently necessary to meet TxDOT's hypothetical, but always increasing, future travel demand estimates.

A growing number of TxDOT roads are now being built with the help of a sort of road bidding competition. This demands that local government contribute matching funds to help TxDOT pay for construction. With the "pass-through tolling" being encouraged by TxDOT, TxDOT helps by building a road while a county (like Williamson and Hays near Austin) helps front the money. The county gets reimbursed by TxDOT, but ONLY if the projected traffic shows up in TxDOT's subsequent traffic counts.

As an agency currently in obvious financial trouble, TxDOT is doing whatever it can to shift its debt burden toward private lenders, toward local level government, and toward making roads a general obligation of Texas government.

In Part 2 of this series we will take a closer look at why TxDOT's denial of current trends is leading to financial disaster.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

The Rag Blog

[+/-] Read More...

[+/-] Summary only...

Michael Winship : Rick Perry's Texas Tall Tales

Pecos Perry? Art from vintage childrens book via saltycotton / Flickr.
'Emperor in a fig leaf':
Rick Perry's tall tales of Texas

By Michael Winship / Truthout / August 28, 2011

Although born and raised in a small town in the Finger Lakes region of New York, I'm the hybrid child of an upstate New York father and a mother from Texas -- they met at Fort Hood (then Camp Hood) during World War II. And you thought different species couldn't mate.

As a result, we were the only kids on the block who said, "Y'all," or had relatives named Bubba, Vade, Hoyt, and Cleburne.

My mother's father was known in our family as Granddaddy Lloyd. CARE packages of unshelled pecans and Frito-Lay products (then largely unknown above the Mason-Dixon Line) would arrive at Christmastime. And among the books in our house was a buff-covered, dog-eared paperback titled Tall Tales of Texas.

I flipped through it over and over. Inside were wild and woolly stories of the outlaw Sam Bass, frontiersman and Texas Ranger Bigfoot Wallace, Davy Crockett at the Alamo. Even taller were tales of Pecos Bill, with his lasso made from a live rattlesnake, the toughest cowboy in the world; and his wife Slue-Foot Sue, riding down the Rio Grande on the back of a giant catfish.

So, courtesy of some Lone Star DNA and basic reading comprehension skills, I think I know a Texas tall tale when I hear one, and presidential candidate and Texas Governor Rick Perry's tales of "the Texas miracle" are as tall as they come.

Between December 2000 and December 2010, the state did have a net gain of 907,000 jobs, more than half the 1.6 million new jobs nationwide during that same period. But a lot of the state's success in job creation looks more like dumb luck than evidence of ole Pecos Perry's political prowess or expertise in governance.

"It's not that the emperor has no clothes," Dan Hamermesh, an economics professor at the University of Texas, told the website AOL Jobs. "But he's got little more than a fig leaf over his crotch. It is a true fact, but he had nothing to do with it."

Perry points to deregulation and low taxes, including an incentive program called the Texas Enterprise Fund, said to have created 58,000 jobs, but there were many factors largely beyond his control, including increased trade between the United States and Mexico and the high price of gasoline that pumped revenue into the state, accompanied by new technologies for oil and gas extraction.

In the August 15 New York Times, Clifford Krauss reported,

The oil and gas industry now delivers roughly $325 billion a year to the state, directly and indirectly. It brings in $13 billion in state tax receipts, or roughly 40 percent of the total, financing up to 20 percent of the state budget.

What's more, a lot of the increase has been funded -- say it ain't so, Pecos! -- by federal largesse, including President Obama's economic stimulus. In the last 10 years, federal spending in the state has more than doubled to over $200 billion a year (thanks in large part to NASA and the many military installations in the state, including the aforementioned Fort Hood, one of the world's largest military bases and the biggest single employer in Texas).

