Your Money and Education Debt

Transcription

1 Susan Combs Texas Comptroller of Public Accounts Your Money and Education Debt A Texas, It s Your Money report digging deeper into public and higher education debt.

2 A Texans Right to Know To maintain Texas position as a global economic powerhouse, we have to ensure that tomorrow s leaders have the education they need to keep our state competitive. But educating Texans is becoming increasingly expensive, and some of these costs are being pushed off for future generations to pay. School districts have the largest outstanding share of local government debt in Texas. Debt service payments have increased from 7 percent to 9.8 percent of total school district expenditures, making them the fastest-rising spending category in Texas public education during the past decade. This growth is largely due to school construction and technology upgrades. The debt burden of higher education is rising rapidly as well. Since, state university and college enrollment rose by 32 percent, while outstanding debt increased by 246 percent. This report on public and higher education debt provides a snapshot of how much debt our public and higher education institutions are carrying, highlighting trends in debt growth. It also suggests information that taxpayers should get from their state and local governments before approving new debt. Texans deserve comprehensive information on the details T AF of all debt carried in their R D names. This report is the third in a series that will help Texas taxpayers know more about the AFT DR /12 ways in which government affects 9/5 their wallets. Susan Combs Texas Comptr oller of Public Accoun ts Sus an Com bs ller Comptrounts Texas lic Acco of Pub d oney an Your Mxing Facts The Ta Your Money Pension Ob and ligations s Comptroller, one of my roles is to predict how and where our economy will grow and to provide state leaders with critical information for future decisions. Educating young Texans is crucial to the state s continued economic success, but these costs are rising. Our public and higher education institutions have an obligation to be financially prudent and manage their expenditures and debts, just as Texas taxpayers and business owners do. Our office is committed to making Texas state government transparent and our books open, accessible and understandable to our citizens. Government should not make it hard for you to see our books. But it really only works when taxpayers use that information to make informed decisions and hold their government accountable. As taxpayers, you need accurate information to decide whether public and higher education institutions are meeting the responsibility of managing debt as prudently and conservatively as possible. SUSAN COMBS EVERY TEXAN S RIGHTS You have a right to know who is taxing you and for what purpose. A Texas, It s Your report digging Money public pension deeper into s Your hard-earned dollars deserve the light of day, down to the penny. ey Your Mon g as, It s A Tex on who is taxin report why. you and Su sa n Co Tex mb as of Pu Comp s blic tro Acco ller unts Keeping A Shar Yo and ur Mon e Loc al D y ebt p Eye On Pens ion Obligation s We encourage you to visit and to read this report for a detailed look at how much school districts, community colleges and state universities and colleges owe. Follow the Comptroller s Texas, It s Your Money series of reports at A Te rep xas, It s ort local diggin Your Mo gover g dee ney nm ent per int o deb t. You have a right to know exactly how and where state and local governments spend your money. Through our Web resources such as Where the Money Goes, we ve opened the state s books for public inspection, and we re encouraging all other levels of Texas government to make transparency their highest priority as well, placing annual budgets, annual financial reports and virtual check registers online. You have a right to expect that government obligations are transparently funded, and that government finances are managed soundly and prudently. Government should provide its citizens with an honest assessment of the financial challenges it faces. You have a right to know about the debt local officials issue in your name. All ballots proposing new debt should provide voters with a full disclosure of existing debt. You have a right and a responsibility to be aware of and engaged in the affairs of your government. Our democracy depends on it. In short, you need to know, and have the right to know. 2 YOU R M O N E Y A N D E DUC ATI O N DE B T

3 15.7% THE COST OF EDUCATION: TODAY AND TOMORROW Anyone who follows the economy or has a child knows that education is vitally important for our kids success as well as for our state as a whole. Virtually all of tomorrow s jobs will require a quality education and some degree of technical training. Education is not exempt from rising costs. Alongside the increased expense of delivering instruction, continued investments in classrooms, technology and other facilities, leaders in public schools, community and junior colleges, and the state s public college and university systems have to make strategic decisions about how to pay for education. That has included issuing new debt and refinancing existing debt to take advantage of improved interest rates or more advantageous terms. For public schools, the majority of debt service is supported directly by local property tax revenues, although the state s Permanent School Fund is the guarantor for much of this debt, and state funds directly support annual debt service for almost half the school districts with debt. Community colleges, too, have local property tax levies as part of a broad spectrum of revenue. Overall, the debt incurred by schools, colleges and universities is increasing, passing costs to future generations. Each school district, community college district and university has unique needs and must grapple with a broad array of challenges. The reasons for issuing debt, identifying available revenue, and other variables can affect how, why and when educational institutions spend money. Public education accounts for more than one-third of local government debt in Texas. As citizens and taxpayers, you should ask questions of our education leaders and hold them accountable for their spending decisions to ensure they are spending borrowed dollars efficiently and effectively. Public universities and colleges don t collect taxes directly, but rely on state appropriations to service some debt, as well as drawing on revenue generated by state assets through the Public University Fund and Higher Education Fund. To understand the issues surrounding public education debt, you need to understand the basic facts. This report highlights the numbers through fiscal (the most recent available data). We hope it will provide a useful basis for exploring education-related government debt. LOCAL GOVERNMENT DEBT OUTSTANDING 7.7% 33.% 32.6% 6.9% 2.2% 1.8% OUTSTANDING TOTAL $192.7 BILLION PUBLIC SCHOOL DISTRICTS COMMUNITY AND JUNIOR COLLEGES HEALTH/HOSPITAL DISTRICTS COUNTIES CITIES OTHER SPECIAL PURPOSE DISTRICTS WATER DISTRICTS/RIVER AUTHORITIES Note: Total may not sum due to rounding. Source: Texas Bond Review Board WHAT IS DEBT? DEBT can refer to debt issued or outstanding debt. AUTHORIZED BUT UNISSUED DEBT is debt available for borrowing without the need for further voter approval. DEBT ISSUED is the total amount of funds borrowed during a specified time period. DEBT OUTSTANDING is the total principal owed over the remaining life of all bond issues. DEBT SERVICE is the amount needed to repay the principal and interest on debt outstanding. LEASE PURCHASE is financing the purchase of an asset over time through lease payments that include principal and interest. Lease purchases can be financed through a private vendor. REVENUE-SUPPORTED DEBT is secured by nontax revenues such as tuition or admissions to athletic events. This type of debt does not require voter approval. TAX-SUPPORTED DEBT is funded by property tax levies within the school or community college district s boundaries. It must be voter-approved. WHO ISSUES DEBT? PUBLIC SCHOOL DISTRICTS may issue debt supported by local property taxes, state funds and other revenues. COMMUNITY AND JUNIOR COLLEGE DISTRICTS may issue debt supported by local property taxes, tuition and fees, state revenue and other revenues. PUBLIC COLLEGES AND UNIVERSITIES may issue debt supported by state general revenue, the Permanent University Fund s revenue, tuition and fees or other revenues. SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 3

4 OUR BIGGEST DEBT: PUBLIC SCHOOLS Local Government Debt at a Glance 33.% 33% $63.6 BILLION PUBLIC SCHOOL DEBT OUTSTANDING, TO THE POINT Transparency Duty No. 1: Before approving new debt, taxpayers should be told how much outstanding debt has been issued and how much would be added. In fiscal, public school districts combined had one-third of outstanding Texas local government debt $63.6 billion or $13,53 for every student in a district with debt. Of Texas 1,24 school districts, 854 have outstanding debt. From -, public school districts total debt outstanding rose by percent, far more than the increase in inflation. This debt is incurred locally, meaning that each district s taxpayers are responsible for paying it back. The school district property tax includes two portions: Maintenance & Operations (M&O) tax, which pays for recurring expenses such as salaries, instructional materials and utilities; and Interest & Sinking (I&S) tax, which is intended exclusively for meeting debt obligations. Most School Debt is Tax-Supported The most common way school districts incur debt is by selling bonds approved by voters, which currently account for $62.6 billion of local debt outstanding. Although turnout for bond elections is often very low, bond propositions need to be approved only by a majority of those voting in the elections. Before bonds may be issued, a school district must show the Office of the Attorney General that it will be able to meet all of its debt obligations without levying an I&S tax rate of more than 5 cents per $1 of assessed property value. This is often called the 5-Cent Debt Test. Texas law limits the uses of school bond revenue to expenses such as building, renovating and equipping school facilities; purchasing capital items such as land and school buses; and refinancing previous bonds. Permanent School Fund Lowers Debt Interest Rates The state helps school districts obtain lower interest rates by allowing their bonds to be guaranteed by the AAA rated Permanent School Fund (PSF), a state-managed endowment valued at about $25.5 billion in fiscal 212. More than $53 billion of voterapproved public school debt is PSF-guaranteed, saving the districts millions in interest costs. A portion of the PSF s revenues are transferred to the Available School Fund (ASF), along with a quarter of Texas net motor fuels tax revenues. The ASF, which is expected to total $3.7 billion for the fiscal biennium, is distributed to schools $3.1 billion for general expenses, and $.6 billion for instructional materials. While voter-approved bonds traditionally represent about 98 percent of all school district debt, districts can issue several other types of debt: Maintenance & Operations (M&O) tax debt is accrued by issuing maintenance tax notes that can only be used to finance renovations; issuing time warrants (with a maximum length of five years) to buy or renovate buildings and equipment; or by entering into other contractual obligations. These debt obligations do not require voter approval. In, M&O tax-supported debt totaled $612.5 million. Lease-purchase agreements allow school districts to provide security for bonds issued by an affiliated nonprofit corporation to finance buildings. Because districts are only bound by an annual lease contract, lease-purchase agreements are often the most costly type of debt. After notice of the proposed bonds is made public, voters can petition the district to place these debt obligations on the ballot. In, debt supported by leasepurchase agreements totaled $373.1 million. Revenue debt is secured by school district revenues other than property taxes, such as revenues from high school football tickets or concessions. This type of debt also does not require voter approval. In, revenue debt totaled $3.4 million. 2% CUMULATIVE PERCENTAGE GROWTH OF SCHOOL DISTRICT DEBT BY FISCAL YEAR TOTAL DEBT OUTSTANDING INFLATION (CPI) ENROLLMENT 155.2% 26.5% 21.% Sources: Texas Bond Review Board, Texas Education Agency, Bureau of Labor Statistics 4 YOUR MONEY AND EDUCATION DEBT

