important than protecting children from abuse and neglect. At present,

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1 VOL. 33, NO. 9 IN THIS ISSUE A Texas Crisis: Toward Reducing Child Maltreatment A Texas Crisis: Toward Reducing Child Maltreatment Child maltreatment is a tragedy that transcends dollars and cents, but State budget priorities may well lead to only band-aid solutions. The Perryman Group s extensive research indicates spending which reduces child maltreatment or improves foster care will be repaid many times over. The Capital Region The state s Capital Region includes ten counties and the Austin-Round Rock Metropolitan Statistical Area (MSA). The region is home to over 2 million residents (7.63% of the state s population) and accounts for 8.21% of all wage and salary jobs in Texas. Economic Development News Around the State Texas is a top choice for new business investments, expansions, and jobs. For the latest economic development news in the state, check out this section. Perryman s Perspective: To Choose or Not to Choose: The School Choice Debate The idea behind school choice is that competition can improve the education system. However, with Texas chronically underfunded system, the result could be further deterioration. There is no social issue more important than protecting children from abuse and neglect. At present, millions of children in the United States are living in households where abuse occurs. More than three million experienced abuse for the first time this year, and many will continue to be maltreated. It s nothing short of tragic, and the consequences for the children involved often last a lifetime. Dealing with maltreatment is difficult due to both the magnitude and complexity. Resources are insufficient, resulting in overloaded caseworkers, inadequate and disorganized documentation, and too few options in the form of quality foster care homes and support (or efforts to reduce the need for such care). Because of years of chronic underfunding and neglect, nowhere is the problem more acute than in Texas. RECENT ISSUES Child Protective Services (CPS) has recently been under scrutiny for apparent failings of the system to protect vulnerable children in Texas. Although a common guideline is that each caseworker should be in charge of no more than 14 cases, the current average is near 30 per worker and up to 40 in urban areas. With starting salaries in the low $30,000s and significant job stress due to the nature of the work, the high workload causes extremely high turnover rates. Recent reports indicate turnover of 31% in San Antonio and 57% in Dallas in This turnover leads to more cases added to the employees that remain at CPS, and hiring of new caseworkers is difficult. There are currently hundreds of vacancies. Millions of children in the United States are living in households where abuse occurs. The number of children in foster care permanent managing conservatorship situations, in which the child has been in state custody for 12 to 18 months, has caused foster group homes to be overfilled. There have been reports of children forced to sleep in state offices and other locations for lack of a better alternative. The number of employees of CPS cannot keep up with the number of children requiring help, which has left more than 2,800 children THE PERRYMAN GROUP Page 1

2 named in maltreatment allegations unseen, as of Oct. 17. Of the 2,800 unvisited children, 511 were named Priority 1 cases, meaning that they are at top risk of being harmed and need attention within 24 hours. Priority 1 cases can sometimes go days without contact by CPS, putting these children at even greater risk of harm. Given the reality of finite and scarce resources and the current political climate, there will be serious debate about whether to commit new resources and, if so, how much. To combat these issues, many requests were made by Department of Family and Protective Services Commissioner Henry Hank Whitman, including adding 550 new front-line investigator and caseworker positions and 279 supervisor, support staff, and training and hiring specialist positions. Whitman also asked for a $12,000 per year raise for 7,100 CPS workers. More employees combined with a salary increase could help combat the high caseload of the existing CPS caseworkers, which could in turn lead to more children receiving more personalized care. An emergency salary increase has been approved. COURT MANDATED IMPROVEMENT In response to the situation in Texas, US District Court Judge Janis Graham Jack ruled in December 2015 that the state s foster care system was unconstitutional in that it failed to protect children from harm. She appointed special masters to come up with proposed solutions and reforms, and the recommendations were filed in November. Thirty-one steps/processes/tasks are recommended, complete with subtasks, implementation dates, and monitoring methodology. Monthly face-to-face visits by caseworkers are recommended, including time alone with each child. Other improvements include better case file systems, 24-hour hotlines to report abuse and neglect, target caseload levels and changes designed to reduce turnover among workers, and multiple measures designed to increase the safety of children in foster care. Failing to address this issue is not only a human tragedy, it is also very