The bill, H.B. No. 325, introduces a new section, 140.014, to the Local Government Code, which establishes a limit on annual expenditures for municipalities and counties in Texas. Under this new provision, a political subdivision's total expenditures from all available revenue sources in a fiscal year cannot exceed the greater of its total expenditures from the previous fiscal year or an amount calculated by multiplying the previous year's expenditures by a rate determined by the Legislative Budget Board, which factors in both the population growth rate and the inflation rate. The Board is required to publish this rate by January 31 each year.

Additionally, the bill allows for exceptions to this expenditure limit if the voters of the political subdivision approve additional spending at an election or if the governor declares a state of disaster that affects the area. It also specifies that certain revenues, such as those from bonds approved by voters or grants, are not considered available sources of revenue for the purpose of this limit. The provisions of this bill will apply to fiscal years beginning on or after December 1, 2025, and the act is set to take effect on September 1, 2025.

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