Texas continues to position itself as a national leader in business innovation and technology. However, the Lone Star State is risking that position if lawmakers allow a Research & Development tax incentive to expire next year. A newly released study, The Economic Effects of R&D Tax Incentives in Texas, by Rice University’s Baker Institute, highlights the substantial economic benefits of extending the state’s Research & Development (R&D) tax credit. The findings are clear: an expanded and permanent R&D tax credit would create over 113,000 jobs, generate $13.8 billion in additional Gross State Product (GSP), and strengthen Texas’ long-term economic competitiveness. With the current R&D tax credit set to expire in 2026, the Partnership is joining a broad coalition of business leaders known as Texans for Innovation in calling on lawmakers to pass SB 2206 and HB 4393—bills that would extend and enhance the credit. This ensures that Texas won’t fall further behind other states in R&D investment and remains a top destination for technological advancements. Below are some highlights from the study and examples of how extending this R&D tool will keep the Texas Miracle growing for future generations. Texas' R&D Investment Gap Despite being the second-largest state in both population and economic output, Texas significantly lags in R&D investment: Texas ranks 33rd in R&D investment as a percentage of GSP. The state contributed only 4.3% of U.S. business-funded R&D in 2022, while California’s 36.2% leads the nation. Existing R&D tax incentives have been intermittent and comparatively modest, making Texas less competitive in attracting research-intensive industries. Extending and strengthening these R&D incentives will bolster our status as a business-friendly state and provide a better recruitment tool for businesses to expand or relocate.  Economic Benefits of Expanding R&D Tax Credits The study emphasizes the significant benefits of making R&D tax incentives more robust: Economic Growth: Texas' GSP could rise by 0.13% over the long term. By 2035, Texas could add 113,850 new jobs and infuse an additional $8.5 billion in wages. Total investment is estimated to grow by 0.25% in the first year, with sustained growth thereafter. These benefits make Texas more attractive for business and improve job opportunities and economic prosperity for Texans. Fiscal Responsibility and Revenue Offsets A common concern with tax incentives is their impact on state revenue. However, the study finds that the economic growth generated by R&D investment will offset the initial costs: The tax credit expansion would cost $661.4 million in FY2026 (less than 0.2% of the state budget), but increased economic activity would lead to more significant revenues from business property and sales taxes. Over 20 years, Texas could see a net economic gain of $58.8 billion (an 8790% ROI). The tax credit would ultimately pay for itself by boosting overall state revenue. Policy Recommendations To maximize these benefits, the study’s authors recommend that Texas lawmakers: Extend and increase R&D tax credits beyond 2026 to create a stable investment climate. Make the credits permanent to reduce business uncertainty and encourage long-term investment in research projects. “Extending these incentives is critical to attracting high-tech industries, creating jobs, and maintaining Texas’ position as a national leader in technology and innovation,” Glenn Hamer, CEO of the Texas Association of Business, said in a news release announcing the study. Texas has long been a hub for business and innovation, but without strong R&D incentives, the state risks losing ground to competitors. SB 2206 and HB 4393 will ensure that Texas remains a top destination for cutting-edge research, high-paying jobs, and long-term economic growth. Read the full study and learn more about R&D incentives.

Texas lawmakers are moving forward with securing the state's long-term water future with sweeping new legislation aimed at increasing water availability and funding critical infrastructure improvements. Senate Bill 7 (SB 7) lays out a comprehensive framework to address these challenges, reinforcing the state’s commitment to sustainable water solutions. The Partnership joins Texas 2036, a leading voice in the statewide coalition, in supporting this critical initiative. Filed by Sen. Charles Perry in early March, SB 7 represents one of the most anticipated policy measures of the legislative session. Here's a look at the proposed legislation in both chambers. What’s in the Bill? Sen. Perry was emphatic about the need for Texas to deliver a solution. “Water scarcity is no longer a distant threat,” the senator said in his Thursday press release announcing the bill's filing. “It’s here, and it’s already disrupting the lives of Texans across the state. From West and South Texas, where agriculture is being strangled, to communities struggling to keep up with economic and industrial growth, the lack of water has become the biggest limiting factor for our state’s future.” For decades, Sen. Perry has been a leading voice on this issue. SB 7 is the culmination of decades of work that saw its first taste of victory in 2023 with the creation of the Texas Water Fund. In SB 7, the plan includes three key components: expanded authority for the Texas Water Development Board to deliver funding for water projects, enhanced legislative oversight through the restructured Texas Water Fund Advisory Committee, and improved reporting and accountability measures. What are ‘Sweeping Changes’? SB 7 is targeting the following initiatives to bring new water resources across the Lone Star State: Creates the Texas Water Fund Advisory Committee to provide oversight of all Texas Water Fund activities Requires the Texas Water Development Board (TWBD) to submit a biennial progress report to the Legislature regarding projects financed with Texas Water Fund money Creates the Office of Water Supply Conveyance Coordination to optimize water supply infrastructure construction for regional and statewide interconnection and interoperability Protects non-saline groundwater reserves in the state’s rapidly depleting freshwater aquifers Preserves local control over surface water rights Authorizes TWDB’s state water bank program to purchase out-of-state water for importation to meet the needs of Texans across the state Expands both project eligibility for financing from the New Water Supply for Texas Fund and the available methods of financing Prioritizes wastewater treatment projects in rural communities and small cities for financial assistance Adds the Flood Infrastructure Fund to the Texas Water Fund structure, allowing flood projects to be financed using the funding stream constitutionally dedicated by Senate Joint Resolution 66. Click here to download the one-pager outlining the goals for SB 7 and Senate Joint Resolution 66. What is in the House Bill? There are many similarities between SB 7 and House Bill 16 (HB 16) by Representative Cody Harris. The latter is broader in scope, with differences in approach to water infrastructure development, financial allocations, legislative oversight, and reporting measures. Here are several highlights from HB 16: Expands funding for produced water treatment projects, excluding those identified for oil and gas exploration Emphasizes prioritization of rural populations (less than 150,000) and projects with significant progress on state/federal permitting Allows funding transfers for the economically distressed areas program account and ensures funding for public water awareness, water conservation, and water loss mitigation Slightly modifies the makeup of Texas Water Fund Advisory Committee—including a seat for Texas Department of Emergency Management Expands the duties of the committee to conduct regular reviews of historically underutilized businesses participation, annual reports on statewide supply expansion, and direct oversight of state water project funding Requires regular reports to the legislature with updates on project delivery, completed infrastructure repairs and economic benefits of funded projects What’s Next? HB 16 has already been referred to the House Committee on Natural Resources. SB 7 will likely be referred to the Senate Committee on Water, Agriculture, and Rural Affairs, which Sen. Perry chairs. One version of the bill must pass the legislative process. If the House or Senate makes significant modifications after the first chamber's approval, a Conference Committee may be convened to reconcile the differences and finalize a unified version. The Partnership will continue to provide updates as the bill advances.