Of all the U.S. government jobs added in this country between 2007 and 2010, 47 percent of them were in Texas. According to Jared Bernstein, former economic adviser to Joe Biden,

Texas employment wasn't down much at all in these years, as the state lost only 53,000 jobs. But looming behind that number are large losses in the private sector (down 178,000) and large gains (up 125,000) in government jobs.

Which shows, Bernstein goes on, that Texas has followed "a traditional Keynesian game plan: as the private sector contracts, turn to the public sector to temporarily make up part of the difference."

In 2009, Governor Perry made a show of rejecting $556 million in federal funds for unemployment, saying there were too many strings attached. In fact, that money was equal to only 2 percent of the more than $20 billion in stimulus money Texas did accept, including cash used to cover 97 percent of the state budget's shortfall for 2010, according to the National Conference of State Legislatures.

This, in spite of GOP attacks on the public sector, Perry's claim that the stimulus was failed and misguided, and the pledge in the announcement of his presidential candidacy that he would "work every day to make Washington, DC, as inconsequential in your lives as I can."

As the August 20 Washington Post noted,

The significant role of government in Texas' relative prosperity stands in stark contrast to the "go-it-alone" image cultivated by Perry, who credits a lack of government interference for fostering a business-friendly environment in Texas.

For those like Governor Perry who brag about being no-nonsense, freedom-loving cowpokes, it's a delusion that goes all the way back to the early settlement of the American West.

As Patricia Nelson Limerick writes in her seminal history, The Legacy of Conquest: "At any period in Western history, the rhetoric of Western independence was best taken with many grains of salt." Whether it was fighting Indians or gaining access to public grazing lands, the federal government has always been integral. "Nothing so undermines the Western claim to a tradition of independence," she writes, "as this matter of federal support to Western development...

And yet humans have a well-established capacity to meet facts of life with disbelief. In a region where human interdependence has been self-evident, Westerners have woven a net of denial.

Sounds familiar.

Accompanying Governor Perry's denial is cronyism and patronage, both good ole boy-style and corporate. (Of the $102 million in campaign contributions raised for his gubernatorial races, Katrina vanden Heuvel wrote, half came "from just 204 sources," and the Los Angeles Times reports, "Nearly half of those mega-donors received hefty business contracts, tax breaks, or appointments under Perry.")

So, too, with greed comes hubris and shortsightedness. The Times' Krauss reported that

critics, among them Democrats... have long complained that the state's economic health came at a steep price: a long-term hollowing out of its prospects because of deep cuts to education spending, low rates of investment in research and development, and a disparity in the job market that confines many blacks and Hispanics to minimum-wage jobs without health insurance.

A report from the policy research and advocacy group Demos and the Austin-based Center for Public Policy Priorities notes that

27 percent of Texas workers lack health insurance compared to 17 percent nationally. The ranks of the uninsured have grown steadily as access to employer-sponsored health insurance has declined... Fewer than half (48 percent) of the state's workers have access to a retirement plan at work, a figure that has plummeted since reaching a high of 61 percent in 2000.

Over the past 20 years, college costs in Texas have quadrupled, with the steepest jump occurring since tuition was deregulated by the state in 2003. Former first lady Barbara Bush observed in a February op-ed that the state ranks 49th in verbal SAT scores, 47th in literacy, and 46th in average math SAT scores:

We rank 36th in the nation in high school graduation rates. An estimated 3.8 million Texans do not have a high school diploma... the United Way estimates that the price tag for dropouts to Texas taxpayers is $9.6 billion every year.

But the state's latest budget cut $4 billion from public schools.

A recent, four part series on Perry's Texas from a team at the Houston Chronicle reports:

After a decade of Perry-style frugality the Texas welcome mat is growing increasingly threadbare as the state struggles to accommodate a booming, young populace hoping to travel its roads, get educated in its schools, drink its water, and access its health care system. During Perry's tenure the state has postponed investment or turned to debt to finance crucial infrastructure needs, experts say.

