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 political subdivisions 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 published annually by the Legislative Budget Board. This rate is the sum of the population growth rate and the inflation rate, both determined based on specific criteria outlined in the bill.

Additionally, the bill allows for exceptions to this expenditure limit if the voters of the political subdivision approve additional spending at an election held on a uniform election date. It also clarifies that certain revenues, such as those from bonds 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 bill will apply to fiscal years beginning on or after December 1, 2025, and it will take effect immediately if it receives a two-thirds vote from both houses of the legislature; otherwise, it will take effect on September 1, 2025.

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