Commentary: Texas' fast-growing debt tops that of U.S. government's

The Fort Worth Star-TelegramJuly 18, 2011 

For all the controversy over the national debt ceiling, here's a surprise: Since 2001, the debt load in conservative Texas has grown faster than the federal debt.

Texas has been borrowing more than most other states, too. And local entities, from cities to school districts to transit authorities, have been piling up even more debt.

From 2001 to 2010, state debt alone grew from $13.4 billion to $37.8 billion, according to the Texas Bond Review Board. That's an increase of 281 percent. Over the same time, the national debt rose almost 234 percent, with two wars, two tax cuts and stimulus spending.

The sets of numbers are not easily comparable, and not just because one is counted in billions and the other in trillions. National figures exclude some obligations, and the Texas total includes so-called conduit bonds, for which the state is not necessarily liable if the borrowers default.

Still, the trend is undeniable. While Texas lawmakers have refused to raise taxes -- and often criticize Washington for borrowing and spending -- the state has been paying for much of its expansion with borrowed money.

That's not a bad thing, if everybody can handle the debt service and spend the money prudently. Texas' population grew almost twice as fast as the nation's in the past decade, so it needs new highways, schools, prisons and more.

Local borrowing accounts for almost 85 percent of public debt in Texas, because the government is so decentralized. Combine state and local borrowing, and Texas ended fiscal 2008 with $216 billion in total debt, up from $98 billion in 2001, according to census figures. (The latest census data for local debt is 2008.)

The borrowing isn't slowing. New issues expected for 2011 include $2 billion for transportation, $434 million for water projects and $235 million for cancer research. All those are paid from the state's general fund.

Much more borrowing is planned for debt that's supported by revenue and user fees. And local borrowing dwarfs all the categories.

Texas doesn't appear to be overextended. In a May report, Standard & Poor's gave the state an AA+ rating, citing its outperforming economy, strong cash management and constitutional limits on debt.

"Texas has what we consider to be a very low net debt burden," S&P wrote. In part, that's because so much debt is borne by local governments. Per capita, only Tennessee has a smaller state tax burden than Texas. But on local debt, only New York and Washington, D.C., are larger, according to the website usgovernmentspending.com.

Conservative writer Christopher Chantrill presents publicly available data on government finances and his estimates. Measured as a percentage of state product, he ranks Texas among the lowest on state debt and among the highest on local debt. Combine state and local, and in 2010, he estimates that Texas had debt of $8,943 per person, $380 more than the average for all the states. In 2001, the Texas debt load was $4,608 per person -- and $843 lower than the states' average.

There are crucial differences between state and national debt, said John Kennedy, a senior analyst at the Texas Taxpayers and Research Association in Austin. Texas isn't borrowing to pay deficits, and it's limited in the amount that it can borrow, because the debt ceiling can't be raised without voters' approval.

"The most important thing is that we usually borrow to build things," Kennedy said.

Bonds for cancer research will pay salaries, but they're an exception. A more common example: Since 2005, revenue debt for special districts rose 215 percent, according to the Texas Bond Review Board's annual report. That increase was largely due to the North Texas Tollway Authority's issuance of $6.5 billion in debt. Dallas Area Rapid Transit contributed a $2.5 billion increase in that category.

Two government bodies, created to oversee transportation projects, sold $2.5 billion in bonds last year, including funds for the North Tarrant Express project.

Bonds for veterans' housing have increased, because the state has more soldiers. There's more debt for student loans, because college tuition has grown so much. Many years ago, the state might have paid cash for a building, but no more.

"We're not a pay-as-you-go state and we're not averse to debt, as some people believe," said Eva DeLuna Castro, a senior budget analyst at the Center for Public Policy Priorities in Austin. "Maybe you're not paying for it now, but your children or grandchildren will."

Bob Kline, executive director of the review board, said that's largely a political question. Some would argue that long-term investments, such as highways and university buildings, will be serving future generations, too.

Let's hope so, because everyone is on the hook for them.

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