Does Texas’ Future Add Up?

The state struggles with an education crisis, income inequality and a growing generation gap.


Politicians tend to think in the short term. Every two to four years, they pledge “no new taxes” and to “cut the fat from state government.” These slogans are alluring to voters in a state that prides itself on a lean state government. Demographers take a longer view, however. If Texas doesn’t invest now in its social services, especially education, household incomes will plummet by 2040, says Steve Murdock, a Rice University professor. “There is no more significant indicator for economic prosperity than education,” he says.

Murdock has been sounding the alarm about Texas’ dismal education numbers and the growing gap between rich and poor since he served as the state’s demographer at the beginning of the decade. For legislators, 2040 might seem far away, but for a demographer like Murdock, it’s just around the corner. If state leaders don’t change course now, they’ll face a host of problems later: lower wages, a greater need for social services and a decline in the quality of living for Texans.

By 2040, there will be an estimated 33 million people living in the state. Texas residents will be divided into two camps: the young and the old. A majority of the younger population will be Hispanic, while the state’s older residents will be predominantly Anglo. The key to a viable future, Murdock says, is for Texas’ two dominant populations to “realize that they need one another.”

Hear Melissa del Bosque’s interview with KUT’s Jennifer Stayton.


Education Gap

Texas’ prosperity hinges on education. The numbers are troubling, however. The state ranks 36th in the nation, with just 71.9 percent of students graduating from high school, according to the U.S. Department of Education. African-American and Hispanic students are twice as likely to drop out as Anglo students. By 2040, at least 30 percent of Texas’ work force will consist of workers without a high-school diploma if current trends continue, Murdock says. “If we don’t close the gaps now, there’s going to be a significant reduction in household income later,” he says.

A high school dropout is more likely to earn poverty-level wages of about $14,500 a year. That’s at least $7,000 less than someone with a high school diploma. The mounting costs for social services and the prison system should worry state leaders. Nearly 75 percent of state prison inmates are high school dropouts. Every year’s worth of dropouts means a loss of $377 million in Medicaid, prison expenses and lost tax revenue, according to the Milton and Rose D. Friedman Foundation.

Another challenge is enrolling more students in higher education. Hispanics trail other students, making up just 29 percent of total college enrollment. In 2000, the Texas Higher Education Coordinating Board created the “Closing the Gaps 2015” program, with the goal of enrolling 630,000 more Texans in college, including 5.7 percent of the Hispanic population, by 2015.

Enrollment is increasing, but slower than educators hoped. The agency admitted in its 2009 report that it had fallen behind on its goals to recruit more African-American males and Hispanics. One big hurdle is cost. Those who do have high school diplomas struggle to pay increasing tuition rates. More than 60 percent of students apply for student aid. But state-based grant and loan programs like the Texas Grant Program and B-On-Time Loan Program have run out of funding. With an estimated $24 billion state budget shortfall in 2011, it’s doubtful that those coffers will be replenished any time soon. For many, a four-year college degree is already out of reach.

The economic gap will continue to widen if more Texans don’t seek higher education degrees. A person with a college diploma can expect to make $1 million more on average in a lifetime than a person without a high school diploma, says economist Ray Perryman, president of the Perryman Group, a financial-analysis firm.


Rich and Poor

Texas already has the second-largest economic divide between rich and poor, after New York. In the past two decades, the benefits of economic growth have favored the wealthiest, while the poor have seen little improvement. From 1980 to 2000, the richest 5 percent of Texans saw their average income increase 13.8 times as much as the poorest 20 percent of families. The middle class didn’t fare much better. The richest 20 percent of Texas’ population earned average incomes 2.9 times as large as the middle class did—an increase from 2.3 times in the early 1980s.

The median income, now $42,139, for Texas households, has lagged behind the U.S. median income, now $46,242, for decades. Nearly 30 percent of Texas households make less than that—$25,000 a year. Another 28 percent of the population have incomes between $25,000 and $49,999. Many of those lower-income households are Hispanic. In Texas, Hispanics not only earn less than their Anglo counterparts; they also earn less than Hispanics working in other parts of the United States, according to the Federal Reserve Bank of Dallas.

