S.B. No. 427, introduced by Hinojosa, amends the Local Government Code by adding Section 140.014, which establishes eligibility criteria for political subdivisions seeking state loans or grants after failing to comply with certain financial reporting requirements. The bill specifies that a political subdivision that does not file or publish its required annual financial statement or report is ineligible for state funding for the fiscal year in which the non-compliance occurred. Additionally, it outlines that political subdivisions created under specific sections of the Texas Constitution will also be ineligible for state loans or grants if they fail to meet financial reporting requirements.

However, the bill provides exceptions for political subdivisions that fail to comply due to a disaster, allowing them to maintain eligibility if they notify the administering agency and provide documentation regarding the disaster's impact on their reporting capabilities. The bill requires that applications for state programs include a statement about these eligibility requirements and mandates that political subdivisions demonstrate compliance as prescribed by the administering agency. The changes will apply to financial statements or reports required to be filed or published on or after January 1, 2026, and the act will take effect on September 1, 2025.

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