Susan Combs

Texas Comptroller of Public Accounts

Its Time to Choose Our Fiscal Future

Be informed. Be engaged. Take charge.

A Roadmap to Better.

Texas, Its Your Money

Texas, Its Your Money

Susan Combs

Texas Comptroller of Public Accounts

Your Money and The Taxing Facts

A Texas, Its Your Money report on who is taxing you and why.

Susan Combs

Texas Comptroller of Public Accounts

Your Money and Local Debt

A Texas, Its Your Money report digging deeper into state and local government debt.

Susan Combs Texas Comptroller of Public Accounts

Your Money and Education Debt

A Texas, Its Your Money report digging deeper into public and higher education debt.

Susan Combs Texas Comptroller of Public Accounts

Your Money and Pension Obligations

A Texas, Its Your Money report digging deeper into public pensions

Keeping A Sharp Eye On Public Pension Obligations

To download the reports, visit www.TexasItsYourMoney.org.

DR AF T

ver the last year, Ive been traveling around our state, talking with people from all walks of lifeand doing a lot of listening. In 40 town hall meetings, a common theme has emerged about whats on our minds. Its pretty simple: Texans are worried about paying the bills. Not only our own household bills, which can be challenging at times in the aftermath of the recession, but the incredible bills being piled up by every level of governmentbills that are going to come due, whether we like it or not. This is about real families living real lives. Theyre worried about their kids and grandkids. Theyre worried about the spiraling national debt, and the rapid growth in state health care costs, which will be accelerated by health care reform. Theyre concerned about an ever-growing array of special purpose districts across Texas that adds to their taxes. No one wants to suffer the same fate as the poor proverbial frog in the pot of water that couldnt tell that the temperature was getting too hot before it was too late. Thats why weve taken the temperature of Texas public debt and pensions and examined the various taxing entities that all take a toll on our take-home pay.

Our Texas, Its Your Money series of reports, summarized in this booklet, is an in-depth look at all the ways taxpayers wallets are affected. Its our effort to give every citizen the information they needand deserveto make informed decisions. And its an acknowledgement that the temperature in those pots is climbing a little each day. The question, as always, is What are we going to do about it? Thats a job for every Texan, taxpayer and elected official alike. Be informed. Be engaged. Take charge. Texas has fared better economically than most of the country, and we want to keep it that way. We dont want to be like Illinois, California or Greece, where attempts to rein in decades of fiscal mismanagement are proving bitter pills to swallow. There will always be wants and needs, just as there will probably be those who want to deliver bothdespite the harsh realities that it must all be paid for. Its always easier to say yes to every spending request or wish. But its far more responsible to never forget that those credit card statements are still going to be in the mailbox next month. Smart people make smart decisionsand tough ones. They arm themselves with knowledge and meet the challenges head on. Let us know how we can help.

SUSAN COMBS

Your Money and

Your Money and the Taxing Facts examines all the various local entities that add to your tax bill, including cities, counties, special purpose districts and transit authorities, and identifies trends in local taxation. Since 1993, special purpose districts that levy sales tax have increased by more than 1,900 percent, which means that more entities are taxing you. In that same time period, the number of special purpose districts that levy property tax has grown by more than 45 percent, with the creation of more than 500 new districts of this type. The increase in local sales tax and property tax has far exceeded either population or inflation growth.
TEXANS PAY MORE TAXES EVERY YEAR

CUMULATIVE LOCAL SALES TAX GROWTH

200% SALES TAX
200%

CUMULATIVE LOCAL PROPERTY TAX GROWTH

PROPERTY TAX

0% 1993

COMBINED POPULATION AND INFLATION GROWTH* 2011

0% 1992

COMBINED POPULATION AND INFLATION GROWTH* 2010

*While local sales taxes increased by almost 170 percent from 1993 to 2011, property taxes grew by 188 percent from 1992 to 2010. Compare that to slightly more than 120 percent growth in combined population and inflation during those years.

the Taxing Facts

Where We Fall Short
The Comptrollers office has information available online at https://ourcpa.cpa. state.tx.us/atj/addresslookup.jsp that shows you which entities are levying sales tax and at what rate; however this information is often not readily available when you are shopping. With respect to property tax, there is no central source showing which entities can tax a particular piece of property. Many Texans can find this information via their appraisal district website, but the information is not standardized or collected statewide on a single website. Some districts do not even have a website, forcing taxpayers to go to multiple sources to learn who is taxing them.

