Late last year, the Texas Public Policy Foundation (TPPF) found after an open records request that local governments in Texas had amassed $365 billion in debt in 2019. That was an $11 billion increase from the previous year.
But in March, TPPF’s James Quintero released a more detailed report on the numbers behind the initial findings.
According to the Bond Review Board, the state’s debt is slightly less than $60 billion. This means local governments account for 80 percent of government debt in Texas — excluding federal debt.
It’s worth noting, however, that if the total debt across all levels of government were added and divided up per Texan, it would amount to nearly $85,000 per person. About 83 percent of that total can be attributed to the federal government.
Among the local districts, outstanding total debt (principal debt plus interest) amassed includes:
- $137.9 billion from school districts
- $113.5 billion from cities
- $92.8 billion from special districts, which includes hospitals, transportation authorities, etc.
- $21 billion from counties
This debt can be separated into two categories: tax-supported and revenue-supported.
Tax-supported debt generally applies to the ad valorem (property taxes) taxing authority. For the most part, these must be approved by voters. One exception is certificates of obligation (COs), which are intended to allow flexibility for emergency spending, though their use is not limited to that.
Revenue-supported debt, meanwhile, consists of taxing sources such as sales tax, severance tax, and other consumption-based taxes.
School districts and counties rely more heavily on tax-supported debt. Almost the entirety of the former’s principal debt is tax-supported (99.7 percent) and 83 percent of the latter’s is tax-supported.
Cities and special districts, however, lean more on revenue-supported debt with it constituting 55.3 percent and 61.6 percent of their debt totals, respectively.
Texas ranks second behind only New York in local government debt per capita, and local government debt has grown 11 percent since 2015
By and large, most local government budgets have increased from year-to-year beyond the rate of inflation, thus increasing taxes to keep up with the spending. Some local entities, however, have avoided such spending increases.
The state itself increased its budget by $15 billion in 2019 for this biennium, and much of that increase came from Senate Bill 2 and House Bill 3. These bills, while limiting the growth of property taxes, increased school funding, costing $6.5 billion, and included a buydown of the local government’s property taxes, costing $5.1 billion.
Some of this funding came from the state’s savings account, colloquially referred to as the Rainy Day Fund.
As oil prices plunge, the Rainy Day Fund may be stretched thin if its revenue source continues the downward trend. Much of the state’s severance taxes are funneled into the Rainy Day Fund. The state could also choose to dip into the Rainy Day Fund to mitigate coronavirus’ effect on the economy.
Back in December, the Texas Municipal League (TML) told The Texan of the initial findings that “Just looking at the increase in local debt says nothing about the overall burden of local debt issuances or the taxpayers’ ability to pay.”
Texas’ real gross-domestic-product increased by 12.5 percent from 2014 to 2018. The median household income increased 14 percent during the same time frame.
But from 2014 to 2018, total property taxes collected in the state increased by almost 40 percent.
And with the unexpected, but very likely, economic downturn and increase in unemployment— expected to rise into double digits after months of historic lows in light of the coronavirus pandemic— it’s fair to question the taxpayers’ ability to pay off this debt their governments have accumulated.
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Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad watching and quoting Monty Python productions.