5 Texas school districts report their expenditures to the Texas Education Agency (TEA) by broad categories called objects, such as: PAYROLL salaries, wages and benefits for school district employees; OTHER OPERATING COSTS operating expenses such as food services, vehicle fuel, supplies, materials and services; CAPITAL OUTLAY spending on fixed assets such as buildings, equipment, furniture, library books, vehicles; and DEBT SERVICE principal and interest payments on bonds and other debt. GROWTH RATE OF PUBLIC SCHOOLS COSTS 2-1 THROUGH SCHOOL YEARS 15% In the past decade, when interest rates generally declined, debt service costs were the fastest-growing category of public school spending. PAYROLL OTHER OPERATING COSTS 126.5% 12 TO THE POINT CAPITAL OUTLAY DEBT SERVICE ENROLLMENT 67.8% 62.9% % 3 Transparency Duty No. 2: Source: Texas Education Agency $ Source: Texas Education Agency PUBLIC SCHOOLS: WHERE THE MONEY GOES OTHER OPERATING COSTS CAPITAL OUTLAY DEBT SERVICE (IN BILLIONS) PAYROLL TOTAL 21.% PURPOSE 2-1 SCHOOL YEAR SCHOOL YEAR CHANGE PAYROLL $21,57,582,565 $34,311,16, % OTHER OPERATING COSTS $5,398,969,441 $9,6,357, % CAPITAL OUTLAY $4,657,389,69 $6,18,183, % DEBT SERVICE $2,359,97,181 $5,344,363, % TOTAL $33,473,38,877 $54,733,921, % Before approving new debt, taxpayers should be told how much annual debt service they are currently paying, how much new debt service would be added and the length of obligation. In the school year, debt service payments cost Texas school districts more than $5.3 billion, accounting for 9.8 percent of all expenditures. Over the previous 1 years, expenditures on debt service rose by percent, compared to total growth in payroll and other operating expenditures of 63.5 percent. New construction, rising construction costs and technology upgrades are factors in this increase. As a result, debt service costs are generally highest in fast-growing suburban districts. SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 5

6 PUBLIC SCHOOLS FUNDED FROM MULTIPLE SOURCES In recent years, funding for public education has come from five main sources: LOCAL TAX REVENUE is generated through the levy of Maintenance & Operations tax and debt service (Interest & Sinking tax) on property within the school district. Rates for these two tax rates are capped at $1.17 and $.5 per $1 property value, respectively. OTHER LOCAL REVENUE includes donations, cafeteria sales, admissions to athletic events or performances, rental income or fees. FEDERAL FUNDS are distributed to school districts through a variety of programs including Title I grants for low-income children, GEAR UP, Head Start, and the National School Breakfast and Lunch Program. STATE FISCAL STABILIZATION FUND is part of the American Recovery and Reinvestment Act (ARRA), the stimulus package passed by the U.S. Congress in 29. STATE FUNDS are primarily distributed to schools through the Foundation School Program (FSP), which allocates money according to the number and type of students served. This program is (IN MILLIONS) $6, 5, 4, 3, 2, 1, 2 LOCAL TAX REVENUE OTHER LOCAL REVENUE FEDERAL FUNDS STATE FISCAL STABILIZATION FUND (STIMULUS) STATE FUNDS DEBT GROWTH EXCEEDS ENROLLMENT GROWTH PUBLIC SCHOOLS: WHERE THE MONEY COMES FROM funded through the state s sales taxes, the franchise tax and the Permanent School Fund. The state also distributes some aid for facilities, instructional materials and other grants outside the FSP M&O I&S 21 Note: This chart has not been adjusted for inflation. Sources: Texas Education Agency, Texas Comptroller of Public Accounts While debt per student rose across the board from to, it rose most for districts with slower enrollment growth. Average per student debt for districts in the bottom 2 percent of enrollment growth increased most from $1,988 in to $7,19 in an increase of percent. This can be partially explained by enrollment trends in these districts because per student debt burden increases when enrollment decreases. For districts in the top 2 percent of enrollment growth, average per student debt is highest, increasing from $7,67 in to $16,847 in an increase of percent. CHANGE IN SCHOOL DISTRICT DEBT For these fastest-growing districts, average debt per student in dollars increased by $9,78, more than districts with slower growth that added $5,125 on average. The fastest-growing 2 percent of districts account for 53. percent of all outstanding debt and enroll 4.4 percent of all Texas schoolchildren. QUINTILE GROUPS BY - ENROLLMENT GROWTH NUMBER OF DISTRICTS AVERAGE ENROLLMENT CHANGE AVERAGE DEBT PER STUDENT AVERAGE DEBT PER STUDENT TOTAL DEBT PER STUDENT CHANGE 8TH 1TH PERCENTILE % $7,66.97 $16, % 6TH 8TH PERCENTILE % $4,123.5 $1, % 4TH 6TH PERCENTILE % $3, $9, % 2TH 4TH PERCENTILE 25-6.% $2,59.87 $8, % 2TH PERCENTILE % $1, $7, % ALL DISTRICTS % $3, $1, % Sources: Texas Bond Review Board, Texas Education Agency, Texas Comptroller of Public Accounts 6 YOUR MONEY AND EDUCATION DEBT

7 DEBT SERVICE TAX RATES INCREASED WHEN OPERATING TAX RATES WERE CUT From to, average property tax rates for debt service (Interest & Sinking or I&S rates) rose from 9.5 to 17.6 cents per $1 property value, an 86 percent increase. This represents an average annual growth rate of 6.4 percent. By law, Maintenance & Operations (M&O) property tax rates were compressed downward between 25 and 27, from an average of $1.46 per $1 in 25 to $1.4 in 27. This compression in M&O rates allowed school districts to raise debt service rates with taxpayers still seeing a decrease in their total tax rates. Debt service rates rose from 11.2 cents to 14.5 cents per $1 between 25 and 27, a 3.1 percent increase. The bulk of the debt service increase occurred between 26 and 27, jumping from 11.9 cents to 14.5 cents per $1, an increase of 22.3 percent in one year, greatly exceeding the average annual increase of 6.4 percent over the past decade. In the same year, M&O rates were compressed by an average of 21.8 percent. CUMULATIVE PERCENTAGE CHANGE OF SCHOOL DISTRICT TAX RATES BY FISCAL YEAR 1% 8 6 AVERAGE DEBT SERVICE (I&S) TAX RATE AVERAGE MAINTENANCE AND OPERATIONS (M&O) TAX RATE M&O rates were compressed over two tax years 86.% 4 AVERAGE TOTAL TAX RATE % -23.2% Source: Texas Comptroller of Public Accounts STATE FUNDS DEBT SERVICE PAYMENTS FOR SCHOOLS Two state public education programs, established in response to a perceived need for new and renovated facilities in some school districts, give less-wealthy districts more access to funding for facilities, and help districts retire existing debt. The Instructional Facilities Allotment (IFA) reimburses school districts for a portion of debt service costs on new debt issued for the construction or renovation of instructional facilities. In the school year, the state spent $33. million in IFA payments to 376 districts. The Existing Debt Allotment (EDA) can help districts retire debt. The state provides assistance only on the first 29 cents of the I&S tax rate. In the school year, the state spent $295.9 million on EDA payments to 42 districts. (IN MILLIONS) $ PUBLIC SCHOOLS: HOW THE STATE HELPS OUT TOTAL ALLOTMENT $598.9 EXISTING DEBT ALLOTMENT INSTRUCTIONAL FACILITIES ALLOTMENT SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 21 7 $295.9 $33. Source: Texas Education Agency In 21-11, the state s IFA and EDA programs funded $598.9 million. Of the 481 districts funded, 297 received money from both programs.