How Texas Can Do Better

You have a right to information on whos taxing you and why, including details on the growing number of special purpose districts. To ensure this data is consolidated into one statewide electronic resource for efficient access and review by the public, Texas should require the tax assessor-collectors or chief appraisers of appraisal districts to report the tax rate information to the Comptrollers office and require the Comptroller to publish all local tax rate information (including local property and sales tax rates) on one public website and to update the site at least annually. You have a right to know that special purpose districts are still providing the service for which they were created, and that the taxes they collect are being applied exclusively to that purpose. Texas should institute a formal review process, similar to that used by the Texas Sunset Advisory Commission, to periodically examine whether special taxing entities should be continued. This would provide a much-needed check on the increase of taxing authorities. You have a right to accurate, up-todate and useful information on the revenues and expendituresincluding administrative, legal and other costsof the entities that tax you, with information posted on a public website.

Most CoMMon ProPerty tax sPeCial PurPose DistriCts by tyPe

Municipal Utility District Emergency Services District Hospital District Water Control & Improvement District Water District College District 637

Most CoMMon sales tax sPeCial PurPose DistriCts by tyPe

Crime Control District Emergency Services District Municipal Development District Library District Improvement District 52

271 129

52

20 15 12

109 64 64

*Data is reported to the Comptrollers office by local appraisal districts.

Your Money and

Your Money and Local Debt focuses on the debt our local governments issue for purposes such as hospital construction, water infrastructure projects and vehicle and technology purchases. Just like household debt, this debt can spiral out of control if not watched and planned for carefully. Our local governments more than doubled their debt load in the last decade, amassing more than $7,500 in debt for every man, woman and child in the state. Between 2001 and 2011, the outstanding debt of Texas local governments rose more than twice as fast as inflation and population growth rates combined.
TOTAL LOCAL OUTSTANDING DEBT BY FISCAL YEAR
$183.8 $192.7 $200

$174.6 $160.3
OTHER SPECIAL PURPOSE DISTRICTS WATER DISTRICTS/ RIVER AUTHORITIES PUBLIC SCHOOL DISTRICTS HEALTH/HOSPITAL DISTRICTS COUNTIES COMMUNITY AND JUNIOR COLLEGES CITIES

$141.4 $110.1 $119.4 $127.4

150

(IN BILLIONS)

$86.7

$94.9

$102.6

100

50

SOURCE: Texas Bond Review Board

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Local Debt
Where We Fall Short
New debt often is approved by a small percentage of voters, who must make vital decisions about new debt with little information about its implications. And a large share of local debt totaling $12.7 billion since 2005is issued through certificates of obligation, generally, without any voter approval. Furthermore, it is difficult for taxpayers to learn the full scope of debt in their area. While some local debt is reported to the Texas Bond Review Board, information not reported includes bank loans and some lease-purchase arrangements. Often, detailed research in budget and financial reports is needed to gather this additional detail.

How Texas Can Do Better

You have a right to a full and complete disclosure of public debt. All government entities should reveal all debt obligations on a public website, including the debts original stated purpose, the total amount of debt authorized, the issued and unissued amounts of authorized debt, spent and unspent amounts of issued debt and the per capita debt burden on taxpayers. Any ballot for new debt should be accompanied by a similar accounting. You have a right to approve debt issued in your name. Texas should significantly narrow public governments authority to issue debt without voter approval, and revise the petition process to make it easier for taxpayers to compel a public vote on proposed debt.

