Texas Tomorrow

Stabilize Stabilize is defined as the quality, state, or degree of being firmly established, not changing or fluctuating, steady in purpose and not subject to insecurity. That is what a good government should offer. While change is necessary, a destabilized environment does not provide the security its citizens or businesses desire in order to make important day-to-day decisions. For Texas to continue to be a magnet for economic growth it must provide that stable environment. It must provide a stable tax system that is both adequate and fair. It must provide a stable regulatory system that encourages investment while protecting its citizens. And it must stabilize its spending in order to ensure taxpayers keep more of their hard earned money. Texas has one of the lowest tax burdens in the nation and that is a reason why businesses locate here. But its heavy reliance on property tax unfairly burdens citizens and businesses alike. It also causes problems (Placeholder3) with the funding of our schools as evidenced by the numerous school funding lawsuits filed over the years. It is also likely that the recently enacted Margin’s Tax will need to be changed during the upcoming legislative session. Added to that is a sales tax rate that can be adjusted at the whim of state or local governments. Changes in any of these taxes cost businesses money and do not provide the stability necessary for economic growth. Texas has and still does rely heavily on oil and gas production taxes. But Texas' economy is shifting to a more service oriented structure and the current tax system is not reflective of that. One suggestion is to lower and broaden the Margin’s Tax to cover more businesses and business types. Every business should pay their fair share for the basic services Texas government provides. But that price should not be so steep that business owners, and eventually consumers, can't afford it. Another option being discussed is to eliminate property taxes in favor of an increased sales tax. Whatever the decision is it should take a super majority of the legislature to make further changes to the amount and type of tax levied. That being said I believe we can eliminate the Margin’s Tax and over a period of 10 years transition period eliminate the property tax in lieu of a broader expanded sales tax. I project this transformation would create an economic boom for the state that would lead the nation for many years. Another area of concern for businesses small and large is the regulatory environment. Regulations always come with a cost of compliance, permitting, and/or licensing. While business owners must pay the cost, ultimately the consumer picks up the tab. But consumers get hit twice by the cost of regulation. They, as tax payers, also pay the cost that government incurs to enforce the regulation and issue the permits and licenses. For these reasons burdensome regulations are a hindrance to economic growth. There is no doubt that government regulation is needed, but there remains a question of how much is truly necessary. There is also question as to how those regulations are carried out, especially (Placeholder4) the permitting that they require. Identifying the many regulations that businesses operate under and taxpayers pay for is like peeling an onion. One finds layer after layer of them. Identifying the true cost of those regulations is no less difficult. There is much that can be done to lessen the regulatory burden on businesses and to lessen the costs to taxpayers and consumers. While many of the regulations Texas businesses must face are federal, the state can reduce the burden to those businesses by being smarter about how it regulates. For instance a dry cleaner is required to pay a yearly $2,000 fee to the Texas Commission on Environmental Quality in case of ground contamination due to a chemical spill. That dry cleaner could purchase a $1,000 insurance policy that would provide much more coverage than $2,000 if remediation is needed. Another example of the problem is getting permits needed to construct an industrial plant. Many projects require local, state, and federal permits. The most onerous are required by the Clean Air Act, and some require multiple state and federal permits. The cost to business is not only in the consultants and staff time devoted to navigating these regulations, but in the delay of construction. State spending is the key to keeping tax rates and business costs low and stabilizing that spending will take innovative and new ways of doing business. For example, in 2010 the State of Texas spent over $40 million for building and maintenance expenses. These expenses included repair for elevators, windows, doors, overhead doors, painting and carpentry. The process for securing such work is repeated by each agency for each maintenance item needed. This is a costly and cumbersome process. It is estimated that securing a contract can cost up to $2,000 and issuing purchase orders under that contract can cost hundreds of dollars. The current system also lacks economies of scale. Why isn’t this handled as one service for all state agencies to ensure the lowest possible price for services at the lowest possible cost to government? And finally, Texas must improve its back office efficiency while achieving a high level of customer satisfaction. Governments at all levels are constantly working to become more efficient in an effort to save tax dollars and better serve its citizens. It is not uncommon for state agencies to identify private sector best practices that would achieve these goals. For a number of years industrial sector businesses have employed a method of improving quality and reducing the costs of services called Lean Six Sigma. While developed for manufacturing processes, its principles can be applied to many business processes that deliver a product to a customer. In 2011, I helped author and pass S.B. 563 which directed the Texas Workforce Commission, "to establish a pilot program to improve the efficiency and quality of operations while reducing costs, and to adopt a structured approach for identifying the wasteful use of state resources and improving processes." After the pilot project concluded, it was found to be a complete success. The program on which it was used saw an increase in productivity and services provided while reducing waiting times and cost. In this test of Lean Six Sigma’s methodology at the Texas Workforce Commission, all of this resulted in more people put to work more quickly in Texas. As can be seen from the above discussion providing a stable base for job growth can come from many directions and my recommendations are only a start. I think, we can all agree that steps to stabilize Texas must be taken soon and built upon from there. In that way Texas can continue to be a bright beacon in a nation enveloped in the darkness of a failed economy. Recommendations • A state task force should be established to identify, for purposes of elimination, all regulations and permits and study their effectiveness, usefulness, and impacts on the economy and government spending with a focus on those that are 10 years old and older; • The Legislature should direct the Office of State-Federal Relations to engage the Texas congressional delegation to encourage federal regulatory agencies to work with Texas regulatory agencies to align regulatory and permitting requirements; • The legislature should expand the concept of the Coastal Coordination Council to all permits required of businesses operating in Texas; • The legislature should require a cost-benefit analysis of any regulation or permit required by statute or administrative rule before that statute or rule is adopted; • The Council on Competitive Government (CCG) should declare the maintenance of facilities as a statewide service and issue a contract for such service;