At Least the Texans Know How Much They Owe
Editor’s Note: In this report by Mike Shedlock, which provides details from the recent Texas State Comptroller’s report entitled “Your Money and Local Debt,” you can see that in Texas, state and local government total outstanding debt combined equals $233.2 billion, which equates to nearly $9,000 for each and every one of the 26 million people living in Texas (not including unfunded retirement pension/health obligations). But at least they know how much they owe. In a UnionWatch post earlier this month, “How Big is California’s Wall of Debt“, we estimated the total state and local outstanding debt in California to be $872 billion, which equates to $23,000 for each and every one of California’s 38 million residents (including unfunded retirement pension/health obligations). About a week later, respected Sacramento Bee political columnist Dan Walters had this to say about the total “Wall of Debt” facing Californians: “All in, with realistic pension fund earning projections, our governments may be upward of a trillion dollars in debt.” But nobody knows for certain. Calls to the California State Treasurer’s office, State Controller’s office, and the California Debt and Investment Advisory Commission were all answered by experts, who, after asking around, basically told us “nobody knows.” We challenge the paid analysts staffing the financial bureaucracy within California’s state government to produce a report of the clarity produced by their counterparts in Texas. If we have to pay it, we deserve to know how much we owe.
“It’s Your Money”
Susan Combs, Texas Comptroller of Public Accounts says “Texas, It’s Your Money”.
At the Comptroller’s office, we’ve long championed the importance of transparency — giving the Texans we serve the information they need to make informed decisions and hold their government officials accountable.
That’s why our office launched the Texas, It’s Your Money series of reports, which spotlights issues that hit Texans in their wallets: local taxes, government debt, education debt and public pension obligations. We’re committed to keeping the state’s books open, accessible and understandable for our citizens.
A Roadmap to Better
With that introduction lets dig deeper into one of the reports “A Roadmap to Better“
Sales Taxes and Property Taxes
Since 1993, special purpose districts that levy sales tax have increased by more than 1,900 percent, which means that more entities are taxing you. In that same time period, the number of special purpose districts that levy property tax has grown by more than 45 percent, with the creation of more than 500 new districts of this type.
While local sales taxes increased by almost 170 percent from 1993 to 2011, property taxes grew by 188 percent from 1992 to 2010. Compare that to slightly more than 120 percent growth in combined population and inflation during those years.
Our local governments more than doubled their debt load in the last decade, amassing more than $7,500 in debt for every man, woman and child in the state. Between 2001 and 2011, the outstanding debt of Texas local governments rose more than twice as fast as inflation and population growth rates combined.
Total Local Outstanding Debt
Local Debt – Where We Fall Short
New debt often is approved by a small percentage of voters, who must make vital decisions about new debt with little information about its implications. And a large share of local debt — totaling $12.7 billion since 2005 — is issued through “certificates of obligation,” generally, without any voter approval.
Combined State and Local Debt
How Texas Can Do Better
You have a right to a full and complete disclosure of public debt. All government entities should reveal all debt obligations on a public website, including the debt’s original stated purpose, the total amount of debt authorized, the issued and unissued amounts of authorized debt, spent and unspent amounts of issued debt and the per capita debt burden on taxpayers. Any ballot for new debt should be accompanied by a similar accounting.
You have a right to approve debt issued in your name. Texas should significantly narrow public governments’ authority to issue debt without voter approval, and revise the petition process to make it easier for taxpayers to compel a public vote on proposed debt.
In fiscal 2011, our public school debt was $63.6 billion, or $13,530 for every Texas student in a school district carrying debt. And while state college and university debt is lower, at $12.5 billion, that debt rose nearly eight times faster than enrollment in the last decade.
College Debt vs Enrollment
The bulk of Texas’ education debt supports the construction or renovation of school facilities. Yet Texas has no centralized source for information on current public school facilities, such as total square footage, square footage per student and total cost. To obtain such information, every district must be contacted individually. Construction costs also are not reported to any single entity, making it almost impossible to identify unreasonable costs on individual projects.
In addition—as with other debt—new debt often is approved by a small percentage of voters. It also is difficult for taxpayers to learn the full dimensions of debt in their area.
How Texas Can Do Better
You have a right to full and complete information on education debt. Every Texas school district should disclose on its website the cost and details of all construction and renovation projects, including actual square footage, total cost per student, total cost per square foot and square footage per student. Each district should also post an online inventory of all existing facilities, detailing available square footage, total student capacity and current student enrollment for each campus.
All ballots for new education debt should reveal all current and proposed debt obligations, including the amount of outstanding debt, existing debt service, amount of new debt and the average length of proposed debt obligations.
Too little public information on public pension finances is readily available. Many plans do not report their actual investment returns to the state’s Pension Review Board.
Several of the state’s largest pension plans also have “infinite amortization periods,” meaning that they can never eliminate their unfunded liabilities as currently structured.
Texas public pension plans cover 2.3 million active and retired members. As with most other investments globally, Texas public pension program earnings fell during the recent recession. Although plan assets have rebounded since 2010, overall they are still below pre-recession levels.
Will Work to Pay Debt
The following image shows precisely what the current Ponzi scheme looks like.
The number of workers is shrinking dramatically compared to the number of retirees collecting Social Security or disability checks. Meanwhile state and local taxing bodies want still more debt and forever increasing taxes to keep the Ponzi scheme going longer.
This state of insanity is frequently described as being “Progressive“.
Instead, I support the common sense proposals of Susan Combs, Texas Comptroller of Public Accounts.
About the author: Mike “Mish” Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management. His top-rated global economics blog Mish’s Global Economic Trend Analysis offers insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education. Every Thursday he does a podcast on HoweStreet and on an ad hoc basis he contributes to many other websites, including UnionWatch.