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The previous chapters have documented historical, economic, social, medical and other interdependencies that typify day-to-day life along the U.S.-Mexico border. The ties between the people on each side of the Rio Grande are strong and unite the two countries in an indissoluble bond.

But in governing the region as a region by jointly resolving shared problems, the width of the Rio Grande, which can shrink physically to scores of yards in some places, might well seem more like hundreds of kilometers politically. Indeed, in some cases, even coordination of activities on just one side of the border is often difficult or nonexistent. In the end, human ties are split by national, state, and local government boundaries. Some commendable efforts to overcome the political boundaries can be seen and applauded, but coordinated regional decision-making about regional problems remains the exception and not the rule.

In part, this lack of coordination can be attributed to the fractured structure of governmental decision-making along the border. But to a large degree, it also reflects the inability of local leaders to independently call forth the resources to deal with issues, because funding either does not exist, or must first be approved by agencies whose responsibilities extend far beyond the Border region. If the Border region is to deal successfully with the crucial problems of the 21st century, this situation must change.

Border Infrastructure: Who Pays And How

Communities on both sides of the border face similar infrastructure needs but have different federal, state, and local ways of financing projects.1

U.S. communities along the Texas-Mexico border can access low-cost tax-exempt municipal financing by issuing revenue bonds, a source of funds for all state and local governments such as cities, counties, special districts, and other government authorities. The tax-exempt bond market allows public entities to raise funding in U.S. capital markets at lower interest rates due to the federal income tax exemptions investors receive and high bond ratings of the institutions offering them for sale. States and border communities also tap federal aid, private capital, and user fees, usually devoted to environmental infrastructure projects. Portions of projects that cannot be financed on a pay-as-you-go basis fill the gap with federal, state, and local funds.

Mexico is constitutionally a federation of states like the U.S., but its strongly centralized political system has left most states isolated from decision-making in Mexico City. Mexico has no established municipal financing market to fund regional infrastructure.2

In contrast to the large degree of state and local funding of public projects in the U.S., Mexico finances infrastructure projects through federal government grants and loans from multilateral organizations, and only secondarily from state and local budgets. Federal revenues are distributed to the state and local governments through a mix determined by each state's population and contribution to federal tax receipts. Other revenue sources include redistribution of a federal vehicle tax and a municipal development fund comprising 1 percent of general federal tax revenue.3 Each state's governor decides how to allocate the state's federal funds to individual cities. In practice, however, northern Mexico's infrastructure projects must compete for funding with other national priorities such as the basic needs of poorer Mexican states further south.

Recent international and internal political issues in Mexico have probably caused a shift of federal funding away from the Border region. While the North American Free Trade Agreement (NAFTA) might have been a logical reason for the federal government to focus funds on border needs, other budget pressures prevailed. Federal deficits resulting from the peso devaluation of 1994--and the Mexican government's subsequent emphasis on paying its foreign debt--severely limited federal funds available for infrastructure projects nationally and on the U.S. border.

In total, Texas and the bordering Mexican states of Chihuahua, Coahuila, Nuevo Leon, and Tamaulipas share common infrastructure, environmental, health, and economic development concerns. But there are significant differences in how their governments fund infrastructure improvements and other public programs. In light of these differences, mutual cooperation could be crucial to reaching solutions that work for both countries and the five states.

More Depressed Than Appalachia

The most distinguishing characteristic of the Border economy is its crushing povertyrelative to U.S. national and state averages.

Much of the Border region is extremely poor. As of 1995, more than a quarter of the Border counties, or 11 of 43, fell into the poorest 1 percent of all counties in the U.S., with per-capita incomes of less than $10,840. The region contained three of the nation's five poorest counties: Maverick, Starr, and Zavala.4 Twenty-two of the 43 counties, more than half, ranked in the poorest 10 percent of all counties with per-capita personal income of less than $13,914. At the other end of the scale, the Border region did not have a single county ranked in the top 10 percent of the nation's income distribution.

Also notable is the level of public as opposed to private sector economic activity in the region. Nearly one-quarter of the personal income of the Border region, 22.5 percent, came from transfer payments in 1995, compared to 16.8 percent for the nation and 15.2 percent for all of Texas. In addition, military and civilian governmental employees generated 26.4 percent of the personal income in the Border region the same year, compared to 23.5 percent for the U.S. and 20.9 percent for Texas. As a result, the private economy, including farms, generated only 51 percent of the personal income in the Border region, considerably behind the 59.7 percent accounted for by the private sector in the national economy and the 63.9 percent for Texas. If current trends hold true, then non-wage income, including transfer payments, is expected to surpass wage income in the Border region as the leading source of household income by 2020.