8 SCHOOL CONSTRUCTION COST SURVEY REVEALS WIDE COST VARIATIONS TO THE POINT Transparency Duty No. 3: Before approving new debt, taxpayers should be told the outstanding debt per capita and what new debt per capita would be added. The primary use of public education debt is school construction and renovation. It can be difficult to learn just what our school districts are acquiring with this debt, however, since the state does not collect data on school size, capacity and costs, and few districts provide facilities inventories. For the purposes of this report, the Comptroller s office surveyed a broad group of Texas public school districts asking them to provide information on construction costs. It may not be reflective of statewide costs; a comprehensive statewide analysis of school construction would be helpful. Specifically, the survey requested information on construction costs (exclusive of land acquisition) for new or replacement schools built from 25 to the present. Data was requested from 23 of the 1,24 school districts across Texas ranging in size from fewer than 3,4 students to more than 2,. More than 1 million children are enrolled in these 23 selected districts, 22.2 percent of the state s total public school enrollment. One district did not respond to repeated requests; school construction data from its website was used when available. TYPE CONSTRUCTION COSTS FROM SELECTED SCHOOL DISTRICTS COST PER SQUARE FOOT In all, the survey collected information for more than 181 school campuses, including seven pre-kindergarten centers, two intermediate (grades 2-5) campuses, one upper elementary (grades 5-6) campus, 116 elementary schools, 3 middle schools, three pre-k to 8th-grade campuses, one ninth-grade campus, one ninth and tenth grade campus, two academic (grades 6-12) centers, 16 high schools and two early college high schools. In addition to actual construction cost data, the survey also collected data on capacity, square footage and year of construction. The following table shows the range of costs per square foot, cost per student and space for student by elementary, middle and high school as reported. One item of interest that emerges from these numbers is the wide range of construction costs and space per student. While such variation may be due in part to factors such as geographical location and local labor costs; it is also clear that there is little standardization in Texas school construction. Some districts have found that using common prototype designs for buildings can yield considerable savings. For a complete list of all districts and campuses included in our survey and individual schools spotlighted, see COST PER STUDENT AT CAPACITY SQUARE FEET PER STUDENT AT CAPACITY LOW HIGH LOW HIGH LOW HIGH ELEMENTARY $88 $249 $7,88 $3, MIDDLE SCHOOL $85 $229 $12,273 $33, HIGH SCHOOL $17 $28 $16,67 $5, Note: Texas Comptroller of Public Accounts surveyed school construction cost data from 23 public school districts. Data was requested for schools constructed from 25 to 212. Source: Texas Comptroller of Public Accounts Anita Uphaus Early Education Center Wide variances are found in construction costs per square foot and costs per student in traditional elementary, middle and high schools built in Texas between 25 and 212. There are also significant differences in non-traditional school facilities. For example, among the seven prekindergarten and kindergarten schools surveyed, Martin Luther King Jr. Early Childhood Center built in 25 in the Houston Independent School District had a below-average cost per pre-k student of $13,717. The Anita Uphaus Early Education Center built in the Austin Independent School District in 212, however, had a cost per pre-k/k student of $4,444, nearly double the sample s average of $2,947. Learn more by visiting 8 YOUR MONEY AND EDUCATION DEBT

9 SAVINGS SNAPSHOT: KAHLA MIDDLE SCHOOL Cypress-Fairbanks Independent School District serves more than 15, students in a fast-growing suburban area west of Houston. In the last decade, the district has built 33 new campuses, including Kahla Middle School, which opened its doors in 25 with room for 1,539 students in grades 6 through 8. Based on data supplied by the school district, construction costs for the facility were just $85 per square foot, well below the average of $147 found in a Comptroller survey of public schools built in Texas between 25 and 212. The construction cost per student (at capacity) was $12,273, just under 57 percent of the average of $21,683. To make the most efficient use of its resources and employ optimal instructional designs, Cypress-Fairbanks ISD uses architectural prototypes, with several designs suited for elementary and middle schools and one developed for high schools. According to district officials, prototype designs save money, permit faster construction and allow the district to test materials and improve its work processes with each successive use. By using an existing architectural prototype suited to the grades served and the building site, the district saved more than $47, in design fees alone on the Kahla project. KAHLA MIDDLE SCHOOL AT A GLANCE SQUARE FOOT COST PER SQUARE FOOT AT CAPACITY $85 (OPENED 25) TOTAL CONSTRUCTION COST $18,888,186 TOTAL SQUARE FEET 222,49 CAPACITY (STUDENTS) 1,539 COST PER SQUARE FOOT AT CAPACITY $85 COST PER STUDENT AT CAPACITY $12,273 SQUARE FEET PER STUDENT AT CAPACITY 144 COST PER STUDENT AT CAPACITY $12,273 MIDDLE AND JUNIOR HIGH SCHOOLS AT A GLANCE (CONSTRUCTED 25-12) AVERAGE COST PER SQUARE FOOT AT CAPACITY $147 AVERAGE COST PER STUDENT AT CAPACITY $21,683 AVERAGE SQUARE FEET PER STUDENT AT CAPACITY 148 SQUARE FOOT AVERAGE COST PER SQUARE FOOT AT CAPACITY $147 AVERAGE COST PER STUDENT AT CAPACITY $21,683 Note: The averages are for the sample and may not be representative of statewide averages. Sources: Comptroller survey, FAST data and information provided by CFISD SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 9

10 SNAPSHOT: CORBETT JUNIOR HIGH SCHOOL Schertz-Cibolo-Universal City Independent School District serves more than 12, students in an area northeast of San Antonio. In 29, Corbett Junior High School moved to a new campus with a capacity of 1,2 students in grades 6 through 8. Based on data supplied by the school district, Corbett s construction cost per student (at capacity) of $32,25 was 68 percent above the average of $21,683 found in a Comptroller survey of public schools built in Texas between 25 and 212. The cost per square foot of $229 was 64 percent above the average of $147. It should be noted, however, that Corbett was built in a time of relatively high labor and material costs, prior to the nationwide economic slowdown. CORBETT JUNIOR HIGH AT A GLANCE (OPENED 29) TOTAL CONSTRUCTION COST $38,43,582 TOTAL SQUARE FEET 168, CAPACITY (STUDENTS) 1,2 COST PER SQUARE FOOT AT CAPACITY $229 COST PER STUDENT AT CAPACITY $32,25 SQUARE FEET PER STUDENT AT CAPACITY 14 SQUARE FOOT COST PER SQUARE FOOT AT CAPACITY $229 COST PER STUDENT AT CAPACITY $32,25 MIDDLE AND JUNIOR HIGH SCHOOLS AT A GLANCE (CONSTRUCTED 25-12) AVERAGE COST PER SQUARE FOOT AT CAPACITY $147 AVERAGE COST PER STUDENT AT CAPACITY $21,683 Corbett Junior High School SNAPSHOT: BULVERDE RANCH MIDDLE SCHOOL The new Bulverde Ranch Middle School, $36,997 is 71 percent over the average is scheduled to open in August 214 of $21,683 for public middle schools in the North East Independent School built in Texas between 25 and 212, District in Bexar County. Based on data based on a Comptroller survey of 23 supplied by the school district, the school districts. At $258 per square campus is projected to cost $55,494,985. foot, projected construction costs for With a capacity of 1,5 students, the 214,711-square-foot facility are 76 the construction cost per student of percent over the average of $147. AVERAGE SQUARE FEET PER STUDENT AT CAPACITY 148 SQUARE FOOT AVERAGE COST PER SQUARE FOOT AT CAPACITY $147 AVERAGE COST PER STUDENT AT CAPACITY $21,683 Note: The averages are for the sample and may not be representative of statewide averages. Sources: Comptroller survey, FAST data and district/school websites 1 YOUR MONEY AND EDUCATION DEBT

