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Though Texas's state government has a reputation for fiscal moderation, its localities collectively owe about $213 billion, up from $130 billion in 2006. In 2015 alone, the Texas Bond Review Board reports, localities issued nearly $39 billion in new debt, compared with $20 billion a decade ago. The board now estimates the state's per-capita local debt -- $8,350 -- to be the second-highest in the nation, trailing only New York's $10,465 debt per person.
The Texas debt frenzy's apologists contend that the Lone Star State's situation differs from those of other heavy-borrowing states like New York, Illinois, and Pennsylvania. New York has managed to amass its record obligations despite nearly stagnant population growth of just 401,000 people, a 2.1% increase, during the first decade of the new millennium. Texas's population, by contrast, expanded by 4.3 million, or nearly 21%, during that same period.
New York's school enrollment, a key factor in education borrowing, has shrunk by 6% since 2000, meaning about 180,000 fewer students in classrooms. In fast-growing Texas, by contrast, the schools have swelled with 1.1 million additional students, a 30% increase, since 2000.
Texas officials have rushed to build the most basic projects needed to accommodate so many newcomers. School-district borrowing accounts for 34%, or $72.3 billion, of the local debt -- the most of any category. Another major borrower: water districts, which are working to install essential hydration and sewage systems to help transform undeveloped land into new communities before new residents, and their tax dollars, even arrive.
But some critics point to troubling signs that the debt surge is also fueling a massive growth of government. Local debt has been rising at about twice the rate of population growth, plus inflation. The increase in school debt has been particularly alarming. In a 2013 study, the state comptroller's office found that over the previous ten years, debt more than doubled even in districts with falling enrollment. The cost of servicing new debt rose 125%, more than double the rate of spending growth.
To borrow all this money, Texas localities have resorted to financing techniques typically associated with struggling communities looking to push costs off into the hazy future. Texas municipalities have made liberal use of so-called capital-appreciation bonds, which let the issuer make no payments to bondholders for years. Such bonds often increase the total amount that a community must pony up over the long term, meaning big bills for future taxpayers.