A watchdog group which explores state and local finances says, despite the fact that the Texas Legislature just made a lot of fanfare after passing a 'balanced budget,' the state's finances are in a lot worse shape than most taxpayers realize, News Radio 1200 WOAI reports.
Most of the off the radar debt, according the Sheila Weinberg of the group Truth in Accounting, is in what are called 'unfunded liabilities,' mainly long term debt that the state is not properly planning for.
"The state is in the hole by $69 billion," he said. "Which divided by the number of taxpayers in Texas is $8,600."
The major problem, she says, is long term pension and retiree health care obligations, mainly made to municipal police, firefighters, and state and local civilian government employees.
"The major source of this indebtedness is the state's unfunded retiree health care benefits."
The Legislature made a how at dealing with long term pension liability in the last session, but did nothing to attack the true source of the problem--the fact that the state is not doing enough to make sure the state has the money to pay those bills when they come due.
"The state has promised them these benefits, but the state has put nothing aside to pay the promised benefits."
She says it doesn't have to be this way. Several states don't have anywhere near this level of long term debt. While each Texas taxpayer has an $8600 hole, taxpayers in Alaska are in the black for long term debt.
But other states are a lot worse than Texas. States like Illinois and New Jersey are facing major budget quagmires, with far more long term debt unfunded.
The City of Dallas recently placed limitations on pension withdrawals, and concerns about the possibility of major cities and the state not being able to make good on its pension promises has begun to be a significant headwind toward the recruitment of new police officers.
Weinberg says the problem is becoming so acute that tax increases may be needed to make up for the shortfall. Experts say raising taxes to cover public employee pension and health care benefit costs is extremely politically dangerous, because fewer than 10% of private sector employees have defined benefit pension systems today. It is very difficult to convince private sector taxpayers to foot the bill for a benefit they have little hope of ever receiving themselves.
She says local indebtedness, due to bond issues like the one passed in San Antonio last month, is less of a problem, because credit rating agencies require that cities demonstrate that funds to repay that debt are anticipated to be available during the term of the bond issue, something which is not required for long term employee benefit debt.