11 SCHOOL DISTRICT DEBT As of Aug. 31,, Texas school districts issued more than $63.6 billion in outstanding debt, or about $2, per Texas resident and $13,53.12 per student. Ten large urban and fast-growing suburban districts had more than 23 percent of school district debt. The Bond Review Board lists no debt for 17 (16.6 percent) of districts. TOP 1 SCHOOL DISTRICTS BY TOTAL DEBT OUTSTANDING AS OF AUG. 31, DISTRICT TOTAL DEBT OUTSTANDING DEBT PER RESIDENT* DEBT PER STUDENT - ENROLLMENT GROWTH RANK IN SIZE*** DALLAS ISD $2,619,4,. $2, $16, % 2ND HOUSTON ISD $2,448,992,52.3 $1, $12, % 1ST CYPRESS-FAIRBANKS ISD** $1,765,185,.2 $3, $16, % 3RD NORTHSIDE ISD (BEXAR)** $1,755,365,. $3,399.4 $18, % 4TH FRISCO ISD** $1,247,258,98.51 $7, $33, % 3TH NORTH EAST ISD** $1,225,367,69. $3,89.85 $18, % 8TH KATY ISD** $1,83,556,63.96 $4, $17, % 12TH LEWISVILLE ISD** $1,14,778, $3, $19, % 17TH CONROE ISD** $1,6,845,. $3, $19, % 18TH PLANO ISD $976,599,83.6 $3,14.52 $17, % 14TH ALL OTHER 844 DISTRICTS WITH DEBT $48,481,58,3.71 $2, $12, % TOTAL (854 DISTRICTS WITH DEBT) $63,624,45, $2, $13, % * District resident information is from the 21 U.S. Census. These data are the most recent measure of district resident population available. **Denotes fast-growing school districts that are in the top 2 percent of enrollment growth from -. ***The Rank in Size column is a ranking of all 1,24 school districts from largest enrollment to smallest enrollment. Sources: Texas Bond Review Board, Texas Comptroller of Public Accounts, Texas Education Agency, U.S. Census Bureau PUBLIC SCHOOL DISTRICT DEBT PER CAPITA EXAMPLE In the map at left, the darkest colors represent the school districts with the most outstanding debt per resident. Of school districts with debt, 9 had debt-per-resident burdens exceeding $5, in. 17 districts have no debt. INTERACT ONLINE>> Go to Transparency.org for interactive versions of these maps where you can click to see more details on the outstanding debt per school district. HOUSTON ISD Tax-Supported Debt Interest & Sinking: $2,218,28,577. Maintenance & Operations: $112,15,. Revenue-Supported Debt: $. Lease-Purchase Debt: $118,948,925. Total Debt Outstanding: $2,448,992,52. District Population: 1,312,684 Debt per Capita: $1, District Enrollment: 23,294 Debt per Student: $12,46.56 DEBT PER CAPITA $ $.1-$ $1,-$2, $2,5-$4, GREATER THAN $5, DALLAS - FT. WORTH HOUSTON Sources: Texas Comptroller of Public Accounts, Texas Bond Review Board, Texas Education Agency, U.S. Census Bureau SAN ANTONIO - AUSTIN CORPUS CHRISTI SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 11

12 COMMUNITY COLLEGES FUNDED BY LOCAL AND STATE REVENUE 8% LOCAL TAX REVENUE AND STATE APPROPRIATION FISCAL 23 THROUGH LOCAL GOVERNMENT DEBT AT A GLANCE Debt at a Glance COMMUNITY COLLEGE LOCAL PROPERTY TAX REVENUE STATE FUNDING FALL ENROLLMENT Note: Tax revenue data is not available before 23. Sources: Legislative Budget Board, Texas Higher Education Coordinating Board COMMUNITY AND JUNIOR COLLEGE REVENUES AND EXPENDITURES STATE 2.7% FISCAL REVENUES 49% 41% 18% 2.2% $4.3 BILLION COMMUNITY COLLEGE DEBT OUTSTANDING, Texas community and junior colleges receive revenue from multiple sources. More than half of community college expenditures in were related to instruction. The Texas Bond Review Board estimates that the community colleges debt service (principal and interest) for 212 will total $394 million. TUITION AND FEES 24.5% OTHER REVENUES 3.% LOCAL PROPERTY TAXES 24.8% REVENUES TOTAL $5.4 BILLION $ FUNDING SOURCE REVENUES STATE $1,117,25,376 TUITION AND FEES $1,325,145,151 OTHER REVENUES $1,622,111,563 LOCAL PROPERTY TAXES $1,337,961,389 TOTAL $5,42,468,479 EXPENDITURES $ INTEREST ON DEBT 3.7% OTHER 2.8% FACILITIES 12.5% ADMINISTRATIVE 29.6% INSTRUCTION 51.5% PURPOSE EXPENDITURES INSTRUCTION $2,49,289,568 ADMINISTRATIVE $1,433,886,891 FACILITIES $63,122,345 INTEREST ON DEBT $176,832,279 OTHER $136,147,874 TOTAL $4,84,278,957 EXPENDITURES TOTAL $4.8 BILLION Source: Texas Higher Education Coordinating Board Community College Revenue and Expenditure Definitions: REVENUES: State State appropriations, grants and contracts. Tuition and Fees Tuition and fees after exemptions and allowances. Other Revenues Auxiliary enterprises, local government grants, gifts, investment income and other operating revenue. Local Property Taxes EXPENDITURES: Instruction Program instruction, scholarships and fellowship grants. Administration Academic support, student services, institutional support and auxiliary expenses. Facilities Operations and management of plant and depreciation. Interest on Debt Only interest on debt service is reported to the Texas Higher Education Coordinating Board. (Principal is distributed among the other spending categories.) Other Other expenses including research and public service. 12 YOUR MONEY AND EDUCATION DEBT

13 COMMUNITY AND JUNIOR COLLEGE DEBT OUTPACES ENROLLMENT Texas community college systems occupy a uniquely important place in our educational system, pursuing multiple missions at the intersection of public and higher education. An almost 6 percent growth in enrollment points to the increasing demand for affordable education in the past 1 years. They offer college preparation for high school students through a wide variety of dual-credit programs. Their technical training degrees and certifications allow students to enter the workforce quickly, with high-demand skills. And they allow students pursuing academic degrees to earn their first two years of college credit inexpensively and with flexible hours that can accommodate varying work schedules. Many offer evening classes as well. 3% $1.1B CUMULATIVE PERCENTAGE GROWTH OF COMMUNITY COLLEGE DEBT DEBT OUTSTANDING TUITION AND FEES ENROLLMENT INFLATION (CPI) Texas 5 community and junior college districts (CCDs) have issued outstanding taxsupported debt, revenue debt and debt from lease-purchase agreements. At the end of, Texas CCDs had $4.3 billion in outstanding debt. At that time, 29 of the 5 CCDs had tax-supported debt, 42 issued revenue debt and only two issued debt related to lease-purchase agreements. Tax-supported debt is secured through local property taxes levied by the district and requires voter approval. Taxsupported debt accounted for more than $3. billion or 7.6 percent of the total. Revenue debt is secured by CCD revenues other than property taxes, including tuition and fees, FISCAL THROUGH $2.1B and typically does not need voter approval. Revenue debt represented nearly $991.1 million or 23. percent of the total. Lease-purchase agreements allow a CCD to provide security for bonds issued by an affiliated nonprofit corporation to finance buildings. Because districts are only bound by an annual lease contract, lease-purchase agreements are often the most costly type of debt. After notice of the proposed bonds is made public, voters can petition the district to place these debt obligations on the ballot. This debt totaled nearly $274.4 million or 6.4 percent of total CCD debt in Note: Tuition and fee rate of growth is assumed for 22-4 as data is not available. Sources: Texas Bond Review Board, Texas Higher Education Coordinating Board, Bureau of Labor Statistics $4.3B 297.2% 1.9% 58.9% 26.5% TO THE POINT Transparency Duty No. 4: Before approving new debt, taxpayers should be told how the debt will improve educational outcomes at a reasonable price. Since, community and junior college debt per student has outpaced enrollment growth and inflation. Although a steep increase, this debt represents a very small portion of local government debt. SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 13

