Despite a $9 billion-plus surplus and an overall economy that ranks tenth largest in the world, Texas’ fiscal health earned a D grade according to an analysis of its latest audited financial reports.
Overall, Texas has $76.1 billion worth of available assets to pay $158.3 billion worth of bills. The result is a shortfall of $82.2 billion, or $10,100 each taxpayer would have to pay to fill the gap.
“Texas’ elected officials have made repeated financial decisions that have left the state with a debt burden of $82.2 billion,“ the report produced by the financial nonprofit organization Truth in Accounting (TIA), states.
“Because of Texas’ balanced budget requirement,” TIA says the $10,100 taxpayer burden should be $0.
Texas’ financial problems stem mostly from unfunded retirement obligations that have accumulated over many years, the report notes. Of the $238.4 billion in retirement benefits promised, $45 billion in pension and $65.5 billion in retiree health care benefits remain unfunded.
“Texas’ financial condition is not only alarming but also misleading as government officials have failed to disclose significant amounts of retirement debt on the state’s balance sheet,” the report states. “Residents and taxpayers have been presented with an unreliable and inaccurate accounting of the state government’s finances.”
The state’s reported net position is also inflated by $7.3 billion, TIA argues, primarily because it defers recognizing losses incurred when the net pension liability increases.
Worse still, TIA argues, “the state continues to hide $58.8 billion of its retiree health care debt.”
Gov. Greg Abbott’s office did not respond to a request for comment from The Center Square for this story.
“The asserted improvement is based on short-term, cash-accounting-based funds accounting,” Bill Bergman, director of research at Truth in Accounting, told The Center Square. “In households, bank accounts can grow when people borrow money, and put more spending on credit cards. Texas’ bonds payable account has been growing significantly in recent years. In our view, the state government’s net position – the ‘Taxpayer Burden’ facing future taxpayers, has been deteriorating, even amidst the state’s economic growth.”
The state’s three largest cities received failing grades in the more recent “City Combined Taxpayer Burden” report.
Of the ten largest cities analyzed, Dallas, Houston and San Antonio have the 7th, 8th, and 9th worst taxpayer burdens, respectively.
The comprehensive annual financial reports released by Dallas, Houston, and San Antonio exclude significant underlying data from major government entities like entire school districts, transit agencies, housing authorities, and others. The trend appears to be nationwide for municipal ledgers, with the exception of New York City.
“Taxpayers are on the hook for the debts accrued by these underlying government entities, but you would not know it just by looking at the reported data for the city,” the report states.
“The annual financial reports issued by state and local governments are called ‘Comprehensive Annual Financial Reports,’” Bergman told The Center Square. But they “aren’t always all that comprehensive.”
“The debt facing school districts in Dallas, Houston and San Antonio don’t add nearly as much to the total debt burden facing taxpayers in those cities as most others of the largest 10 cities we studied,” Bergman added. “Still, one might have expected better overall financial conditions for those Texas cities in light of economic and demographic trends in the last decade.”
In order for the City of Dallas to pay off its debt, each taxpayer would need to pay $21,600. In Houston, each taxpayer would pay $11,300; in San Antonio, $3,200. When combined with unaccounted for city debt costs, county debt and state debt, the individual taxpayer burden increases significantly, according to the report.
This article was first published on The Center Square.