Jun 21, 2022 - News

To do business with Texas, you can't boycott Israel

Illustration of the Texas State Capitol with lines radiating from it.
Illustration: Allie Carl/Axios

If you want to sell widgets — or really any item or service — to the state of Texas, you first have to formally pledge that you won't boycott Israel and that you won't "discriminate against" firearm companies.

The big picture: Standard provisions buried deep in Texas contracts and reviewed by Axios show state officials can exert political leverage on companies hungry to win — and keep — business with government entities.

Why it matters: It could limit the number of companies willing to work with Texas state agencies, school districts or cities.

Flashback: Texas legislators last summer passed S.B. 19, which prevents state government entities from entering into contracts "with companies that discriminate against firearm and ammunition industries."

  • That requirement, fashioned with support from gun manufacturers, has won greater attention after the mass shooting in Uvalde.
  • In a letter sent last month to the Texas attorney general, before the Uvalde shooting, officials at JPMorgan described the bank's "longstanding business relationships" with the Texas firearm industry, noting that it "anticipates continuing such relationships into the future," the New York Times reported.

But the requirements go beyond guns. Companies seeking business with Texas have to certify that they:

  • Do not boycott energy companies
  • Do not boycott Israel
  • Do not require proof of COVID-19 vaccinations
  • Do not have "a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association"
  • Are not engaged in business with Iran, Sudan or a foreign terrorist organization
  • Are not majority owned or controlled by citizens or governmental entities of China, Iran, North Korea or Russia

Of note: School districts, cities and other local governments also must use most of these contract provisions —though some of these rules apply only to contracts with businesses that have 10 or more full-time employees and for contracts with a value of $100,000 or more.

What they're saying: The COVID-19 requirement "​fits in with the policy direction of the state," Ann Bowman, a professor of government at Texas A&M, tells Axios.

Between the lines: The current version of the state law — previously challenged by a Pflugerville school speech pathologist — appears unenforceable.

  • A federal judge in January ruled that Texas can't block an engineering firm from boycotting Israel as part of its contract with the City of Houston.
  • The judge stopped short of blocking the state law, but said the free speech rights of the firm would be violated if the contract included the clause.

The other side: When Texas Gov. Greg Abbott signed an initial version of the law barring public contractors from boycotting Israel, a major Texas trading partner, he said "anti-Israel policies are anti-Texan policies."

  • Texas Attorney General Ken Paxton is appealing the January ruling to the conservative Fifth Circuit.

Zoom out: Such contract restrictions are not unique to Texas — or to Republican-controlled states.

  • California lawmakers in 2010, for example, approved a measure barring companies investing in Iran from getting state business.
  • And per California's contracting manual, gardening companies serving state agencies must compost or recycle their landscaping waste.
  • Plus: As of 2021, at least 35 states have passed bills and executive orders aimed at discouraging boycotts of Israel, per the American-Israeli Cooperative Enterprise.

"Depending on the particular politics and values of different states, this is pursued in different ways," Don Kettl, a retired UT public policy professor at the LBJ school, tells Axios.

Yes, but: Taken together, the provisions raise questions about whether Texans are getting the biggest bang for their buck.

The bottom line: "From the taxpayer's point of view, you want to go with whatever entity can perform the job for the lowest possible cost," Kettl says. "The more restrictions you put in place with the contract, the more you run the risk of driving out the lower bidder."

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