The average urban Texan loses a week a year to traffic delays on the state's "overburdened" highway system. While Perry boasts of luring thousands of doctors to the state, "lawmakers this year cut $805 million from doctors serving Medicaid patients" and "postponed $4 billion in Medicaid costs for payment in the next payment cycle." Texas is 48th out of 50 states in the number of physicians per 100,000 residents.

Perry doubts climate change is real, yet,

As Texas endures its most severe one-year drought in its history, state leaders have identified $53 billion in state investments needed to expand water capacity by 2060 but have not resolved how to pay for it. Unless Texas increases its water resources, experts say 83 percent of Texans will not have an adequate supply of water in times of drought.

Perry issued a proclamation urging Texans to pray for rain.

With more bad news ahead, stagnant wages, and an explosion in population and the labor force that now has unemployment advancing much faster than Perry's touted job growth, "the Texas miracle" is heading into a ditch.

Which brings to mind another tall tale, the old joke about the Texan who says to an Eastern visitor, "Yessir, I can drive across my ranch all day and all night and still not get to the other end." To which the visitor replies, "I know what you mean. I have a car like that, too."

[Michael Winship is senior writing fellow at Demos, president of the Writers Guild of America, East, and former senior writer of Bill Moyers Journal on PBS. This article was originally published at Truthout.

Also see:

• "Is Rick Perry a Person?" by Glenn W. Smith / The Rag Blog / August 25, 2011
• "The Highs and Lows of Rick Perry's 'Texas Miracle'" by Sarito Carol Neiman / The Rag Blog / August 16, 2011

And listen to:

• Thorne Dreyer's Rag Radio interview with political analyst Glenn W. Smith on Rick Perry and the "Texas Miracle"

The Rag Blog

[+/-] Read More...

[+/-] Summary only...

Sarito Carol Neiman : The Highs and Lows of Rick Perry's 'Texas Miracle'

And a tip of the ten-gallon hat to the 'Texas Miracle.' Photo by Paul Moseley / Ft. Worth Star-Telegram.
The highs and the lows:
Rick Perry’s 'Texas Miracle'

By Sarito Carol Neiman / The Rag Blog / August 16, 2011

Buried in the “Room for Debate” pages of The New York Times online is an interesting little piece by Ruben Navarrette Jr., a columnist with The Washington Post Writers Group, Cnn.com contributor, and member of the USA Today board of contributors. Before he reached such lofty national heights, Navarrette was on the editorial board of The Dallas Morning News, and sometime in the early part of 2003 he had the opportunity to interview Governor Rick Perry when he dropped by the Morning News offices.

In his “Room for Debate” piece, Navarrette recalls that at the time of the interview, he had just read a series in The New York Times about McWane, Inc., a company based in Birmingham, Alabama, that was, at the time, one of the world’s largest manufacturers of cast-iron sewer and water pipe, and had an absolutely horrendous and Dickensian record when it came to the safety of its workers.

Navarrette says he mentioned to the governor that this notorious company had said that it “would only do business in two places: developing countries and Texas." I asked the governor if he was bothered by this fact. He wasn’t, to put it mildly.

"Well," Mr. Perry said... "I don’t take direction from The New York Times." Then he changed the subject and proceeded to make the case for why many other companies had moved to Texas. He also adjusted his chair so that, for the rest of the meeting, he had his back to me. Message received.

Since Perry’s “Response” prayer rally in Houston, and the declaration of his candidacy for president, more and more nuggets of information have been surfacing about “Gov. Goodhair,” the secrets to his success, who his best buddies are, and the mediocre grades that characterized his passage through his college years.

And much chatter has arisen about the “Texas miracle” that appears, in the world of “damn lies and statistics,” to award credit to Perry’s stewardship for the (relative) lower unemployment rate and faster job growth in the great state of Texas than in much of the rest of the country during the recent economic meltdown.

