Best & Worst States for Business 2021: What Mess In Texas?

To all but the most hardcore fan, the scene in Texas isn’t pretty right now. The freak mid-February winter storm and collapse of its power system delivered a haymaker and wobbled the Lone Star State in the opinion of CEOs across the country for the first time since the 1980s.

Texas’s dominant oil-and-gas business busted on cue, as Covid stalled the global economy— and kept millions of drivers off the roads for months. America’s growing immigration problem is massing mainly at Mexico’s border with the state. And for the first time, key outposts such as Austin are showing signs of growth fatigue. Things got so bad in February that even Texas superbooster Elon Musk seemed a bit grumpy on Twitter with his new home state.

Any other place would be worried about losing its longstanding billing as The Best State for Business. But Texas? Hell, no.

“These things aren’t going to affect our standing at all,” Governor Greg Abbott tells Chief Executive. “People know one-off events occur, and what matters most is what our response is. Texas is responding very aggressively and strongly and will ensure a stable power-grid system that will be the most robust in the United States,” especially after the state legislature finishes grappling with solutions in May.

In fact, Abbott says, despite the failure of wind power in Texas’s numbing outage, by next year the state will be No. 1 in generation of solar as well as wind energy. “That will help keep us the top energy state,” he says, “and much of the transformation is being led by some traditional energy companies that are transforming their portfolios, knowing that fossil fuels will be required for years to come—but also alternatives.”

As for the problem of illegal immigration, Abbott insists it “ebbs and flows” over the decades and “is something that affects the entire nation. Congress and the administration hopefully will be looking for solutions.”

Glenn Hamer, president and CEO of the Texas Association of Business, sums up the everboosterish mood at the top: “Mother Nature can humble any country or state,” he says, “but the fundamentals of the Texas economy are as strong as ever.”

So far, so right. Blackout or not, Texas outscored every other locale in the nation again this year in our annual CEO poll. But after the travails of 2020, among many business leaders—both in the state and outside—there is an emerging realism that low taxes and high confidence alone won’t cut it.

For example, Josh Brumberger, CEO of Utilidata, a utility software outfit based in Providence, Rhode Island, believes that Texas’s phenomenal growth is beginning to yield some strains. These are most apparent in Austin, where tech companies are flocking from California and elsewhere in search of capable digital workers in a fertile business climate. Among the effects have been skyrocketing real-estate costs and big new encampments of homeless.

“A lot of native Texans have had enough,” says Steve Murphy, CEO of Epicor Software, who relocated to Austin from San Mateo, California, three years ago. “The price of housing in Austin has pretty close to doubled in the last five years. The commutes have gotten bad, and when people go back to the office, they will be worse.” How much worse? Time will tell.