DALLAS — Despite Texas Gov. Rick Perry's claim that "government doesn't create jobs," the state capital owes its top debt rating and stable outlook in large measure to government employment, analysts said.

Of the top five employers in the Austin area, only Dell Inc. is not part of state or local government, according to rating agencies.

Largest among all employers is the state of Texas itself with 38,538 employees, followed by the University of Texas with 24,864.

Dell is third with 14,000, then the city of Austin with 11,815, and the Austin Independent School District with 11,570.

While the state and local governments are cutting payrolls amid the sharpest budget reductions in modern history, those same employers provided a stable base for employment in the area during Texas' remarkable decade of 20% growth, analysts said.

Austin's population, estimated at 800,000 for 2011, has also increased more than 20% since 2000, making it one of the fastest-growing cities in the nation.

With the growth of the city and the state, demand for government services in Austin also grew, rising 7.2% between 2007 and 2011, according to the U.S. Bureau of Labor Statistics.

During those same years, Austin's tax base added an average 8.1%, even with a 3.8% decline in fiscal 2011, according to Moody's Investors Service. In the Austin area, the jobless rate for June was 7.6%, well below the 8.2% state and 9.2% national averages.

"The city's economy historically has been buffered by the large and stabilizing presence of state government as well as seven colleges and universities, including the University of Texas," wrote Fitch Ratings analyst Steve Murray. "High-technology manufacturing is also a major employer, attracted to the area by a well-educated workforce, relatively low cost of living, and the availability of major research facilities."

Along with Moody's and Standard & Poor's, Fitch conferred the coveted triple-A rating on a $231 million issue of bonds and certificates of obligation the city plans to sell beginning this week. All three agencies retained stable outlooks.

Though Standard & Poor's has warned that its recent downgrade of the United States to AA-plus from AAA could affect cities and states that rely on federal dollars, so far, Austin's triple-A shows no signs of weakening.

The city will price about $164 million of new money for public improvement projects in a competitive deal on Thursday and offer refunding debt in early September. Public Financial Management Inc. is financial advisor and McCall Parkhurst & Horton is bond counsel.

The offering includes $78.1 million of Series A tax-exempt public improvement bonds, a taxable $8.45 million Series B, $51.15 million of certificates of obligation, $26.73 million of public property financial contractual obligations, and $66.63 million of public improvement refunding bonds.

The public improvement refunding bonds will be used to refund a portion of the city's outstanding general obligation debt for debt service savings while the other issuances will be used to finance various capital projects.

Like most local governments, Austin is grappling with declining property values, but not to the degree of other U.S. cities. July sales of Austin-area existing homes were about 32% higher than the same month in 2010, according to the Austin Board of Realtors.

Sales tax revenue has been rising for 16 straight months in the city, increasing 12.7% to $13.5 million in July, according to state Comptroller Susan Combs.

Perry's presidential campaign, announced in South Carolina where the Civil War officially started in 1861, has brought intense national scrutiny to the "Texas miracle" that has resulted in a relatively healthy economy in Texas and its capital.

Perry, who once rhetorically floated the idea that Texas could secede from the union, has credited the state's low taxes and pro-business environment for much of the growth.

"The fact is, government doesn't create jobs, otherwise the last two and a half years of stimulus would have worked," Perry recently told the National Conference of State Legislatures.

"Government can only create the environment that allows the private sector to create jobs," he added. "The single most important contributor to our jobs-friendly climate here in Texas is our low tax burden, because we know dollars do far more to create jobs and prosperity in the people's hands than they do in the government's."

In Austin, private-sector growth has been fairly robust, but some of the employers were incentivized by funds from Perry's controversial Emerging Technologies Fund.

Created at the governor's urging in 2005, the ETF operates under a 17-member advisory board appointed by the governor, whose office has distributed almost $200 million to 133 companies.

Some of the benefactors of the fund have been financial backers of Perry's campaign for re-election.

Perry is the longest-serving governor in state history, ascending to the office in the wake of George W. Bush's election as president in 2000.

A state auditor's report on the ETF in April found that decision-making on who would receive funds was fairly opaque, with no minutes of meetings in which decisions were made and misleading accounting of the state's investments.

Ultimately, the governor's office keeps no records of the value of its investments in various companies, according to the audit.

Perry took the audit as a vindication of his administration of the fund.

"In Texas, we've fostered an environment that encourages individuals to risk their capital and create innovative, groundbreaking technologies that have the potential to impact lives, not just in our state, but around the world," Perry said in a prepared response to the audit. "The program has continued to improve research at our universities by bringing world renowned research teams to Texas, and is helping put Texas on the path to becoming the next Silicon Valley."

Never mentioned in Perry's campaign speeches is the role of government in Austin's economy, particularly the federal presence. Numerous federal agencies maintain offices in the city, including the regional headquarters of the Internal Revenue Service that was the target of an angry taxpayer's airplane attack last year.

The high percentage of government jobs has made Austin one of the most "recession-proof" cities in the nation, according to the Brookings Institution's annual survey. Of 20 large metropolitan areas, Austin ranked first in job growth, according to the 2011 MetroMonitor survey. Six others were also state capitals, and the District of Columbia was among the top gainers.

"The metropolitan areas that suffered least since the beginning of the recession typically had increases in the number of government jobs (federal, state, and local combined)," according to the MetroMonitor report. "Those that suffered the most typically lost government jobs. Yet government job cuts have become widespread even as total employment has grown during the recovery."

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