No doubt there is much yet to surface about that miracle, as more pundits and commentators take a closer look under the hood of the Texas economic engine and discover all the low-wage jobs (Texas ties Mississippi for the most minimum-wage workers in the country), disparities between the rich and the middle class and working poor, and unequal tax burdens that fuel that engine. Complicated, of course, by a very large Mexican-American population that has a not-insignificant portion of socially conservative, just-grateful-not-to-be-caught in the border drug wars, component.

Meantime -- for the record -- here’s a short list of the highs and lows -- the “A’s” and the “F’s” if you will -- on the transcript of Rick Perry’s Texas miracle. It might begin to answer the question, at least, of why the McWane, Inc. management considered Texas to be equivalent to a third world country. For the B’s, C’s, D’s, and E’s, see the Texas on the Brink website.

A’s (Texas is #1 in the country!)

• Amount of Carbon Dioxide Emissions
• Amount of Volatile Organic Compounds Released into Air
• Amount of Toxic Chemicals Released into Water
• Amount of Recognized Cancer-Causing Carcinogens Released into Air
• Amount of Hazardous Waste Generated
• Number of Executions
• Percent of Population Uninsured

F’s (Texas is 49th/50th in the country!)

• Women’s Voter Turnout
• Percent of Pregnant Women Receiving Prenatal Care in First Trimester
• Workers’ Compensation Coverage
• Per Capita State Spending on Mental Health
• Per Capita State Spending on Medicaid
• Percent of Population 25 and Older with a High School Diploma
• Average Credit Score.

[Sarito Carol Neiman was a founding editor of The Rag in 1966 Austin, and later edited New Left Notes, the national newspaper of Students for a Democratic Society (SDS). With then-husband Greg Calvert, Neiman co-authored one of the seminal books of the New Left era, A Disrupted History: The New Left and the New Capitalism and later compiled and edited the contemporary Buddhist mystic Osho’s posthumous Authobiography of a Spiritually Incorrect Mystic. Neiman currently lives in Junction, Texas. Read more articles by Sarito Carol Neiman on The Rag Blog]

• Listen to Thorne Dreyer's July 29, 2011 Rag Radio interview with Sarito Carol Neiman.

The Rag Blog

[+/-] Read More...

[+/-] Summary only...

Mary Tuma : Rick Perry (Selectively) Touts Texas Economy With Glenn Beck

It's all good. Rick Perry's broad brush. Image from The Last Refuge.
Schmoozing with Glenn Beck:
Rick Perry paints the Texas
economy with a broad brush

Texas leads the nation in the number and proportion of people making minimum wage or less.

By Mary Tuma / The Texas Independent / June 29, 2011

AUSTIN -- On Monday, Texas Gov. Rick Perry appeared via satellite on Fox News’ Glenn Beck Show -- this time sticking around longer than his 35-second in-person cameo on the program two weeks ago -- to tout the Texas economy and job creation numbers, his prime talking points as of late.

Beck, whose television program is set to end Thursday, prefaced the interview by lauding Texas for generating 37 percent of all new post-recession U.S. jobs since June 2009. Both he and Perry avoided mentioning the state’s structural budget deficit, sweeping cuts to health services and public education, and its surge of low-wage jobs, as noted by the Texas Independent.

From 2007 to 2010, the number of minimum wage workers in Texas rose from 221,000 to 550,000, an increase of nearly 150 percent. Texas leads the nation in the number and proportion of people making minimum wage or less.

Aside from the lack of a state income tax and Perry’s push for tort reform, neither the host nor guest paid much attention to other variables that could have influenced the job creation numbers, such as Texas’ natural resources, energy and high-tech industries, successful Gulf port business, and trade with Mexico and China, all factors pointed to by Pia Orrenius, a senior economist at the Dallas Federal Reserve -- the source of the 37 percent figure (via PolitiFact Texas).

Referencing a critical story in TIME Magazine’s Swampland, Beck asked Perry to assess the idea that he is a “master at the theater of job poaching” from other states like California and New York, to which Perry replied, that is what the “Founding Fathers had in mind with the Tenth Amendment.”