14 COMMUNITY COLLEGE TOTAL OUTSTANDING DEBT FISCAL - TO THE POINT TAX SUPPORTED DEBT REVENUE DEBT $ 3.4 $3 LEASE PURCHASE DEBT Transparency Duty No. 5: Before approving debt, taxpayers should be told the estimated cost of borrowing. For example, how much will a $5 million bond cost taxpayers by the time it is repaid? $.99 $.62 $.46 $.27 $ Source: Texas Bond Review Board. Outstanding debt held by Texas community college districts (CCDs) rose by 297 percent between and. Debt supported by property taxes accounts for the majority of CCD debt. 2 1 (IN BILLIONS) COMMUNITY AND JUNIOR COLLEGE DISTRICT DEBT EXAMPLE INTERACT ONLINE>> Go to Transparency.org for interactive versions of these maps where you can click to see more details on the outstanding debt per school district. DEBT PER CAPITA $ $.1-$ $25-$ $5-$ GREATER THAN $75 * Note: Based on district population reported at the most recent debt issue. Sources: Texas Bond Review Board, Texas Higher Education Coordinating Board The darkest colors indicate community colleges with the most debt per district resident. Cisco Junior College District has the most debt per resident* of $2, Three districts have no debt. SOUTHWEST TEXAS JUNIOR COLLEGE DISTRICT Tax-Supported Debt: $ Revenue-Supported Debt: $8,225, Lease Purchase Debt: $ Total Debt Outstanding: $8,225, District Population (21): 4,573 District Enrollment (21-11): 5,664 Debt per Capita*: $22.72 Debt per Student: $1, YOUR MONEY AND EDUCATION DEBT

15 COMMUNITY AND JUNIOR COLLEGE DISTRICTS OUTSTANDING DEBT AS OF AUG. 31, DISTRICT DEBT OUT- STANDING** ENROLL- MENT* DEBT PER STUDENT DISTRICT DEBT OUT- STANDING** ENROLL- MENT* DEBT PER STUDENT ALAMO CCD $627,315, 62,517 $1,34 HOUSTON COMMUNITY COLLEGE SYSTEM $618,69,527 51,413 $12,22 LONE STAR COLLEGE SYSTEM $591,625, 68,254 $8,668 DALLAS COUNTY CCD $421,735, 78,549 $5,369 AUSTIN CCD $365,128,175 42,4 $8,693 SAN JACINTO CCD $325,88,568 33,382 $9,762 CITY OF CORPUS CHRISTI (DEL MAR) JCD $115,15, 12,22 $9,575 LAREDO CCD $1,381,943 1,46 $9,992 MCLENNAN CCD $1,115, 1,18 $9,834 SOUTHMOST UNION JCD (TEXAS SOUTHMOST COLLEGE) $98,175, 1,53 $9,347 ODESSA JCD $87,55, 5,112 $17,118 BRAZOSPORT JCD $64,34, 4,194 $15,341 GRAYSON COUNTY JCD $63,46, 5,166 $12,284 TYLER JCD $62,68, 11,54 $5,432 SOUTH TEXAS CCD $61,389, $2,8 EL PASO CCD $6,49, 28,146 $2,149 AMARILLO JCD $58,71, 11,329 $5,182 COLLIN COUNTY CCD $51,65, 27,179 $1,899 MIDLAND COUNTY JCD $47,199, 6,61 $7,787 WASHINGTON COUNTY (BLINN) JCD $43,67, 18,8 $2,415 TEMPLE JCD $38,587,264 5,692 $6,779 TARRANT COUNTY COLLEGE DISTRICT $3,495, 56,86 $537 NAVARRO COUNTY JCD $26,865, 1,383 $2,587 LEE COLLEGE DISTRICT $25,86, 6,416 $4,31 HOWARD COUNTY JCD $22,48, 4,666 $4,818 ANGELINA COUNTY JCD $22,415, 5,836 $3,841 NORTHEAST TEXAS CCD $2,181,574 3,324 $6,71 ALVIN CCD $16,96, 5,193 $3,266 VICTORIA JCD $16,81, 4,514 $3,724 PARIS JCD $15,527, 5,936 $2,616 SOUTH PLAINS COLLEGE DISTRICT $14,64, 1,55 $1,394 WILBARGER COUNTY JCD (VERNON REGIONAL JR COLLEGE) $12,125, 3,247 $3,734 CISCO JCD $1,425, 4,363 $2,389 SCURRY COUNTY JCD (WESTERN TEXAS COLLEGE) $8,645, 2,286 $3,782 PARKER COUNTY JCD (WEATHERFORD COLLEGE) $8,515, 5,513 $1,545 NORTH CENTRAL TEXAS (COOKE CO) CCD $8,46, 9,831 $861 SOUTHWEST TEXAS JCD $8,225, 5,664 $1,452 PANOLA COUNTY COLLEGE DISTRICT $6,763,81 2,561 $2,641 WHARTON COUNTY JCD $6,17, 6,998 $882 BEE COUNTY (COASTAL BEND) COLLEGE DISTRICT $5,635, 3,9 $1,445 HILL COUNTY JCD (HILL COLLEGE) $3,95, 4,37 $97 GALVESTON COLLEGE $2,625, 2,214 $1,186 KILGORE COLLEGE DISTRICT $2,65, 6,355 $41 TRINITY VALLEY CCD $2,455, 7,482 $328 FRANK PHILLIPS COLLEGE DISTRICT (BORGER JCD) $1,885, 1,31 $1,828 CLARENDON JCD $1,74, 1,343 $1,296 COLLEGE OF THE MAINLAND $855, 4,168 $25 CENTRAL TEXAS COLLEGE DISTRICT $ 1,737 $ RANGER COLLEGE DISTRICT $ 1,736 $ TEXARKANA CCD $ 4,484 $ *Fall student enrollment was used for enrollment and to calculate debt per student. **Debt outstanding includes tax-supported, revenue-supported and lease purchase debt. Sources: Texas Bond Review Board, Texas Higher Education Coordinating Board SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 15

16 SNAPSHOT: TARRANT COUNTY COLLEGE DISTRICT The Tarrant County College District (TCCD) is one of the fastest growing community college districts in the state, with enrollment nearly doubling over the past decade as Fort Worth and surrounding communities have grown in population. Despite this rapid expansion, TCCD has reduced its outstanding debt by 66 percent since. Both TCCD s in-resident tuition and total tax rate have continued to stay near or below state averages. This reduction in outstanding debt is largely attributable to TCCD s payas-you-go strategy for financing facility construction, rather than issuing bonds that accrue interest. New Campuses Built Although TCCD s Trinity River East campus which opened in did draw scrutiny over its cost, the facility was financed without issuing bonds. It brings state-of-the-art nursing training, which will provide increased capacity to meet a high-demand workforce need in Tarrant County, which ranks 19 out of the 254 counties in Texas for LVN-topopulation ratio. The District s new Haltom City Center was opened in a renovated former library. To further save on costs, TCCD obtained financial support from Haltom City and private companies. TARRANT COUNTY COLLEGE DISTRICT AT A GLANCE % CHANGE TOTAL DEBT OUTSTANDING $88,635, $3,495, -65.6% ENROLLMENT 26,836 49,18 83.% TOTAL TAX RATE $.164 $ % STATE AVERAGE $.162 $ % TUITION AND FEES IN-DISTRICT RESIDENT ENROLLED IN 12 HOURS* $447 $6 34.3% STATE AVERAGE $42 $ % *Tuition and fee rates are for the fall semesters of and. Sources: Texas Association of Community Colleges, Tarrant County College District, Texas Bond Review Board, Texas Comptroller of Public Accounts, Texas Higher Education Coordinating Board Refunding Debt is Reducing the Long-term Burden TCCD also works to bring down interest costs by refunding past bond issuances at lower interest rates and has the top AAA bond rating from Standard & Poor s. In 24, TCCD refinanced bonds worth $23.5 million, saving taxpayers an estimated $845, over the life of the bonds. The district expects to be debt free by 215. Serving More Students TCCD has employed innovative facilities and educational delivery models to manage its debt: Through distance learning, TCCD delivers instruction to 22, students in 25 courses. Weekend College is offered at all TCCD locations to more than 6,5 students. Dual enrollment participation has grown in recent years and now serves more than 4, high school juniors and seniors in area school districts. 16 YOUR MONEY AND EDUCATION DEBT

