La Joya ISD Superintendent Gisela Saenz resigned her position in the spring, after she supported a plan that would close two elementary schools and lay off 120 employees—this after LJISD used more than $20 million in public funds to buy an entire water park, including tube slides and a lazy river. The troubled school district—which is in the process of being taken over by the Texas Education Agency for financial malfeasance—also has a golf course at the site of the water park as well as a planetarium.
Mismanagement of funds has become a major problem for many local governments.
LJISD isn’t the only local governmental entity doing questionable things with Other People’s Money. In fact, there is widespread concern and those concerns are driving the idea that, without strong property tax reforms to accompany historic tax relief, local governments will simply erode whatever gains ultimately accrue to taxpayers’ benefit.
That is, after all, how things have traditionally gone.
An examination of local governments from 2016-2020 shows their method for raising taxes is not sustainable. The city of Austin saw a nearly 70% increase in property taxes against a growth + inflation rate of 10.2%. Denton County’s property tax burden rose by 146% while population and inflation only grew by 20%. In Fort Worth ISD property taxes went up by 40.6% while enrollment only increased by 3%.
The evidence is clear: Cities, counties, and school districts are taking more out of the Texas economy than they should, leaving taxpayers to shoulder a big and growing burden. But here are a few ways that policymakers can prevent some of this bad behavior from eating away at future relief.
First, lawmakers should require local governments to include nonvoter approved debt in their voter-approval tax rate (VATR) calculation. This would eliminate a loophole that allows cities and counties to avoid the new 3.5% revenue limit and drive-up spending by going into debt, either through the issuance of certificates of obligation or tax anticipation notes.
Second, local governments should be made to adhere to a spending limit. Just like someone who has grown physically unhealthy must diet and exercise, so too should we address local government largesse through strict fiscal discipline. One of the reasons why Texas state government has been able to enjoy a historic budget surplus is that it is subject to numerous constitutional and statutory tax and expenditure limits. Cities, counties, and school districts should be required to follow a similar requirement, with the most preferable fiscal rule being one that centers on limiting spending growth to population and inflation. Such a change would bring accountability and sustainability to the local public finance scene.
On top of creating legislation that restricts how governments tax and spend, there is also room to benefit the people directly. If we continue along with the tax diet metaphor, then we should also target hording and hiding food. That is to say, if a taxing entity has enough money to run its operation and a healthy savings account, then it should be required to return any money beyond a reasonable threshold (say, anything above 90 days of operating expense) back to taxpayers. Let’s not forget that tax money comes from the people—it does not belong to the politicians. It should be returned to the people either by lowering taxes or paying off debt.
There is a lot of room for improvement at the local level, and it’s critical that policymakers make these good government changes.
Local governments like La Joya ISD are just like a person who consistently overeats. These habits must be changed to return to a healthy state. In so doing, the Legislature will have gone a long way toward protecting the massive tax relief that has been delivered by the Legislature.