As Texas Economy Expands, State Pins Future on Educating Youth

Texas has had its share of resource-based business empires. Cotton, cattle, timber, and oil have all had their day. The next Texas empire will be built on human resources - and it could make the oil boom ``look like a barn dance,'' says John Sharp, the state comptroller.

``We have young people. The work force of the future is here,'' adds economist Ray Perryman, a consultant in Waco. Among the 15 most populous states, Texas has the highest percentage of people 17 years old and under. It leads the United States in immigration of young families. Six of the 10 fastest-growing regions in the country are in Texas.

Mr. Perryman hosted a conference in Austin last week, where Mr. Sharp and other speakers assessed the state's economy and where it is going.

If Texas were a nation, its gross product would be the 10th largest in the world. Sharp calls it ``a $400 billion corporation without a plan.'' To fill in that blank, his office will soon release ``Forces of Change,'' a sort of ``Megatrends'' report for Texas.

One conclusion: The growing population will be a liability if the state does not change its ways, but an asset if it does. For instance, the state will need to offer lifelong schooling, Sharp says. That is because the workers who retire in 2025 will have changed jobs anywhere from five to seven times.

Texas also will need to give retirees, who frequently vote against school bonds, a stake in the schools. Crime, infrastructure, and environment are other areas Texas must address, the comptroller says.

Sharp's work on a performance audit of the state government was embraced by the Clinton administration as a model for Washington's ``reinventing government'' drive.

Texas ought to consider ``deinventing'' its government, Sharp says, because 547 agencies, commissions, and advisory boards set policy and duplicate efforts while the relatively powerless governor is held responsible.

Texas has sorted out some problems since the oil bust of the mid-1980s. Half as many banks do business in the state than a decade ago, but they are making more money, Perryman says.

The new prevalence of out-of-state bank ownership does not mean that Texas deposits will be loaned out of state. Rather, out-of-state deposits will flow in, Perryman predicts. ``As long as we are leading the nation in growth, we will get the money,'' the economist says.

Texas has led the nation in job growth for five years. It is the only state among the largest 15 that did not lose manufacturing jobs last year. It gained 15,000 jobs in 1993, and 165,000 total new jobs in all industries.

The North American Free Trade Agreement will be more of a benefit to Texas than any other state, Perryman says. The value of Texas goods exported to Mexico rose by $12 billion between 1987 and 1992 to stand at $19 billion - three times as much as from second-place California.

ON the other hand, weak prices will continue to hurt the oil sector. Foreign production is plentiful, and Iraq is waiting to get back into the market.

Perryman forecasts US real gross domestic product at 3.1 percent this year. Texas will fare slightly better at 3.2 percent. Employment will grow 2 percent in the US and 2.1 percent in Texas.

By 2020, Perryman forecasts 141 percent job growth in medical services and 134 percent in business services in Texas. Employment will more than double in engineering services, legal services, and air transportation, he says.

Farming will lose 27 percent of its jobs, railroads 23 percent, textile manufacturing 22 percent, military 19 percent, apparel manufacturing 17 percent, and pipelines 11 percent, he predicts.

``All economic development is local,'' says William Shelton, a development adviser in Fort Worth. In 1989 the Texas Legislature passed a law allowing cities to levy up to half a cent to fund economic development.

More than 100 cities have done this, raising $36 million last year. Amarillo alone nets $8 million a year, far more than the state budgets for statewide efforts.

For five years Texas has campaigned in California more than any other state for companies seeking to relocate. During that time, 10 percent of the jobs California lost to relocation came to Texas.

But California has begun to pass pro-business laws to keep firms from leaving. Shelton says this year's Trends 2000 exhibition, where California companies can learn about opportunities out of state, will indicate whether the trend will continue.

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