By Dr. Vance Ginn and Nozim Ishankulov
Texas Comptroller Glenn Hegar recently reported that the leading credit rating agencies (Moody’s, Standard and Poor’s, and Fitch) praised Texas’ ability to finance its general obligation debt by giving the highest ratings possible.
Only eight other states have managed to get a top grade from all three agencies. California, for example, has marks between high and upper medium grade due to a “highly volatile revenue structure.”
By contrast, the Fitch agency noted, “Texas’ rating reflects its low debt burden, conservative financial operations, and a growth-oriented economy.
In addition to stable economic growth despite a plunge in oil prices, Texas continues to perform well in these credit ratings by practicing fiscally conservative policies. This includes measures taken during the 2015 Legislative Session of passing a conservative Texas budget and historic tax relief. These types of measures should be continued in the future.
To compare, Texas’ state government spent $3,952.30 per capita in fiscal year (FY) 2015 and California’s per capita was $5009.90, which is 27 percent higher than in the Lone Star State. Lower government spending in Texas relative to California helps keep borrowing under control as gross public debt per capita in California of $3,953.90 is 80 percent more than Texas’ $2,195.60 in FY 2015.
Legislators should avoid the temptation to spend every taxpayer dollar available by passing conservative budgets while keeping taxes low, as they did this past session, so that the Texas model can continue to foster economic opportunity for all. If they do this, there’s no doubt Texas will keep its high credit ratings.