From Bragging to Begging

Hard times hit the Lone Star State

It was not a moment of pride for Texas, or for Republican Governor William Clements, who is in the midst of a tough re-election fight. Growing layoffs have brought the state unemployment compensation fund to the edge of bankruptcy. Clements last week was forced to summon a special session of the legislature to bail out the fund. After two days of partisan debate, both senate and house passed a measure authorizing the state to borrow up to $350 million (at 10% interest) from the federal Unemployment Trust Fund. The legislative package will also require employers to increase their contributions to the fund by about $180 million a year.

Democrats, who control both houses, went along with the deal, but not before having some rhetorical fun at Clements’ expense. Representative Robert Bush of Sherman complained that “we’ve gone from bragging to begging.” Clements’ opponent in November, State Attorney General Mark White, noted that the incumbent “has the dubious distinction of being the first Governor in the Southwest to preside over the bankruptcy of a state unemployment compensation fund, and this is a disgrace.” The Governor accused the Democrats of “demagoguery.”

At long last the recession has caught up with a state that had seemed immune to the general economic malaise. A year ago the major industrial cities of Texas were meccas for workers from the Midwest who migrated south in search of jobs. In August, the state’s unemployment rate was 7%—significantly below the national average of 9.8%, but up from last December’s 4.6%. Today labor leaders are warning would-be immigrants not to consider Texas as a new home unless they have jobs solidly lined up.

A major factor in Texas’ new economic blues has been depression in the energy industry. A worldwide glut of crude has brought a sharp drop in oil prices, killing incentives to drill new wells. The number of active drilling rigs in the state has dropped 40% since December, and refineries and petrochemical plants in the state’s eastern counties have been operating at about 70% capacity for at least a year. In the Houston bankruptcy court, 98 energy-related companies have filed for Chapter 11 protection so far this year.

In the East Texas town of Lone Star (pop. 2,036), the Lone Star Steel Co. shut down last month, laying off 3,500 workers. Nearly 75% of the town’s residents work at the plant, and most of the others are employed by firms that depend on the factory, which made tubular steel for oil pipes. But when no one is drilling, no one is buying tubular pipes. Opinion in Lone Star is divided about when, or even whether, prosperity will return to town. “There’s a lot of people leaving, and we know we’ll lose some good citizens,” says B.R. Mattox, a laid-off steel worker who is also Lone Star’s part-time judge. “But most of us are taking the attitude that this is a four-to-six-month ordeal.”

Says Dale Crumbaugh, a labor-market analyst for the Houston branch of the Texas Employment Commission: “Blue-collar workers tied to the oilfield industry are the ones suffering the most from layoffs here.” For example, Hughes Tool Co., a major oil-equipment supplier, has laid off 2,500 workers nationwide this year; 1,800 of them were employed in Houston. Other industries are not immune. Layoffs of 7,000 workers at Texas Instruments Inc. over the past 18 months included 3,000 Texans.

In May, 6,000 Texans lost their jobs when Braniff International went bankrupt. Some former employees of the airline have been laid off by the companies that subsequently hired them, while others found themselves in unacceptable working conditions. Steve Suhn, 30, a former reservations supervisor, quit his job as a business manager with a money-transfer company when his duties were increased but his salary did not keep pace. “They wanted airline-quality work but wanted to pay peanuts,” complains Suhn, who, despite being unemployed once again, insists, “I’m not as freaked out as I was after Braniff.” Like many of its former employees, he hopes that a new airline will somehow rise phoenix-like from the ashes of the old.

Other events beyond the control of Texans added to the economic gloom. Spring rains and hail caused an estimated $686 million damage to cotton and wheat crops in the state. The threat of bankruptcy in Mexico and last month’s devaluation of the peso sent shoppers south of the border in search of bargains, thereby bringing stores in El Paso and other cities along the Rio Grande to the edge of insolvency. Joe Castro, manager of an El Paso camera store, says the devaluation cut his business 50%. He is now ready to “kiss the rest of the year goodbye.”

The persistent economic troubles should help Democrats at the polls in November, but the experts are not sure how much. State Democratic Party Chairman Robert Slagle advises that the anger of the unemployed may not automatically translate into an anti-Republican tide. “It’s hard to gauge what people will do who lose their jobs. You wonder if they’ll vote at all,” Nor is it clear what hard times will do to the Texas psyche, especially in the oil business, where prosperity flourished even when other industries were hurting. “It was more shocking than expected,” says Richard Murray, a pollster who teaches political science at the University of Houston. “People didn’t think that the bottom would fall out of the oil boom so precipitously.” The bust may not last. But somehow everything in Texas seems bigger, and its citizens have come down with a whopping case of Lone Star State blues.

— By Don Winbush.

Reported by Sam Allis/Houston