According to the Legislative Budget Board (LBB), HB 365 would have no significant fiscal impact on the state. The Texas Water Development Board (TWDB), the Bond Review Board, and the Comptroller of Public Accounts all indicated that the bill’s implementation could be managed within existing resources. While there may be a decrease in interest and repayment revenue from EDAP loans due to a higher proportion of grants being issued (which do not require repayment), this potential reduction is not expected to be substantial.

For local governments, the fiscal outlook is similarly neutral to positive. No significant cost increases are anticipated for cities, counties, or special districts. In fact, the bill could offer a financial benefit to political subdivisions by making it easier to secure EDAP grants. These grants would reduce the need for localities to match higher percentages of project funding with their own financial resources, thereby improving access to essential water infrastructure projects in distressed areas without imposing new fiscal burdens on local budgets.

In summary, HB 365 is expected to modestly shift some funding dynamics within the EDAP program by increasing grant-based support, but it does not entail new expenditures or obligations that would significantly affect the fiscal posture of the state or local governments.

HB 365 seeks to increase the cap on non-repayable financial assistance offered under the Texas Water Development Board’s Economically Distressed Areas Program (EDAP), raising it from 70% back to 90% of the total principal amount of authorized state-issued bonds. This change would restore the level of grant support previously available prior to the 86th Legislature’s reforms enacted via SB 2452 in 2019. The bill is intended to incentivize water and wastewater infrastructure development in low-income communities that lack access to basic services—particularly in areas like El Paso County—by easing the local financial match requirements.

While the intent of HB 365 is commendable, as it addresses legitimate infrastructure and public health needs in underserved communities, the method by which it does so raises significant concerns from a fiscal responsibility standpoint. Increasing the share of grant-based funding—particularly to 90%—shifts a greater portion of financial responsibility away from local governments and places it on state taxpayers, effectively collectivizing the cost of localized infrastructure improvements. This not only expands the state’s financial exposure but also reduces incentives for local cost discipline, long-term planning, and ownership of infrastructure solutions.

Maintaining the current 70% cap, or even implementing a more flexible loan-based model with provisions such as zero-interest or deferred-payment terms, would offer a more fiscally sound alternative. Such an approach would preserve access to capital for distressed communities while ensuring the state’s funds are replenished over time, limiting the net outlay of taxpayer dollars. Additional strategies, such as matching grants tied to local contributions, public-private partnerships, or a tiered aid system based on financial need, would further promote accountability and sustainability.

From a liberty-oriented policy perspective, the bill represents a movement away from limited government by expanding non-repayable state funding in a manner that lacks clear long-term safeguards. It does not include provisions that cap the state’s annual financial exposure, nor does it include metrics to ensure the prioritization of projects based on efficiency or sustainability. As such, while the bill aligns with important humanitarian and infrastructure goals, its current design is too fiscally open-ended and could unintentionally encourage dependency on state resources.

Therefore, Texas Policy Research recommends that lawmakers vote NO on HB 365 unless amended to include repayment mechanisms, caps on annual spending, or alternative funding models that better balance the need for infrastructure support with the principles of fiscal responsibility, taxpayer protection, and limited government. This would preserve the spirit of the bill while aligning it more closely with the stewardship expectations of state taxpayers.

• Individual Liberty: HB 365 seeks to enhance access to clean water and wastewater services in economically distressed areas—a foundational element of public health and quality of life. In this sense, the bill supports individual liberty by enabling more Texans to live with the dignity and autonomy that come from access to basic infrastructure. A household without water or sanitation is fundamentally limited in its ability to engage in education, employment, or civic life, so the bill indirectly promotes freedom by removing such barriers. However, liberty also includes freedom from excessive taxation and centralized government control. Since this bill increases reliance on state-level grants (i.e., statewide taxpayer funding), it potentially infringes on the liberty of taxpayers who are compelled to fund local projects in areas they may have no connection to. This creates tension between expanding physical access to liberty (through infrastructure) and preserving financial liberty (through restrained public spending).
• Personal Responsibility: One of the bill's core criticisms from a liberty standpoint is that it weakens the principle of personal—and local—responsibility. By restoring the 90% grant cap, the bill makes it easier for local political subdivisions to avoid sharing in the financial burden of the projects they undertake. This reduces incentives for long-term financial planning, local innovation, or the pursuit of private-sector partnerships. A more responsible approach would involve requiring a local match or use of repayable loans to ensure communities maintain a stake in the outcomes.
• Free Enterprise: Expanded water infrastructure can promote economic development by enabling housing construction, attracting businesses, and supporting agricultural and industrial activity. In that regard, the bill may open the door for more enterprise in previously underdeveloped regions. However, the reliance on public funding instead of incentivizing market solutions may crowd out private-sector innovation in the infrastructure space. A program that better integrates public-private partnerships could more effectively stimulate free enterprise while limiting taxpayer liability.
• Private Property Rights: Improved access to water and sewer systems can increase property values and enable lawful habitation, thereby enhancing the utility and marketability of private property. HB 365 could indirectly expand property rights by making properties in distressed areas habitable, financeable, and compliant with health and building codes. This aligns well with liberty principles, especially when the infrastructure upgrades avoid coercive land-use changes or eminent domain.
• Limited Government: This is the area where HB 365 most clearly conflicts with liberty principles. By expanding the percentage of state-issued bonds that may be granted without repayment, the bill increases the footprint of state government in local affairs. It creates an open-ended financial commitment without repayment mechanisms, expenditure caps, or sunset provisions. This undermines fiscal restraint and shifts more control—and cost responsibility—from local to state authorities, contrary to the principle that government should be small, efficient, and close to the people it serves.