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Opinion

Why Texas is winning

The Nevada state seal inside the Legislature on Wednesday, Aug. 5, 2020 during the sixth day of the 32nd Special Session in Carson City. (David Calvert/The Nevada Independent)

In a provocative opinion piece featured in The Nevada Independent last week, Reno-based attorney Brett Sutton posited that Fortune 500 companies – such as Tesla and Oracle – exiting California had chosen Texas “and not Nevada” as their destination because Nevada’s current governor had signaled that “he doesn’t really care about the financial health” of gaming companies and other businesses. However, a comparison of innovation indicators suggests there is a plausible alternative explanation as to why Texas is successfully attracting California-based companies that are seeking greener pastures.

Companies have attributed their exodus from California to the “high cost of living and hefty state taxes.” Against those factors, Nevada is arguably an attractive and competitive destination. The Silver State’s tax environment consistently earns high marks in national comparisons. Nevada is very similar to (and often better than) Texas in that regard. For example, the Tax Foundation ranked Nevada 7th in its 2021 State Business Tax Climate report, followed by Texas (11th); both states ranked considerably higher than California (49th). In CNBC’s America's Top States for Business 2019 report, Nevada and Texas were both tied at 17th in the ‘Business Friendliness’ category, higher than California (49th). Nevada ranked 15th in the ‘Cost of Doing Business’ category and Texas ranked 19th; California was last. Given these metrics and the geographic proximity of Nevada to California, it is curious why companies are opting for Round Rock and not Reno.

But these successful companies, many of whom are tech behemoths, recognize that a low-tax environment is only one variable in the cost-benefit analysis that informs their long-term business strategy. The innovation ecosystem – e.g., research and development (R&D) activity, investment in technology and innovation, a high-skilled workforce, and a community of peers – is an important consideration. Against these metrics, Nevada falls short. Very, very short.

Below are several indicators associated with R&D, investment, and innovation. (Some of these indicators were originally presented in the 2011 economic development report authored by Brookings Institution, Brookings Mountain West, and SRI Economic Development.) While the measures account for the differences in population between Nevada and Texas (and California), I include Utah, which is considered one of Nevada’s peers, given its population size and geographic location.

Variable Nevada Texas California Utah
Earned Doctorates, 2019

Per Capita (in 10,000)

217

0.70

4,166

1.4

6,342

1.6

549

1.7

Science and Engineering Research Space, 2019

Per Capita

916,000 ft2

0.30 ft2

16,539,000 ft2

0.57 ft2

24,784,000 ft2

0.63 ft2

2,844,000 ft2

0.89 ft2

University and Private R&D Spending, millions, 2018

Per Capita

$7.1 million

$2.3

$225.4 million

$7.8

$554.8 million

$14.0

$9.4 million

$2.9

NSF Awards Count, 2019

NSF Awards, millions, 2019

NSF Awards Value, Per Capita

66

$26.0 million

$8.4 

741

$430.7 million

$14.9

1,387

$981.7 million

$24.9

125

$54.2 million

$16.9

Nevada ranks 48th (out of 51 states and the District of Columbia) in the number of earned doctorates, well behind Texas (28th); California and Utah rank 24th and 21st, respectively. Science and engineering research space in Nevada has actually declined in the last decade. In CNBC’s America's Top States for Business 2019 report, Nevada ranked 44th in Technology and Innovation, trailing Texas (10th); California took top honors in this category.  

The quality and preparedness of our Silver State workforce also lags that of Texas. The CNBC 2019 report includes a ‘Workforce’ category that assesses workforce educational attainment, number of available employees, concentration of STEM workers, union membership, and state right to work laws. In this category, Nevada, whose college attainment rate is below the national average, ranks 48th, well behind Texas (4th) – and California (10th). According to the U.S. Bureau of Labor Statistics, Nevada ranks 50th (out of 51 states and the District of Columbia) in the percent of the workforce employed in science, technology, engineering, and mathematics (STEM) jobs; Texas ranked 19th (and California ranked 7th). 