(That particular amendment explicitly asserts that powers not granted by the U.S. Constitution to the federal government are reserved to the individual states; unless those powers are prohibited by the U.S. Constitution to the states -- then they are reserved to the people.)

The TIME article recounted a trip Perry made to California last November in which he “crowed that he had stolen 153 businesses from the Golden State in 2010; some 92 companies moved the other way, leaving Perry with a net gain of 61 businesses.”

A CNN opinion piece, written by a former Dallas Morning News columnist, calls the “Texas miracle” a mere “mirage.” In it, state Rep. Joaquin Castro (D-San Antonio) says many of those highly touted jobs went to people moving to Texas in order to take those jobs, and therefore, fail to raise the employment rate of native Texans:

“That jobs thing is a sleight of hand,” Castro said. “More than half of those new jobs have been filled by non-Texans. So it’s people moving here to take those jobs. It underscores this bipolar state that we live in. You have a population in Texas that is generally lower educated, poor, isn’t covered by health insurance... all of these things... so you can recruit these companies to come here from out of state but your own people, often times, aren’t qualified to fill these jobs.”

The way that Castro sees it, this is all about long-term investment and conflicting priorities.

“We’re not creating a system that educates them well and prepares them,” he said. “We underinvest in these things, which is what Perry is doing in public education and higher education. We can create the jobs, and that’s great. But our own people who have gone through Texas schools and Texas universities aren’t the ones filling them.”

When Beck brought up the TSA “anti-groping” bill, added to the special session call by Perry, the governor took to the opportunity to voice his disapproval of federal employee-led unions:

Beck: Are you concerned at all about the organizing of the airport workers by the AFL-CIO? The security, homeland security?

Perry: Sure. I think anytime you have federal employees being unionized, I have a real problem with that. You don’t have to look much further than what we have already that those federal agencies, or the federal employees that are unionized at the end of the day, it’s not in the best interest of the citizens, certainly the citizens who aren’t part of the union.

As a “right-to-work” state, employees in Texas cannot be required to join unions upon employment. The classification is seen by opponents as a means to deter from collective bargaining, a way to dilute unionization and prevent employees from securing higher paying jobs.

According to a report by the Economic Policy Institute, the “right-to-work” law -- because it decreases wages and benefits, weakens workplace protections, and minimizes the likelihood that employers will be required to negotiate with their employees -- “is advanced as a strategy for attracting new businesses to locate in a state.”

The report’s analysis of Oklahoma, the most recent state to enact a “right-to-work” law, also found evidence that the laws could actually hurt the economic prospects of states looking to branch out from traditional or low-wage manufacturing jobs into areas such as high-tech manufacturing or “knowledge” sector jobs.

Referring to reporting by the Associated Press, Media Matters for America also notes:

Although Beck cited Texas’ AA+ rating from S&P, he neglected to mention that Texas is “unlikely to receive the top AAA rating because lawmakers have not addressed a structural deficit created by an underperforming business tax.”

Beck joked that he is considering moving to Texas and toyed with the idea of running for Perry’s spot, if he decides to make a presidential bid, saying,

You know, Rick, I mean this sincerely. And I know that you’re considering possibly running for president of the United States. And I’m considered possibly moving to Texas. I don’t know who your lieutenant governor is, but I am thinking that we’re not going to let you leave Texas. I mean, I could run for governor of Texas, I’m just saying.

Political observers expect current Lt. Gov. David Dewhurst to announce soon that he will campaign for the U.S. Senate seat to be vacated by Sen. Kay Bailey Hutchison.

[Mary Tuma is a reporter for The Texas Independent and will be contributing regularly to The Rag Blog. A graduate of the University of Texas School of Journalism, Tuma has worked for The Houston Chronicle, The Texas Observer, and Community Impact Newspaper. She is in the process of obtaining her master’s degree in media studies from UT-Austin. Born and raised in Houston, she now calls Austin home. This article first appeared at The Texas Independent.]



