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Red State, Blue Cities

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Red State, Blue Cities

Will the Texas model become a victim of its own success? Texas Rising 2016
Texas
Politics and law

John Steinbeck once called Texas “a mystique closely approximating a religion”—and today, the Lone Star State remains full of myth, mystery, and paradox. Yet, as Steinbeck also noted, “Texas has a tight cohesiveness perhaps stronger than any other section of America.” This strong sense of place and identity owes to Texas’s distinctive origins and the hardy character of the migrants it attracts.

Texas’s booming economy has produced rapid population growth, much of it in the form of migration from other states. Most new arrivals have settled in Texas’s large and burgeoning cities, which, despite Texas’s reputation as a red state, lean increasingly blue. As a result, Republican governor Greg Abbott warns that Texas runs the risk of being “California-ized.” As Texas becomes ever more populous and urban, preserving the small-government identity that has proved vital to its prosperity and growth will pose a challenge. Will the “Texas model” become a victim of its own success?

Taking pride in a unique history, Texans value independence, freedom, and self-reliance, perhaps more than residents of any other state. Texas schoolchildren still learn about the Alamo and memorize Colonel William Barret Travis’s “Victory or Death” letter. To this day, proud Texans celebrate General Sam Houston’s triumph at the Battle of San Jacinto in 1836 and revel in the state’s frontier heritage, with sports teams named Cowboys, Spurs, Rangers, Mavericks, and Longhorns. The state’s official structures reflect this prideful attitude. Texas’s magnificent red granite capitol building in Austin is taller than the U.S. Capitol in Washington; the San Jacinto Monument, near Houston, reaches higher than the Washington Monument. No other state fought for and won its independence as a sovereign republic or commands such loyalty among its residents. From El Paso to Beaumont, Amarillo to Brownsville, throughout the 268,000 square miles of this vast state, Texans—now numbering 27 million—devotedly display, and pledge allegiance to, their state flag.

New arrivals eagerly embrace Texas’s customs and traditions. At the Broken Spoke, Austin’s famed honkytonk, newcomers (including hipsters) crowd the dance floor, learning the two-step. Patrons line up for hours to enjoy authentic brisket, a Texas culinary staple, at Austin’s Franklin Barbecue. The attitude of many recent transplants is reflected in the popular expression, “I wasn’t born in Texas, but I got here as soon as I could!” Texans can display an almost cult-like camaraderie.

Texas has reinvented itself many times. In the nineteenth century, waves of migrants—Germans, Swedes, Czechs, and distressed immigrants from other states—settled the land, often leaving behind signs reading, “Gone to Texas.” Like their Texan antecedents, twentieth-century opportunity-seekers—often midwesterners fleeing the Rust Belt—brought hardy values with them. Texas has always offered a fresh start to stubborn souls unwilling to accept defeat.

The state’s economy has changed dramatically through the years. An early focus on cattle and agriculture gave way to the cyclical booms and busts of oil and gas production following the Spindletop gusher in 1901. (See “Texas Flood.”) By the late twentieth century, Texas had also developed a richly diversified manufacturing and technology economy. Texas has a GDP of $1.6 trillion (bigger than Mexico’s and just behind Canada’s) and more exports than any other state (and more technology exports than California). Texas has survived severe droughts, the deadliest natural disaster in U.S. history (the 1900 Galveston hurricane), wildly fluctuating oil prices, the late 1980s savings and loan collapse, the bursting of the high-tech bubble in 2000, and the Enron scandal in 2001, the largest-ever corporate bankruptcy up to that time.

Texas hasn’t voted for a Democratic presidential candidate since narrowly going for Jimmy Carter in 1976.

The nation regards Texas, and Texans regard themselves, as distinctly conservative—and justly so. Riding the Tea Party wave in 2009, then-governor Rick Perry casually mentioned the possibility of secession. National commentators were appalled, and some even accused the governor of treason—but Perry’s popularity soared in Texas, where residents regarded the secession comment not as a gaffe but as an admirable statement of principle. In 2010, fresh on the heels of his anti-Washington manifesto, Fed Up!, Perry won reelection in a landslide, trouncing his Republican primary opponent, moderate U.S. senator Kay Bailey Hutchison, by more than 20 points.

