Regional Report 2015: The Southwest

In the Southwest, Texas is the Leader. Hands down.

The Lone Star State’s 21st century economic trajectory has been fueled by such factors as export productivity, tax advantages to employers and its former governor’s economic proselytizing. To many in the business community, Rick Perry is—despite being hauled up on abuse-of-power charges in his last days in office—a Texas icon.

“I’ve worked with six Texas governors and Rick Perry has done more economic development than the prior five combined,” rhapsodizes Austin-based economic development consultant Angelos Angelou. For all of Perry’s CEO-whispering and free hand with incentive disbursements—historically he spent more than half the state’s budget on grants and subsidies, tallying over $19 billion a year as recently as 2013—the economic boom in Texas is not primarily a tale of cash-back deals. Economically, Texas in 2015 is much as it was in 1915—a state whose fortunes are very much tied to energy.

The No. 1 producer of oil and gas in the nation, Texas reversed a decade-long slide of oil-related revenues in 2010, just as Perry took office and shale fracking took off. The mining doubleplay has solidified Texas’s position as top U.S. fuel producer, accounting for oil and well over one quarter of its natural gas.

WHY OKLAHOMA: “I knew what I would be able to gain from a lower-cost but strong technology operational environment and strong technology workforce.”

Jobs in this sector outpaced the rest of the state’s employment growth by a factor of five. These are high-paying jobs, too. Sector revenues, combined with high property taxes, helped fund the state’s aggressive soliciting of out-of-state employers, effectively diversifying the economy. Angelou shrugs off the suggestion that the wave of relocating employers—locals call the influx “The Texodus”—reflects pay for play. “It’s not about incentives anymore,” he insists. “Companies go where they can attract talent.”

While execs pay special attention to relocation pitches coming from states that eschew taxes, most recognize that there is no free lunch. High property taxes and the state’s gross receipts tax claw back potential savings.

Where Texas stands out may well be the efficiency with which local recruitment efforts synchronize with state outreach initiatives. While Governor Perry made his well-publicized rounds of Fortune-500 chiefs, most small and midsized companies played small ball, connecting with small-town government officials and their economic development field reps.

When their corporate searches drilled down to the last round, the governor’s office weighed in with matching offers, tapping such sources as the now-legendary Texas Enterprise Fund. Usually, the combined offers prevailed.

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