According to the Legislative Budget Board (LBB), HB 1065 is not expected to have a significant fiscal implication to the State. The bill would require the Department of Public Safety to inspect employment records of certain private security license holders during an audit or inspection. DPS reported that any costs associated with that added duty could be absorbed using existing resources.

The fiscal note, therefore, does not identify a negative net fiscal impact for the 2026–27 biennium and does not project the need for new appropriations, staffing, or technology expenditures. The main cost driver is the additional employment-record review required during audits or inspections, but LBB treats that work as manageable within DPS’s current budget and administrative capacity.

The fiscal note also states that no significant fiscal implication to units of local government is anticipated. As written, the bill’s fiscal effects are concentrated at the state level, specifically within DPS’s regulatory oversight of certain private security license holders, with no meaningful local-government cost expected.

Texas Policy Research recommends that lawmakers vote NO on HB 1065 unless amended as described below. HB 1065 addresses a legitimate compliance concern within the private security industry. Security guard companies are regulated by the Department of Public Safety and guards must work under a company license. The stated concern is that some companies may classify guards as independent contractors to avoid statutory requirements related to liability insurance, criminal background checks, training, and payroll-tax collection. The Committee Substitute responds by prohibiting a person licensed only as a security services contractor from intentionally misclassifying an employee as an independent contractor in violation of applicable federal guidelines. It also requires DPS, during an audit or inspection, to inspect employment records and notify the Texas Workforce Commission if DPS determines that misclassification occurred.

The Committee Substitute is narrower and less burdensome than the originally filed bill. The filed version would have applied to company license holders generally and would have required DPS to inspect employment records before issuing or renewing a company license. The substitute limits the bill to persons licensed only as security services contractors and shifts the review to audits or inspections, rather than making it a prerequisite to license issuance or renewal. That change reduces the risk of licensing delays and avoids a broader front-end review process for all affected applicants and renewing license holders.

Even as narrowed, the bill grows the size and scope of government by assigning DPS a new labor-classification review duty during audits or inspections. DPS’s core role under the Private Security Act is public-safety licensing and oversight. This bill expands that role into employment-classification review and requires DPS to evaluate whether a business has violated “applicable federal guidelines.” That creates a limited-government concern because it relies on an external federal standard and gives a state agency additional discretion over private employment arrangements.

The bill does not appear to significantly increase the taxpayer burden. The LBB states that no significant fiscal implication to the State is anticipated and that DPS expects any costs associated with the bill to be absorbed using existing resources. The fiscal note also states that no significant fiscal implication to units of local government is anticipated. The direct fiscal concern is therefore limited, but the absence of a significant fiscal note does not eliminate the broader concern that the bill expands the regulatory scope of an existing agency.

The bill does increase the regulatory burden on affected businesses. Covered security services contractors would face additional employment-record review during DPS audits or inspections, and the review would be tied to compliance with federal worker-classification guidelines. Businesses already subject to private security licensing requirements would therefore face an added compliance checkpoint involving employment records and worker classification. The substitute reduces this burden compared with the filed version, but it does not eliminate it.

For these reasons, the bill should not be supported as written. Texas Policy Research recommends that lawmakers vote NO on HB 1065 unless amended to narrow the inspection trigger to complaint-based or Texas Workforce Commission-referred cases, define the applicable classification standard in state statute rather than relying broadly on federal guidelines, prohibit DPS from initiating audits solely for employment-classification purposes absent a threshold finding, protect the confidentiality of inspected employment records, and provide a safe harbor for good-faith classification disputes. These amendments would preserve the bill’s stated purpose while reducing government growth, limiting administrative discretion, and lowering the regulatory burden on lawful businesses.