Commentary: What Texas manufacturers need

By David Hendricks
San Antonio Express-News

Texas manufacturing shows a lot of momentum and optimism as Tony Bennett takes over as president of the 450-member Texas Association of Manufacturers in Austin.

The oil-and-gas industry is growing the fastest, surging as drilling in South Texas’ Eagle Ford Shale and the Permian Basin are helping keep manufacturers of petrochemicals and petroleum products busy.

Bennett was a Texas Association of Manufacturers co-founder in 2005 and served as its first chairman. His 33-year business career includes serving as a former executive at Temple-Inland. As the association’s top staff person, Bennett is eyeing the organization’s priorities for the 2013 Texas legislative session.
Skills development, taxation, incentives and water top his list.

On skills development: The association would like the legislature to tweak its mandatory high school math and science curriculum requirements so that manufacturing skills are worked into classes, especially for students who do not plan to attend college, Bennett said.

More flexibility could reduce dropout rates, he said. “There’s lots of experimentation (in education and training programs) in and out of Texas,” Bennett said. “The legislature will hold hearings on this.

“Manufacturing jobs are high paying and have great benefits,” Bennett said. “For each manufacturing job, 2.5 service-sector jobs are created.”

Bennett is correct. Manufacturers are having trouble finding skilled workers partly because high schools have eliminated vocational courses, once called “shop” classes.

On taxation: The association would like to preserve the revenue-based business tax, called the margins tax, that started in 2007 because it captures more Texas businesses than the loophole-filled franchise tax before it, Bennett said.

The association is watching ongoing litigation over Texas’s public school finance system because court rulings could push Texas toward a statewide property tax. Bennett said he does not anticipate a statewide property tax to be approved during the 2013 session. “We could see it down the road,” he said.

Manufacturers also would like to see a research-and-development tax credit added for Texas manufacturers, Bennett said. The credits work well in other states.

Bennett is correct again, except that the margins tax ought to be tweaked to exempt companies that lose money. Some unprofitable firms must pay a tax on revenues anyway
.

On incentives
: Bennett said he likes Louisiana’s 10-year, property-tax exemption on manufacturing equipment because it adds jobs and improves plant performance. Texas could add a similar incentive to its main incentive program, the Texas Enterprise Fund, he suggested.

A new-equipment incentive is worth considering. Texas ought to match what neighboring states offer.

On water: The association is watching the legislative fallout of the state’s prolonged drought, Bennett said.

How will new water resources be funded? Will lawmakers mandate permanent conservation measures that must be followed even when the drought ends? Those are good questions.

Manufacturing companies employ more than 838,000 Texans. They are among the best-paid workers in the state. Manufacturing is a critical economic sector that needs more skilled workers, appropriate taxation and sufficient water.


Hendricks is a reporter and columnist.