The supply of STEM workers in Nevada remains limited, hindered, in part, by pipeline issues that start with the K-12 education system. One professor at UNLV noted that only a small percentage of freshman computer science majors complete the program; many pursue different degree programs after encountering the advanced math courses required by the program. The lack of skilled workers hinders the ability of tech firms to expand. Leadership at companies who employ significant numbers of software engineers and information technology trained workers shared that it is difficult to hire the workers they need locally.

Sadly, Nevada’s business-friendly climate is not enough to overcome the chronic underinvestment and neglect of the institutions and systems that are critical to the Silver State’s long-term economic development. And it is too easy (not to mention unfair and inaccurate) to blame one person for our current state of affairs. Data reveal long-term systemic problems for which we bear collective responsibility.

Nevada has underinvested in education, particularly higher education, and has struggled to build a workforce ecosystem that reflects a productive alignment among our education and training systems and employer needs. (It is worth noting that Nevada’s K-12 education system fares better on some K-12 Achievement assessments than California and Texas). As we know, Nevada’s higher education budget sustained bigger cuts than the K-12 education budget in the July Special Session. Even before the recent round of cuts, higher education spending in Nevada was 23 percent lower than pre-Great Recession levels (compared to K-12 per pupil spending, which was only down only 3 percent). A comparison of higher education spending in Texas (and California and Utah) found that Nevada has “below average funding” while Texas (and California and Utah) have “above average” funding. In 2018, per capita higher education funding was $205 in Nevada, compared to $322 in Texas. (Per capita higher education funding levels are even higher in Utah and California, $326 and $448, respectively.)  

Unfortunately, there is no single, easy fix to these long-term systemic problems. Strengthening Nevada’s value proposition to attract new businesses and long-term investment will require leadership, strategic focus, intentional planning, broad collaboration, and of course, resources.

Fortunately, we have (relatively) new but seasoned professionals leading our colleges and universities who understand the critical role higher education should play in our state’s economic development. And we have an unprecedented opportunity.

Without warning, the pandemic has turned our education delivery system on its head, prompting higher education (and K-12) officials to reflect, revisit, and challenge entrenched practices and long-held assumptions. While Nevada may not have financial resources in the near term, it does have time (and an opportunity). As we move through the next two years of budget constraints, stakeholders in our higher education ecosystem (e.g., colleges and universities, workforce development intermediaries, employers, foundations, etc.) should initiate a system-wide visioning exercise and strategic planning process that seeks to ‘Reimagine Higher Education’ in Nevada. Efforts to assess the Silver State’s higher education system to determine whether it is organized to support, fund, and scale innovation and produce the skilled workforce for tomorrow’s jobs requires only leadership and vision, not resources. Question 1 (and the outcome) revealed two things: 1) There are a significant number of people who believe Nevada’s higher education system is not working for many of its stakeholders; and 2) There are many aspects of Nevada’s higher education system that warrant review and evaluation, none of which have anything to do with governance. An exercise to assess Nevada’s higher education system over the next 18 months can help guide and inform the allocation of resources when the state has fully recovered and money is available to invest in economic development. Efforts to invest in our innovation system will take time, but the payoff could be significant.

Texas may have won today.  The question is whether we are collectively committed to ensuring Nevada is in a position to win tomorrow.

Nancy Brune, Ph.D. is the founding executive director of the Guinn Center, a statewide, independent, nonpartisan policy research center. She is a senior fellow at the Boyd School of Law and serves on the Law and Leadership Program Advisory Council. Dr. Brune received her Ph.D. from Yale University and her Master of Public Policy and B.A. degrees from Harvard University. Prior to joining the Guinn Center, she was a senior policy analyst at Sandia National Laboratories, where she worked on issues of national security. You can follow her on Twitter @NancyBrune or email her at [email protected]

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