According to the Legislative Budget Board (LBB), HB 1109 would have a measurable but moderate fiscal impact on the state’s revenue. The bill exempts counties from motor fuel taxes when purchasing gasoline and diesel for their exclusive governmental use. According to the Legislative Budget Board’s fiscal note, this exemption would result in a projected loss to the state totaling $2.3 million in General Revenue-related funds over the 2026–2027 biennium if it takes effect on July 1, 2025, or $2.1 million if implemented on September 1, 2025.

Over a five-year period, the bill is expected to result in cumulative revenue losses across three major funds: the General Revenue Fund, the Available School Fund, and the State Highway Fund. For instance, in the fiscal year 2026 alone, the projected losses total $4.27 million across these funds, with the bulk of the loss ($3.1 million) affecting the State Highway Fund. These annual losses are expected to rise incrementally through 2030 due to projected growth in county fuel consumption.

The estimated revenue impact was based on data indicating that Texas counties operate approximately 23,800 gasoline or diesel-powered vehicles, which collectively consume about 20.95 million gallons of fuel annually. At a state fuel tax rate of 20 cents per gallon, this equates to an annual tax burden of around $4.2 million, which the proposed exemptions would eliminate. While this represents a cost to the state, counties would benefit through reduced operating expenses, thereby enhancing local budget flexibility and potentially easing the tax burden at the county level.

HB 1109 offers a narrowly tailored exemption from state motor fuel taxes for gasoline and diesel used exclusively by Texas counties. It extends an exemption already afforded to entities like school districts and nonprofit emergency responders, providing parity in tax treatment and reducing operational costs for county governments. The bill also allows counties to file for refunds on taxes paid prior to the exemption, ensuring full applicability of the policy.

From a liberty principles standpoint, HB 1109 supports limited government and efficient use of public funds by preventing state tax dollars from being collected and recycled back to local government—an inefficient loop that ultimately costs taxpayers. It upholds free enterprise by reducing operating costs for counties without distorting private market dynamics or introducing new subsidies.

Taxpayers are aided through this exemption because it eases budgetary pressures on counties, helping them to potentially avoid raising local property taxes or cutting essential services like law enforcement or infrastructure maintenance. This ensures better use of existing tax dollars and enhances local service delivery.

That said, caution around tax exemptions is warranted. When tax relief is extended to a narrow class of recipients—such as counties in this case—it shifts the overall tax burden unless accompanied by a proportional decrease in state spending. While HB 1109 represents a relatively small fiscal impact (approximately $2.3 million over the biennium), it contributes to the broader trend of carving out tax base exceptions. Ideally, exemptions like these should be accompanied by efforts to reduce or offset state expenditures to avoid gradually eroding the general revenue base and shifting costs to others.

In sum, while HB 1109 is a fiscally responsible exemption that aids local governance and offers practical taxpayer benefits, it also reinforces the need for broader spending discipline. With that caveat, Texas Policy Research recommends that lawmakers vote YES on HB 1109.

• Individual Liberty: Although the bill does not expand or restrict individual freedoms directly, its financial implications matter. When counties are less burdened with operational taxes, they may be less likely to raise local taxes or cut services—preserving the individual’s control over more of their earnings and access to consistent public services like emergency response and road maintenance.
• Personal Responsibility: The bill does not weaken or reinforce the expectation that individuals or governments act responsibly in managing resources. It provides a benefit to counties based on their governmental role, but does not excuse them from transparent or accountable use of taxpayer dollars. 
• Free Enterprise: The bill does not interfere with the competitive landscape of private markets. Rather, it ensures public entities are not placed at a financial disadvantage when providing necessary services like public safety and road maintenance. It avoids placing upward pressure on local taxes that would otherwise be needed to absorb these operating costs—an indirect benefit for businesses and households alike. That said, if exemptions proliferate and erode the fuel tax base, long-term pressures on infrastructure funding could result in higher regulatory fees or indirect costs to the private sector—diluting the positive effect.
• Private Property Rights: The bill does not touch regulatory takings, zoning, land use, or eminent domain. Thus, it has no direct bearing on property rights.
• Limited Government: This is where the bill most directly aligns. By exempting counties from paying state motor fuel taxes for their government fleet operations, the bill reduces the financial loop where one level of government taxes another. This adheres to the principle that government should be minimal, efficient, and not self-burdening. It reflects fiscal restraint by removing a tax that doesn’t serve a market-checking function and instead complicates public budgeting. However, this principle is only upheld fully if the exemption does not later require other tax hikes or spending increases elsewhere in the budget. Without corresponding cuts or revenue offsets, the exemption could unintentionally shift financial responsibilities onto other taxpayers, thereby undermining broader limited government goals.

• SB 677 (Same As)
• SB 935 (Same As)