17 TEXAS EDUCATION: WHAT LIES AHEAD Every facet of the educational process may be on the cusp of massive change, and public schools will not be exempt. The digital revolution is already altering the most fundamental processes involved in education, and the growing availability of courses that offer high school students access to college credit and has made many high schools de facto extensions of local colleges. Wider adoption of electronic textbooks, complete with interactive features and video tutorials, may create significant new opportunities for self-paced learning. Online education may greatly expand our schools course offerings and allow campuses and districts to share resources across jurisdictional boundaries. Of course, such innovations will never eliminate the need for traditional school campuses. Many students may still benefit from face-to-face instruction. But these changes may reduce the size and number of facilities our school districts need, and perhaps even the number of teachers and support staff. A few decades from now, the dimensions of and need for public school debt may look very different. SAMPLE BALLOT IF KEY INFORMATION WAS INCLUDED Currently, the only information that voters get to see on their ballot when voting on a proposed debt issuance is the amount their local government entity proposes to borrow and a general description of the purpose. As the example here demonstrates, providing increased transparency that informs voters about the tax-supported debt already on that entity s books could be accomplished by simply adding information about existing debt, any change to the tax rate required to support the new debt, and the effect that tax rate would have on the debt service component of and average value residential property tax bill in the entity s jurisdiction. BETA COMMUNITY COLLEGE DISTRICT BOND ELECTION - NOVEMBER 6, 212 DEBT TOTAL DEBT DEBT OUTSTANDING REMAINING SERVICE OUTSTANDING PRINCIPAL INTEREST PAYMENT PER CAPITA AUG. 31, 212 $65,3,343 $42,742, $17,772,343 $1,4.76 PROPOSED ISSUE $25,795, $18,2,* $43,995,* $ AVERAGE LENGTH OF PROPOSED DEBT: 2 YEARS EXISTING ANNUAL DEBT TAX RATE $.18 per $1 PROPOSED NEW RATE IF BOND PASSES $.22 per $1 EXISTING AVERAGE RESIDENTIAL DEBT SERVICE TAX LEVY** $ ESTIMATED DEBT SERVICE TAX LEVY IF BOND PASSES ASSUMING NO STATE ASSISTANCE $336.8 % INCREASE 22.2% % INCREASE 22.2% * Estimated interest and total payment. ** Average debt service tax is calculated on the average 212 residential property value in the city of $152,76. PROPOSITION THE ISSUANCE OF BONDS IN THE AMOUNT OF $25,795, FOR THE CONSTRUCTION, RENOVATION, ACQUISITION AND EQUIPMENT OF SCHOOL BUILDINGS, INCLUDING THE CONSTRUCTION OF THREE SCI- ENCE CLASSROOM AT BETA COMMUNITY COLLEGE, REHABILITATION OF THE PERFORMING ARTS CENTER AND THE MULTIPURPOSE STADIUM AT W.H. BETA HIGH SCHOOL AND THE LEVYING OF THE TAX IN PAY- MENT THEREOF. FOR AGAINST BETA ISD BOND ELECTION - NOVEMBER 6, 212 VOTERS SHOULD BE TOLD THE DEBT FACTS DEBT TOTAL DEBT DEBT OUTSTANDING REMAINING SERVICE OUTSTANDING PRINCIPAL INTEREST PAYMENT PER CAPITA AUG. 31, 212 $65,3,343 $42,742, $17,772,343 $1,4.76 PROPOSED ISSUE $25,795, $18,2,* $43,995,* $ AVERAGE LENGTH OF PROPOSED DEBT: 2 YEARS EXISTING ANNUAL DEBT TAX RATE $.18 per $1 PROPOSED NEW RATE IF BOND PASSES $.22 per $1 EXISTING AVERAGE RESIDENTIAL DEBT SERVICE TAX LEVY** $ ESTIMATED DEBT SERVICE TAX LEVY IF BOND PASSES ASSUMING NO STATE ASSISTANCE $336.8 % INCREASE 22.2% % INCREASE 22.2% * Estimated interest and total payment. ** Average debt service tax is calculated on the average 212 residential property value in the city of $152,76. PROPOSITION THE ISSUANCE OF BONDS IN THE AMOUNT OF $25,795, FOR THE CONSTRUCTION, RENOVATION, ACQUISITION AND EQUIPMENT OF SCHOOL BUILDINGS, INCLUDING THE CONSTRUCTION OF THREE SCI- ENCE CLASSROOM AT BETA MIDDLE SCHOOL, REHABILITATION OF THE PERFORMING ARTS CENTER AND THE MULTIPURPOSE STADIUM AT W.H. BETA HIGH SCHOOL AND THE LEVYING OF THE TAX IN PAYMENT THEREOF. FOR AGAINST Unless they ve done research on their own or proponents of a local government debt issue have shared information about the current debt outstanding, voters are often not fully informed before they walk into the voting booth. Ballot propositions currently offer no information other than the debt issue being considered. Key debt information could be included on ballot forms that would let voters decide whether new debt is merited based on how much debt they, as taxpayers, are already paying. For example, the sample ballot above shows key information about the local government entity s debt that voters could consider if the details were on the ballot. SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 17

18 STATE UNIVERSITIES HAVE EXPANDED ENROLLMENT, FACILITIES AND DEBT State colleges and universities use bond debt primarily to fund facility construction and renovation projects. At the end of fiscal, Texas public four-year colleges and universities had $12.5 billion in outstanding debt. From fiscal through, state university and college enrollment rose PUBLIC COLLEGE AND UNIVERSITY REVENUES AND EXPENDITURES AND REVENUES (IN BILLIONS) STATE 3.8% () FUNDING SOURCE REVENUES REVENUES CHANGE STATE $2,75,454,688 $3,542,118,364 31% TUITION AND FEES $1,212,198,736 $3,282,497, % FEDERAL $73,13,688 $1,99,587, % INSTITUTIONAL RESOURCES $1,56,725,243 $2,694,27,43 73% TOTAL $6,28,59,355 $11,59,23,597 85% PURPOSE EXPENDITURES EXPENDITURES CHANGE INSTRUCTION $2,458,589,774 $4,144,39,711 69% RESEARCH $562,868,548 $1,166,34,291 17% ADMINISTRATION $1,873,228,992 $3,395,916,988 81% FACILITIES $971,827,72 $1,117,268,492 15% OTHER $172,27,356 $414,661,54 141% TOTAL $6,38,784,742 $1,238,272,22 7% Sources: Texas Higher Education Coordinating Board TUITION AND FEES 28.5% () FEDERAL 17.3% () INSTITUTIONAL RESOURCES 23.4% () REVENUES TOTAL $11.5 BILLION RESEARCH 11.4% () FACILITIES 1.9% () OTHER 4.1% () EXPENDITURES (IN BILLIONS) INSTRUCTION 4.5% () ADMINISTRATION 33.2% () by 32.5 percent to 61,558 while outstanding debt increased by 246 percent. The state has established funds that service debt using revenues generated by state assets including the Permanent University Fund and the Higher Education Fund. EXPENDITURES TOTAL $1.2 BILLION % HIGHER EDUCATION DEBT CLIMBS FISCAL THROUGH UNIVERSITY DEBT OUTSTANDING 246% COMBINED ENROLLMENT AND INFLATION 67.8% Sources: Texas Bond Review Board, Texas Higher Education Coordinating Board Definitions: REVENUES STATE State appropriations, state grants and contracts, Research and Development Fund, Texas Competitive Knowledge Fund, Higher Education Fund and Permanent University Fund. TUITION AND FEES Tuition and fees after exemptions and allowances. FEDERAL Federal grants and contracts. INSTITUTIONAL RESOURCES Endowment and interest income, local government grants, private gifts and grants, sales and services, net auxiliary enterprises and other income. EXPENDITURES INSTRUCTION Program instruction, scholarships and fellowship grants. RESEARCH All expenses for research activity. ADMINISTRATION Academic support, student services, institutional support, auxiliary expenses. FACILITIES Operations and management of plant, capital outlay from current fund sources. OTHER Other services not directly related to basic services, public service. For more detailed information, visit the Texas Higher Education Coordinating Board s website at 18 YOUR MONEY AND EDUCATION DEBT

19 STATE GENERAL REVENUE FUNDS PART OF HIGHER EDUCATION DEBT SERVICE The Legislature appropriated $3.5 billion to public universities and colleges in fiscal, of which $297 million will service tuition revenue bond (TRB) debt. Enrollment in fall grew to 61,558. Other university debt includes non-tuition revenue bonds, Permanent University Fund (PUF) bonds and Higher Education Fund (HEF) bonds. TRBs are self-supporting bonds that are authorized by the Legislature, the institution s board of regents and the Texas Bond Review Board (BRB). TRBs are not backed by the full faith and credit of the state. Historically, however, the Legislature has appropriated general revenue to reimburse the higher education institutions for debt service payments on TRBs, providing $3 million for this purpose in fiscal 212. In theory, they are backed by revenue generated by the projects they support as well as tuition and fee revenue. TRBs are no longer approved by the BRB if the issuer is exempt from BRB approval by Senate Bill 5 (see page 2). The last major TRB authorization occurred in 26, when the Legislature approved 63 projects with a total value of $1.86 billion. Since that time, the Legislature has approved just $168 million in TRBs, $155 million of that amount for Hurricane Ike recovery. As of the end of fiscal, TRBs represented 2.4 percent of all outstanding college and university debt, totaling $2.54 billion. 25% PUBLIC COLLEGE AND UNIVERSITY DEBT GROWTH EXCEEDS INFLATION DEBT OUTSTANDING AVERAGE TUITION AND FEES ENROLLMENT INFLATION (CPI) FISCAL THROUGH Sources: Texas Bond Review Board, Texas Higher Education Coordinating Board $ $79.4 $78.9 $31.5 $1 $263.1 $246.8 $2 $312.6 $31.2 In 23, the legislature deregulated university tuition, allowing institutions to set their own tuition rates and fees. TUITION REVENUE BOND ISSUANCE FISCAL THROUGH $3 $412. $424.8 $4 (IN MILLIONS) $5 $64.5 $6 $741.1 $ % 125.8% 32.5% 26.5% Texas college and university issuance of tuition revenue bonds (TRBs) has fluctuated greatly in the past decade. The Legislature must authorize TRBs before institutions can issue the debt. Once authorized, however, institutions can issue TRBs at any time without further legislative approval, based on their individual priorities, which accounts for the fluctuations seen during the past decade. As of Aug. 31, 212, almost no authorized but unissued TRB debt remained. $8 Source: Texas Bond Review Board SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 19

