H.B. No. 203 introduces a framework to limit annual expenditures for political subdivisions in Texas that are authorized to impose ad valorem taxes or issue bonds. The bill establishes a new section in the Local Government Code that defines key terms such as "consumer price index," "disaster relief cost," "inflation rate," and "population growth rate." It stipulates that total expenditures in a fiscal year cannot exceed the greater of the previous year's expenditures or an amount calculated based on population growth and inflation. Exceptions to this limit can be made if approved by at least two-thirds of voters in an election. Additionally, the bill amends the Health and Safety Code and the Tax Code, changing the voting threshold for adopting ad valorem tax rates from a majority to at least two-thirds of registered voters.

The legislation also modifies tax rate regulations for districts, allowing voters to petition for an election if the board adopts a combined tax rate that exceeds 1.06 times the previous year's amount on a residence homestead. It updates the procedures for determining the voter-approval tax rate and emphasizes transparency by requiring detailed notices regarding proposed tax rates and public hearings. The bill includes several deletions and insertions to refine definitions and calculations related to tax rates, such as adjusting the operation and maintenance tax rate multiplier. It also repeals certain sections from the Education Code, Local Government Code, and Tax Code to streamline the tax rate approval process. These changes will take effect on February 1, 2026, for ad valorem taxes imposed for tax years beginning on or after this date.

Statutes affected:
Introduced: Health and Safety Code 281.124, Special District Local Laws Code 1101.254, Special District Local Laws Code 3828.157, Special District Local Laws Code 8876.152, Tax Code 26.04, Tax Code 26.041, Tax Code 26.05, Tax Code 26.07, Tax Code 31.112, Water Code 49.107, Water Code 49.108, Water Code 49.236, Water Code 49.23601, Water Code 49.23602, Water Code 49.23603 (Special District Local Laws Code 8876, Health and Safety Code 281, Special District Local Laws Code 1101, Tax Code 31, Water Code 49, Tax Code 26, Special District Local Laws Code 3828)