Texas agencies expect to issue about $8.05 billion in bonds, commercial paper and notes in fiscal year 2022, an increase of $2.88 billion or 56% over the previous fiscal year, according to the state Bond Review Board.
The board produces an annual report each December covering debt issuance and related data for the fiscal year that ends Aug. 31. Texas entered the 2022 fiscal year Sept. 1.
After a brief but severe recession in 2020 brought on by the COVID-19 pandemic, Texas's economy has rebounded with help from a flood of federal funding. But debt issuance in the state declined in fiscal year 2021.
“In fiscal year 2021, the average issue size for Texas’ state issuers decreased to $168 million from $343 million in fiscal year 2020,” the report noted.
Half of the 18 transactions completed in fiscal year 2021 were $100 million or greater in size compared to 20 of the 25 transactions, or 80%, completed in fiscal year 2020, the report said.
Texas’ issuance costs increased overall in fiscal year 2021, the board reported. Because of smaller transaction sizes, average cost per $1,000 generally increased when compared to fiscal year 2020.
Texas’s total debt outstanding grew 1.2% to $63.21 billion compared to $62.44 billion in fiscal year 2020 and $59.90 billion in the pre-pandemic fiscal year 2019.
The $63.21 billion of total state debt outstanding for fiscal year 2021 includes $6.96 billion, or 11%, of not self-supporting debt, and $56.26 billion, or 89%, of self-supporting debt paid from various sources other than the state’s general revenues.
Bonds issued by Texas state agencies, colleges, and universities during fiscal year 2021 fell 68% to $4 billion compared to $12.4 billion issued in fiscal year 2020.
Fiscal year 2021 issues included $2.41 billion in new-money and $1.61 billion in refunding bonds. Separately, other debt issued included $1.11 billion of commercial paper.
During the 87th Legislature Third Called Special Session, held in October, Senate Bill 52 authorized about $3.35 billion in tuition revenue bonds for campus construction at state colleges and universities.
Lawmakers also passed House Bill 2219, authorizing the Texas Transportation Commission to issue $3.57 billion of Texas Mobility Fund obligations by Jan. 1, 2027.
At the local level, governments had $266.38 billion in outstanding debt, an increase of $47.4 billion or nearly 22% since fiscal year 2017. Of the 2021 total, 65.5% or $174.54 is general obligation debt to be repaid from local ad valorem tax collections while the remaining 34.5% or $91.85 billion will be repaid from revenues generated by various projects.
Since fiscal year 2017, tax-supported debt outstanding increased 22.6% or $32.18 billion and revenue debt outstanding increased 19.9% or $15.22 billion, the report said.
School districts accounted for 36.7% or $97.79 billion of all local debt outstanding, and cities accounted for 31.6% or $84.24 billion.
Water districts held the third highest percentage and accounted for 14.9% or $39.69 billion of all local debt outstanding. The remaining 16.8% or $44.67 billion was held by community college districts, counties, hospitals and other special districts, the report said.
Texas ended fiscal year 2021 with a total consolidated general revenue fund cash balance of $14.42 billion, an 85.4% increase from the fiscal year 2020 year-end closing balance of $7.78 billion.
According to Moody’s Investors Service 2021 State Debt Medians, Texas ranked 42nd among all states in net tax-supported debt per capita. Texas had $365 in net tax-supported debt per capita compared to the national mean of $1,535.
Texas’ net tax-supported debt per capita ranked second lowest when compared to that of the nine other states the agency rates AAA.
In November, state Comptroller Glenn Hegar, who sits on the Bond Review Board, announced a 15% increase in general revenue for the 2022-23 budget cycle. The revenue will be available to the 88th Texas Legislature meeting in 2023. Texas lawmakers meet in odd-numbered years to adopt two-year budgets.
The projected revenue will support the $123.33 billion in general-purpose spending called for by the 87th Legislature and will result in a projected fiscal 2023 balance available for certification of $11.99 billion.
“The Texas economy rebounded strongly from the deep but short recession caused by the onset of the COVID-19 pandemic, and we project continued expansion of the Texas economy in this biennium,” Hegar said. “Since April of this year, the Texas economy and state tax collections, particularly from sales taxes, have continued to outperform expectations.
“Though we remain optimistic, this is a conservative estimate. Risks impacting this estimate include continued global supply chain disruptions and bottlenecks affecting a range of products,” he said. “Labor shortages and inflationary pressures could impact both business and consumer demand. Volatile energy prices and the potential spread of coronavirus variants also remain uncertainties for Texas’ economic outlook.”
The State Highway Fund and the Economic Stabilization Fund, also known as the “Rainy Day Fund,” receive funding from oil and gas severance taxes.
Fiscal 2022 transfers will total $1.46 billion each to the ESF and SHF, Hegar said. Fiscal 2023 transfers are projected to be $2.43 billion to each fund. After accounting for interest and investment earnings by the ESF, along with expenditures authorized by appropriations made in recent legislative sessions, the CRE projects a fiscal 2023 ending Rainy Day Fund balance of $12.62 billion.
Based on a constitutional amendment passed in 2015, and because annual state sales tax revenue is projected to exceed $28 billion, an additional $2.5 billion will be deposited in the SHF in each year of the 2022-23 biennium. The 2015 amendment also stipulated that when motor vehicle sales tax revenue collected in any fiscal year exceeds $5 billion, a portion of that surplus will be transferred to the SHF.
The Texas Bond Review Board is responsible for the approval of all state debt issues and lease purchase obligations with an initial principal amount greater than $250,000 or a term of longer than five years.
The BRB is also responsible for the collection, analysis, and reporting of information on state debt as well as the debt of local political subdivisions in Texas. The BRB also administers the state’s Private Activity Bond Allocation Program.