20 Public college (IN BILLIONS) $8 7 and university Tuition Revenue Bond (TRB) debt 6 outstanding totaled $2.54 billion in 5 fiscal. TRB debt service 4 was reimbursed by a state 3 general revenue appropriation of 2 $1.84 $297.2 million. 1 Non-tuition revenue $.78 $.98 bond debt is by far the most common form of higher 22 education debt and the fastest-growing. Outstanding debt in this category Revenue bonds are selfrose by 311 percent supporting bonds serviced between entirely by institutional income. and. Revenue bonds do not Enrollment has require legislative approval, but increased from do require approval from the 46,955 students Office of the Attorney General in to 61,558 (OAG) and the BRB. In, in. the Legislature passed Senate Bill 5, which exempts from BRB approval any university that has a AA- credit rating or better if the debt is not backed by the state s general revenue. Some capital projects funded by revenue bonds may require approval from the Texas Higher Education Coordinating Board (THECB) as well. Revenue bonds account for the largest OUTSTANDING STATE COLLEGE AND UNIVERSITY DEBT FISCAL THROUGH TUITION REVENUE BONDS (TRB) NON-TUITION REVENUE BONDS PERMANENT UNIVERSITY FUND BONDS Note: Higher Education Assistance Fund Bonds were $4.8 million of state university debt outstanding in, too small an amount to be displayed on this chart. Source: Texas Bond Review Board component of total outstanding college and university debt, 6.7 percent of total debt outstanding or nearly $7.6 billion at the end of fiscal. PUF bonds are available only to certain University of Texas and Texas A&M University system schools. They are secured and serviced by the Available University Fund (AUF), which consists of the returns on all investment assets of the PUF. In, the AUF distributed $56 million to the University of Texas and Texas A&M University systems. They do not require approval by the Legislature or BRB but must be approved as legal by the $2.54 $7.58 $2.35 OAG. PUF bonds made up 18.9 percent of all outstanding college and university debt, or nearly $2.4 billion at the end of fiscal. HEF bonds (sometimes called Higher Education Assistance Fund or HEAF) are available to higher education institutions who cannot use PUF bonds. HEF bonds are backed by the fund and serviced by state general revenue appropriations and were.33 percent of all outstanding college and university debt or $4.8 million at the end of fiscal. They do not require approval from the Legislature but do need approval from the BRB and OAG. 2 YOUR MONEY AND EDUCATION DEBT

21 DEBT ISSUED BY TEXAS PUBLIC COLLEGES AND UNIVERSITIES Four Texas universities, seven college and university systems and one state agency may issue debt for higher education. As of Aug. 31,, these institutions had incurred $12.5 billion in outstanding debt. A significant share of this debt is issued on behalf of health science centers and medical schools; some of these institutions receive revenue from sources such as hospital and patient income. To see a campus breakdown of debt, including debt incurred by health science centers and medical schools, see AUTHORIZED STATE DEBT ISSUER TEXAS PUBLIC COLLEGES AND UNIVERSITIES OUTSTANDING DEBT DEBT OUTSTANDING* AS OF AUG. 31, ENROLLMENT** DEBT/ STUDENT** CREDIT RATINGS MOODY S FITCH S&P THE UNIVERSITY OF TEXAS SYSTEM $7,292,62, 28,574 $34,962 Aaa AAA AAA THE TEXAS A&M UNIVERSITY SYSTEM $2,248,796, ,435 $18,367 Aaa AA+ AA+ TEXAS STATE UNIVERSITY SYSTEM $777,73, 76,545 $1,16 Aa2 AA AA- UNIVERSITY OF HOUSTON SYSTEM $699,536, 65,253 $1,72 Aa2 n/a AA- TEXAS TECH UNIVERSITY SYSTEM $528,77, 43,173 $12,232 Aa2 AA AA UNIVERSITY OF NORTH TEXAS SYSTEM $455,55, 39,479 $11,527 Aa2 AA n/a STEPHEN F. AUSTIN STATE UNIVERSITY $177,91,*** 12,72 $14,6 A1 AA- n/a TEXAS SOUTHERN UNIVERSITY $126,5,*** 9,73 $13,1 Baa1 BBB+ BBB+ MIDWESTERN STATE UNIVERSITY $87,87,136*** 5,811 $15,121 A1 AA- n/a TEXAS WOMAN S UNIVERSITY $86,965, 14,53 $5,996 Aa3 n/a A TEXAS STATE TECHNICAL COLLEGE SYSTEM $47,675,714 12,353 $3,859 A1 n/a A TOTAL**** $12,528,177,517 61,558 $2,519 *Inclues revenue bond, tuition revenue bond, Permanent University Fund and Higher Education Fund issuances. **Fall student enrollment reported to Texas Higher Education Coordinating Board was used for enrollment and to calculate debt per student. ***Includes debt issued by the Texas Public Finance Authority. ****Excludes Texas Higher Education Coordinating Board bonds outstanding of $798,915, issued to finance education loans to students. Sources: Texas Bond Review Board, Texas Higher Education Coordinating Board DEBT PER STUDENT FOR FIVE LARGEST UNIVERSITY SYSTEMS (IN THOUSANDS) $ Outstanding debt per student for the five university systems with the largest enrollment has increased substantially since. UT A&M TECH UH TX STATE FISCAL YEAR THE UNIVERSITY OF TEXAS SYSTEM THE TEXAS A&M UNIVERSITY SYSTEM TEXAS TECH UNIVERSITY SYSTEM UNIVERSITY OF HOUSTON SYSTEM TEXAS STATE UNIVERSITY SYSTEM $11,884 $1,434 $6,431 $3,387 $3, $13,848 $9,993 $8,815 $3,49 $3, $16,33 $11,637 $8,558 $5,32 $5, $17,718 $11,789 $1,823 $5,186 $5,6 25 $2,262 $11,957 $1,76 $5,429 $5, $23, $12,823 $12,52 $5,795 $8, $25,14 $12,52 $11,991 $5,46 $7,91 28 $29,51 $12,883 $12,662 $7,65 $9, $32,737 $15,76 $13,578 $1,8 $9, $33,357 $18,375 $12,638 $1,861 $9,696 $34,962 $18,367 $12,232 $1,72 $1,16 PERCENT CHANGE 194% 76% 9% 217% 163% *Fall student enrollment was used for enrollment and to calculate debt per student. Sources: Texas Bond Review Board, Texas Higher Education Coordinating Board SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 21

22 HIGHER EDUCATION: WHAT IS NEXT? Higher education institutions may have more than adequate capacity to support current levels of debt, particularly in a low interest rate environment. As that environment changes, however, their ability to meet increased demand by adding new facilities may be constrained. Fortunately, new and innovative means of delivering courses may expand the reach of higher education to more students without the need for expensive new buildings. One factor is the rapid growth of online education in Texas public community college and universities. In, students enrolled in 12.3 million semester credit hours. In, online and hybrid classes accounted for almost 37 percent of 3.7 million additional semester credit hours taken compared to 2, when only 1.1 percent of the 8.5 million semester credit hours were online classes or a hybrid of classroom and online work. Many universities across the nation are placing vast amounts of coursework online. Such innovations dovetail neatly with the rise of competency-based instruction, which awards credit based on demonstrations of actual knowledge and skill without spending a set amount of time in a classroom. In October 212, the University of Texas System joined Harvard University, the University of California-Berkeley and the Massachusetts Institute of Technology s edx online initiative, which offers free online courses available to anyone, anywhere. Such models point toward a future in which a college career may not be linked to a single institution or degree program. And in many ways, the student body already reflects this change. Today, an increasing number of entering students already have a good deal of college under their belts, from dual-credit, AP and similar courses in high school and summer community college sessions. As higher education delivery changes, so will the expenditures in infrastructure both buildings and technology supported by higher education revenues and debt. How and when remain to be seen. 22 YOUR MONEY AND EDUCATION DEBT THE RAPID GROWTH OF ONLINE EDUCATION Between 2 and, online credit hours taken by postsecondary students rose by 1,113 percent in Texas community colleges and 2,337 percent in our universities. In actual numbers, that s fewer than 1, semester credit hours to 1.5 million in just 11 years. In fall, online and hybrid coursework accounted for 14.6 percent of credit hours taken at community college and 9.4 percent at universities. Semester Credit Hours Attempted: Online Semester Credit Hours* Total Semester Credit Hours Community, Junior and Technical Colleges 1.9% 98.1% % 14.6% Hours 2 Growth Online 73, , ,113% Traditional 3,878,91 5,179, % Total 3,952,14 6,67, % Universities (Undergraduate and Graduate).5% 99.5% 2 * Includes hybrid coursework combining classroom and online instruction. Source: Texas Higher Education Coordinating Board 9.6% 9.4% Hours 2 Growth Online 24,222 59, ,337% Traditional 4,6,863 5,658, % Total 4,625,85 6,248, %

