The bill, H.B. No. 117, introduces a new section, 140.015, to the Local Government Code, which establishes a limit on annual expenditures for political subdivisions that are authorized to impose ad valorem taxes or issue bonds. 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 based on the previous year's expenditures adjusted for population growth and inflation rates. The bill defines key terms such as "consumer price index," "disaster relief cost," "inflation rate," "political subdivision," and "population growth rate" to facilitate these calculations.

Additionally, the bill allows for exceptions to the expenditure limit if at least two-thirds of the voters in the political subdivision approve additional expenditures through an election. It also clarifies that certain revenues, such as grants and disaster relief costs, are not considered available sources of revenue or expenditures, respectively. The attorney general is granted the authority to enforce compliance with this section, and the bill is set to take effect on January 1, 2026, applying to fiscal years beginning on or after December 1, 2025.

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