short-sighted. Obviously, protecting young people from maltreatment is the primary goal of any and all of these actions. However, given the reality of finite and scarce resources and the current political climate, there will be (and, in fact, already has been in Direct social costs of child maltreatment include incremental expenses for health care (childhood and adult), social welfare services, criminal justice (juvenile and adult), and education. response to hundreds of unaddressed situations) serious debate about whether to commit new resources and, if so, how much. The State is challenging the requirements across the board, and interim legislative actions certainly helped, but have only provided a fraction of the resources requested by CPS. Failing to address this issue is not only a human tragedy, it is also very short-sighted. COST OF MALTREATMENT The cost of maltreatment is measurable from an economic perspective. A number of studies have quantified the direct social costs (health care, social welfare, juvenile and adult crime, and education costs) associated with child maltreatment. About two years ago, The Perryman Group (TPG) compiled and analyzed available information, updated and refined cost estimates, and calculated the total economic costs as the various direct effects work their way through the US economy in a pro bono effort to inform the discussion. Page 2 THE PERRYMAN GROUP

3 Millions of Dollars Cost of Each Individual Occurrence of First-time Child Maltreatment to the US Economy (2014 estimate over the lifetime of the affected individual) $0.0 -$0.2- -$0.4- -$0.6- -$0.8- -$1.0- -$1.2- -$1.4- -$1.6- -$1.8- -$2.0- Total Expenditures -$1.800 Source: The Perryman Group -$0 -$50 Gross Product -$0.800 Personal Income -$0.500 Cost of Child Maltreatment in Texas (lifetime effects based on 2014 first-time incidence) Total Expenditures Gross Product Direct social costs of child maltreatment include incremental expenses for health care (childhood and adult), social welfare services, criminal justice (juvenile and adult), and education. These costs total hundreds of thousands of dollars per victim. Education level, productivity, and ability to work are affected, thereby reducing lifetime earnings. This loss, in turn, has ripple effects throughout the economy, which TPG was able to comprehensively model. In Texas, child maltreatment in 2014 was estimated to lead to losses of $454.9 billion in lifetime spending, $206.7 billion in lost gross domestic product, and 2.1 million person-years of employment. -$100 Billions of Dollars -$150 -$200 -$250 -$300 -$350 -$400 -$450 -$500 Source: The Perryman Group -$ $ million Person-Years of Employment The economic consequences of child maltreatment in a given year (2014, which is the year TPG performed the study) were estimated as they would likely be manifested over the life cycle of the affected individuals. (Given increasing costs of services, such as education and health care, the lifetime totals have likely risen over the past two years.) This approach, known as an incidence approach is commonly used in health-related studies and is appropriate for policy evaluation. The Perryman Group estimates that each individual occurrence of firstcontinued on page 6 THE PERRYMAN GROUP Page 3

4 An Economic Overview The Capital Region A total of ten counties are included in the Lone Star State s Capital Region. One metropolitan statistical area (MSA), the Austin-Round Rock Metropolitan Statistical Area, also lies within the region. With a population of approximately 2.06 million, the Capital Region represents 7.63% of all residents in the state. The area also accounts for 8.21% of all wage and salary jobs in Texas and generates 7.58% of the real gross product (RGP or output) in the state. The Capital Region s population is forecast to increase at a compound annual growth rate (CAGR) of 1.96% over the long term ( ). During the same 25-year period, real personal income (RPI) is expected to grow at a CAGR of 4.17% and real retail sales is projected to increase at a CAGR of 4.74%. The Capital Region is home to one of the most vibrant economies in the country. In Austin, the technology industry is a driving force behind its economic success and continues to attract skilled workers to the area. Samsung Austin Semiconductor LLC had a $3.6 billion impact on the regional economy in 2015 and supported 10,755 area jobs. Moreover, the company plans to invest over $1 billion by the first half of Apple has also been a major player in the city creating more than 2,000 jobs since In recent news in the city of Round Rock, Performance Services announced its plan to establish a regional headquarters here investing $12 million and building a 60,000 square foot facility. Construction is also underway on a large mixed-used development in San Marcos. Located near the area s outlet malls, the $475 million project on 420 acres will include 1,000 single-family homes and up to 850 apartments along with some office and retail space. Capital Region s RGP to Expand Over Long Term From 2015 to 2040, the area is expected to expand at a CAGR of 3.75%. This pace is above the 3.35% CAGR forecast for the state as a whole. Sectors with the largest annual expansion rates include durable manufacturing (4.53%), services (4.42%), and information (4.26%). Area to See Solid Gains in Wage and Salary Employment Total wage