COMBINED STATE AND LOCAL OUTSTANDING DEBT BY FISCAL YEAR

2001 $13.7B $86.7B 2011 $40.5B $192.7B $167.8 $130.1 $140.8 $150.7 150 (IN BILLIONS) $221.6 $233.2 $250

STATE LOCAL

$208.6 $191.3

200

$100.3

$112.1

$120.8

100

50

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Note: Numbers may not sum due to rounding. SOURCE: Texas Bond Review Board

Your Money and

Your Money and Education Debt examines the indebtedness of our public schools and higher education institutions. In fiscal 2011, our public school debt was $63.6 billion, or $13,530 for every Texas student in a school district carrying debt. And while state college and university debt is lower, at $12.5 billion, that debt rose nearly eight times faster than enrollment in the last decade.
CUMULATIVE PERCENTAGE GROWTH OF SCHOOL DISTRICT DEBT
200% DEBT OUTSTANDING 150 INFLATION (CPI) ENROLLMENT 100 SOURCES: Texas Bond Review Board, Texas Education Agency, Bureau of Labor Statistics 155.2%

50 26.5% 21.0% 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

STATE COLLEGE AND UNIVERSITY DEBT GROWTH EXCEEDS ENROLLMENT

250% DEBT OUTSTANDING 200 150 TUITION AND FEES ENROLLMENT INFLATION (CPI) 125.8% 100 50 0 2001 246.5%

In 2003, the legislature

deregulated university tuition , allowing

institutions to set their own tuition rates and fees.

32.5% 26.5% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

SOURCES: Texas Bond Review Board, Texas Higher Education Coordinating Board

Education Debt
Where We Fall Short
The bulk of Texas education debt supports the construction or renovation of school facilities. Yet Texas has no centralized source for information on current public school facilities, such as total square footage, square footage per student and total cost. To obtain such information, every district must be contacted individually. Construction costs also are not reported to any single entity, making it almost impossible to identify unreasonable costs on individual projects. In additionas with other debtnew debt often is approved by a small percentage of voters. It also is difficult for taxpayers to learn the full dimensions of debt in their area. including actual square footage, total cost per student, total cost per square foot and square footage per student. Each district should also post an online inventory of all existing facilities, detailing available square footage, total student capacity and current student enrollment for each campus. All ballots for new education debt should reveal all current and proposed debt obligations, including the amount of outstanding debt, existing debt service, amount of new debt and the average length of proposed debt obligations. You have a right to know that education debt is being used prudently and efficiently. Texas should provide incentives for school districts to use more cost-effective construction and design practices, which can slash design costs and save millions per project. Such incentives also could encourage school districts, community colleges and universities to enter into dual-use facility arrangements, to help reduce construction costs and the need for new debt.

How Texas Can Do Better

You have a right to full and complete information on education debt. Every Texas school district should disclose on its website the cost and details of all construction and renovation projects,

CUMULATIVE PERCENTAGE GROWTH OF COMMUNITY COLLEGE DEBT

Note:: Tuition and fee rate of growth is assumed for 2002-04 as data is not available.
300% 250 200 150 DEBT OUTSTANDING TUITION AND FEES ENROLLMENT INFLATION (CPI) 297.2%

SOURCES: Texas Bond Review Board, Texas Higher Education Coordinating Board, Bureau of Labor Statistics

100 50 0 2001

100.9% 58.9% 26.5% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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Your Money and Pe

Your Money and Pension Obligations spotlights the thorny issue of public pension plans facing shortfalls. In some parts of the country, benefits promised to public employees might not be met without additional revenue from taxes and fees, because of lower-than-required investment revenue and employer/employee contributions. Some California cities are already in bankruptcy. We need to keep an eye on pension expenditures to make sure they stay manageable.
All defined benefit public pension plans ultimately rely on two sources of revenue: contributions from the employer and the salaries of covered public employees, both of which are supported by taxes and fees; and investment earnings generated by the pension plans assets. These funding sources determine the financial health of the plan, along with a third factor: plan designthe benefits to be provided and the ways in which employees will qualify to receive those benefits.

