According to the Legislative Budget Board (LBB), HB 875 is not expected to have a fiscal impact on the state. The bill is not projected to require state spending, reduce state revenue, or create state-level administrative costs.

For local governments, the LBB similarly concludes that no significant fiscal implication is anticipated. Because the bill applies to certain small municipal construction projects, any fiscal effects would occur primarily at the municipal level. The bill could allow some municipalities to reduce project costs by not requiring workers’ compensation coverage verification or performance bonds for qualifying projects, but the LBB does not estimate those effects as significant statewide or across local governments.

The fiscal note does not identify recurring costs, one-time costs, or savings drivers, and it does not characterize the fiscal impact as indeterminate. In practical terms, the bill is treated as fiscally neutral for state government and not meaningfully costly for local governments under the assumptions used by the LBB.

Texas Policy Research recommends that lawmakers vote NO on HB 875 unless amended as described below to preserve taxpayer safeguards while reducing unnecessary contracting burdens. The bill is deregulatory in form and does not grow the size or direct scope of state government. It does not create a new agency, program, fund, criminal offense, or rulemaking authority. The bill analysis expressly states that the committee substitute does not create a criminal offense and does not grant additional rulemaking authority.

However, the bill reduces existing municipal contracting safeguards for certain public construction projects. For municipalities with a population under 20,000, the bill would allow qualifying projects below one percent of the municipality’s adopted budget to proceed without the municipality ensuring workers’ compensation coverage or requiring a performance bond. That may reduce compliance costs and encourage more small contractors to bid, but it also removes protections that help manage project-completion risk and workplace-injury risk.

The bill does not impose a new regulatory burden on individuals or businesses. To the contrary, it reduces regulatory and contracting burdens on contractors seeking to perform small municipal construction projects. That is the strongest argument for the bill: it may lower barriers to entry for small contractors and reduce costs or delays for small municipalities. The bill analysis states that the bill is intended to improve contracting efficiency, promote competition, and reduce costs for municipal projects.

The concern is that the bill may increase taxpayer exposure indirectly. The Legislative Budget Board found no anticipated fiscal implication to the state and no significant fiscal implication to local governments, so the bill is not expected to create a measurable budget cost on its face. But the fiscal note does not eliminate downstream risk. If a contractor without adequate coverage is injured, causes an injury, defaults, abandons work, or fails to complete a project, the municipality may have fewer tools to protect public funds. In that scenario, the savings from reduced upfront requirements could be outweighed by completion costs, litigation, delays, or replacement-contractor expenses borne by local taxpayers.

For a limited-government lawmaker, the key issue is whether the bill reduces government overreach or merely transfers risk from contractors to taxpayers. As written, the bill creates a broad statutory exemption based on population and project size, but it does not require an open-meeting vote, written risk disclosure, a hard dollar cap, or a finding that waiving these safeguards is in the taxpayers’ interest. That weakens accountability. Local flexibility is valuable, but local officials should be required to make the risk decision transparently when public funds and public construction projects are involved.

The bill should be amended to require governing-body approval in an open meeting before a municipality uses the exemption; require written disclosure in the contract file if a contractor does not carry workers’ compensation coverage; add a hard dollar cap in addition to the one-percent-of-budget threshold; and preserve explicit municipal authority to require workers’ compensation coverage or a performance bond when project risk warrants it. Without those changes, HB 875 reduces a contracting mandate at the cost of weakening taxpayer protections and contractor accountability.

• SB 1890 (Same As)