and salary employment in the Capital Region is projected to expand at an annual pace of 2.0% during the next twenty-five years. The area s services sector is forecast to lead the pack growing at a CAGR of 2.78% over the long-term period ( ). The graph below displays projections for the Capital Region s total RGP by sector for the year Projected Sectoral Composition of Real Gross Product for the Capital Region 2040 Agriculture 0.07% Mining 2.28% Government 7.36% Construction 3.64% Services 32.35% FIRE 17.09% Note: TWU is Transportation, Warehousing, & Utilities FIRE is Finance, Insurance, & Real Estate Source: The Perryman Group Durable Mfg % Nondurable Mfg. 1.79% Trade 14.26% TWU 1.73% Information 7.03% Projected employment growth and CAGRs, along with the percentages of total employment in 2040 for the various sectors are noted in the following table. Growth in Employment in the Capital Region by Industrial Sector: Compound Percentage Annual of 2040 Growth Rate Employment Agriculture 0.31% 0.16% Mining 1.24% 0.44% Construction 1.24% 4.37% Durable Mfg. 0.64% 3.22% Nondurable Mfg. 0.71% 0.73% Trade 1.67% 14.49% TWU 1.38% 1.48% Information 1.68% 2.45% FIRE 1.57% 5.34% Services 2.78% 53.97% Government 0.80% 13.35% Compound Annual Growth Rate reflects changes in the size of the base used to calculate growth. Page 4 THE PERRYMAN GROUP

5 Economic Development News from Around the State Waco: $40 million senior living complex, The Delaney at Lake Waco, being built. The 167-unit, 4-story upscale complex on 13 acres is expected to be ready in August Owentown: GG Distributing moving to Smith County site, investing $15 million. The alcoholic beverage wholesaler plans to create up to 185 jobs over the next five years. Tyler: Life jacket maker Kent Sporting Goods Co. is adding another facility here. Opening 92,000 sq. ft. distribution center with more products like snowboards, wakeboards. The University of Texas at Tyler recently broke ground on a 140,000 sq. ft. project. The $56 million College of Business and Technology building should be complete in Roanoke: North Carolina-based tire supplier to open regional distribution facility. American Tire Distributors locating to 756,000 sq. ft. warehouse, creating around 60 jobs. Irving: OKI Data Americas plans to create over 100 jobs for its new office in city. Company markets printers and solutions & will be receiving Texas Enterprise Fund grant. Allen: Law enforcement video systems maker to build corporate headquarters here. WatchGuard Video to invest $46 mln in 200,000 sq. ft. facility. 280 to 300 initial workers. Pearland: Swiss pharmaceutical firm is adding space to project under construction. Lonza Houston Inc. s biotech facility to now total 250,000 sq. ft. & will be ready late El Paso: Topgolf is planning its tenth Texas location here, should open late The 65,000 sq. ft. complex is expected to attract about 450,000 visitors during its first year. Temple: The Hub, a new shopping spot in city s downtown, starting to take shape. Variety of specialty retailers locating to the 22,000 sq. ft. development in historic building. Sugar Land: Leading provider of facility solutions to bring about 390 jobs to city. ABM relocating its corporate shared services operations to 62,000 square foot office space. Longview: Nationstar Mortgage opens customer care center with over 60 workers. During the next 3 yrs, the company plans to create 600 jobs for the loan-servicing facility. Want to include a business announcement for your community? Let our editors know what s taking place in your neck of the woods. Share the details of recent economic development happenings in your area. The Perryman Report & Texas Letter is read monthly by the state s most notable leaders. submissions to info@perrymangroup.com or send fax to THE PERRYMAN GROUP Page 5

6 continued from page 3 Every dollar of State funding required for Foster Care Redesign returns about $3.44 in ultimate revenue or reduced costs to the State. time child maltreatment costs the US economy about $1.8 million in total expenditures, $800,000 in gross product and $500,000 in personal income over the lifetime of the affected individual. In Texas alone, child maltreatment in 2014 was estimated to lead to losses of $454.9 billion in lifetime spending, $206.7 billion in lost gross domestic product, and 2.1 million personyears of employment. (Because of cost increases in services as noted above, the failure to address the issue at its core, and the upward trend in the incidence of child maltreatment, these estimates are likely understated.) ROLE OF FOSTER CARE REDESIGN Part of the solution to child maltreatment is the availability of alternatives such as quality foster care. A well-functioning safety net system can both reduce the likelihood of further abuse and ameliorate the effects of past abuse. As noted, however, the Texas foster care system is broken. One promising initiative is Foster Care Redesign, which changes the way the Department of Family and Protective Services procures, contracts, and pays for foster care and other services to children in foster care and their families. Rather than a statewide model, the redesigned structure would be community based, with a single contracted entity (the Single Source Continuum Contractor or SSCC) responsible for ensuring the full continuum of foster care and other services for