Question 1: Why didn’t Texas get a higher grade in this report?

 

They got that grade because it would take $900 from every taxpayer for the state to pay off all its bills.

 

If the state used every penny it has available right now to pay its current bills, it would still be short by almost $10 billion.

 

That’s not good, but this is the best it’s ever been since this report was first released in 2009. That’s partially because Texas’ Teachers Retirement System changed its accounting methods. They’re now estimating they’ll spend less on disability and pensions in the future because teachers will retire at an older age. But people are also living longer as healthcare improves - so it’s possible this improvement could be on paper only.

 

 

Question 2: But Texas's financial statement says it would only take $700 from every resident to pay off the state’s debt. Truth in Accounting’s number is higher. Why?

 

There’s a few reasons.

 

Almost every state in America has a law saying their budget must be balanced, so they all claim that it is balanced.

 

But that often isn’t entirely accurate. Most states will underestimate expenses in their financial statements and push the costs into the future, just to make it appear that the budget is balanced and there’s no bills that can’t be paid. But eventually the bills will come due.

 

A lot of that comes from money Texas has invested to later pay its state workers for healthcare and pensions once they retire. 

 

State financial statements don’t account for market changes in those investments, even though they go up and down just like your stocks or 401k. And they don’t always account for the money Texas will eventually have to pay in pensions to its current active employees.

 

Truth in Accounting says once you account for those market changes, the potential cost of retirement benefits goes way up.

Question 3: How do Texas’s bills compare to other states?

 

They’re ranked #24 based on how much each person in the state would need to spend to pay off the debt.

 

But a lot of nearby states like Louisiana and Oklahoma are in a better situation. There’s 23 states that could pay all of their bills and still have money left over to give back to their taxpayers if they wanted to.

 

The NorthEast is in the worst financial situation. New Jersey and Connecticut are at the very bottom - it would take over $42,000 from every person in the state to pay all their bills. 

 

 

Question 4: But the state debt is only one part of the story. How’s the financial situation in Texas’s local governments?

 

That’s where things get worse - Texas’s cities certainly deserve a lower grade than “C.”

 

For the cities to pay all of their bills, it would take $9,000 from every person in Texas. Only New York and California are in a worse situation.

 

That’s partially caused by Texas politics. It’s typical for states with a Republican governor to have more power and money concentrated in local governments instead of the state. But when you have as many large cities as Texas does, each one is given the opportunity to rack up huge debt if they aren’t responsible with their budget.

 

A lot of the debt is concentrated right here. If you look at the 10 biggest cities in Texas, Austin has the second most debt per person. And this summer we just passed the most expensive budget in the city’s history.