Diversity Pays: As Energy Jobs Fall in Texas, Public Sector Jobs Grow

by Mitchell Schnurman

Source: The Dallas Morning News

Maybe Texas government can soften the oil price shock.

Sounds almost blasphemous for a state that worships free markets and disdains Big Brother.

But consider what happened in November: Falling oil prices led to job cuts in oil and gas, and Texas added enough government workers to more than offset the decline.

It wasn’t a one-month wonder. For the year that ended in November, Texas gained over 34,000 government jobs — 5,000 more than in oil and gas. It was also more than in retail trade, financial activities and manufacturing.

This isn’t a government stimulus in the usual sense; public money isn’t being doled out to lift a sagging economy. It’s actually a return to the natural order, when the public sector expanded with the population.

The hiring just happens to coincide with falling oil prices.

“It’s more a reflection of a diversified economy,” said Dale Craymer, president of the Texas Taxpayers and Research Association in Austin. “Government, by design, isn’t trying to pick up the slack.”

Nearly all hires were in local government, led by teachers, school workers, police and firefighters. The feds are still cutting jobs here, and Texas itself added a small number of state employees.

For over 20 years, local government growth was a constant in Texas. Then the recession clobbered tax revenue and Austin lawmakers slashed the budget in 2011.

The public sector shrank for almost two years, even while Texas kept growing. In the 2011-12 school year, classrooms lost nearly 11,000 teachers statewide — and Texas added 66,000 students.

The Legislature restored most education funding in 2013, and some local and state government hiring resumed. Last year, gains accelerated sharply, although the private sector still grew faster.

Property values have soared and retail sales are up by double digits in many cities. That bodes well for more expansion, although oil prices remain a wild card.

Teachers in demand

In the Dallas area, 86 school districts use the Teacher Job Network to recruit educators. Since September, year-over-year job postings are up 44 percent, a spokeswoman said. And the peak hiring period is still ahead.

“We have to be mindful of government growing too quickly or too slowly,” said Jason Saving, a senior research economist at the Federal Reserve Bank of Dallas.

Many leaders attribute Texas’ success to small government and limited regulation. While there’s some truth to that, Saving said, research shows that government spending on public safety and infrastructure often provides a good return on the investment.

The combined revenue of local governments in Texas is nearly as large as state revenue, according to Census Bureau data. But the 5,000-plus local entities have twice as much debt and half the cash.

That’s because locals finance the building of schools, water treatment plants and other infrastructure. Local governments have over 1.3 million workers, almost a million more than the state.

Through November, local government jobs were growing at an annual pace of nearly 3 percent, a fast rate for the group. Is that good or bad for the economy?

“A lot of it is cyclical,” said Craymer, who monitors state fiscal policy. “If money’s spent in the classroom, it’s probably a good thing. If it’s spent on more administration, it may not be.”

The paycheck

Not all jobs are created equal, either. In Texas, energy workers earn about three times as much as those in local government (whose average pay is $800 a week). Oil and gas production also generates royalties for landowners, magnifying the industry’s ripple effects.

Government growth can be more risky, too, said Pamela Villarreal, senior fellow at the National Center for Policy Analysis.

Many government jobs have traditional pensions and rich benefits, and their true costs may not emerge until years later. Laying off public employees can also be difficult.

“The temptation is to expand benefits and add workers rather than catch up on basic services,” Villarreal said. “And when cities get in trouble, it usually begins with pensions and benefits.”

The state has several policies that limit the growth of government. Schools must rely on the Legislature’s funding formula, which shares local property taxes among districts. And annual increases in property taxes are capped, Craymer said, which prompts booming cities to lower tax rates.

But growth in sales tax is all upside for cities. If low oil prices sock the industry in Texas, at least consumers will pay less at the pump — and spend most of the savings here.