H.B. No. 203 introduces a cap on 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." Under this legislation, a political subdivision's total expenditures in a fiscal year cannot exceed the greater of the previous year's total expenditures or an amount calculated by multiplying the previous year's expenditures by a rate based on population growth and inflation. However, if two-thirds of voters approve, a political subdivision can exceed this limit. The bill also modifies the voting requirements for adopting ad valorem tax rates, changing it from a majority to at least two-thirds of registered voters, and ensures that governing bodies cannot disapprove tax rates approved by voters based solely on those rates.

Additionally, the bill revises the procedures for voter-approval tax rates, stipulating that if a proposed tax rate exceeds both the no-new-revenue tax rate and the voter-approval tax rate, an election must be held for registered voters to accept or reject the proposed rate, requiring at least two-thirds approval for adoption. It also clarifies definitions and calculations related to tax rates in the Tax Code and Water Code, adjusts thresholds for mandatory tax elections, and repeals several existing provisions to streamline the process. The new regulations will take effect for fiscal years beginning on or after January 1, 2026, with a publication requirement for the comptroller of public accounts to ensure transparency regarding the new tax regulations.

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 (Water Code 49, Tax Code 31, Special District Local Laws Code 3828, Special District Local Laws Code 1101, Tax Code 26, Special District Local Laws Code 8876, Health and Safety Code 281)