By applying free-market principles and extending a friendly hand to business, Texas has experienced a post-recession economic boom that's unrivaled by any state other than shale-rich North Dakota. But even the bright Texas horizon has a few dark spots. As Steven Malanga at City Journal notes today:
Thanks to its low state debt, Texas enjoys a reputation for budgetary restraint. Yet as Texas comptroller Susan Combs found to her dismay, the state’s towns, cities, counties, and school districts have racked up the second-highest per-capita local debt in the nation, behind only New York’s spendthrift municipalities. The total, nearly $8,000 per resident, is more than seven times higher than Texas’s per-capita state debt. Over the last decade, local debt in the Lone Star State has more than doubled, growing at twice the rate of inflation plus population growth. At the moment, Texas localities owe $63 billion for education funding—155 percent more than they did a decade ago, though student enrollment and inflation during that period grew less than one-third as quickly. The borrowing has also paid for a host of expensive new athletic facilities, such as a $60 million high school football stadium, complete with video scoreboard, in the Dallas suburb of Allen.
So while Texas's state officials, led by thrifty Governor Rick Perry, generally do a bang-up job, the Lone Star State's localities are borrowing with abandon. As Malanga observed in another piece from earlier this year, Texas's high school football culture has something to do with that:
According to an article last fall in Bloomberg Businessweek, more than 100 high school stadiums had opened in Texas during the previous five years. Pricey upgrades are common, too. Carthage High School, with an enrollment of just 750, used a bond offering to raise $750,000 for a video scoreboard for its football stadium. More than 100 Texas high school stadiums have such scoreboards.
Not surprisingly, debt owed by public school districts constitutes the biggest chunk of the state’s soaring local obligations. Over the last decade, it has increased 155 percent, even as the state’s student population has grown just 21 percent. And the fastest-growing part of Texas school budgets is debt service, which has gone up by 126 percent in 10 years, to $5.5 billion. Payments on debt now constitute 10 percent of school spending, up from 7 percent a decade ago.
Another big chunk of the problem is, of course, pension funds. None of Texas's local pension plans are fully funded and only 19 percent are more than 80 percent funded; Houston's pension system is only 61 percent funded. For perspective, none of this comes close to Detroit's twin dilapidated pension funds, which according to our own Eileen Norcross's calculations, are 37 percent and 44 percent funded respectively. And none of this should detract from the overall Texas recovery, a testament to conservative economics and the leadership of state officials. But festering debt can undermine even the most resounding economic booms. Texas localities should ease up on the spending and start paying the bills.