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Few states top Texas for financial security

 

Another flurry of headlines and reports caught my eye over the past few days, as they placed Texans among the worst off. The basis was a recent study by the Corporation for Enterprise Development, which ranked Texas 41st among all states in terms of the financial security of residents. Without a doubt, there are families struggling, and the recent recession has taken a toll on many households’ savings and other money assets. However, Texas has avoided some major national problems (such as the severe housing market weakness in many areas), and the state economy continues to outperform most others. The reasons for the apparent disparity are somewhat subtle.

The Corporation for Enterprise Development is a Washington, D.C.-based think tank. It espouses ideals such as ”expanding economic opportunity” and fostering “social innovations that build wealth in low-income families and communities.” Its priorities include savings and financial security, affordable housing, entrepreneurship, and economic development. The Corporation for Enterprise Development recently released its “Assets & Opportunity Scorecard,” billed as a “comprehensive look at wealth, poverty, and the financial security of families in the United States.” By financial security, the report refers to having the assets (such as cash, a house, a car, etc.) to deal with emergencies or longer-term needs. All states (and the District of Columbia) are ranked along a spectrum of parameters and, as noted, Texas comes in at 41.

Among the five areas of interest where the Corporation for Enterprise Development assigns grades, the worst was health care, which essentially boils down to the proportion of people who are uninsured. I couldn’t agree more with this one; underinsurance has long been a problem in Texas. I’ve analyzed the situation a number of times from multiple perspectives: Medicaid, CHIP (the Children’s Health Insurance Program), private insurance, indigent care, public hospitals, and many others. I serve on the board of one of the largest health insurance providers in the nation, and I am a small business owner. No matter how you slice it, insufficient insurance is a big problem in the state. It strains the entire system of health-care provision and leads to a host of inefficiencies and higher costs. The difficulty, of course, is how to solve the underinsurance problem, particularly given tight budget conditions and current and evolving demographics. It will require a combination of regulatory reform, innovative procedures to improve efficiencies, and intelligent use of resources.

Texas also didn’t compare well in the area of education (largely due to our low scores in the areas of high school graduation and eighth-grade reading proficiency). The “high school degree” statistic used in the study was 80.7 percent compared to 85.6 percent for the United States, which puts the state dead last.

Clearly, this situation is troubling, both now and in the future, and keeping kids in school and preparing them for life (and the workforce) should be a primary goal. We rank 42nd for eighth grade reading, something we should also work to improve. Good signs are the relatively high rankings in early childhood education enrollment (12th), eighth grade math proficiency (14th), and the fact that the average college graduate debt is lower ($20,919 in Texas compared to $25,250 nationally).

Texas’ best score was in the area of housing and homeownership. While the rate of homeownership is slightly lower than the national average, we score very well in terms of affordability, the low percentage of foreclosures, and the relatively small differences in ownership levels among races. The Lone Star State didn’t escape the downturn entirely, but we dodged the worst of it.

The Corporation for Enterprise Development ranked Texas low (34 of 51) for the “businesses and jobs” category. I respectfully disagree. It looked at a variety of measures and found that the state doesn’t compare well for some (such as small business ownership rate, business creation rate, and retirement plan participation).

Certainly, we would like to see improvement, but the bottom line is that Texas businesses added some 260,000 net new jobs in 2011, and there have been job gains for the past 20 months. A host of publications and other studies rank the state among the best for small business and finding a job in the decades to come, and I fall squarely in this camp (though we do face some challenges).

In terms of the “financial assets and income” section of the Corporation for Enterprise Development analysis, Texas ranked 37th based on poverty rates and various banking measures. As I’ve discussed in prior columns, measuring poverty is a difficult task.

The number reported for income poverty by Corporation for Enterprise Development for Texas households (15.7 percent) is significantly higher than that reported by the Census Bureau report, which Corporation for Enterprise Development itself calls the preferred source (Texas at 13.8 percent for families).

Subtle differences in definitions aside, it is important to note that of the 10 urban areas found to be least expensive according to the widely used American Chamber of Commerce Research Association (ACCRA) Cost of Living Index, five of them are in Texas. To the extent that this fact is not fully incorporated, the results are skewed.

Any ranking is, by definition, shaped by the analysts’ particular areas of interest and the weights assigned to various attributes. I agree that there are some significant problems facing Texas, particularly with regard to health insurance and educational attainment. However, I would argue that one of the most important aspects of financial security is the ability to get a job, and few states can top Texas in that all-important category.

Dr. M. Ray Perryman is president and chief executive officer of The Perryman Group (www.perrymangroup.com). He also serves as institute distinguished professor of economic theory and method at the International Institute for Advanced Studies.

 
 
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