Comptroller Issues Report on Education Debt in Texas

Texas Comptroller Susan Combs released the third report in a series focused on transparency entitled Texas It’s Your Money. The report, “Your Money and Education Debt,” provides a snapshot of how much debt public and higher education institutions in Texas are carrying. The report also includes recommendations intended to provide greater transparency regarding education-related public debt in Texas and reduce debt across public and higher education.

Outstanding debt issued by Texas public schools and Texas institutions of higher learning is mounting faster than the general rate of inflation and the growth of enrollment. Public school districts have the largest outstanding share of local government debt in Texas.

“Public education is a critically important function of the state, and taxpayer dollars should always be spent prudently,” said Combs. “Construction costs are a large portion of school debt and we should all strive to spend efficiently and effectively.”

In fiscal 2011, public school debt was $63.6 billion or $13,530 for every student in a school district with debt. Of Texas’ 1,024 school districts, 854 have outstanding debt. Debt service payments have increased from 7 percent to 9.8 percent of total school district expenditures, making them the fastest-rising spending category in Texas public education during the past decade. The debt burden of higher education has risen sharply as well. Since 2002, state university and college enrollment rose by 32 percent, while outstanding debt increased by 246 percent.

“Educating young Texans is crucial to the state’s continued economic success, but we must also ensure costs do not over-burden Texas taxpayers and families,” Combs said.

Although some public school districts, community and junior colleges, and public colleges and universities provide clear notice of new projects they plan to fund with long-term debt, taxpayers are not always aware of the magnitude of the debt being issued.

To improve transparency so that taxpayers can decide whether public and higher education institutions are meeting the responsibility of managing debt as prudently and conservatively as possible, Combs provided the following recommendations:

  1. As new public education and community college debt is presented to voters for approval, consider requiring that the following be placed on the ballot and on a publicly accessible website:
      1. Amount of outstanding debt,
      2. Existing debt service,
      3. Per capita obligation as of the most recent annual financial report,
      4. Amount of new debt,
      5. Estimated additional debt service,
      6. Average length of proposed debt obligations, and
      7. Estimated debt per capita burden being proposed assuming no state assistance.
  2. To help decrease the amount of new debt required for construction and renovation of public school facilities, the Legislature should consider providing incentives for school districts to use more cost-effective construction and design practices. Additionally, the Legislature should consider whether the state should review funding of non-instructional facilities.
  3. Many school districts already post information regarding expenditures from bond programs online, and provide data showing the capacity and usage of existing facilities. To provide greater transparency, each school district should be required to disclose on its website the progress, cost and details of all construction and renovation projects, including actual square footage, total cost per student, total cost per square foot and square footage per student. Each district should also be required to post online an inventory of all existing facilities detailing the available square footage, total student capacity and current student enrollment for each campus.
  4. Because construction costs for additional classroom space can be expensive, the Legislature should consider providing school districts, community colleges and institutions of higher education incentives for entering into dual-use facility arrangements, to help reduce these costs. Further, to assist in facilities planning and to provide greater transparency, consider requiring community colleges to report construction costs to the Higher Education Coordinating Board for an analysis similar to that provided by the existing Construction Cost Standards Report.
  5. The Legislature should consider giving the Bond Review Board sufficient authority and resources to improve the dependability and consistency of data available to the public on all outstanding debt held by public school districts and institutions of higher education and to provide greater transparency to taxpayers.