Interim charge to review and make recommendations regarding existing and future public debt at all levels of government in Texas, including independent school districts, cities and other local governments and the Texas Guaranteed Tuition Plan.

Americans for Prosperity has researched local government spending and debt and found that local government spending has grown four times faster than Texans’ paychecks and local government debt was growing five times faster.

Local government spending is unsustainable. We are leaving our children a legacy of debt – not the legacy we want to be leaving them.

I will be addressing the growth in local government in this testimony.

Local governments in Texas are currently carrying $174.55 BILLION in debt, as of 2009, according to the .Texas Bond Review Board.

And according to the Texas Bond Review Board’s annual report:
• Texas ranked third among the 10 most populous states in terms of local debt per capita;
• Local government debt issuance in Texas for FY ’07 experienced a resurgence with a 45.5% increase when compared to 2006 ($29.7 billion vs $19.9 billion)
• New-money bond volume climbed by 44.1% over FY ’06 as did refunding bond volume by 47.7%.
• Data for FY ’07 indicate that of the $29.07 billion issued, approximately $18.0 billion was for new-money purposes while $11.04 billion was issued for refunding prior outstanding debt.

Legacy we are leaving our children is one of debt
Thanks to our generosity, we are leaving our children a legacy of debt. That is not the legacy we want to leave our children.

But there are ways we can change that.

• Create model school facilities which can be changed based on local building materials and terrain. There is no need to reinvent the wheel every time a new school is built. If we pay 6% to an architect for each school, and many facilities are well over $100,000 – it is clear we are spending a lot of public money on architectural fees. And buildings don’t teach students – teachers do. Today in Texas, we still spend only about half our education dollars on instruction, and teachers constitute only about half of the education staff and make far less in most districts than do the support staff.

• Call bond initiatives what they are – deferred tax increases The public is very generous, with bond initiatives passing about 85% of the time; however, property taxpayers are ready to revolt. In talking to taxpayers across the state, they are largely unaware of the local government debt they are incurring, though much of it is taxpayer-approved. We propose calling a bond initiative what it is – a deferred tax increase.

• Inform voters of the current debt each time a new bond initiative or addition debt would be incurred. Many citizens are not aware of local government debt.

The Texas Bond Review Board does a good job of tracking bond initiatives and debt – and each taxing entity in Texas should be required to report proposed bond initiatives or incurring more debt to the TRB.

Some local government debt is supported by current revenue, but the debt is staggering and is getting worse:

It should be noted that some cities and local governments are operating deficits, which are not reflected in the debt.
• For instance, Houston’s five-year operating deficit of $1.5 billion is monumental, particularly so when compared to the operating results at San Diego, San Francisco, and Los Angeles in the bankrupt state of California, at Detroit in the automotive bankruptcy plagued state of Michigan, and at our sister Texas city of Dallas. See attached Exhibit A.
• The $1.5 billion operating deficits occurred even though the City’s revenues (program and general combined) increased a very generous 37.7% in fiscal years 2004-2008. The operating deficits occurred because operating expenditures increased an even greater 44.9% rate during that five-year period. (CAFR pages 198-199)
• The 44.9% increase in operating expenditures is considerably above the combined 29.4% increase in population (10.3%, including the Katrina influx, CAFR page 223) and inflation (19.1% per the Houston SMSA CPI from June 2003-2008).

We at Americans for Prosperity want to shed the light of public scrutiny on local government debt so taxpayers are better informed before voting on tax increases or bonds.

If you have any questions, please fee free to call us at 512-476-5905. Thank you.