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Will tight budget bring fewer jobs?
Report says proposed cuts could mean thousands of jobs will disappear from Texas over the next few years.By Barry Harrell and Tim Eaton
Published: 8:56 p.m. Thursday, March 24, 2011
Hundreds of thousands of jobs would disappear from Texas' economy in the next two years if the House's current no-new-taxes, bare-bones budget proposal stands, an analysis by the state's Legislative Budget Board says.
The analysis — which looked at the effect of proposed spending levels in the state's general appropriations bill — calculates a combination of people losing government jobs and a ripple effect of private-sector jobs not being created.
The result, according to the analysis released Thursday, is that the state would have 271,746 fewer jobs in 2012 and 335,244 fewer jobs in 2013. The totals are not cumulative, according to the Legislative Budget Board. About 189,000 of the 335,000 total would be government positions, and about 146,000 would be from the private sector, according to the analysis.
The report, intended to give lawmakers information about the budget proposal's impact before House members vote on it next week , provided little clarity. Lawmakers and interest groups on both sides of the budget debate — those who refuse to consider a tax increase and those who favor preserving some state programs — used the report to attempt to bolster their positions.
The proposed 2012-13 budget is 12.3 percent smaller than the 2010-11 budget, reflecting the recession's effect on state sales tax revenue, plus the disappearance of federal economic stimulus money used in the last budget.
State Rep. Jim Pitts, R-Waxahachie and chairman of the appropriations committee, told The Dallas Morning News the budget plan "reflects the money we have."
State Rep. Mike Villarreal, the San Antonio Democrat who initiated a change to the House rules that led to the analysis, said it shows problems with the proposed budget and that it would help lawmakers "understand the consequences."
"The voters did not elect us to eliminate hundreds of thousands of jobs," Villarreal said. "We have to be smarter than this."
Katherine Cesinger, spokeswoman for Republican Gov. Rick Perry, said that Perry "firmly believes that government doesn't create jobs; entrepreneurs in the private sector do. However, government has a key role to play in cultivating a favorable climate for job creation."
Republican Lt. Gov. David Dewhurst also defended the budget plan.
"The (Legislative Budget Board) report clearly shows that job creation is tied to the size of the economy, not the budget. What it does not calculate, however, are the dramatic job losses Texas would suffer if the Legislature raised taxes just as our economy is starting to rebound," Dewhurst said. "You cannot expect to grow the economy and create jobs by growing bigger government."
Scott McCown, executive director of the Center for Public Policy Priorities, a left-leaning advocacy group for low- and middle-income Texans, criticized the appropriations bill and urged lawmakers to vote against it.
The Legislative Budget Board's report "establishes the damage the proposed budget would do to our economy," McCown said.
Talmadge Heflin, director of the conservative Texas Public Policy Foundation's Center for Fiscal Policy , said the report doesn't show the effect of increasing taxes, which would be necessary to bring up spending levels. When lawmakers raise taxes, the economy suffers, and companies get rid of employees, Heflin said.
The Legislative Budget Board, which reports to the Legislature, does not comment on its fiscal reports. But economists indicated the analysis draws a direct link between the amount of money removed from the Texas economy and the number of jobs it projects will disappear.
The House appropriations bill calls for a combined decrease of $23 billion in the 2012-13 budget, compared with the 2010-11 budget.
That decrease would represent about 1 percent of the state's total economy for the next two years. In 2009, the most recent year for which there is data, Texas' total economy was about $1.14 trillion, according to the federal Bureau of Economic Analysis.
Meanwhile, Texas' labor force was about 12.1 million in January, according to the Texas Workforce Commission. The 272,000 jobs projected to disappear in 2012 would account for 2.2 percent of that number, and the 335,000 in 2013 would account for about 2.8 percent.
The projections do not come as a surprise to Bernard Weinstein, an economist at the Cox School of Business at Southern Methodist University.
Weinstein said he had not examined the analysis but that it appeared to be "a government agency in the state of Texas saying, 'Before you start slashing right and left, remember there are going to be consequences.'"
Weinstein said it was obvious that proposed budget cuts would have an effect on the state's job market.
"Jobs creation results from spending by both the private sector and the public sector. So now you have what economists call the negative multiplier," Weinstein said. "By cutting the budget here and cutting the budget there, there will be at least for some time a negative economic impact on income, employment and tax revenue. By cutting state spending, you are cutting state revenues, because the recipients of that spending will not be paying taxes on that."
Weinstein said the effect is illustrated by the possibility of thousands of teachers being laid off statewide as part of the budget crunch.
"Where are they going to find employment quickly?" he said. "The answer is: nowhere."
The state Legislative Budget Board projects that hundreds of thousands of jobs will disappear from Texas during the next two years if the current House budget plan is approved.
Total jobs expected to disappear 271,746 335,244
Government jobs expected to disappear 154,684 188,787
Private-sector jobs expected to disappear 117,060 146,457
Projected percent employment change -1.9% -2.3%
Source: Legislative Budget Board