"(The Center Square) – The most populous Texas cities, all run by Democrats, have the highest debt and taxpayer burdens compared to Republican-led cities, according to an analysis published by the Chicago-based nonprofit, Truth in Accounting.
TIA every year evaluates the fiscal health of the 75 most populous U.S. cities. This year’s Financial State of the Cities report analyzed fiscal 2021 data.
The report ranks cities according to taxpayer burdens and surpluses, identifies them as a sinkhole or sunshine cities, and assigns them letter grades. A taxpayer burden is the amount of money each taxpayer would owe if the city were to pay all of its accumulated debt to date. A taxpayer surplus is the amount of money the city has left over after all of its bills are paid, divided by an estimated number of taxpaying residents. Sinkhole cities can’t pay their bills; sunshine cities can and have a surplus.
Nine of the 10 worst sinkhole cities with the highest taxpayer burden nationwide are run by Democrats, including Dallas, the only Texas city to rank in the bottom 10. Austin and Houston ranked in the bottom 20, at 16th- and 19th-worst, respectively. Fort Worth, El Paso and San Antonio ranked 23rd-, 38th- and 39th-worst, respectively. All received D grades for fiscal health except for El Paso and San Antonio, which received C grades.
By contrast, Republican-led Plano and Arlington reported surpluses. Democratic-led Corpus Christi also reported a surplus. Plano ranked in the top 10 nationwide reporting a $313.1 million surplus. Arlington reported a $26.1 million surplus and Corpus Christi, a $159.1 million surplus. All received B grades.
Elected officials in Dallas, Austin, Houston, Fort Worth, El Paso and San Antonio have all “repeatedly made financial decisions” that left their respective cities in debt, the report states. Their financial problems “stem mostly from unfunded retirement obligations that have accumulated over the years.”
The sinkhole cities’ respective pension liability is calculated by subtracting earned and promised benefits from the market value of pension assets, the report notes. “Based on an exceptionally good year in the markets in 2021,” their pension assets’ values were high, resulting in a “dramatic decrease” in their pension liabilities and a corresponding decrease in money needed to pay bills, it says.
However, negative market returns and federal COVID relief drying up is likely to increase the taxpayer burden for these cities, the report suggests, and they “could struggle to maintain current levels of government services and benefits without further negative impact on its financial health.”
Ranking eighth-worst nationwide, Dallas’ $5.6 billion worth of debt translates to the largest individual taxpayer burden in Texas of $14,700. Dallas officials have only set aside 50 cents for every dollar of promised pension benefits and no money for promised retiree health care benefits, the report found.
Austin’s $2.7 billion debt translates to an individual taxpayer burden of $9,400. Its officials have set aside 71 cents for every dollar of promised pension benefits and no money towards promised retiree health care benefits, according to the report.
The largest debt in the state was in Houston of $6 billion, translating to an individual taxpayer burden of $8,900. Houston officials have set aside more than most sinkhole cities towards pension benefits, 92 cents for every dollar. However, they set aside only one cent for every dollar toward promised retiree health care benefits.
Ft. Worth’s $1.8 billion debt translates to a $6,600 individual taxpayer burden. Its officials have set aside 58 cents for every dollar of promised pension benefits and 10 cents for every dollar of promised retiree health care benefits.
El Paso’s $386.6 million debt translates to a $1,900 taxpayer burden. Its officials have set aside 88 cents for every dollar of promised pension benefits and no money toward promised retiree health care benefits.
San Antonio’s $707.7 million debt translates to a $1,700 taxpayer burden. Its officials set aside 88 cents for every dollar of promised pension benefits and more than most sinkhole cities of 52 cents for every dollar of promised retiree health care benefits.
Despite having balanced budget requirements, sinkhole cities are in debt because politicians use “accounting tricks” to make their budgets appear balanced, TIA explains. This includes inflating revenue assumptions, counting borrowed money as income, understating the true costs of government, and delaying the payment of current bills until the start of the next fiscal year so they aren’t included in the calculations, TIA says.
Officials often “hide employee benefits” like healthcare, life insurance, and pensions “from the current budgeting process by not acknowledging they exist” even though they are obligated to pay them as employees earn them, the report states. Retirement benefits aren’t paid until employees retire but “they still represent current compensation costs because they were earned and incurred throughout the employees’ tenure,” TIA says.
“Shifting these payments to future taxpayers allows the budget to appear balanced while city debt is increasing,” TIA says. “Governments are able to accumulate debt while claiming balanced budgets because the vast majority of budgets are prepared on the cash-basis,” which TIA says is “an antiquated accounting method that includes cash inflows, including loan proceeds as revenue, and outflows – in other words, only checks written.”
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