The bill, H.B. No. 294, seeks to enhance the authority of the Texas Attorney General to investigate and take legal action against local governments—specifically municipalities and counties—suspected of violating laws. It introduces a new Subchapter E to Chapter 402 of the Government Code, which outlines the definitions, procedures, and consequences related to such investigations. The Attorney General is granted the power to investigate alleged violations and, if warranted, initiate legal proceedings against the local government. The bill also establishes that during the pendency of such actions, the local government may face restrictions, including the withholding of state funds and limitations on tax rates.

Additionally, the bill stipulates that if the Attorney General prevails in court, the local government will be prohibited from adopting a tax rate exceeding its no-new-revenue tax rate and from receiving state grant funds for five years following the judgment. Conversely, if the local government wins the case, it will receive the balance of its suspense account maintained under the Tax Code. The bill emphasizes the burden of proof on the local government to demonstrate compliance with the law and sets specific timelines for hearings and appeals. The provisions of this bill will apply only to violations occurring after its effective date, which is set for 91 days following the end of the legislative session.

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