Second only to California in population, Texas boasts two Republicans in the U.S. Senate, a delegation to the House of Representatives tilted in favor of the GOP by a lopsided 25 to 11 margin, Republican supermajorities in both houses of the state legislature, and a Republican governor. For the past two decades, every statewide elected official in Texas—including all nine justices on the Texas Supreme Court—has been a Republican. In 2012, Texans supported Mitt Romney over Barack Obama by nearly 16 points, a difference of more than 1.2 million votes. Texas hasn’t voted for a Democratic presidential candidate since narrowly going for Jimmy Carter in 1976.

Texas wasn’t always so Republican. For nearly a century following the Civil War—as elsewhere in the formerly Confederate South—it was solidly Democratic. The twentieth-century political realignment in Texas generally tracked the experience of other Southern states (though Barry Goldwater did not carry Texas in 1964) and had much to do with the liberal drift of the national Democratic Party during the 1960s. But Texas’s rightward shift really got going in the 1970s, amid a tsunami of migration that more than doubled the state’s population from 1970 to 2010. During his 14-year tenure as governor—a Texas record—Perry became a national figure and solidified GOP control over the state. His conservative swagger came to epitomize Texas politics.

With Perry gone, and a continuing influx of residents fleeing blue states such as California, Texas Democrats had high hopes for reversing their electoral misfortunes in 2014—but they failed miserably. The George Soros–funded Battleground Texas campaign spent $3.4 million, to little electoral effect. Republican Greg Abbott crushed Democrat Wendy Davis by more than 20 points in the governor’s race. In the lieutenant governor’s race, conservative state senator and former talk-radio host Dan Patrick defeated state senator Leticia Van de Putte by a similar margin. Critics of the outspoken Patrick had predicted his defeat in the general election, following an unusually acrimonious GOP primary and runoff. His lopsided victory over a Hispanic woman was particularly noteworthy because, in addition to being a white male, he emphasized border control, pledged to abolish sanctuary cities, and opposed in-state tuition for illegal immigrants. Exit polls showed Patrick getting 46 percent of the Hispanic vote overall and actually beating Van de Putte 53 percent to 46 percent among Hispanic men. He even outperformed Abbott among Hispanics, though Abbott ran Spanish-language campaign ads emphasizing his marriage to a Latina. The results demonstrate the deeply ingrained conservative culture in Texas, even among ethnic minorities. Hispanics were evidently swayed by Patrick’s pro-life message, advocacy of school choice, and opposition to taxes—all GOP mainstays.

Winning elections doesn’t necessarily pay off in policy victories—just ask the Republican-controlled Congress in Washington—but it has in Texas, where a Reconstruction-era constitution minimizes government power. The state’s conservative politics consistently translate into conservative policies: no state income tax or state-imposed property tax, below-average taxes overall, minimal regulation, right-to-work laws, limited collective bargaining rights for public employees, comprehensive tort-reform legislation, relatively low state government spending per capita, a part-time legislature that meets every other year, and—at least in recent decades—business-friendly court rulings. Texas even has a constitutional cap on statewide government spending increases, limiting them to the estimated rate of economic growth.

Statewide policies—combined with abundant oil and gas reserves—have created a booming Texas economy in recent decades, with lots of jobs, affordable homes, and inexpensive electricity. Perry called it the “Texas Miracle.” Paul Krugman and other liberal pundits demurred, but in 2013, Austin-based journalist Erica Grieder wrote a book-length defense of Texas’s economic performance: Big, Hot, Cheap, and Right: What America Can Learn from the Strange Genius of Texas. Often a harsh critic of conservative policies, Grieder nonetheless concluded that the Texas model—low taxes, low spending, and low regulation—works. “[T]he bluster about how the nation has nothing to learn from Texas is just willfully obtuse,” she wrote, “almost prima facie absurd. . . . The Texas model has clearly and incontrovertibly worked.”

