The details are contained in a report issued by the Texas Bond Review Board, as presented to the Pensions, Investments and Financial Services Committee. Part of the problem is that the state has shifted financial burdens to local governments and still uses "antiquated state funding formulas" to determine what level of funding is required by the state to local jurisdictions.
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Jurisdictions
across Texas now carry debt on the books of almost $193 billion, an increase of
a third over the last five years and a total that keeps the state pegged as
having the second heaviest local debt load in the country.
The Texas
Bond Review Board, bowing to public interest, has published its first report
on that debt. Executive Director Bob
Kline told the Pensions, Investments and Financial Services Committee the
increasing debt load is the results of local jurisdictions that moved forward
with debt at the height of economy.
“Local debt has increased by 36 percent over the last five years, to $193 billion,” Kline said. “That’s a lot of local debt issuance.”
According to a report issued by the Texas Bond Review Board in May, debt issues by local jurisdictions breaks down as roughly a third to school districts, a third to municipalities and the balance to various other jurisdictions. The total debt per capita has risen from $4,359 in 2002 to $7,507 in 2011.
No jurisdiction has teetered on the brink of bankruptcy in Texas, as they have in other states, but Kline still sees the stressors on local jurisdictions. On the other hand, cities and school districts have steeply increased bond re-fundings. In most cases, the re-fundings bring down interest costs on outstanding bonds.
“That’s a positive out of this,” Kline said. “I think the concern is that the erosion of the tax base and the ability for the debt service to occur.”
Former Superintendent Joe Smith, who tracks school bond and tax rate elections over at the website Texas ISD, agreed that school districts are under additional stress to repay bonds out of current revenue. Despite those limits, many school districts strapped for cash have turned to bonds to pay for items that once came out of operating expenses, such as district-wide technology upgrades.
“I see the stress on funding, even on the operating side,” Smith said. “School districts oftentimes are funding things off of bonds that they once funded off of maintenance and operations.”
The state also has failed to keep up its end of the bargain when it comes to sharing the cost of bond issues, Smith said. The rate for equalizing debt hasn’t been changed in more than a decade, and because it’s equalized to 1999 levels of property wealth, fewer districts qualify for the state subsidies.
“That rate hasn’t changed since 1999, and so more of it is falling on the districts, and the districts don’t have any avenues for meeting the need except for bond issues and tax increases,” said Smith.
Growth hasn’t stopped in Texas, Smith said, but the number of bond issues that have been called in recent years has declined steeply. Putting together a plan to pay off bonds is tough, especially for property poor districts, which typically have much longer bond terms than their property wealthy counterparts, Smith said.
