According to the Legislative Budget Board (LBB), HB 3945 is expected to have a negative fiscal impact on General Revenue related funds, totaling approximately $463,942 over the biennium ending August 31, 2027. The estimated annual negative impact is $234,471 for the fiscal year 2026 and $229,471 for each subsequent fiscal year through 2030.

The primary cost driver identified is the increase in emergency order cases resulting from the bill's provisions, which are expected to significantly expand the Texas Department of Licensing and Regulation’s (TDLR) authority over massage establishments. The bill grants TDLR the power to issue emergency orders, suspend licenses, and impose civil and criminal penalties. Due to these expanded regulatory responsibilities, the State Office of Administrative Hearings (SOAH) anticipates handling 96 new cases in FY 2026 and 192 cases in FY 2027, primarily related to human trafficking concerns.

To manage this increased caseload, SOAH projects a need for 2 additional full-time employees (1 Administrative Law Judge and 1 Legal Secretary), incurring costs for salaries and related expenses. The estimated increase in work hours for the Administrative Law Judge is approximately 1,056 hours in FY 2026 and 2,112 hours in FY 2027. Additionally, technology costs are projected at $14,000 in FY 2026 for new equipment and software, and $9,000 annually from FY 2027 onward for software maintenance.

The LBB notes that no significant fiscal impact is expected for local government entities. While local law enforcement may be involved in enforcing emergency orders, any associated costs are anticipated to be minimal.

The bill is not expected to significantly impact state correctional populations or increase the demand for correctional resources. Furthermore, state agencies such as the Office of Court Administration, Attorney General's Office, and Department of Information Resources do not foresee significant operational impacts.

While the bill enhances regulatory oversight of massage therapy establishments, the financial cost to the state primarily arises from the increased number of emergency order cases and the staffing required to manage them. The estimated costs are primarily associated with staffing and technology upgrades to support the adjudication process. 

HB 3945, while well-intentioned in its effort to combat human trafficking within massage establishments, raises significant concerns related to due process, economic impact, and regulatory overreach. Although addressing human trafficking is undeniably important, this bill could result in unintended consequences for legitimate businesses and property owners, potentially infringing on individual rights and creating economic burdens.

One of the primary reasons for opposing HB 3945 is the potential violation of due process rights. The bill grants the Texas Department of Licensing and Regulation (TDLR) broad authority to issue emergency orders to halt the operations of massage establishments without a prior hearing. The decision to extend the hearing timeline from 10 to 17 days could leave businesses in legal limbo for an extended period, even if they are ultimately found not to have committed any wrongdoing. This delay could result in severe financial and reputational harm to legitimate businesses that are wrongly accused. Furthermore, allowing TDLR to act on "reasonable cause" without clear evidence may open the door to potential misuse or overreach.

HB 3945 could negatively affect small business owners and legitimate massage therapy practitioners. If an establishment is erroneously linked to criminal activity, the loss of income from a prolonged shutdown could permanently damage their financial stability. Additionally, the bill requires businesses to obtain a new license if they change locations, even if the move is due to circumstances beyond their control, like eviction. This additional licensing requirement could be seen as excessive regulation, creating unnecessary financial and administrative burdens for compliant businesses.

The bill also places a significant and arguably unfair burden on property owners. If a massage establishment is found to be involved in illegal activity, the property itself can be subject to a temporary prohibition on licensing, regardless of whether the property owner was aware of or involved in the illegal acts. To have the prohibition lifted, property owners must demonstrate that they have implemented specific controls to prevent criminal activities on their premises. This requirement could disproportionately affect landlords of commercial properties, who may not have the resources or expertise to implement such measures, particularly when they are not directly involved in the tenant’s business operations.

While combating human trafficking is essential, HB 3945 risks creating overregulation that could harm legitimate businesses more than illicit ones. Increased regulatory scrutiny on massage establishments may inadvertently discriminate against immigrant and minority-owned businesses, as many massage therapy establishments are operated by individuals from diverse communities. Heightened inspections and licensing barriers could lead to unintended racial or ethnic profiling, fostering an environment of suspicion rather than safety.

The Legislative Budget Board (LBB) projects that implementing HB 3945 will result in a negative fiscal impact of approximately $463,942 over the biennium ending in 2027. This cost is primarily due to the anticipated increase in emergency order cases and the need for additional staffing at the State Office of Administrative Hearings (SOAH). Lawmakers who prioritize fiscal responsibility may question whether the increased cost and administrative complexity are justified by the potential benefits, especially when existing regulations already address many of the issues targeted by the bill.

Rather than imposing sweeping new regulations, a more balanced approach would involve strengthening existing anti-trafficking laws while ensuring that legitimate businesses are not unfairly penalized. Enhancing inter-agency collaboration between TDLR and local law enforcement could improve the effectiveness of current enforcement mechanisms without unduly harming lawful operators. Additionally, offering guidance and training to massage therapy businesses on compliance and reporting would proactively address potential issues without resorting to blanket punitive measures.

While HB 3945 seeks to address the serious issue of human trafficking, it does so in a way that risks infringing on due process rights, burdening legitimate businesses, and unfairly targeting property owners. The bill’s potential for overregulation and economic harm, coupled with its fiscal and administrative costs, outweighs its intended benefits. A more targeted and balanced legislative approach would better protect public safety while preserving the rights and livelihoods of lawful business owners. For these reasons, Texas Policy Research recommends that lawmakers vote No on HB 3945.

• Individual Liberty: The bill’s provisions may infringe on individual liberty by allowing the Texas Department of Licensing and Regulation (TDLR) to issue emergency orders without a prior hearing, effectively shutting down massage establishments based on "reasonable cause" rather than concrete evidence. This power can result in business closures even if no criminal activity is ultimately proven. The extension of the hearing timeline from 10 to 17 days further delays the opportunity for business owners to contest these orders. This undermines the principle of individual liberty, as it risks punishing legitimate business operators without due process.
• Personal Responsibility: While the bill attempts to hold business owners accountable for illegal activities on their premises, it does so in a way that can penalize law-abiding owners who may not be directly involved in or even aware of the illegal conduct. The bill places an undue burden on property owners and landlords to prove they have taken measures to prevent trafficking, even if they had no knowledge of the criminal activity. This approach displaces personal responsibility from the perpetrators to those indirectly associated, potentially punishing innocent parties.
• Free Enterprise: The bill’s broad regulatory scope could hinder free enterprise by increasing the risk of arbitrary shutdowns. Requiring a new license for a change of location also imposes additional bureaucratic obstacles on businesses trying to relocate. Moreover, legitimate massage therapy establishments could face heightened scrutiny and costly compliance requirements, discouraging new businesses from entering the market. The risk of erroneous enforcement might stifle business innovation and growth, particularly for small and minority-owned businesses that dominate the industry.
• Private Property Rights: HB 3945 significantly impacts private property rights by holding property owners liable for their tenants' activities. If a massage establishment operating on rented property is implicated in trafficking, the landlord may face a temporary ban on future licenses at that location. This policy essentially penalizes property owners for tenant misconduct, even when they had no involvement or knowledge of the illegal activities. Such provisions conflict with the principle that property owners should not be held accountable for the independent actions of their tenants.
• Limited Government: The bill expands the regulatory power of TDLR, giving the agency broad authority to issue shutdown orders without sufficient judicial oversight. Allowing TDLR to halt operations based on suspicion alone increases the risk of government overreach. Additionally, by imposing new licensing requirements for location changes and enhancing penalties, the bill deviates from the principle of limited government by intensifying bureaucratic control over the massage therapy industry.