As the post-tech-crash recession wracked most of the U.S. during the opening years of the twenty-first century, Texas offered opportunity, employment, and a stable housing market, and Americans flocked to the state. The roaring economy and attractive business climate also lured employers from other states (especially Democrat-dominated California) to relocate their operations here. Texas weathered the financial crisis and subsequent downturn better than any other state, creating 40 percent of all U.S. civilian jobs during the past eight years. Combined with expansion of local businesses and the arrival of job-seeking refugees from economically distressed blue states, Texas’s population grew by more than 4 million between 2000 and 2010, the most of any state. Its remarkable growth enabled it to gain four additional House seats in the last redistricting. Not all the population expansion was due to newcomers: Texas has the second-highest birthrate in the country, after Utah.

California and Texas, the nation’s two largest states, stand at opposite poles of the political spectrum—and their recent population fortunes have diverged as well. During the same period, California’s population grew at less than half the Texas rate, and—in a stunning reversal of long-standing trends—actually experienced a net loss in domestic migration numbers, with more people leaving than arriving from other states. California’s meager population growth was fueled entirely by domestic births and foreign immigration.

Most of Texas’s new residents (only a portion of whom come from California) have settled in its growing, vibrant metro areas. Urbanization is a relatively new phenomenon here. As recently as the mid-1940s, the state was sparsely populated and predominantly rural. Since the end of World War II, however, Texas’s population has nearly quadrupled—the introduction of affordable air conditioning helped—and shifted overwhelmingly to metropolitan areas. Indeed, Texas is now one of the most heavily urbanized states, with 85 percent of its residents living in or near cities. As Texas Monthly (“the national magazine of Texas”) recently reflected, while Texas’s “rural population of 3.8 million is still the country’s largest, we are, for the most part, a bunch of city folk.” Texas is now home to three of the nation’s ten largest cities—Houston (fourth), San Antonio (seventh), and Dallas (ninth). Those metropolitan areas, along with tech hub Austin (11th), are among the most dynamic and rapidly expanding cities in America. All four enjoyed double-digit job growth from 2010 through 2014, well above the national average. Forbes recently named all four among its top ten “Cities of the Future,” and urban demographer Joel Kotkin included them in his ten cities “most likely to boom over the next 10 years.” The cities are large and, for the most part, increasingly diverse. With Texas’s ample open space, the surrounding suburbs extend like the outsize cattle ranches of yore.

People still move to the Lone Star State primarily for opportunity (jobs) and land (affordable homes). Many young families settle in suburbs surrounding the major cities, which—as in the case of Williamson County outside Austin, Montgomery County outside Houston, and Collin County outside Dallas—are solidly red. The most significant demographic factor among the recent arrivals, though, is arguably not their state of origin (which varies over time), or race, or ethnicity, but their age. Census data indicate that young people aged 25 to 34 make most moves. And these millennials, coming to Texas in droves, exhibit political attitudes and voting patterns strikingly different—i.e., more liberal—from those of most Texans. Recent trends in municipal governance reflect this shift.

Spending is getting out of whack, for starters. Among the nation’s largest states, Texas trails only New York in local government debt per capita. Houston, Texas’s largest city, dramatically illustrates how a thriving city has let its cost structure grow out of control. No longer just an oil town, Houston has become a sprawling behemoth, with more than 2.2 million residents, a bustling deepwater port, NASA’s Johnson Space Center, and more Fortune 500 corporate headquarters than any city except New York. (See “America’s Opportunity City,” Summer 2014.) The city’s industrial base is broad and varied. Between 2000 and 2010, the Houston metropolitan area added more people than any other U.S. metropolitan area. The 1.2 million new arrivals included some 250,000 evacuees from New Orleans fleeing Hurricane Katrina in 2005 (about 100,000 of whom remained in Houston) and 400,000 foreign-born immigrants, an influx exceeded only in New York. According to a Rice University study, Houston—not New York, Los Angeles, or Miami—is the most racially and ethnically diverse city in America. Though not as heavily Latino as San Antonio or El Paso, Houston is home to more Hispanics than any American city other than Los Angeles and New York.

