By Kolten Morris
As the 84th Texas Legislature gains steam and lawmakers begin considering budget proposals, on the table are tax cuts, infrastructure improvements, education-related expenditures, and other important issues. With the drop in oil prices, many are worried about tax revenues.
But Texas doesn’t have a revenue problem, Texas has a spending problem.
The Texas Constitution stipulates that lawmakers adopt a balanced budget, which curbs excessive D.C.-like deficit spending. Lawmakers can still issue debt through voter-approved bonds for things like transportation and water projects. However, this debt must be funded with General Revenue (GR) or specific revenue sources costing Texans more from paying higher taxes and fees to support these bonds.
From fiscal years 2005 to 2014, total state debt outstanding increased by an astounding 123% from $19.9 billion to $44.3 billion, according to the Bond Review Board. Figure 2 presents the total debt that is either General Obligation (GO) or Non-General Obligation debt—also known as Revenue debt.
(Conduit & Component falls under Non GO or Revenue debt)
GO debt is legally secured by a constitutional pledge of the first monies coming into the State Treasury not already dedicated for another purchase, and must be voter approved. Revenue debt on the other hand does not require voter approval. Unfortunately, these two types of debt and the effects they have on taxpayers in the future is difficult to fully understand.
The Texas Comptroller’s office helps voters understand the costs of the state’s debt by providing information at texastransparency.org, but lawmakers still need to do more.
Legislators should pass legislation requiring the principal cost of debt (debt outstanding) and the total cost of future interest payments (debt service outstanding) be provided to taxpayers so they can clearly see the financial impact of debt issuance.
For example, Senate Bill 2, the Texas Senate’s introduced2016-17 budget, includes $3.9 billion in debt service; a cost of debt issued long ago that usually goes unnoticed.
The more debt Texas issues, the more funds the state will require to pay off the debt. To completely eliminate the state debt, every man, woman, and child in Texas would need to pay $1,479—and that number will only grow larger if the state continues to spend money it doesn’t have through debt issuance.
Lawmakers need to focus on Texas’ spending problem during the 2015 Legislative Session by restraining the total budget to no more than population growth plus inflation, paying down existing debt obligations when possible, and working toward not issuing any additional debt.