On April 16 the House Committees on Ways & Means and Appropriations Subcommittee on Articles I, IV & V met to discuss the following interim charge:
- Analyze increases in Texas’ overall state debt burden and the role debt plays in the state’s fiscal management. Recommend strategies to reduce the state’s debt, as well as the calculation of the constitutional debt limit.
Among those invited to testify were:
- Jennifer Jones, an analyst with the Legislative Budget Board;
- Bob Kline, Executive Director of the Bond Review Board;
- Robert Coalter, Executive Director of the Texas Public Finance Authority;
- Phil Wilson, Executive Director of the Texas Department of Transportation; and
- Melanie Callahan, Executive Administrator of the Texas Water Development Board (TWDB).
Jennifer Jones provided an overview of the state’s Constitutional Debt Limit (CDL) and an explanation of the state’s debt authority, which outlined Texas’ general obligation (GO) and revenue bond processes. According to Jones, the Texas Legislature has authorized $37.5 billion in GO and revenue debt since 2001.
Bob Kline testified that it is the state’s not self-supporting debt, or debt that is expected to be paid with General Revenue (GR), that affects the state CDL (Self-supporting debt is that which is expected to be paid with revenues other than GR). Kline also said that in comparison to the local and state debt outstanding of the United States’ 10 most populous states, Texas ranks 10th in state debt, but 2nd at local debt; approximately 87% of the state’s debt is at the local level.
Robert Coalter with Texas Public Finance Authority explained the credit ratings system. The three major rating companies in the United States are Fitch, Moody’s and Standard & Poor’s. Texas has a credit rating equal to the Federal Government with Triple-A ratings from Fitch and Moody’s and a Double-A+ from Standard & Poor’s.
Phil Wilson testified on TxDOT’s bond authority and explained Prop 12. Up to $5 billion in GO bonds for highway improvement projects were authorized by the Texas Legislature and approved by the citizens of Texas.
Finally, Melanie Callahan provided an overview of the TWDB’s three constitutional authorizations for debt issuance: the Development Fund, which is its largest and contains four programs in its authority; the Economically Distressed Areas Program; and the Agriculture Water Conservation Program. The TWDB has been successful over the past few years in moving debt off of the not self-supporting rolls and over to the self-supporting, meaning the agency has adequate cash flow to support certain programs and will no longer be bringing GR down for them. 65% of the TWDB’s outstanding debt is self-supporting.