Politicians Desperate to Obfuscate Debt Debate

The Texas Tribune recently published an informative piece that lists all local districts across Texas with bond propositions on May’s ballot.  The main culprits driving debt trends in Texas are school districts, which according to the Comptroller, account for 92% of the $6.65 billion that voters will be asked to approve this cycle.

The article was accurate in citing the intended use of bond proceeds; to expand enrollment capacity for districts experiencing growth.  But many districts don’t intend on building new schools, an issue the article doesn’t address.

Arlington ISD, for example, plans to spend hundreds of millions of dollars on unrelated projects like redundant athletic complexes, security, technology, new vehicles and renovations.  While some upgrades are necessary, the merits of the package are dubious, which will increase their total debt by 117%.  At over $19,000 per student, excluding interest, that’s 40% higher than the state average of $13,500.

Other districts, like Frisco ISD, are actually targeting capacity expansion, with plans to build fourteen new schools.  But the proposal plans to spend over $270 per sq/ft on construction costs, which excludes land purchases, an amount 57% higher than FISD’s historical costs for comparable schools, and 86% higher than the state average.

Most troubling, however, was the Tribune’s failure to fact-check the narrative advanced by local politicians, who intend to avoid accountability by obfuscating the debate.

“The growth [in local debt] has drawn criticism from some conservative groups that say local governments are not borrowing responsibly…Local entities counter that borrowing often makes the best financial sense in light of fast-growing populations and limited state funding. Fast-growing school districts, in particular, have argued that they are forced to issue debt because their property taxes are at or near the state’s cap of 50 cents per $100 taxable value.”

That’s objectively backwards. Districts aren’t issuing excessive debt because of property tax limits, they’re hitting tax rate limits because they’ve issued too much debt.

Texans pay two separate property tax rates to schools districts; a Maintenance and Operating (M&O) and an Interest and Sinking (I&S) rate.  Revenue collected by the M&O rate funds the district’s operating budget, which finances facility maintenance, staff salaries, supplies, equipment and other expenses.  Revenue from the I&S rate finances an entirely separate fund that can only be used to repay principal and interest obligations, otherwise known as debt service.

Local politicians are claiming that, because the state limits their I&S tax rate at 50 cents, they have no choice but to issue debt as a funding alternative to raising taxes.  But what forces districts to raise the I&S tax rate is excessive borrowing and the annual payments required to carry that debt.

Similar to a personal credit card, the more you run up on the card, the higher your minimum payment is.  For districts, revenue from the I&S tax is what pays that minimum…and just like with every line of credit, there’s a limit.

Is it any wonder that local officials blame Austin for problems created by their own wasteful spending?

There’s no question that Austin needs to reform education funding.  After all, Robin Hood does take local M&O tax revenue away from some districts, redistributing it elsewhere.  But local officials have absolutely no excuse for inappropriately issuing debt, either by misusing the funds, exaggerating their capital needs, or by gouging Texans with inflated construction costs.

In reality, every tax dollar swallowed by debt service is money that can’t be spent on students and teachers in the classroom.

And that’s an inconvenient truth some politicians are hoping taxpayers, parents and teachers overlook.

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ABOUT THE AUTHOR

Ross, a Denton County native, runs the Metroplex Office for Empower Texans and Texans for Fiscal Responsibility, primarily focusing on county and local government. He studied Economics at Arizona State University with an emphasis on Public Policy and Constitutional history. Since 2008, Ross has been active in grassroots organizing, political campaigns and as an Irving ISD volunteer. He enjoys speaking to liberty-minded groups regarding the strategic effectiveness of state and local engagement. Ross is an avid golfer, automotive enthusiast, and movie/music junkie.

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