The State of Texas has become as synonymous with crippling public school debt as it is with oil wells and tumbleweeds.
Its public schools have $148.3 billion in bond debt – the most of any state by far – that will eventually have to be repaid, along with an additional $88.3 billion in interest. For every dollar of borrowed money public schools use to improve education, they must give 59 cents to outside creditors, including large institutions such as Wells Fargo and State Farm, as well as hedge funds.
This costly debt burden, which is lining the pockets of investors with money that could be going to teachers and students, is the result of a convoluted school funding system that makes Texas an outlier nationwide.
Decades ago, to keep state taxes low and funding for education in check, legislators handed more of the financial responsibility for education to school districts that depend on local property taxes. Districts, in turn, began dipping into the bond market for help. But what started as a way to renovate aging buildings and security systems morphed over the years into a borrowing frenzy, with some districts constructing fancy campuses and athletic facilities.