According to the Legislative Budget Board (LBB), HB 2765 cannot be precisely determined due to uncertainty around the volume and terms of potential loans, grants, and repayments under the revised Rural Economic Development and Investment Program. The bill does not appropriate funds directly but establishes the legal foundation for future appropriations to support its implementation.

HB 2765 broadens eligibility and project scope under the Texas Economic Development Fund (TEDF), and it grants the Texas Department of Agriculture (TDA) more flexibility by allowing rulemaking to set loan repayment terms. It also separates the cap on financial awards into two distinct categories: $1 million for loans and $1 million for grants per recipient, potentially increasing fund utilization. However, the long-term revenue and expenditure impacts—particularly related to repayment schedules and fund replenishment—remain unpredictable at this stage.

The TDA has indicated that it can implement the bill using existing resources without requiring additional funding, and it is expected to maintain the statutory minimum balance of $2.23 million in the TEDF. Still, the bill may lead to higher disbursement volumes over time, especially with the expanded pool of eligible entities and projects. For local governments, the financial impact is also indeterminate, as it will vary depending on participation levels, project types, and loan or grant structures.

HB 2765 seeks to modernize and expand the Rural Economic Development and Investment Program, with the goal of increasing access to state-backed financial assistance for a broader group of rural counties, municipalities, and economic development entities. While the bill is well-intentioned in its aim to support rural infrastructure and job creation, it ultimately does so through mechanisms that conflict with sound principles of limited government, fiscal responsibility, and market neutrality. These concerns warrant a firm vote recommendation of NO.

First, HB 2765 preserves and broadens the use of grants, non-repayable financial assistance, which is a core objection for those who oppose government redistribution of taxpayer funds for economic development. The bill allows up to $1 million in grants per recipient, in addition to a separate $1 million loan cap. This dual-track system increases the exposure of public funds to potential misuse, waste, or political favoritism, without guaranteeing lasting economic results. Grants, particularly those issued by government agencies, often lack the performance accountability and market validation that comes with private investment.

Second, the bill expands eligibility to larger counties (up to 200,000 in population) and includes new entities such as special districts and publicly owned utilities. This broadening significantly increases the universe of potential applicants and may strain program resources. More importantly, it represents a shift away from a narrowly tailored program toward a more open-ended state economic intervention platform, further distancing the initiative from its original intent of narrowly supporting under-resourced, sparsely populated areas.

Third, the fiscal implications of HB 2765 are officially indeterminate, as noted by the Legislative Budget Board. The bill does not appropriate specific funds, but it does establish the legal framework for future appropriations and expands the program’s utilization. The unknown scope of future financial obligations, particularly regarding loan defaults or grant dependency, raises serious concerns about long-term sustainability, transparency, and taxpayer liability. For advocates of fiscal prudence, this lack of clarity is unacceptable.

Fourth, the bill authorizes the Texas Department of Agriculture to adopt repayment rules by administrative fiat. While flexibility is often seen as a virtue, in this context, it means that critical repayment terms will be developed without legislative oversight, raising concerns about transparency, consistency, and the potential for politically motivated rulemaking. Such open-ended delegation of authority undermines legislative accountability.

Fifth, and most fundamentally, HB 2765 perpetuates a model of government-driven economic development that risks displacing or crowding out private sector solutions. Rural economic challenges are real, but they are more effectively addressed through deregulation, tax relief, and infrastructure streamlining—strategies that empower communities without injecting state capital into potentially speculative or politically favored projects.

In summary, HB 2765 expands a program that relies on government grants, increases state economic intervention, and exposes taxpayers to unknown financial risk without sufficient accountability. These are substantial concerns for anyone who prioritizes free markets, limited government, and responsible fiscal stewardship. As such, Texas Policy Research recommends that lawmakers vote NO on HB 2765.

• Individual Liberty: While the bill aims to help rural communities improve infrastructure and economic opportunity, potentially empowering residents, the mechanism by which it does so undermines liberty in a more fundamental sense. By expanding government financial intervention, the bill subtly shifts power and decision-making away from individuals and private actors and toward public institutions that distribute funding. The involvement of state bureaucracies in choosing which projects or entities receive assistance diminishes the space for individuals to pursue unencumbered, voluntary economic activity.
• Personal Responsibility: Grant programs, particularly those that are not performance-based or repayable, can erode the principle of personal responsibility. When local governments, districts, or economic entities rely on state funds rather than self-generated or privately raised capital, it introduces a dependency dynamic. Entities may come to expect bailouts or external funding instead of building durable, self-sustaining financial practices. The bill does little to require that grant recipients demonstrate financial need, sustainability, or local investment—key components of responsible governance and planning.
• Free Enterprise: The bill directly interferes in market dynamics by using state funds to subsidize specific economic actors and infrastructure projects. This distorts competition, advantages certain firms or sectors over others, and risks displacing private capital and innovation. Markets function best when entry, investment, and failure are determined by value creation, not by access to state-backed grants or subsidized loans. By allocating resources through a political process rather than consumer demand, the bill undermines the principles of voluntary exchange and entrepreneurship.
• Private Property Rights: While the bill does authorize funding for land acquisition and infrastructure development, it does not appear to create new eminent domain authority or change legal protections related to private property. However, as the government becomes more involved in economic planning and infrastructure, the risk of encroachment on property rights can increase indirectly. Vigilance is warranted to ensure that subsidized development does not lead to coercive land-use practices or unjust takings in the name of economic progress.
• Limited Government: This is the principle most clearly undermined by the bill. The bill expands the scope of a state program, broadens the number of eligible recipients, increases the types of projects that qualify, and empowers an executive agency to adopt repayment rules by regulation. These changes collectively represent a substantial increase in the size, reach, and discretion of state government. Rather than scaling back state involvement in the economy, the bill deepens it, contrary to the foundational belief that government should be constrained to core functions and not involved in directing economic outcomes.