Yet for all its success, Houston faces crippling unfunded pension liabilities, a result of its mayors’ obeisance to unionized public employees. On December 31, 2015, the latest date allowed by law, Houston restated its unfunded pension liability for city employees from $1.2 billion to $5.6 billion—a nearly fivefold increase. Houston’s actual liability is even higher—it’s closer to $7.7 billion—if retiree health care and outstanding pension bonds are included. To make matters worse, Rice University’s John Diamond has stated that the city’s 8 percent assumed rate of return is too high; using a more realistic rate, the city’s unfunded liability could be $10 billion, almost twice the city’s annual budget and dangerously close to the city’s net worth. That, on top of $3.3 billion in general-obligation debt coming due, sharply falling oil prices, and a ratings downgrade by Moody’s, has cast a shadow on Houston’s future.

Worse still, reform doesn’t look likely in the near future, since Houston voters, in last year’s mayoral election, elected the candidate pledged to preserve the status quo: Sylvester Turner, a progressive Democrat who ran with strong government-union backing. Turner narrowly prevailed over Bill King, who had run on a plan to institute a defined-contribution pension plan for new government employees. Turner will have a hard time providing basic city services—from fixing potholes to maintaining public safety—in the face of an impending budgetary calamity.

The story of Houston’s pension shortfall, a nearly inevitable feature of the unaffordable defined-benefit plans no longer used in the private sector, is depressingly familiar: politically powerful public employees manage to elect friendly politicians, who then stealthily grant them inadequately funded, overly generous guaranteed pensions that impose staggering liabilities on taxpayers. Local elected officials (with the complicity of hired-gun actuaries) try to minimize and obfuscate the magnitude of these liabilities through accounting gimmicks and rosy projections regarding future investment returns. Ultimately, the extent of the underfunding gets exposed, but usually long after the responsible officials have left office. Taxpayers are left facing sharp tax hikes or cuts in municipal services, or both. In extreme cases, as in Detroit, San Bernardino, and Stockton, cities are forced to file for bankruptcy under Chapter 9.

In Texas, urban fiscal problems aren’t confined to Houston. Dallas faces crippling unfunded pension liabilities, estimated at $5 billion for its public-safety retirement system. The problem arose thanks in part to gold-plated benefits enacted more than two decades ago that allow the city’s police and fire personnel to start collecting pensions after 20 years on the job, even while they continue working and earning a guaranteed return of 8 percent or more on their pension money. The city faces other fiscal woes related to employee pay. Three years ago, Dallas officials restored so-called step-pay increases—automatic annual pay hikes based on years of service—to police and fire workers during negotiations with the union. (Though Texas doesn’t officially have collective bargaining for public employees, city officials can allow unions to bargain with them through a process known as “meet and confer.”) The weight of those extra pay increases is helping to crimp the city’s budget as the Texas economy slows. The city also faces additional costs because last year, it passed a $10.37 minimum wage that it requires city contractors to pay their workers. Prompted mainly by the growing crisis in the city’s pension fund and other fiscal concerns, both S&P and Moody’s downgraded the city’s credit rating last fall.

Further, in the guise of “local control,” municipal elected officials in Texas have increasingly been adopting progressive ordinances on issues that would normally be subject to state regulation (if at all). For example, Austin and about a dozen other cities passed a ban on plastic bags at grocery stores; the city of Denton banned fracking within city limits; Houston and Dallas adopted (and voters in Houston then repealed) measures mandating transgender restrooms; other Texas cities have mandated a higher minimum wage for their employees and contractors than state law requires; Austin’s city-owned electric utility has implemented “green energy” mandates—and so on. Austin—seemingly eager to become the San Francisco of the Southwest—recently enacted a “fair chance” ordinance that would forbid employers to ask applicants about prior criminal convictions. Governor Abbott has condemned these measures as “a patchwork quilt of bans and rules and regulations that are eroding the Texas model.” Last year, the Texas legislature overrode the local ban on fracking; Abbott favors a categorical prohibition of such measures.

