House Bill No. 3537 introduces a new section to the Local Government Code, specifically Section 140.014, which establishes a limit on annual expenditures for local governments, including municipalities, counties, and special purpose districts. The bill defines key terms such as "Board," "Consumer price index," "Inflation rate," and "Population growth rate," which are essential for determining the expenditure limits. According to the bill, 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 applying a rate published annually by the Legislative Budget Board, which combines the population growth rate and inflation rate.

Additionally, the bill allows for exceptions where a political subdivision can exceed the expenditure limit if its voters approve the additional spending through a referendum held on a uniform election date. It also specifies that certain revenues, such as those from bond issuances approved by voters or grants, donations, or gifts, are not considered available sources of revenue for the purpose of this expenditure limit. The provisions of this new section will apply to fiscal years beginning on or after December 1, 2025, and the bill will take effect immediately if it receives a two-thirds majority vote in both houses; otherwise, it will take effect on September 1, 2025.

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