Despite these troubling numbers, it can be argued that the Border region is not unique in its poverty--even within the U.S. In this century, among the most recognized impoverished areas has been the sprawling Appalachia region, encompassing 399 counties in 13 states stretching from Mississippi to New York. In the late 1960s, in fact, the Appalachia region was by some measures more poverty-stricken than the Texas Border today. However, the Texas Border region has been "catching up," and even surpassing, Appalachia in its poverty.

Per-capita income levels from 1969 to 1995 in the Appalachia Region, the 43-county Texas Border region, and a larger four-state border region--adding to the Texas region the nine counties immediately next to Mexico in Arizona, California, and New Mexico--were tracked in this report. Throughout the 25-year period, average per-capita income in Texas' 43-county Border region was consistently less than that of the counties served by the federally created Appalachian Regional Commission (see Appalachian Regional Commission: After 35 Years). Since the mid-1980s, the numbers show, the gap between the two regions widened, with the Texas Border region falling further behind. And since 1991, the four-state region bordering Mexico has become even more economically depressed than Appalachia, at least according to the yardstick of per-capita income (see Figure 12.1).

Appalachian Regional Commission: After 35 Years

While the Texas Border region is not unique in its intense poverty, it appears alone in the U.S. for not being singled out to receive the full-fledged attention of the federal government. Since 1965, Washington has formed five regional commissions to address regional development in "problem" areas, including Appalachia. Special focuses have been brought to a block of counties in Arizona, Utah, and New Mexico through the Four Corners Regional Commission. A group of counties in Michigan, Wisconsin, and Minnesota make up the Upper Great Lakes Regional Commission. The Ozarks Regional Commission includes parts of Arkansas, Oklahoma, Kansas, and Missouri. And the New England Regional Commission encompassed four states on the nation's eastern seaboard.

Planning for Higher Standards of Living

No federal, state, or regional master plan comprehensively addresses the Border region's problems, but government leaders and others have reached many binational and state-to-state agreements on a program-by-program basis.5 For example, the U.S. and Mexican governments have cooperated on certain water, health, environmental, labor, and manufacturing issues affecting the region. And Texas state agencies and the Mexican government work together periodically on border issues related to health, the environment, wildlife, education, transportation, criminal justice, and tax policy (see Texas-Mexico Initiatives). Since 1990, moreover, additional state and federal funding has flowed to the Border region for projects related to housing, transportation, the environment, water treatment projects, and higher education.

Texas-Mexico Initiatives

Possibly the most enduring example of commercial collaboration between the two governments have been the maquiladoras. But even the development of maquilas underscores the lack of coordinated policy between the U.S. and Mexico, although in this case, policy stumbling appears to have yielded positive results.

It can be argued that maquiladoras emerged as a patchwork solution to a unilateral economic policy shift of the U.S. on the bracero program in 1964. At that time, the U.S. terminated the bracero program, which provided jobs for 185,000 Mexicans in the U.S.6 Mexico clearly needed a policy response to the problems caused by the resulting surging unemployment along the border. But the Mexican government, following a long-standing policy, did not want to open its economy to unbridled foreign investment, possibly resulting in destructive competition for nascent Mexican-owned firms. Yet, foreign capital was desperately needed to create jobs.

The solution to this dilemma came in 1965 from a regional economic development plan for northern Mexico--the Programa Nacional Fronterizo.7 A component of the plan was the Border Industrialization Program, permitting American manufacturers to own and operate plants making export goods on the Mexican side of the border--giving birth to the twin plant or maquiladora concept. Since then, the number of Texas-Mexico border maquiladoras has mushroomed from an original 12 plants in Juarez in 1966 to more than 600 plants in cities along the Texas-Mexico border in November 1997.8

From the vantage point of the late 1990s, the astounding success of maquilas may appear to be the result of coordinated economic policy, but in a more long-term perspective, this view fades to one of a scrambling response to economic adversity.

In a similar fashion, many federal and state agreements with Mexico, and the new flow of dollars, have not been part of a cohesive federal or state regional development plan. Instead, they are scattershot responses to crisis "hot spots," such as air quality investments, transportation projects, and health-related initiatives.

Border community leaders are dissastified with a long history of "just-in-time" policy-making. Many leaders agreed that the overarching goal of state and local economic development policy in the region should be to raise the standard of living for all residents.9 But state and local government, along with business and community leaders, must develop policies that foster an environment, infrastructure, and workforce that would attract and sustain higher standards of living.

Community leaders told review team members that the lack of both regional economic goals and priorities and planning cohesiveness among state and local officials helps explain underinvestment in the region's schools, roads, water and wastewater treatment systems, housing, health, and environmental programs.