By 2040, there will be a large elderly Anglo population that will work longer and retire later. There will also be an ethnically diverse younger population, but fewer people of working age contributing to the tax base and Social Security because of Americans’ current trend of having fewer children.

Texas’ older residents will be counting on the reduced workforce to fuel the economy and pay into social service programs such as Social Security, Medicare and Medicaid. Three out of every four of those workers will be non-Anglo, according to Murdock. It’s to the benefit of all that Texas has a highly educated workforce that can significantly contribute to the tax base.

“I like to say, well, if I, as an aging Anglo, forget that the quality of services I’m going to have—fire, police and other services—depend on how well primarily the working-age population is doing, I really do so to my own detriment. Our fates are intertwined and related. How well our non-Anglo citizens do in Texas is how well Texas will do.”

Next year the first wave of Baby Boomers (born from 1946 to 1964) will turn 65. Because people are living longer, Texas will have a large population of retirees. States will need some sort of immigration—domestic or international—to provide the tax base for the social services those retirees will need, Murdock says. “Immigrants are at the paying ages, not the taking ages,” he says.

In Texas’ favor, our population is younger than most other states, thanks to immigration and a large Hispanic population with above-average birth rates. Many believe that Texas’ population boom is due to international immigration—illegal and legal—but at least 54 percent of Texas’ growth is from Texas residents, with 22 percent from domestic immigration. International immigration counts for 24 percent of the population increase. As Texans become older, they’ll need to rely on some immigrants to bolster the tax base. Some of the state’s success in 2040 will depend on whether the Texas leaders of today decide to welcome immigrants or pass increasingly xenophobic policies.


John Wesley Bishop, 59, reaches out to get a cup of hot chocolate from a mobile canteen set up by The Salvation Army in San Antonio. (photo by Shaminder Dulai/San Antonio Express News/Zuma Press)


Rural vs. Urban

The state is growing by at least 1,000 people a day, says Perryman. Texas still has the largest rural population in the nation, but it’s increasingly becoming an urban state with the majority of its population in an area called the “Central Texas Triangle,” which encompasses the metro areas of Dallas, Austin, San Antonio and Houston. Residents in rural areas such as the Panhandle and West Texas will be increasingly elderly and Anglo, while South and Central Texas and the urban corridor surrounding Fort Worth and Dallas will grow younger and more ethnically diverse. “We need to keep up with the infrastructure needs to serve the fast growing population,” Perryman says.

The state’s rural population will also continue to grow, albeit slightly, but it will be largely eclipsed by the urban and suburban growth. On the whole, rural Texans will be older than their urban counterparts.


Health Care

Texas will need a healthy work force and affordable health care for its large elderly population. State leaders need to do something drastic now to fix serious health inequities that already exist. Texas has the highest uninsured rate in the nation, with one in four residents having no health insurance. At least 21 percent of today’s children under 18 don’t have health coverage.

Will these children grow up to have a disproportionate amount of chronic illnesses? Not only are Texans becoming sicker, the consequences of uncompensated care means that every resident, business and local government in the state pays the extra costs of treating the uninsured. It remains to be seen what impact the recently passed federal health care legislation will have on these daunting numbers.


Tough Decisions

The state’s economic health in 2040 depends on whether its leaders today take a shortsighted approach to governing or choose to invest for the long term. With an estimated $24 billion budget shortfall this legislative session, lawmakers will be facing tough decisions that will have a ripple effect for future generations. “I hope that we don’t get into across-the-board cuts,” says Perryman. “When there’s budget cuts, education always seems to take it on the chin. We need some real leadership to prioritize our needs and make some tough decisions.”

If state leaders don’t make those tough decisions now, future generations could be less educated, less economically competitive, have higher levels of poverty and be in greater need of government assistance. It’s up to the state’s leadership and its people to reverse that course.

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