Proponents of ad hoc local regulations contend that conservative principles support experimentation and innovation by Texas’s cities, using the analogy of “states’ rights” in our federal system—but cities, it’s important to remember, are creatures of state law. Abbott’s goal to rein in Texas’s unruly local governments faces massive resistance from the Texas Municipal League, a powerful lobbying organization representing the interests of 1,100 Texas towns and cities that employs more lobbyists in Austin than any other trade association. The irony is that local Texas governments use copious amounts of taxpayer money—which finances TML—to lobby the state legislature to permit them to impose more taxes and regulations. State senator Konni Burton, a Tea Party favorite from Fort Worth, has proposed legislation to bar the use of taxpayer funds for lobbying purposes.

While the state legislature lacks the constitutional authority to levy income or property taxes, local governments in Texas also impose one of the nation’s heaviest property-tax burdens. The Texas comptroller recently reported that state property taxes are rising 2.5 times faster than median family income. Cities are extending boundaries to expand their property-tax base, plundering the more affluent surrounding suburbs. A recent study by WalletHub estimated that Texas homeowners pay, on average, a real-estate-tax rate equal to 1.93 percent of a value of a home, the fifth-highest rate among states. Perhaps most startlingly, Texas is way out of step with most Republican-leaning states. Thanks to high property-tax rates in cities and suburbs, Texas taxes property like a Democratic state, the study found.

Abbott is right, then, to worry that Texas’s cities are drifting from the state model of low taxes, low spending, and low regulation—especially since liberal advocates at the local level seem more motivated than conservatives. Liberal activists in Texas gravitate to local government because they’re effectively shut out of state government and national politics. Local elected officials have some advantages: they usually serve on a full-time basis, year-round, unlike state legislators, who meet just 140 days every other year. Even the position of lieutenant governor—thought to be more powerful than the governor—is a part-time job, paying just $7,200 annually. Moreover, compared with the state legislature, where voting districts are huge and campaign costs imposing, it’s easier to win election to a city council, county board, or school district. And, as James Madison noted in Federalist 10, the influence of “factions” (his term for what we would now call special-interest groups) is greater in smaller governmental units than in larger ones. Public employees are an especially potent political force.

Simultaneously, many Republicans in Texas have become complacent. Content with their domination of state government, they pay too little attention to the mischief occurring in Texas’s cities, counties, and school districts. The debacle unfolding in Houston, easily preventable, illustrates the consequences of statewide conservatives’ inattention to localities. During recent legislative sessions, the pressing issues of local debt, rising property taxes, and unfunded pension liabilities have taken a backseat to “red meat” issues, such as “open carry” and “campus carry” of guns, defunding Planned Parenthood, and banning gambling on certain types of horse racing.

Two of Texas’s biggest industries: red meat and power production. (F. CARTER SMITH/BLOOMBERG/GETTY IMAGES)

They’ll need to wake up soon, if Texas wishes to preserve its thriving economy and unique cultural identity. The secret to Texas’s past success is that, even as the state became more urbanized, its citizens—drawn by opportunity—continued to view themselves as proud, self-reliant Texans. Low taxes and spending reinforce this identity. One of the primary reasons Texans support limited government, journalist Grieder suggests, is that they “never developed the habit of expecting much from their government.” High taxes and excessive government spending by Texas’s cities could change that. An entitlement mentality, once established, is hard to change.

In its 40th anniversary issue, devoted to “The Cities,” left-leaning Texas Monthly mournfully noted: “Texas has great cities, but in the hearts of its citizens it is not an urban state.” This is the essence of what makes Texas special and distinguishes it from its once-great counterpart, California. Texas’s productive, prosperous cities, unless brought back to the Texas model, may be the long-term undoing of the Lone Star State. Statewide elected officials and the Texas legislature must recognize that the state cannot succeed—and prosper—if its cities become dysfunctional urban fiefdoms resembling Chicago or Baltimore.

Top Photo: Prosperous Austin has become a magnet for millennials, whose voting patterns tend to be more liberal than those of typical Texans. (AARON MCCOY/GETTY IMAGES)

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