A key principle of economic development holds that a well-developed infrastructure is essential to attract high-value businesses. Yet, investment in the Border region's infrastructure was not a state priority until the 1990s, hindering the region's workforce, infrastructure, and ultimately, overall quality of life. According to community leaders, state government responded to the region's needs only after shortcomings were publicized or lawsuits were threatened. For example, South Texas grassroots organizations and others forced the state, sometimes in court or by lobbying state leaders, to increase state funding for housing, public education, and higher education.10

The plight of some rural residents went largely unnoticed until a border grassroots movement focused attention on the dismal living conditions within colonias. In 1988, with the support of then-Lt. Governor Bill Hobby and State Comptroller Bob Bullock, Texas voters approved a constitutional amendment authorizing revenue and general obligation bonds for colonia water and wastewater projects. Between 1989 and 1997, six projects were completed, and another eight costing $138 million are under construction.

Since 1990, major initiatives in public and higher education increased funding to public schools and border colleges and universities. After NAFTA took effect, funding for roads and highways along the border increased, and concern about air and water quality intensified along with it. By early 1998, project funding for ongoing and planned road and highway construction projects in the Border region exceeded $1.4 billion. Border environmental infrastructure projects approved by the Border Environment Cooperation Commission and funded through the North American Development Bank (NADBank) totaled $340 million.11

Despite these initiatives, community leaders reported that planning and funding for some state agency projects had been in the pipeline too long without appreciable results.12 A project to improve U.S. Highway 83 in Laredo took 10 years to reach the construction stage. Some colonia projects remained pending for seven years. Residents frequently raised concerns about a perceived lack of project accountability. They said it was too difficult to find officials willing to assume responsibility for delays in projects.13

Border community leaders consider education and job training programs as major tools for raising the average standard of living. However, they said, the Border region's workforce preparation and educational systems haven't done the job of preparing workers. To back up their criticisms, community leaders cited high school dropout rates among Hispanics, increasing numbers of graduates without basic skills, and a lack of alternative education opportunities for students who might not benefit from going directly to college. They also singled out impractical vocational education programs, including outdated courses in television repair, and bureaucratic job training programs. Community leaders further urged improvements in the way the state funds and supports workforce training.14

Border community leaders identify a slew of potent economic development issues related to the region's workforce, infrastructure, and quality of life (see Table 12.1). Such a listing--spelling out both the region's economic development strengths and opportunities for improvement--should serve as a basis for forging a far-reaching, comprehensive, and effective regional economic development plan. Yet, unless such a plan is embedded into a structure of coordinated decision-making on Border issues, the region will likely suffer growth without prosperity.

In the end, while federal and state funding for Border projects has increased considerably, more remains to be done. Moreover, continuing to address problems piecemeal has not brought prosperity to the Border and probably won't bring about the huge economic and social changes needed to raise the Border to an acceptable standard of living.

Planning the Border's Future

It is one thing to identify economic needs and future goals. But the real work begins when community leaders come together to devise detailed strategies for meeting these needs and exceeding these goals. From the start, a strategy to address the Border's challenges will require cohesive planning by government, businesses, and community leaders. An effective plan, reflecting the shared commitment of all sectors, will allow financial and human resources to agree upon shared priorities, resolve identified roadblocks, and implement cohesive programs. In addition, the plan should have an accountability component to determine if public resources are achieving desired results, and when to redirect resources.

Development of such a plan should involve the governments of Mexico and the U.S., the Mexican states bordering Texas, and local communities. The short-term goal should be to develop a cohesive strategy to overcome U.S. and Texas border resource allocation problems identified by community leaders. A longer-term goal should be to establish lines of communication with Mexico and the Mexican border states on issues pertinent to the region.

Without state-established goals, priorities, or plans for regional economic development, Texas lacks the built-in data and flexibility to address regional disparities. This makes it difficult to determine whether state funding increases in certain program areas might achieve desired results.

Performance measures have been an element in Texas state budgeting since 1974. In 1991, legislative leaders increased the emphasis on performance measurement in budgeting, making accountability and performance measures a year-to-year part of the state's strategic planning and budgeting system.15 While admirable and even groundbreaking, the state agencies' planning, budgeting, and monitoring efforts focus on statewide objectives, rather than regional distinctions and desires.

Texas recently began a new recognition of the special limitations facing poorer regions of the state with the passage of S.B. 370 by the 1997 Legislature. Part of this bill allowed the Commissioners of the Texas Department of Transportation to waive local matching requirements for state highway projects in economically disadvantaged counties. This removes ability-to-pay issues from the assessment of need in counties with above average unemployment, and below average per-capita income and taxable property value.

Clearly, a great variety of state and local initiatives exist (the South Texas Border Initiative for higher education, increased funding for border highway projects, the colonias improvement projects, and environment-related projects with the Texas Natural Resource Conservation Commission), but coordination remains a problem. The Comptroller's review team found an instance in which state agencies were gathering similar information from the same population, suggesting at least the potential for inefficiency and duplication of services.

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