Texas is only Republican-led state among the worst five with largest debt

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(The Center Square) – Texas is the only Republican-led state in the top five states in the U.S. with the most reported state and local debt, according to an analysis by Reason Foundation.

State and local government debt surpassed $6.1 trillion in 2023 nationwide, the report found. In each category, the same states ranked among the top five worst with Texas being the only Republican-led state among them. 

Seven of the top ten states with the most debt are led by Democrats, three by Republicans, according to the analysis. California consistently ranks as the worst state in all categories.

The majority of debt was held by state governments, $2.66 trillion; $1.4 trillion by municipalities, $1.27 trillion by school districts, and $757 billion by counties, according to the analysis. The report analyzed fiscal 2023 data from publicly available audited state and local government financial reports.

The foundation’s State and Local Government Finance Report evaluated short- and long-term obligations, including $1.5 trillion in public pension obligations, $958 billion for retiree health care obligations, and other debt like bonds that will mature in decades.

In all categories, Texas ranks the worst Republican-led state.

Texas’ state and local debt ranked fourth highest in the country at $550 billion, according to the analysis.

Texas reported the third largest long-term debt total in the country of $461 billion. Long-term debt includes bonds, loans and notes, unfunded public pension liabilities, unfunded retiree health care benefits and accrued leave payouts, according to the analysis.

Texas also reported the fourth-largest pension debt of nearly $96 billion, according to the analysis.

“Unfunded public employee retirement liabilities, also known as public pension debt, form when governments set aside fewer assets than required to fulfill promised benefits,” the analysis explains.

Texas also reported the fourth-highest other post-employment benefits (OPEB) debt in the country of $77 billion. OPEB primarily consists of unfunded retiree health care promised to public employees, the analysis explains. 

When it comes to state and local outstanding bond debt, Texas’ $287 billion debt ranked second behind California.

This is largely due to Texas voters continuing to pass record high-bond propositions in elections in recent years. 

In 2023, at least seven counties and 16 cities had a minimum of $6.6 billion worth of bonds on the ballot, The Center Square reported. Five of the largest Texas school district bond propositions totaled nearly $17 billion in debt paid for by increased property taxes, The Center Square reported. 

“Bonds, loans, and notes represent the portion of state and local liabilities explicitly borrowed in credit markets. Unlike pensions or OPEB, which accumulate as estimated unfunded promises, these instruments are contractual debt obligations with fixed repayment schedules,” the analysis explains.

In May, Dallas and Fort Worth voters approved the majority of a combined nearly $6 billion in school district and city bonds. After reporting multi-million dollar deficits, a board that failed to pass balanced budgets, and a district with failing grades, Fort Worth ISD was taken over by the state last week, The Center Square reported.

According to an analysis of fiscal 2024 data by the nonprofit Chicago-based Truth in Accounting, Texas is among 25 states that didn’t have enough money to cover its bills. Texas had $169.7 billion available to pay $180.4 billion worth of bills in fiscal 2024 resulting in a $10.8 billion shortfall, The Center Square reported.

TIA gave Texas a C grade for its fiscal health primarily due to “money tied up in capital investments and funds for specific purposes.” TIA cited record funding for public schools, teachers and retirement as the main reason for the budget shortfall.

The Texas legislature “funded a $5 billion boost in teacher retirement benefits, including a one-time bonus and permanent cost-of-living raises,” TIA notes. “However, the system remains $61 billion underfunded, with ongoing financial challenges ahead.”

Texas’ debt in 2023 and 2024 was reported as the state also reported record surpluses.

In January, the state comptroller announced that Texas had a nearly $24 billion surplus – higher than a $18.29 billion surplus projected for its two-year budget cycle, The Center Square reported.

In January 2023, a $32.7 billion surplus was projected for two years, prompting multiple groups to call on the state legislature to enact a zero-growth budget and issue tax cuts to help Texans suffering from inflation and high property taxes. 

This has yet to happen. 

The state and local governments continue to spend more money than previous years, local governments continue to increase property taxes and state and local debt keeps increasing.