REVENUES OF PUBLIC PENSION PLANS IN TEXAS

2010 Earnings on Investment Government Contribution Employee Contribution Total Revenue $13.7B $4.7B $3.6B $22.0 Billion
21.4% 62.4% 16.2%

SOURCE: U.S. Census Bureau

ension Obligations
Where We Fall Short
Too little public information on public pension finances is readily available. Many plans do not report their actual investment returns to the states Pension Review Board. Several of the states largest pension plans also have infinite amortization periods, meaning that they can never eliminate their unfunded liabilities as currently structured. primary contact information on a public website. Each plan should also post online and report to the Pension Review Board basic historical investment returns, including net investment returns for each of the last 10 fiscal years and one-year, three-year, five-year, 10-year, 30-year, and since inception rolling rates of returns. The report should also include the plans most current assumed rate of return and assumed rates of return for the last 10 fiscal years. Texas should examine the financial health of public pension plans and their ability to meet long-term obligations, considering their benefits, contributions and investment returns, recommending solutions to mitigate any risk of failing to meet those obligations.

How Texas Can Do Better

You have a right to information on public pension finances. Texas should require all public pensions to post

Texas public pension plans cover 2.3 million active and retired members. As with most other investments globally, Texas public pension program earnings fell during the recent recession. Although plan assets have rebounded since 2010, overall they are still below pre-recession levels.

TEXAS LOCAL PUBLIC PENSION PLANS EARNINGS ON INVESTMENTS

U.S. Fiscal 2000-2010
$4

TEXAS STATEWIDE PUBLIC PENSION PLANS EARNINGS ON INVESTMENTS

U.S. Fiscal 2000-2010

$2.3B GAIN

$20
(IN BILLIONS)

(IN BILLIONS)

$11.4B GAIN

$0

$0

-$6

$5.7B LOSS 2000 2002 2004 2006 2008 2010

-$15

$11.2B LOSS 2000 2002 2004 2006 2008 2010

SOURCE: U.S. Census Bureau

Key Takeaway: More Infor

1
Taxpayers Need One Centralized Place for Taxing, Debt and Public Pension Information
There currently is no single look-up tool for those seeking all transparency data on Texas state and local governments. Taxpayers, instead, must look up information from various sources to get a full picture. To start bringing existing data and resources together, the Comptrollers office launched several transparency Web tools in tandem with each report in the Texas, Its Your Money series: Find interactive maps that provide an overview of the entities that assess property and sales taxes in each of Texas 254 counties at www. texastransparency.org/yourmoney/ localtax/entities.php. Compare how your citys or countys debt stacks up with other areas. Look up debt issued by individual city, county, water district and other special purpose districts using the Comptrollers maps and look-up tool at www.texastransparency.org/ yourmoney/localdebt. See how your school districts or colleges debt ranks. Look up debt issued by individual district by using the Comptrollers maps and look-up tool at www.texastransparency.org/ yourmoney/edudebt. Use the Texas Public Pension search tool on to view and sort recent data on Texas public pension plans, including key indicators.

ON THE WEB: OUTSTANDING DEBT PER RESIDENT, TEXAS CITIES, FISCAL 2011

In the map at left, the darkest circles represent the cities with the most outstanding debt per resident. Of cities with debt, the debt per resident in 2011 ranged from $3.83 in the small town of Lyford in Willacy County to $21,900 in Westlake, a suburb of Fort Worth.
DALLAS - FT. WORTH HOUSTON

EXAMPLE SEGUIN Tax-Supported Debt: $41,915,000 Revenue-Supported Debt: $22,600,000 Lease Purchase Debt: $0 Commercial Paper Debt: $0 Total Debt Outstanding: $64,515,000 Population: 25,175 Total Debt Outstanding per Capita: $2,562.66

SAN ANTONIO - AUSTIN

CORPUS CHRISTI

INTERACT ONLINE Go to www.TexasTransparency.org for interactive versions of these maps where you can click to see more details on the outstanding debt per city.

