Comptroller Susan Combs Announces Final Report in the Texas, It’s Your Money Series
We are a critical point in our nation’s history with unprecedented debt, annual deficits of over a trillion, and uncertainty about our economic future and of course business confidence reflects those concerns.
The number $16 trillion is known across the globe and American’s problems are global concerns.
As chief financial officer for Texas, we look at indicators to gauge the fiscal health of the Texas economy. And it’s clear that when people are worried they retrench, the economy slows, jobs slow and the future of our children is not as bright. The national picture is not rosy and we need to be able to control some of our financial destiny here at home.
Rising Medicaid and other entitlement programs do pose a potential to crowd out other Texas priorities such as public education, higher education, water, roads, local health and so on.
We had 40 town halls all across the state to discuss the looming problems to be caused by Medicaid, federal spending and regulation which might in fact hurt those things that we want as Texans. So in these town halls we asked the following question. Do you want more financial information from your state and local governments? And the answer was a resounding yes.
So what does that mean? It means that we as individuals want more control over our financial destiny just as we do in our own lives and businesses. We want more transparency, more information regarding government finances so that we know how our wallets are being affected because right now it’s not easy to get that information.
For example, we don’t take on debt for cars or homes or businesses without reviewing our entire financial landscape, what we owe, can we afford it, how many years do we have to pay it off, and what kind of a debt increase is it?
So in response to requests from you Texans, we have now issued four reports. And you made it clear that you wanted more information as part of this Texas its Your Money series. We’ve listened so here they are. And they can all be found on the web at www.texasitsyourmoney.org.
One point to be made is that there is a common theme running through these reports which is it’s all about your money and how you as individuals can have some control. In many cases you don’t necessarily know how it’s being spent but you need to know because you are paying the freight.
What we want to do is to be sure that the individual Texan has more control over his or her financial destiny. The old phrase, knowledge is power; well it’s never been truer.
Each one of these reports is about an obligation that you will be on the hook for. Whether it’s through a tax, a debt, obligation by city or county, school district or through an underfunded pension plan for public employees that may not be able to meet its obligation so it in essence is also another form of public debt.
So the first report with the, upper left hand corner, is Your Money and the Taxing Facts, that came out in late August and most of us don’t even know who’s taxing us, who, when, where, how much. It’s pretty hard to find out. And this first report deals with literally the thousands of entities across each corner of the state.
The next report with the little girl was called Your Money and Local Debt. That came out in September. And that was all about local debt by cities, counties and other non-education entities and discusses the debt that you vote on but also the debt that you probably not even aware of-yet must pay. And in fact that debt has been steadily increasing over the past decade.
So while state debt is at about $40 billion, local debts are more than four times higher at $192 billion.
Then in October with the pencil we issued a report called Your Money and Education Debt about the rise in debt taken on by public education, community colleges, four year institutions compared to population and inflation growth.
Schools and colleges usually use bond debt primarily to fund facility construction and renovation and there are as we found wide variations in those costs.
And the latest report which is with the balloon which we are releasing today, Your Money and Pension Obligations asks you to keep a sharp eye on pension debt and what is kind of interesting on that, that report here deals with pension funds across the state that pay for the retirement of public employees and those are teachers, and those are firefighters and they’re police, state folks, city, county employees etc.
Now we have of course all heard about cities in California going bankrupt because of their pension obligations for public employees which couldn’t be paid and they had to cut services sometimes libraries etc.
Detroit is in the news as well for some of their issues. The state of Rhode Island dramatically changed its pensions so that taxpayers wouldn’t be on the hook for more unfunded benefits.
There are some warning signs in Texas, especially when it comes to certain large, local pension programs such as the city of Houston’s which has been a great deal in the press recently.
We’re certainly not California, but we at least need to be aware of what those obligations are and in some cases they may need to make some mid-course corrections, but a California style problem could one day be in the cards for some cities which has the effect of exerting downward pressure on other parts of your local budget which of course ultimately affects you, the taxpayer.
And what this chart shows is, it kind of tells you sort of what are the basic sort of points of a pension. What you have here is you of course you have to have your contributions, your investment earnings and your planning design, but what this chart shows is what is the difference if your return is not 8 percent, its not 7 its 6 and so this simply is a way for folks to take a look at what if our investments are not as robust as we would like, do we need to change contributions? Do we need to change plan design? These are all individual pension issues.
We think that these are important questions so we’ve got something here which is called A Roadmap to Better.
What comes through all of these reports is a set of recommendations which shows where we can do better in the state in talking straight to the taxpayer who ultimately pays the freight. So I’m working with the leadership on legislative ideas for the upcoming session that embody these recommendations and principles and I believe that all of the leadership offices are very supportive.
So this report, A Roadmap to Better, with the front line saying Texas it’s your money, which is of course what we always believe. So we do have some recommendations:
And for example with respect to that first report on taxing entities. We think that taxing entities should post more information on the web and that local taxing districts should send that information to us. We’ll be able to put up all local sales and property tax information on one public website so you can find it easily.
And then further because of the soaring growth of special purpose districts, each district we think should be required to do a self-evaluation every few years to ensure they’re continuing to meet the needs for which they were created and performing the public good.
Now these should of course be posted online so you at the local level can find that if they are using your money for the purposes intended.
We also believe that all new debt, which is being voted on, should include ballot language about the already existing debt, its debt service, the years left to pay and per-capita debt per person before taking on more debt.
The Texans I talked to were all very frustrated by not being able to find out this information easily and they expressed real anger about feeling that the debtor was being kept in the dark.
And so that’s this proposed sample ballot if the key information were included.
What’s also interesting to us in doing these reports was that a lot of the debt is taken on without voter participation through certificates of obligation and we think that process needs to be amended to include more transparency so that you, the individual, have more information and a greater say in the debt that’s being issued in your name.
As an additional item, public education debt is the fastest growing area of spending in public schools and accounts for about a third of all local debt. And because most of that is used for school construction, we think that information on the cost of each facility, the cost per square foot, square feet per student should be posted on the web.
We found some extraordinary differences in cost between very similar type schools with some districts spending between two and three times more than another district to build pretty much the same kind of school. And we think that there’s lots of opportunity for best practices, sharing of ideas, gosh how’d you build that wonderful school for a third of the cost that we did.
We also recommend that community colleges, which don’t report this information, should do that again. I think there’s an opportunity for tremendous positive recommendations flowing back and forth between these levels.
Finally with respect to pensions, some pensions may not have the financial strength which they should have and that information is not readily available to the public. This information should be posted online for each pension, along with the prior ten years earnings compared to what they thought the revenue would be. This allows a look at benefits, revenue streams and then of course long term fiscal health which would then help them decide whether they had to increase contributions or change the plan design.
If a local pension experiences difficulty sometimes the local government, you the taxpayer paying for it, has to kick in more money and that means that you as a citizen are on the hook as well.
So what we heard across the state after all these town halls and all this work was that the public really wants more information. They have a need and a right to know who’s taxing them. What it’s for? How their money is being spent, how much bigger their debt might be going because they’re going to pay for it and there is a lack of transparency in some of these areas and we believe this needs to be corrected.
This is my bottom line in my job as Comptroller.
Texans are concerned about Washington spending practices as they should be. We can and must do better here in Texas.
So we urge people with this information; be informed, be engaged, take charge and we must always remember it is your money.