children in specific geographic areas (catchment areas). The SSCC would be accountable for these children achieving positive outcomes while in foster care. Child maltreatment is a tragedy that transcends dollars and cents. Nonetheless, budget priorities may well lead to only band-aid solutions. One reason for shifting to a community-based model is that Texas has one of the largest foster care systems in the United States, both in terms of numbers and geographic area. Administering the system from a central location in Austin has contributed to a number of challenges. In addition, complexities in oversight, payment, and other aspects of the process at times hampered the ability of the system to meet the needs of the youth of Texas. Spending which reduces or minimizes the effects of child maltreatment or improves foster care will be repaid many times over. The Perryman Group estimates that every dollar of State funding required for Foster Care Redesign returns about $3.44 in ultimate revenue or reduced costs to the State. Redesign can initially be more costly, but the long-term benefits in terms of reduced social costs and increased earnings and productivity of the affected individuals lead to sizable fiscal benefits over time. The special masters report recommends that this method be considered as part of the ultimate restructuring. CONCLUSION Child maltreatment is a tragedy that transcends dollars and cents. Nonetheless, budget priorities may well lead to only band-aid solutions. However, extensive research by The Perryman Group clearly indicates that spending which reduces or minimizes the effects of child maltreatment or improves foster care will be repaid many times over. Page 6 THE PERRYMAN GROUP

7 To Choose or Not To Choose: The School Choice Debate One issue that is shaping up to be a major focus of the next legislative session is school choice. Texas came close to passing a bill last legislative session that would have made up to $100 million in tax credits available annually for PERRYMAN S b u s i n e s s e s PERSPECTIVE donating to scholarship funds, but while the legislation passed in the Senate last session, it failed to reach a vote in the House. For the upcoming session, Lt. Governor Dan Patrick has vowed to pass an even better tax credit scholarship program along with other school choice legislation. Texas is ranked anywhere from 10th to 39th based on 2015 reading and math assessments completed by 4th and 8th graders through the National Assessment of Educational Progress performed by the National Center for Education Statistics. Other rankings place the state even lower, such as the Quality Counts report from Education Week which ranked Texas 43rd. The state ranks 38th in per pupil spending, about $2,670 below the national average and far behind some of our major competitors for economic development. Moreover, Texas has fallen further behind in other areas in recent years. In general, there are three types of school choice legislation that are either being proposed or have been implemented around the US. The most commonly referenced form of school choice legislation is the use of school vouchers. Also referred to as opportunity scholarships, vouchers are state-funded scholarships for a student to attend a private school rather than a public school. The idea is to take the money that would have been allotted to a public school for a student and instead make that money available to meet the costs of private schools. There are currently 13 states plus the District of Columbia that have implemented some version of a school voucher program. Another approach, which appears to be the current Texas buzz word, is known as education savings accounts (ESAs). In an ESA system, restricted-use debit cards are issued to participating parents with a portion of state-funding in the form of a grant already loaded on the card. Like vouchers, this program redirects part of the per-student funding that a public school would have received for the student. However, since the money is delivered to the parents instead of to a private school, parents have even greater freedom to decide the areas in which to spend those funds, such as private school tuition, home schooling materials, online courses, or transportation to school. There are currently five states that have adopted ESA programs. The last major type of school choice legislation the type which the Texas Senate passed in the previous session is the use of scholarship tax credits. These programs allow individuals and/or corporations to receive a tax credit for money that was donated to a nonprofit organization that grants scholarships to primary and secondary students, effectively allowing them to apportion part of what they owe in state taxes to scholarship organizations instead. Currently 16 states have a scholarship tax credit program of some form. School choice legislation is highly controversial. Proponents point out that parents are in the best position to decide which type of schooling is best for their child and that school choice programs provide students who are located within failing school districts a chance at a better education. Opponents, in addition to the difficulty of holding private schools accountable and issues that diverting public funds to religious schools cause with separation of church and state, point to the fact that a school