Apr 082011
 

Governor Perry, Don’t Leave Texas Wine Behind

Earlier this week, the day of the big NCAA women’s finals basketball game in Houston, Texas Governor Rick Perry’s office released an announcement (http://governor.state.tx.us/news/press-release/15931/) that exhibited his confidence in the Texas A&M Women’s basketball team. He was placing a friendly wager with Virginia Gov. Bob McDonnell, a Notre Dame graduate, on the game between the ladies form Texas A&M and Notre Dame.

Gov. Perry put up a case of Texas-based, award-winning Becker Vineyards Viognier wine and Gov. McDonnell wagered a case of Virginia’s Barboursville Vineyards finest red and white wines, including its Cabernet Franc, Viognier and award-winning, blended red wine, Octagon.

Perry’s announcement was full of bull and bluster about the talent and spirit of the Aggies team that, in his words, would undoubtedly bring the national championship fame to the Lone Star State.

What most taxpayers in Texas don’t realize is that while shouting out his opportunistic remarks and covering his sports bet with Texas award-winning wines, Perry, in the current state budget process, is leaving Texas wine behind by slashing the budget of this profitable venture.

Texas wine is a product developed by farmers-turned-vintners that’s grown into a $1.7 billion, tax-generating industry for Texas and struggling rural counties. This growth has been fostered mainly by an investment of only $2.1 million per year by the state.

But, contrary to what many people may think when they hear about government programs, this is NOT a subsidy.

This state funding has NOT gone to line the pockets of winegrowers and winery owners. Specifically, these development funds are used for research, education and marketing, channeled through the Texas Department of Agriculture (TDA).  These investment funds were generated by the state from taxes levied on sales of wine in Texas. The influx of dollars to the industry have helped to (1) identify the grape varieties best suited for the Texas soils and weather, (2) devise methods to handle vineyard diseases particular to Texas like Pierce’s Disease and Cotton Root Rot and (3) helped to investigate improved wine making techniques for the grapes that can grow in Texas. Most importantly, these funds have also gone to developing programs that are educating the vineyard and winery personnel critical to the new agricultural jobs in Texas.

As Texas winegrowers and winemakers found out a decade or two ago, a cookie cutter approach won’t work in the development of a wine industry here.  California’s grape selection (i.e. Cabernet, Merlot and Chardonnay) and viticultural practices just don’t translate easily to Texas. The failed two-hundred acre Menard Valley Vineyard near San Saba in the 1990′s proved this point in spades. During this period for every new winery that went into business, one existing winery went out of business, and Texas’s hopes for this new agricultural stimulus lay dying on the vine.

Agricultural specialists found that what was needed was state investment funds to bring a group of grape growing and wine making specialists to study and develop procedures that would work in Texas. This funding supported college programs and short courses in grape growing and wine making and marketing support programs to building awareness of Texas wines and wineries throughout the state and nation. These efforts now bring over a 1.3 million wine-related tourists to this state.

The state funding to do all this was approved less than a decade ago and has resulted in impressive growth for the local Texas wine/agricultural industry and revenues to the state and local economies.

Recently, Jessica Meyer’s article in the Dallas Morning News illustrated the link between the state funding and the growth of the industry: the $1.7 billion economic impact in 2009 was a 26 percent increase from two years earlier. Additionally, she pointed out that wine producers paid $78.5 million in state and local taxes in ’09, up nearly 100 percent from $39 million in 2005 when the state started providing funding through the TDA.

If the state’s funding in support of the Texas wine industry of $4.3 million per biennium (a mere $2.1 million per year) is zeroed out, the State of Texas runs the risk of NOT SAVING this $2.1 million per year, but LOSING HUNDREDS OF MILLIONS OF DOLLARS in terms of loss tax revenue to the state, loss of rural jobs, and tourism dollars.

Keep in mind that wine grapes are now one of the best cash-crops in the state generating from $1000 to over $2000 per ton of crop. These prices far outweigh prices for Texas’s historical cash crops like cotton and corn. One grower told me that his family can make on 100 acres of wine grapes what he used to make on 3000 acres of cotton and use a lot less water, as well. This type of mindset is going to be critical for the future viability of this agriculture in Texas.

The bottom line is this….

The state funding for the Texas wine industry is actually an investment that is making money for the state and its residents that far outweighs the small investment cost. The financial return to Texas is $790  for every $1 the state spends on the Texas wine industry. For comparison, the funds the state spends to promote general tourism in Texas only have a return of $7  for every $1 spent.

A return of $790 for EVERY dollar of investment on the Texas wine industry is one hell of a return! It’s almost too much to believe is true, but it is a fact. I challenge any other state supported program to show that kind of return. Furthermore, this is money that can be used to help fund the state’s critical programs and, if maintained, can actually go toward balancing the state’s budget shortfall.

Based on the trends over the past several biennium, continued state funding of the Texas wine industry development activities at the present rate of $2.1 million per year will result in tax revenues to the state of between $80 million and  $150 million per biennium. Zeroing out the state’s wine development budget runs the risk of losing this growth in tax revenue – up to $70 million over the next biennium. For anyone that’s been in business and looked at both sides of the bookkeeping ledger, they know that you don’t cut funds from income generating programs .

Back in February of this year based on a similar analysis, I blogged with the following question to Texas wine consumers: Will Texas Cut Off its Nose to Spite its Face? Click here. To identify and get in contact with your state representative and senator, please click the following link and enter your address:  http://www.fyi.legis.state.tx.us. Tell them how you feel.

Now, in this final hour as they look out from the edge of a very deep precipice, I ask Governor Perry and all Texas state legislators to take a step back, take a deep breath, look closely at the situation at hand (on both sides of the ledger) and preserve these income generating programs.

Don’t leave Texas wine behind!


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