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A Report to the Citizens of Texas — Texas Prospects & Concerns

Fiscal 2012 • Sept. 1, 2011 – Aug. 31, 2012 


Texas has advantages that have enabled it to grow faster than the nation for many years — relatively low living costs, an attractive business climate and a balanced mix of industries. These advantages remain and will allow the state to outperform the nation over the next biennium and beyond.

Despite the still-precarious national economy, Texas’ economy is predicted to grow by 3.4 percent in both fiscal 2013 and 2014, a pace comparable to the average of the last 30 years. As a stronger economic recovery takes hold nationally, Texas economic growth is forecast to reach 3.9 percent in 2015. Texas personal income is forecast to increase by 5.3 percent in 2013, 5.1 percent in 2014 and 5.3 percent in 2015.


In a normal year, Texas receives an average of about 27 inches of rainfall across the state, with much more falling in the eastern part of the state (up to 55 inches) than in the west (about 10 inches). Such rainfall usually provides enough water for both rural and urban needs.

The current water deficit (marking 2011 as the worst single-year drought in Texas since recordkeeping began) may prove to be one of the most devastating economic events in our history. Estimates put direct and indirect drought losses at well over $10 billion to date. Texas officials want to update the state’s water infrastructure to help the state meet its future water needs.


In 2010, the Texas Transportation Institute evaluated the state’s capacity-based highway needs through 2035 and estimated the amount needed to inspect, maintain and replace existing highways and bridges to be $370 billion.

Funding sources available to the state for transportation needs include direct user fees (tolls, transit fares), indirect user fees (motor fuel taxes, registration fees), general taxes (dedicated sales taxes to support transit), federal funds and bonds. Facing the challenge of limited funding and growing demand, the Texas Department of Transportation suggests these strategies:

  1. Focus available funds on the most cost-effective investments.
  2. Manage the transportation system to encourage changes in how people travel.
  3. Develop partnerships for providing transportation improvements.

Public Education

A major policy issue facing Texas is funding for public education. The Texas Constitution requires the state to establish and make suitable provisions for the support and maintenance of an efficient system of public free schools. After actions taken by the 82nd Legislature regarding school funding, more than two-thirds of Texas’ school districts and the Texas Charter School Association chose to sue the state in five separate lawsuits. In February 2012, a Texas District Court ruled the school finance system unconstitutional, prompting a possible appeal to the Texas Supreme Court. Public school funding will be an important area of budgetary focus in the 83rd Legislature.

Texas Economic Outlook for Fiscal 2012 through 2015
Indicator 2012 2013 2014 2015
Real Gross State Product — total value of goods and services produced (billions) $1,362.9 $1,433.7 $1,510.4 $1,597.9
real gross state product Annual Percent Change 5.8% 5.2% 5.3% 5.8%
Taxable Oil Price ($ per barrel) $91.96 $85.00 $82.18 $80.33
Taxable Natural Gas Price ($ per MCF) $3.51 $3.10 $3.68 $4.04
Nonfarm Employment 10,735,981 10,967,456 11,202,199 11,467,845
Nonfarm EmploymentAnnual Percent Change 2.2% 2.2% 2.1% 2.4%
Unemployment Rate (percent) 7.3% 6.3% 6.1% 6.0%

Nonfarm Employment does not include farm workers, self-employed proprietors, domestic household workers or non-civilian members of the military.


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