AUSTIN — Conservatives could celebrate a win with a court ruling that nixes benefits for same-sex spouses of city employees in Houston, but LGBT advocates and others say the state could lose millions of dollars in business and prestige.

The dispute arises from Pidgeon v. Turner, a case charging city officials with acting unconstitutionally by providing benefits to same-sex couples.

Two Houston residents sued the city, arguing that a U.S. Supreme Court recognition of same-sex marriage stops short of requiring states to offer benefits to lesbian, gay, bisexual and transgender couples.

While the legal proceedings may not interest all Texans, the potential impact of a decision overruling the city’s policies should, said Jessica Shortall, managing director of Texas Competes, a business coalition that supports LGBT equality.

“When a state takes an action that’s perceived as discriminating against LGBT people, that does damage to the state’s brand,” she said. “I’m talking about the rest of the country.”

A separate issue — a bill pending at the Capitol that would require transgender people to use bathrooms corresponding with their sex at birth — is already threatening business.

Dallas has heard from a trade group, the Specialty Graphic Imaging Association, now considering moving its 2024 convention elsewhere should the state adopt the proposed “bathroom bill.”

Ford Bowers, who heads the association, said its conventions are worth about $30 million.

The group hoped to make Dallas one of three cities where it regularly holds conventions, but Bowers said it’s now focused on the legislation.

Bowers said he would also alert his board of directors should the plaintiffs in the Houston case prevail.

“We do monitor these things,” he said. “My inclination would be not to look the other way.”

Phillip Jones, president and CEO of VisitDallas, the city’s convention and visitors bureau, said Texas risks creating a “man-made recession” if it does something that’s perceived as intolerant.

Jones books business 10 years in advance, and he’s already hearing from large groups that don’t like the bathroom bill. As for the same-sex benefits case, he said, “it certainly doesn’t help.”

The state Supreme Court is scheduled to hear oral arguments in the case in March.

The court last year rejected the case but recently reversed course when state leaders – including Gov. Greg Abbott, Lt. Gov. Dan Patrick and Attorney General Ken Paxton – filed a brief supporting the plaintiffs against the city.

DeAnne Cuellar, communications coordinator for Equality Texas, called the case “another nonsensical attempt to establish or maintain rights to discriminate against legally married, same-sex couples.”

But the plaintiffs say the U.S. Supreme Court’s 2015 decision in Obergefell v Hodges didn’t settle all disputes involving same-sex marriage.

Jonathan Saenz, who heads the Austin-based nonprofit Texas Values and represents the Houston plaintiffs, said the Texas court’s decision to hear the case is “an important step in defending our state’s marriage laws and protecting taxpayers’ right to not be forced by government to fund illegal same-sex benefits.”

Sean Williams, a University of Texas Law School professor, said it’s “highly improbable” that a federal court would ultimately treat the same-sex benefits claim any differently from that of an opposite-sex couple.

But while the legal outcome is far from settled, Shortall, of Texas Competes, said it’s a certainty that rejecting benefits for same-sex couples will create a “brand issue” that will burn Texas – and not just in terms of lost conventions.

“Millennials overwhelmingly reject discrimination against LGBT people, whether they are themselves LGBT or not,” she said. “They vote with their feet.”

Texas businesses, she noted, can’t survive on Texas talent alone. They have to draw people from all over the country.

“If we get a decision that we don’t have to treat them the same, that’s something that will make headlines,” she said.

John Austin covers the Texas Statehouse for CNHI’s newspapers and websites. Reach him at jaustin@cnhi.com<mailto:jaustin@cnhi.com>