Texas leads in job imports but figures show a mixed bag

It’s practically a cliché among Texas politicians’ talking points: Californian businesses and workers are fleeing the Golden State for the Lone Star State’s low taxes and minimal regulation.

“If you're abandoning California for Texas, just remember the reason you are escaping high taxes & burdensome regulations,” Gov. Greg Abbott tweeted Nov. 8. “We plan to KEEP Texas, Texas!”

Sen. Ted Cruz joined in the fun in January, responding to a proposal by California lawmakers to essentially double the state’s corporate income tax.

“Which do we want: More jobs, higher wages, bonuses and pay raises for millions? Or fewer jobs, lower wages, more bankruptcies, and more companies fleeing our borders?” Sen. Ted Cruz tweeted. “For CA Dems this seems to be a hard choice. Well, keep sending the jobs to Texas....”

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A recent analysis by the Federal Reserve Bank of Dallas shows that Texas is indeed the top state for corporate relocations. But the report also points out those moves and the jobs they bring make up a small sliver of the state’s economic activity.

“Generally, these interstate moves create a lot of media attention and, in fact, are touted as something that leads to large gains in employment or have very important benefits,” said Anil Kumar, Dallas Fed’s economic policy advisor and senior economist, one of the report’s authors. “But, in the end, it turns out that any job creation or business moves accounted for by such interstate relocations are small compared to the overall economy.”

Kumar added: “What really matters is job gains from startups and expansions of existing firms” — that is, companies already operating in the state.

Though more than 25,000 businesses moved to Texas from other states from 2000 to 2013, they accounted for less than 1 percent of the nearly 2.3 million businesses in Texas in 2013, according to the Dallas Fed analysis.

Jobs that migrated to Texas from out-of-state also averaged less than 1 percent of all jobs here during that 13-year period, and made up 1.5 percent of all jobs created in that time.

The number of jobs coming to Texas from elsewhere stood around 100,000 from 2000 to 2013.

About one-fifth of all jobs relocating to Texas from 2000 to 2013 came from California — more than 51,000. On the other hand, Texas lost 18,000 jobs to California in the same time period.

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Texas has earned some bragging rights over California in recent years. Toyota Motor Corp. moved its U.S. headquarters from Southern California to Plano in exchange for $40 million in state incentives. Jamba Juice announced plans to move from the Bay Area to Frisco, Texas, citing high operating costs in California.

Also, pharmaceutical company McKesson Corp. said in November it would move its headquarters from San Francisco to Las Colinas, a Dallas suburb. The state had already offered McKesson nearly $9.8 million in incentives to expand its presence in Irving.

Although big corporate relocations make for snappy headlines, their economic contributions are mixed. Few companies with more than 1,000 employees moved to Texas from 2000 to 2013, but they made up about 25 percent of all jobs that moved to Texas in that time, according to the Dallas Fed analysis. Businesses with fewer than five employees accounted for roughly 80 percent of all companies that moved to Texas, but less than 12 percent of the jobs gains.

Though job creation from company relocations is “a drop in the bucket,” corporate moves from California, New York and other states give Texas politicians a shorthand for how to sell the state’s economic policies to voters, said Mark Jones, a political science professor at Rice University.

“It’s tougher to abstractly make the claim that Texas has a better climate for business and therefore more businesses are investing here,” Jones said.

In other words, some of Texas’ top politicians see trash-talking California as a political winner.

But the practice of states luring companies from other states can have damaging effects, critics say.

For years, officials in Kansas and Missouri have spent millions of dollars subsidizing Kansas City-based companies’ moves across the state line, depriving both states of tax revenue to provide essential services and creating no new jobs, said Greg LeRoy, a frequent critic of economic development incentives.

“The only value it has is political because people don’t know these numbers,” said LeRoy, executive director of Washington, D.C.-based Good Jobs First, a watchdog organization monitoring public incentives for corporation. “They don’t understand that expansions and startups account for nearly all net job growth.”

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An influx of jobs from a corporate relocation can improve local property values and have other positive effects for local economies, Kumar said, but the national economy largely doesn’t profit from such moves.

“The bigger those firms are, the bigger the larger potential benefits (for the local economy),” Kumar said. “But, for the national economy, we know that it’s a zero-sum game because one jurisdiction’s loss is another jurisdiction’s gain.”

In San Antonio, economic development leaders have mostly focused in recent years on international companies seeking a U.S. presence or domestic companies eyeing expansions elsewhere, said Jenna Saucedo-Herrera, president and CEO of the San Antonio Economic Development Foundation (SAEDF).

Over the last two years, San Antonio and Bexar County officials have relied on incentive packages worth millions to lure foreign companies to the area and subsidize expansions here, including Czech company Okin MPS and British companies Ernst & Young and The Hut Group.

California produced the most economic development projects for San Antonio, followed by New York, Virginia and Illinois, according to figures provided by the SAEDF. Cybersecurity firm Freedom Security Alliance announced last year it was moving from San Diego to San Antonio. But many California-based companies, including Hulu and Wells Fargo, picked San Antonio to expand its operations rather than relocate.

“As we refined our strategy and we further focused the strategy, not only did key industries surface but the key industries define the geographies that we are focused on,” Saucedo-Herrera said.

The city’s economic development strategy has also increasingly emphasized retaining existing businesses. For example, San Antonio-based health-care technology company CaptureRx said last year it planned to hire at least 200 more workers, who would make at least $50,000 annually, over the next six years as it expands its headquarters downtown — in exchange for more than $1 million in incentives valued from the city and county.

It’s hard to measure how much in incentives, including tax abatements and grants, factor into companies’ decisions to relocate, Kumar said, but the strength of a prospective city’s economy often plays a bigger role.

Still, the Texas Enterprise Fund, often referred to as the state’s “deal-closing fund,” has offered more than $608 million in incentives to companies since its inception in 2004.

About 20 percent of San Antonio’s corporate relocations and expansions received incentives from 2000 to 2013, Saucedo-Herrera said. In the last two years, that figure has increased to 35 percent, in part because the foundation has become more targeted in its recruitment efforts, she said.

But incentives are largely used as “deal-closing tactics” on top of Texas’ already-favorable business environment, Saucedo-Herrera said. The state doesn’t have a payroll tax or income tax for individuals or corporations.

“You have to make it on their radar first for these significant decisions,” Saucedo-Herrera said. “Talent, infrastructure, cost of living, all of these elements are key.”

Representatives for Abbott and Cruz did not return emails requesting comment.

jfechter@express-news.net

Joshua Fechter is a San Antonio-based staff writer covering real estate, economic development and philanthropy. Read him on our free site, mySA.com, and on our subscriber site, ExpressNews.com. | jfechter@express-news.net | Twitter: @JFreports