The Rag Blog

[+/-] Read More...

[+/-] Summary only...

Joshua Holland : Governor 'Goodhair' and the 'Texas Miracle'

Texas Gov. Rick Perry: Praying for a miracle.
Texas is a basket case:
Right-wing governance in action

Conservatives claim the 'Texas Miracle' is a model for the nation, but it's actually a blueprint for winning the race to the bottom.

By Joshua Holland / AlterNet / June 22, 2011

Conservative mythology now holds up Texas as a shining example of right-wing governance in action. Republicans would have us believe that gutting the state's social safety net, denying workers the right to bargain collectively, and relentlessly cutting taxes unleashed a torrent of “job creation” and, ultimately, prosperity.

Under Governor Rick “Goodhair” Perry's term in office, Texas has indeed been a model of conservative governance, but the truth is that it has resulted in anything but prosperity for the people of the Lone Star State. In fact, Texas is not only a complete basket-case, it would be faring far worse today without the help of policies enacted by Democrats at the federal level -- policies Perry lambasted as “irresponsible spending that threatens our future.”

The kernel of truth on which the tale of the Texas Miracle is built is that the state has in fact added a lot of jobs over the past decade. In a gushing lead editorial, the Wall Street Journal noted that “37% of all net new American jobs since the recovery began were created in Texas.” The Journal then spun that fact like this:

Capital -- both human and investment -- is highly mobile, and it migrates all the time to the places where the opportunities are larger and the burdens are lower. Texas has no state income tax. Its regulatory conditions are contained and flexible. It is fiscally responsible and government is small. Its right-to-work law doesn't impose unions on businesses or employees.

In the Journal's hyper-partisan view, the lesson to be learned is that “the core impulse of Obamanomics is to make America less like Texas and more like California, with more government, more unions, more central planning, higher taxes.” That spin was echoed during last week's GOP debate by none other than Newt Gingrich, who asked, “Why [would] you want to be at California's unemployment level when you can be [at] Texas's employment level?”

James Galbraith, an economist at the University of Texas, scoffed at the whole narrative, telling AlterNet, “the notion that our state government is a model is almost enough to beckon the spirit of Molly Ivins back from the shades.” Galbraith said “Texas has been a low-tax, low-service state since the time of the Republic,” and noted that it's “therefore impossible that this fact suddenly accounts for its better job performance over the past few years.”

(Texas' record of job creation under Perry is the same as it was under former governor Ann Richards, a Democrat.)

“Texas is an energy state benefiting from high oil prices and the incipient boom in natural gas,” explained Galbraith. “That's an accident of nature.” He added that the state “went through the S&L crisis, had major criminal prosecutions and more restrictive housing finance regulations this time around; hence it was not an epicenter of the subprime housing disaster. That's called a learning experience.”

Tighter regulation of the lending industry is also anathema to today's GOP.

Arguably the biggest sleight-of-hand in the Texas Miracle storyline, however, is that many of those jobs were a result of a huge surge in the state's population, much of it fueled by immigration from Latin America (rather than liberal hell-holes like California).

Texas' population grew by 20 percent over the past decade, and Hispanics accounted for almost two-thirds of that growth. A surge in people created greater demand for goods and services, which leads to more jobs. But the jobs being created in Texas aren't keeping up with the state's expanding workforce -- the Wall Street Journal somehow failed to mention that during the exact same period in which it was adding all those new jobs, Texas' unemployment rate actually increased from 7.7 to 8 percent. (It also failed to note that 23 states -- including such deep blue ones as Vermont, New York and Massachusetts -- enjoy lower unemployment rates than Texas.)

