According to the Legislative Budget Board (LBB), SB 1361, which consolidates the state’s existing Small Business and Micro-Business Disaster Recovery Loan programs, carries indeterminate fiscal implications for the State of Texas. The bill would establish a newly named Small- and Micro-Business Recovery Account within the General Revenue Fund by renaming Account No. 5190 and repealing the never-utilized Small Business Disaster Recovery Revolving Fund. While this change simplifies the structure of the loan program, the legislation’s actual cost to the state cannot be precisely calculated at this time.

The fiscal impact depends on two main variables: (1) the volume of loan applications submitted following a declared disaster, and (2) the level of appropriations allocated by the Legislature to fund the program. Because the program design involves the issuance of zero-interest loans by the state to community development financial institutions, the initial capital outlay could be significant, especially during or after a large-scale disaster event. However, without knowing how much the Legislature will appropriate or how many loans will be requested, a specific fiscal estimate is not feasible.

Additionally, SB 1361 establishes or reconfigures dedicated revenue accounts that are subject to the Legislature’s funds consolidation review process. These include the newly defined recovery account within the treasury system. Importantly, the LBB analysis finds that there would be no significant fiscal impact on local governments as a result of this bill.

SB 1361, while well-intentioned, expands the role of the state in disaster recovery financing by formalizing and funding a government-sponsored loan program targeted at small and micro-businesses. This approach, relying on public funds and state facilitation of zero-interest loans to intermediaries, conflicts with foundational free-market principles.

Despite consolidating and improving a previously fragmented program structure, SB 1361 still involves the state in subsidized capital allocation, a domain that is better served by private lenders, insurance markets, and charitable organizations. The bill creates a dedicated account within the general revenue fund and authorizes ongoing appropriations without a sunset clause or clear outcome benchmarks. This structure risks growing into a permanent financial obligation, especially in the aftermath of increasingly frequent disaster declarations.

Moreover, the program selectively excludes entire classes of businesses, such as franchises, private equity-backed firms, and national chains, which may face similar recovery needs. This introduces the risk of government favoritism and market distortion, rewarding some enterprises while excluding others based on political or ideological criteria.

In a time when fiscal discipline and market resilience are more critical than ever, Texas should avoid expanding the precedent of state-sponsored credit programs. For these reasons, and in defense of limited government, competitive neutrality, and responsible stewardship of taxpayer resources, Texas Policy Research recommends that lawmakers vote NO on SB 1361.

• Individual Liberty: While the bill aims to support small business owners' recovery after disasters, it does so by expanding the state’s role in the private marketplace. This approach risks substituting state dependency for individual initiative, especially when access to capital becomes contingent on government-defined criteria. It nudges business owners toward reliance on state aid instead of preserving their full economic independence.
• Personal Responsibility: The bill softens the natural consequences of poor planning or risk-taking by offering state-backed financial relief. This weakens the incentive for business owners to carry adequate insurance, build reserves, or plan for emergencies. By creating an expectation of state intervention after disasters, the bill reduces the burden of responsibility that normally drives prudent decision-making in a free society.
• Free Enterprise: Though positioned as a support for small businesses, the bill actively skews the market by favoring certain business models, excluding franchises, national chains, and private equity-backed firms. This selective treatment undermines the principles of fair competition and consumer-driven market outcomes, while opening the door to politically influenced allocation of economic resources.
• Private Property Rights: The bill does not directly affect property ownership, land use, or asset seizure. However, by inserting state priorities into how businesses finance recovery, it subtly alters the relationship between ownership and responsibility. Property rights are strongest when free from state entanglements; this bill introduces a layer of state involvement that could grow over time.
• Limited Government: At its core, the bill expands the scope of government by consolidating and funding a disaster loan program under the oversight of the Texas Economic Development Bank. It authorizes ongoing state involvement in business financing through appropriated funds and establishes a dedicated account in the general revenue fund. This creates a lasting footprint in a space the private sector is capable of filling, contravening the principle that government should be limited in scope and reach.