voucher or ESA takes away valuable resources from struggling public schools. Like any controversial issue, school choice legislation is not as simple as it seems on the surface, particularly the potential funding for these programs. The State only contributes 41% of the revenue for school districts on average, while 45% comes from local taxes and the rest comes from federal funding and other local and intermediate sources. At the same time the choice debate is raging, there is also discussion of efforts to reduce local property tax burdens, which could further strain the system. In addition, many of the operating expenditures are either fixed costs (since the school district has to maintain facilities regardless of the number of students) or effectively fixed costs, since small changes in the number of students will not change the need for teachers, guidance counselors, or bus drivers, for example. Therefore, the operating expenses of a school (currently estimated at about $9,000 per student) will not suddenly drop by $9,000 if it has one less student attending. Thus, the funding that follows a student can have a proportionally larger impact on the public school left behind, depending on the amount of that funding. The bottom line is that competition could introduce incentives to improve school performance, which is positive. However, that would only be a viable approach if the underlying system were adequately funded to meet the educational needs of all students and meet the needs for a well-educated workforce. As presently structured, the school voucher and ESA proposals in Texas appear to be nothing more than an attempt to save tax dollars (by providing less than the cost of education while removing a student from the public system) and to further drain the public schools of resources. Depending on the size of the subsidies, it could well be that those who benefit would primarily not be the students with the greatest needs (as their families could not afford the amounts above the subsidies). In essence, the plans would likely have the effect of reducing educational funding and quality in the public school system which must provide opportunities for the vast majority of Texas children. Competition to improve an education system is laudatory; competition as a code word to further deteriorate a chronically underfunded system that is leaving our future workforce behind is not. M. Ray Perryman, PhD THE PERRYMAN GROUP Page 7

8 ADDRESS SERVICE REQUESTED 510 N. Valley Mills Drive, Suite 300 Waco, TX A B O U T O U R S E R V I C E S The Perryman Group (TPG) is a team of highly skilled and focused analysts who stand ready to tackle any economic information task. Our in-house professionals bring expertise in finance, statistics, economics, mathematics, real estate, database management, valuation, programming, systems analysis, engineering, technical communications, and marketing. Dr. Ray Perryman, President and CEO, has almost 40 years of experience in developing systems, analyzing complex problems, and communicating effectively. Services provided by The Perryman Group include: Economic Impact Assessment, Public Policy Studies, and Economic Development Complex Business Litigation, Regulatory Matters, and Dispute Analysis Forecasting and Customized Economic Modeling Speeches and Testimony Additional Areas of Practice Market and industry analysis, Statistical modeling and analysis, Survey and demographic studies, Economic research and information, Feasibility studies and business plans, Business and product valuation For more information, contact Ray Perryman by ing info@perrymangroup.com or calling on Twitter Like us at facebook.com/perrymangroup Follow us linkedin.com/company/the-perryman-group M. RAY PERRYMAN, PhD President and Chief Executive Officer, The Perryman Group Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies Dr. Ray Perryman is President and CEO of The Perryman Group, an economic research and analysis firm based in Waco, Texas. His firm has served the needs of more than 2,000 clients ranging from major corporations to small startups and from local communities to the federal government. Over the past 30 years, Dr. Perryman has helped recruit corporations providing tens of thousands of jobs through economic development work, resolved billion-dollar legal issues, and revamped public policy through impact assessments and other studies. His firm has measured economic impacts for corporate locations and expansions involving billions in investments, and his economic forecasts are used by corporations and government agencies alike. Dr. Perryman has provided economic analysis and expert testimony for civil litigation across a wide range of practice areas. His list of clients includes nationally renowned law firms and Fortune 500 companies and his expert opinions have helped shape important legal decisions. Author: M. Ray Perryman Contributors: Virginia Gleghorn and Nancy Risinger Graphics & Layout Director: Shelia W. Smith Research/Editing Assistants: Karen Amos and Elodia Cavazos Technical Advisor: Pete Tamez For subscription information, call For information about our corporate services, economic forecasts, and other reports, call Fax: info@perrymangroup.com Texas Economic Publishers, Inc. is a division of The Perryman Group 510 N. Valley Mills Dr., STE 300, Waco, TX Page 8 THE PERRYMAN GROUP