According to the Legislative Budget Board (LBB), HB 265 would have a negative net fiscal impact of approximately $2.2 million to General Revenue over the 2026–2027 biennium, with continued annual costs of nearly $947,000 projected through 2030. The primary cost driver is the establishment and administration of the Grow Texas Fund (GTF) grant program, a new infrastructure investment initiative targeting oil- and gas-impacted regions of the state.

To implement the program, the Comptroller of Public Accounts anticipates the need for eight new full-time employees. These include legal, programmatic, administrative, and technical staff responsible for creating grant procedures, evaluating applications, and monitoring compliance. Additionally, the agency expects to incur a one-time technology development cost of $324,000 in fiscal year 2026 to build a database necessary to administer the grants.

Although HB 265 itself does not create new revenue or modify tax policy, it relies on the constitutional reallocation of existing oil and gas production tax transfers—previously split between the Economic Stabilization Fund (ESF) and the State Highway Fund (SHF)—to fund the GTF. Any broader revenue impact, particularly on the ESF or SHF balances, would be addressed through the companion constitutional amendment (HJR 35), which authorizes the existence and funding mechanism of the GTF.

Importantly, no significant fiscal implications for local governments are anticipated. However, local entities may benefit as recipients of infrastructure grants issued by the new Grow Texas Fund Commission.

HB 265 serves as the enabling legislation for HJR 35, which proposes a constitutional amendment to create the Grow Texas Fund and a new grant program for infrastructure development in oil and gas-producing regions. While HB 265 is structured to direct resources to areas of the state under strain from energy production, it is inseparable from the constitutional amendment it implements. If HJR 35 is rejected—as recommended—then the policy mechanism outlined in HB 265 becomes both unnecessary and problematic on its own.

The bill formalizes a long-term reallocation of severance tax revenue away from the Economic Stabilization Fund (ESF) and State Highway Fund (SHF) to a narrowly tailored infrastructure grant fund. It establishes a new commission and administrative apparatus that duplicates existing legislative and executive functions, while also introducing significant ongoing costs to general revenue, as detailed in the fiscal note. These structures would be put in place without broader accountability or sunset protections, and would be constitutionally grounded if HJR 35 were adopted.

More importantly, the bill perpetuates the same core policy concerns raised in opposition to HJR 35: it creates a geographically preferential and permanent spending mechanism; it bypasses normal budgetary review; and it diverts state revenue toward narrowly targeted expenditures instead of addressing deeper systemic concerns like taxpayer relief or spending reform. Embedding such a structure into statute—tied directly to a flawed constitutional amendment—would set a precedent for future regional earmarks that undermine equitable budget policy and legislative flexibility.

In light of these issues, HB 265 cannot be responsibly advanced, even on its own terms. Therefore, Texas Policy Research recommends a NO vote on HB 265 to preserve fiscal discipline, structural clarity in government, and equal benefit from state resources.

• Individual Liberty: The bill aims to support communities affected by oil and gas production by improving local infrastructure (roads, schools, health care facilities), which could enhance residents’ quality of life and access to essential services. In this sense, it indirectly promotes individual liberty by enabling freer movement, better education, and public safety. However, the establishment of a new state-controlled commission to determine eligibility and direct grant funding introduces a risk to liberty through centralized control. The criteria for which communities benefit and how funds are allocated are not clearly constrained in the statute, potentially leading to opaque decision-making or favoritism that reduces the autonomy of local entities.
• Personal Responsibility: The bill does not encourage local governments or energy producers to shoulder more responsibility for the infrastructure impacts associated with resource extraction. Instead, it creates a state-run fund that redistributes revenue from the Economic Stabilization Fund (ESF) to the Grow Texas Fund (GTF), potentially disincentivizing local self-governance and fiscal stewardship. Rather than promoting self-reliance, it fosters a reliance on new state-level appropriations with limited accountability mechanisms.
• Free Enterprise: On one hand, improved infrastructure in energy-producing regions could facilitate private investment and business growth, particularly in rural areas where roads and services are strained. This aligns with a pro-market approach that recognizes the importance of stable infrastructure for economic development. On the other hand, the bill introduces the possibility of market distortion by empowering a new commission with broad discretion to award grants. If funds are allocated in a non-transparent or politically motivated way, the result could be favoritism toward certain communities or projects at the expense of competitive neutrality and market-based decision-making.
• Private Property Rights: The bill neither strengthens nor directly threatens private property rights. Infrastructure investments may raise property values in affected areas, but they could also prompt concerns about eminent domain or state-directed development. However, the bill does not include provisions that would override or alter property rights, so its impact here is considered neutral.
• Limited Government: The bill creates a new fund, a new bureaucratic grant program, and a new commission—all enshrined through its enabling constitutional amendment (HJR 35). These structures increase the size and scope of state government, reduce flexibility in future budgeting, and introduce long-term commitments without corresponding sunset or performance requirements. By embedding a targeted regional funding mechanism into the law and linking it to a constitutional amendment, the bill limits legislative discretion, bypasses existing budgetary oversight, and enshrines a new category of earmarked spending. This is a clear deviation from the principle of limited government.

• HJR 35 (Enabling for)