23 CONCLUSION: DEBT TRANSPARENCY AND DECISION-MAKING Education is one of the most basic and most important services governments deliver to their citizens. Growth in enrollment at all levels of education contributes to growing debt, as public and higher education capacity is expanded to accommodate growing demand for education and workforce training. A low interest environment and relatively strong backing for this debt have made issuing bonds an attractive option, and debt issued by public community colleges and four-year institutions is rising more rapidly than enrollment or inflation. Rapid changes in the field of education, driven by technology, may help stem costs, but present-day debt commitments will continue to affect HIGHER EDUCATION DEBT Texans for decades. Leaders at all levels of education, however, must be prudent in managing construction costs and aware that the favorable interest rate environment could change. Taxpayers should remain vigilant about the amount of debt issued in their name and hold policymakers accountable for its wise use. TYPE OF INSTITUTION TYPES OF DEBT PURPOSE FOUR-YEAR PUBLIC INSTITUTIONS 1 College and University Acquire, purchase, Revenue Bonds 2 (including construct, improve, Tuition Revenue Bonds). enlarge, equip, operate and/or maintain any property, buildings, structures, activities, services, operations or other facilities. COMMUNITY AND JUNIOR COLLEGES Higher Education Fund (HEF) Bonds, sometimes called Higher Education Assistance Fund (HEAF) Bonds 4 Permanent University Fund (PUF) Bonds 5 Tax Supported Bonds Revenue Bonds Land acquisition, construction, major repair and rehabilitations, acquisition of capital equipment and library materials. Land either with or without permanent improvements, constructing and equipping buildings or other permanent improvements, major repair and rehabilitation of buildings and other permanent improvements, acquiring capital equipment and library books and library materials and refunding PUF bonds or PUF notes. Construction and equipment of school buildings and site purchase. Acquire, purchase, construct, improve, enlarge, equip, operate, and/or maintain any property, buildings, structures, activities, services, operations or other facilities. DEBT SERVICE REPAYMENT Payable from all or any part of the revenue funds of the institution or any branch of the institution. (Historically, Tuition Revenue Bonds debt service is reimbursed from general revenue.) Payable solely from general revenue appropriations made pursuant to Texas Constitution, Article VII, Sec. 17. Bonds repaid from the Available University Fund (AUF) based on the total return distributions from the PUF. Payable from ad valorem property taxes of the district. Payable from any part of any revenues of the community college and from any rentals, rates, charges fees, or other resources of the governing board. LEGAL AUTHORITY Education Code, Sec Requires governing board and OAG approval. BRB approval required if not exempted pursuant to SB 5. 3 Texas Constitution Article VII, Sec. 17 Requires governing board, OAG and BRB approval. Texas Constitution Article VII, Sec. 18 Requires governing board and OAG approval. No BRB approval required. Education Code Sec Requires voter approval in a bond election. Education Code Sec No voter approval required. 1 The Texas Public Finance Authority issues bonds for Texas State Technical College System, Midwestern State University, Texas Southern University and Stephen F. Austin University. All other public universities and systems have their own authority to issue bonds. 2 Universities also issue Tuition Revenue Bonds (TRBs), which are considered a type of revenue bond but typically are funded by general revenue appropriations to universities made by the Legislature for debt service. 3 In, the Legislature passed SB 5 which exempted from BRB approval any bonds issued by an institution of public education if the institution has an unenhanced long-term debt rating of at least AA- or its equivalent and the state s general revenue is not pledged as a security. According to the BRB, under the provisions of SB 5 Texas State Technical College, Stephen F. Austin University and Texas Southern University would be required to get BRB approval for the issuance of revenue bonds. 4 Available to certain institutions of University of Texas System and Texas A&M University System not eligible to issue PUF bonds and other institutions. 5 Available to certain institutions of University of Texas System and Texas A&M University System. SUSAN COMBS: TEXAS COMPTROLLER OF PUBLIC ACCOUNTS 23

24 TEXAS TRANSPARENCY TAXPAYERS AND STUDENTS DESERVE ACCOUNTABLE GOVERNMENT: AN OVERVIEW OF DEBT IN PUBLIC AND HIGHER EDUCATION RECOMMENDATIONS FOR EDUCATION Although some public school districts, community and junior colleges, and public colleges and universities provide clear notice of new projects they plan to fund with long-term debt, taxpayers are not always aware of the magnitude of the debt being issued and the potential additional costs to taxpayers, college students and their families. These recommendations aim to provide greater transparency to education-related public debt in Texas, reduce debt across public and higher education, and promote evaluation of the long term sustainability of current methods of education funding, particularly debt. 1 2 As new public education and community college debt is presented to voters for approval, consider requiring that the following be placed on the ballot and on a publicly accessible website: Amount of outstanding debt, Existing debt service, Per capita obligation as of the most recent annual financial report, Amount of new debt, Estimated additional debt service, Average length of proposed debt obligations, and Estimated debt per capita burden being proposed assuming no state assistance. To help decrease the amount of new debt required for construction and renovation of public school facilities, the Legislature should consider providing incentives for school districts to use more cost-effective construction and design practices. Additionally, the 3 4 Legislature should consider whether the state should review funding of noninstructional facilities. Many school districts already post information regarding expenditures from bond programs online, and provide data showing the capacity and usage of existing facilities. To provide greater transparency, each school district should be required to disclose on its website the progress, cost and details of all construction and renovation projects, including actual square footage, total cost per student, total cost per square foot and square footage per student. Each district should also be required to post online an inventory of all existing facilities detailing the available square footage, total student capacity and current student enrollment for each campus. Because construction costs for additional classroom space can be 5 expensive, the Legislature should consider providing school districts, community colleges and institutions of higher education incentives for entering into dual-use facility arrangements, to help reduce these costs. Further, to assist in facilities planning and to provide greater transparency, consider requiring community colleges to report construction costs to the Higher Education Coordinating Board for an analysis similar to that provided by the existing Construction Cost Standards Report. The Legislature should consider giving the Bond Review Board sufficient authority and resources to improve the dependability and consistency of data available to the public on all outstanding debt held by public school districts and institutions of higher education and to provide greater transparency to taxpayers. EXERCISING YOUR POWER AS A TAXPAYER Get involved. Attend hearings and meetings of school boards and districts that issue debt in your name. Learn the faces and know the reasons and arguments behind these decisions to take on debt. Make your voice heard. Put yourself in the know. The Comptroller s report series Texas, It s Your Money looks at broader issues that impact Texas taxpayers every day. Go to Learn the basics of public and higher education debt. The Texas Bond Review Board (BRB) offers information and resources on local government debt, including debt for local school and community college districts and state universities and colleges. BRB does not approve local government debt and is only an information provider. The BRB s mission is to ensure that state debt financing is used prudently to meet Texas infrastructure needs and other public purposes and to support and enhance the debt issuance and debt management functions of state and local entities. View these reports and resources to help you better understand education debt. Go to for more information. See how your school district s or college s debt ranks. Compare how your school district s or community college s debt stacks up with other areas. Look up debt issued by individual district or community college district by using the Comptroller s maps and look-up tool at money/ edudebt. The Comptroller s updated Financial Allocation Study for Texas (FAST) tool provides the debt level carried by each Texas school district. Access the tool at to find expenditures and debts for individual school districts. Find out about state university and college debt. The Texas Higher Education Coordinating Board provides leadership and coordination for the Texas higher education system. Visit to find a wealth of data and information on Texas school cost and expenditures, a general appropriations overview and information on school debt trends. www TexasItsYourMoney org Texas Comptroller of Public Accounts Data Services Division P.O. Box Austin, Texas Publication# Printed October 212