SOURCE: Texas Comptroller of Public Accounts

ormation Still Needed.

2
Voters Should Be Told the Debt Facts
Unless voters have done research on their own or government entities have shared information about the current outstanding debt, voters are often not fully informed before they walk into the voting booth. Information on various ballot measures can be challenging to obtain. Ballot propositions currently offer no information other than the debt issue being considered. What a sample ballot might look like if key information was included, such as: the amount of outstanding debt, debt service, per capita obligation as of the most recent annual financial report, the amount of new debt, estimated debt service, and estimated per capita burden being proposed.

Beta ISD

Bond ElEction

- noVEMBER 06,

2012
DeBt OUtStaNDING PRINCIPaL ReMaINING INteReSt tOtaL DeBt SeRVICe PaYMeNt

DeBt OUtStaNDING PeR CaPIta

AUG. 31, 2012 PROPOSED ISSUE

$65,030,343 $25,795,000 rs

$42,742,000 $18,200,000*

$107,772,343 $43,995,000*

$1,400.76 $555.63

NEW
$274.97

AverAge len

debt: 20 yeA gth of proposed

aL DeBt exIStING aNNU ta x Rate

RAtE PROPOSED nEw If bOnD PASSES % IncREA SE

$0.18 per $100

GE RESIDEntIAl ExIStInG AvERA lEv y** DEbt SERvIcE tAx

y t SERvIcE tAx lEv EStImAtED DEb StAtE ASSUmInG nO If bOnD PASSES ASSIStAncE % IncREA SE

$336.08 22.2%

$0.22 per $100 22.2%

payment. value erest and total ntial property * estimated int rage 2012 reside ated on the ave vice tax is calcul t ser ** average deb 2,760. in the city of $15

PROPOSItIOn

vAtion, truction, reno 00 for the cons tion of three nt Of $25,795,0 S In thE AmOU g the construc of bOnD nter s, includin the issuAnce rming Arts ce school building n of the perfo d equipment of , rehAbilitAtio e tAx in pAyAcquisition An middle school e levying of th d th ooms At betA high school An science clAssr m At W.h. betA purpose stAdiu And the multi ment thereof.

fOR AGAInSt

11

Exercising Your Po
Be informed.
Find our Texas, Its Your Money report series at www.TexasItsYour Money.org to learn more and access state and local government transparency tools. For a list of state debt issuers, recently approved state transactions and a searchable database of all state debt, visit www.brb.state.tx.us/ bfo/bfo.aspx. For a searchable database showing local government outstanding debt, see www.brb.state.tx.us/lgs/lgs.aspx. Visit www.thecb.state.tx.us for data and information on Texas college costs and expenditures, a general appropriations overview and information on school debt trends. Visit the Pension Review Board at www.prb.state.tx.us/agencyinformation/publicationsreports.html for asset reports, pension plan presentations and legislative reports and updates.

www.TexasItsYourMoney.org

wer as a Taxpayer
Be engaged.
Attend hearings and meetings of government entities that levy taxes and issue debt in your name. Learn the facts and know the reasons and arguments behind these decisions. Let your government leaders know your concerns. Make your voice heard. Visit the Pension Review Board at www.prb.state.tx.us for information on pension board meetings, which are open to the public.

Take charge.
Ask for more transparency at every level of government. Make use of the transparency tools offered to keep government accountable. Let government know the information you want to see about your tax dollars. With better transparency, you can be more informed and involved with just a few clicks. Register to vote in state and local elections by visiting the Texas Secretary of States office at www.votetexas.gov. Exercise your right to vote.

13

A Roadmap to Better.

Texas, Its Your Money

Were committed to making Texas government transparent and keeping our books open, accessible and understandable. After all, its your money! www.TexasItsYourMoney.org

Susan Combs

Texas Comptroller of Public Accounts

Publication# 96-1730 Printed December 2012