(Texas Scorecard) – A Thursday discussion at the Texas Public Policy Foundation highlighted the perilous state of municipal finances across the Lone Star State.
Entitled “The Spending Spiral: Factors Pushing City & County Finances to the Brink,” the event featured pro-taxpayer Councilmembers Cara Mendelsohn of Dallas and Marc Whyte of San Antonio along with Strong Towns founder Charles Marhon, while TPPF’s James Quintero moderated.
Quintero detailed local-level Texas’ fiscal calamity. Right now, local government debt has topped $461 billion, up from $323 billion ten years ago. This comes out to approximately $15,000 per Texan.
The city of Austin served as a notably profligate cautionary tale. As Texas Scorecard recently reported, residents of the state’s capitol city could face a “tax bloodbath” if all of the current proposed increases come to fruition.
Mendelsohn talked about Dallas’ $7.5 billion debt and $17 billion in deferred maintenance costs. This has begotten a tax burden that is “significant” for homeowners but often worse for renters since rental properties do not get homestead exemptions. Mendelsohn encouraged the city to “focus on the role of cities and fund those things first.”
Whyte continued in a similar vein. He mentioned that, in a recent budget adoption session, Mayor Ron Nirenberg had commented that much of San Antonio’s current spending is not directed by the city charter, state, or federal law. Later in the discussion, Whyte detailed his struggle to implement zero-based budgeting. Despite incredible resistance from entrenched interests, San Antonio will debut a form of zero-based budgeting in 2027.
Both Whyte and Mendelsohn listed items their respective cities funded instead of core services. These ranged from high-profile, politically charged items like subsidies for abortion and illegal aliens to lower-profile examples like lead abatement. Mendelsohn bemoaned that council members have a political incentive “to chase shiny objects” instead of providing core services cost-effectively.
For his part, Marhon explained that municipal accounting incentivizes profligacy. This happens because when a new item such as a road or a park appears, cities get immediate revenue from growth or increased property values, but never account for the expense of both maintaining and ultimately replacing said infrastructure. The same principle applies to municipal pensions.
Marhon encouraged localities to adopt an alternative form of accounting called accrual accounting, which recognizes liabilities at the time they are incurred. This could dramatically change municipal budgeting.
The Texas legislature is expected to examine local government spending when it reconvenes in January. Opportunities for citizens to engage at the local level are ongoing.