A report from Truth in Accounting revealed that three of Texas’ biggest cities are in solid financial shape, but five are struggling. The pro-taxpayer group urges people to push public officials to ditch “outdated” accounting practices and embrace clearer, more open financial reporting.
In their Financial State of the Cities 2025 report, Truth in Accounting studied eight Texas cities and found their cumulative debt is a steep $37.45 billion. Austin had the highest share with $9.8 billion in debt, while Plano had the least at $467.9 million.
“The data confirms what most people suspect—Texas’ local governments are addicted to debt. And that has major consequences for today’s taxpayers and tomorrow’s Texans,” James Quintero of the Texas Public Policy Foundation stated.
The cities contribute to the mountainous $621.7 billion debt of all the 75 cities Truth in Accounting reported on.
Of these 75, Truth in Accounting (TIA) found that 54 are “Sinkhole Cities.” That means these cities didn’t have enough money to pay their bills. Five of these 54 sinkhole cities are in Texas. TIA figured out each city’s total debt, its budget shortfall, and how much of that deficit each taxpayer owes.
Texas Scorecard graphic based on Truth in Accounting 2025 report.
Dallas was ranked among the bottom 10 least fiscally healthy cities TIA studied. This put them among Cincinnati, New Orleans, Chicago, and New York City.
“Once again, Truth in Accounting’s State of the Cities report for 2025 shows that many cities in Texas, including major cities like Dallas and Houston are spending into oblivion, and forcing their residents to shoulder an unsustainable and crushing tax burden,” wrote Andrew McVeigh, president of Texans for Fiscal Responsibility.
For their report, TIA examined the annual comprehensive financial reports of these cities, which—except for three non-Texas cities—were dated 2023.
A crucial part of these debts is unfunded pensions ($192.1 billion) and other post-employment benefits ($136.4 billion) for city employees. TIA found that such debts today make up more than half of American city governments’ non-capital debt. This type of debt comes weighed with “risks and uncertainties” usually out of the control of lawmakers, taxpayers, and plan managers.
TIA found that some public servants have treated funds for these obligations “as a piggy bank for politically motivated spending.” Such actions sacrifice long-term fiscal health and promise to city employees for elected officials’ short-term causes.
“Unfunded pensions and volatile investment markets put taxpayers and retirees at risk,” TIA stated. “Taxpayers and beneficiaries deserve protection from the risks and uncertainties surrounding these plans because their money is at stake.”
In contrast, only three Texas cities earned the title of “Sunshine Cities,” meaning they had more cash than debt.
Texas Scorecard graphic based on Truth in Accounting 2025 report.
Tricks
TIA reported that all of these indebted cities have balanced budget requirements. That means public servants should not be able to spend more than they tax. These requirements are intended to prevent public servants from burdening future taxpayers with current-year expenses and steer them away from mountainous debts.
However, public servants can claim to have balanced budgets through what TIA called “accounting tricks.” Such “tricks” include overstating expected earnings, reckoning borrowed money as income, and hiding the real price tag of government operations by keeping pension and retirement expenses “off the books.”
There’s also the problem of accurate reporting. TIA found that most city financial reports use outdated information to determine “net pension liability.” For example, a city’s June 2023 financial report will report its net pension obligation from June 2022. They found that the cities of Arlington and El Paso did this in their 2023 annual comprehensive financial report.
The City of Arlington told Texas Scorecard that their 2023 Annual Comprehensive Financial Report complied with “applicable auditing standards” and Governmental Accounting Standards Board Statement No. 68, which regulates pension liability recognition and mandates actuarial valuations with the latest data available during financial statement preparation. The city also stated that the Texas Municipal Retirement System’s actuarial report uses a measurement date of December 31 of the reporting year (e.g., December 31, 2023, for FY24). The net pension liability reflects the latest actuarial valuation within the required framework.
“The City remains committed to financial transparency and accuracy,” read the statement. “Future ACFRs will continue to be prepared in accordance with GASB standards, incorporating the most current actuarial data available within the financial reporting cycle.”
El Paso Mayor Renard Johnson didn’t respond to Texas Scorecard’s inquiry.
“Using outdated pension data clouds the city’s financial condition and undermines the trust in government financial data. It also contradicts the fundamental accounting principle that financial statements should reflect a snapshot of a government’s finances at a specific point in time,” wrote TIA in the report. “The lack of transparency and accountability in funding both pension and retiree healthcare benefits is unacceptable.”
Fixes
Truth in Accounting reported that part of the problem is that many city budgets are prepared on what they called “an outdated method,” just tracking what comes in and what goes out. Such a method provides a “misleading picture” of the health of a city’s finances.
TIA recommends citizens advocate for their public servants to adopt full accrual calculations and techniques (FACT) when budgeting. “FACT-based accounting goes beyond cash-based methods to provide more accurate and truthful budgeting and financial reporting, offering a clearer picture of a city’s financial reality,” they wrote.
TIA also encourages citizens to advocate for their public servants to “balance the budget truthfully.”
Beyond local efforts, there’s a bigger national step to explore. Truth in Accounting (TIA) points to the Employee Retirement Income Security Act of 1974 (ERISA), a federal law that protects private-sector employee benefit plans. TIA recommends that people encourage their members of Congress to consider applying these ERISA protections to taxpayers and beneficiaries in cities and states nationwide.
But there’s still the problem of local public servants increasing the burdensome debt loads on taxpayers.
“Texans should not have to pay for the irresponsible spending practices of local officials that shackles current and future Texas families with debt,” McVeigh stated. “Rather, local governments should employ fiscal restraint, create surpluses, and return surplus revenue to taxpayers in the form of property tax relief.”
Quintero believes it’s time for state lawmakers to slap a leash on these local officials. “State lawmakers must bring this reckless borrowing binge to an end,” he stated. “They can begin to do so by passing strong, new laws to impose debt limits, to require supermajority support for bond approval, and to break up the economic cartel that surrounds the bond issuance process. It’s critical that the Legislature get a handle on this problem now before [it] gets much, much worse.”
Citizens can read TIA’s full Financial State of the Cities 2025 report here.
No ads. No paywalls. No government grants. No corporate masters.
Just real news for real Texans.
Support Texas Scorecard to keep it that way!
