Education Agency, Texas
A Briefing Report on School District Debt
February 1998
Report Number 98-027
Overall Conclusion
The magnitude of tax-supported, long-term school district debt may have implications to the State and to school districts. It is imperative that interested parties have complete and accurate information on school district debt and management and monitoring practices.
Texas independent school districts throughout the State are experiencing rapid growth in student enrollment. To meet the demands of the increasing student population, these school districts are financing facility renovations and building new facilities by issuing debt. During our research of school district long-term debt we found issues that legislative leaders, the Texas Education Agency, and school district administrators and board members should consider.
Key Facts and Findings
The Texas Education Agency should develop guidelines for school districts to use when reporting accretion on capital appreciation bonds in the independent school districts' annual financial reports. Long-term debt is understated in school districts' annual financial reports due in part to a lack of specific guidance on the treatment of capital appreciation bond accretion.
The Permanent School Fund's insurance capacity should be increased. Without an increase in the amount of bonds the Fund can insure it will reach capacity by 2002. As a result, school districts may be forced to purchase insurance from private companies at an increased cost. As of August 31, 1996, 84 percent of school district bonds were insured through the Fund.
The $300 fee charged by the Texas Education Agency to participate in the Permanent School Fund insurance program should be adjusted to reflect the costs of the program.
Texas should consider formulating a statewide policy on school district long-term debt management. School district debt is a local issue, controlled by local school boards. While complete state oversight of school district debt is not appropriate, the long-range impact of increasing school debt could have statewide implications.
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