Austin Think Tank to Teach Local Officials How to Be More  Fiscally Conservative

An Austin-based think tank called the Texas Public Policy Foundation announced recently that it is forming a new “Center for Local Governance.”  According to director James Quintero, in an interview by KUT radio, the purpose of the Center is to “begin to promote conservatism at the local level.”  Mr. Quintero said that state government in Texas has done a good job at being conservative, but not locals:

And so for years what we have seen is at the state level is that Texas has done a really good job of following the Texas model of government, which is low taxes, limited government, and a fair legal climate.  And so what we thought, while this has been such a terrific success at the state level, what we want to do now is translate those into local public policies.  So that’s what this effort is about.

Is it true that state government is one of “low taxes” but city government is not?   Not really.  State government and cities generally rely on the same two main revenue sources to provide services: property taxes and sales taxes.

(Some might contend that school property taxes are local, not state, but that is a technicality.  Public education is a state responsibility under the Texas Constitution, and the state has chosen to fulfill its responsibility by authorizing local school property taxes, nearly all of which hover around $1 per $100 for maintenance and operations.)

As the chart below indicates, cities function on roughly half the property tax that the state does, and less than one-third the sales taxes the state levies.

 

Knowing that cities have substantially less revenue than the state, let’s turn to the following chart to see what services citizens get from the state versus cities:

For less than half of the property and sales taxes as the state (and with virtually no state aid), cities provide essential public safety and infrastructure.  So which level of government practices “low taxes” and fiscal conservatism? The average city property tax rate has remained at around $.50 for decades, including debt service. That is true despite the maximum legal taxing authority of up to $2.50 for a city.  The state (i.e., school) property tax, on the other hand, has a history of constantly creeping up to its legal maximum – sometimes beyond that maximum when debt is considered.

The newly-formed Center also plans to look at local debt, which is allegedly “out of control.”  But is city debt in fact increasing at an alarming rate?  As the following chart shows, for the five years from 2007-2011, city debt increased at less than half the rate of state debt:

Special district debt, alarmingly, increased at an exponentially greater rate of 244 percent.  But that’s a story for a different day.  Suffice it to say, cities are growing their debt at a slower rate than state government.  That would seem to indicate that, if there is a debt problem, it isn’t with cities.

Of course, a good portion of the city debt that is accumulating is because the state is doing less and less when it comes to building critical infrastructure, leaving cities to pick up the slack.  The new water funding bills, passed during the 2013 regular legislative session, will inject $2 billion into the water development fund if approved by the voters in November.  The purpose of dedicating that money is for local governments to borrow against it to leverage more than $25 billion over the next 50 years.  In other words, the new water legislation is expressly designed to encourage local debt to fund our state’s water needs, with the state itself spending only a portion from its own coffers.  That’s not to say the water plan isn’t good progress, because it is.  It is only to say that it’s hypocritical for certain groups like the Center to claim that cities are irresponsible with their debt when increased city debt is the very goal of state infrastructure planning.

When it comes to highway funding, it’s no different.  More and more state highway projects are being funded by city and county “local participation” in the form or right-of-way contributions or cash contributions.  Likewise, a recent proposal could have required cities to take over $165 million in state highway maintenance. Fortunately, it appears that the proposal is being modified to make such maintenance agreements voluntary.

Yet it’s cities, not the state, who are accused by the Center of failing to grasp conservative and transparent fiscal values, while state government remains a “terrific success.”  So what’s the Center’s plan of action?  It first wants to educate local governments on not spending too much or taking on too much debt.  What if education isn’t effective? The answer, interestingly, is state-imposed control.  According to Mr. Quintero:

Now, when it comes to local spending and debt, some of the issues we would like to begin addressing, again beyond just kind of the education aspect of it, really the need for some kind of mechanism to begin controlling how fast and by what rate we’re spending taxpayer money at the local level.

Specifically, Mr. Quintero recommends that “we might expand the state’s tax and constitutional spending limit to cover local government spending.”

That’s not a typo.  First, the Center will try to teach allegedly out-of-control cities how to be frugal and fiscally conservative.  If that doesn’t work? They’ll bring down the full power of big government to make it happen. How’s that for allegedly small government ideology?

To recap, here’s what Texas state government, and its cheerleaders like the Center, have in mind for cities:

  • Underfund infrastructure at the state level.
  • Expect cities to pick up the slack.
  • Blame cities for spending money and incurring debt to do the state’s job.
  • Enact revenue and spending caps to punish cities for doing the job that was pushed down on them by the state.  

Clearly, the Center is more interested in rhetoric than reality.  The League will closely monitor the Center’s efforts to educate local government officials how to act more like state officials.  For the sake of future generations of Texans, let’s hope they don’t succeed. 

 

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