But perhaps the most laughable claim in this whole narrative is that Texas has been “fiscally responsible.” Perry certainly adhered to the conservative playbook, offering massive tax breaks without the deep cuts in services that might inspire a voter backlash. As a result -- an entirely predictable one -- the Austin American-Statesman reported that “state lawmakers have spent much of the year grappling with a budget shortfall that left them $27 billion short of the money needed to continue current state services.”

CNN adds that while Perry was railing against the Democratic stimulus package passed over the fierce resistance of conservatives, the state “was facing a $6.6 billion shortfall for its 2010-2011 fiscal years,” and “it plugged nearly all of that deficit with $6.4 billion in Recovery Act money.”

The stimulus package created or saved 205,000 jobs in Texas, second only to California. But as James Galbraith told AlterNet, while “the state budget has not yet been cut drastically” due to the stimulus boost, “the key phrase is 'not yet.'” Now that the stimulus has run its course, “if projections for the current budget cycle are correct, things will get much worse in the next year.”

Indeed, those cuts are now on their way. The Texas legislature imposed draconian cuts to Medicaid, cut tuition aid to 43,000 low-income students, and is weighing $10 billion in cuts to the state's education system. According to Texas state senator Rodney Ellis, D-Fort Bend, the 2012-2013 budget will underfund “health and human services in Texas by $23 billion, 29.8 percent below what is needed to maintain current services.”

But Perry's tax breaks are indeed part of the state's jobs picture; as Time magazine's Massimo Calabresi noted, Perry established several massive business tax breaks “designed to lure companies from other states.”

[But] the funds have been controversial. They have channeled millions of dollars to companies whose officers or investors are major Perry campaign donors and Perry has allowed them to keep their subsidies in many cases even when they fail to deliver promised jobs. More important for the purposes of judging Perry’s job-creating record, even those that do produce jobs don’t necessarily create long-lasting ones, or increase the state’s overall prosperity.

In a report written for Perry last spring, Michael Porter of Harvard Business School noted that such tax breaks “ultimately don’t support long-term prosperity,” because companies that can move easily “are looking for the best deal and when the deal runs out they move” again, taking their jobs with them.

He also found that Texas’ per capita income growth was the eighth slowest of any state in the country between 1998 and 2008. That's because, as the American Independent's Patrick Brendel noted, “Texas has by far the largest number of employees working at or below the federal minimum wage,” and the number of crappy jobs has exploded while this supposed Texas Miracle was taking place.

“From 2007 to 2010, the number of minimum wage workers in Texas rose from 221,000 to 550,000, an increase of nearly 150 percent,” wrote Brendel. As a result, Texas is now “tied with Mississippi for the greatest percentage of minimum wage workers, while California had among the fewest (less than 2 percent).” It should be noted that the cost of living is higher in California than in Texas.)

At a fundraiser this week, Rick Perry, who despite toying with the idea of secession in the past may now be eying a White House bid, told a group of Republican fat-cats that in his state, “you don't have to use your imagination, saying, 'What'll happen if we apply this or that conservative principle?' You just need to look around, because they've been in play across our state for years, generating real results.”

In this, Perry is absolutely, 100 percent correct. He slashed taxes to the bone, handing out credits to his political cronies like they were candy. He decried the evils of Big Government while hypocritically using federal stimulus funds to help close Texas' budget gap in the short term, and now he's using the state's longer term fiscal disaster -- one of his own creation -- as a premise for destroying an already threadbare social safety net serving the neediest Texans.

As a result of these policies, plus immigration and other external factors, his state's added a lot of low-paying poverty jobs without decent benefits. He's added very little in the way of “prosperity.”

In the final analysis, Texas is indeed a shining example of conservative governance, as well as an almost perfect model for winning the race to the bottom.

[Joshua Holland is an editor and senior writer at AlterNet. He is the author of The 15 Biggest Lies About the Economy: And Everything else the Right Doesn't Want You to Know About Taxes, Jobs and Corporate America. This article was published at and distributed by AlterNet.]

The Rag Blog

[+/-] Read More...

[+/-] Summary only...