According to the Legislative Budget Board (LBB), the fiscal impact of SB 2366 to the state of Texas cannot be determined at this time. While the bill establishes a new grant program administered by the Texas Department of Transportation (TxDOT) to fund short line railroad infrastructure projects, it does not make a direct appropriation of funds. Rather, it provides the legal framework for future appropriations that could support the program.

TxDOT is authorized to use only funds specifically appropriated by the legislature for this grant program or external gifts and grants, including federal grants. Importantly, the bill prohibits the use of money from the State Highway Fund. While TxDOT indicated that the administrative duties associated with managing the new program could be absorbed within its existing resources, the ultimate financial impact depends on the future decisions of the legislature regarding funding levels and the amount of private or federal grants TxDOT may receive.

The bill also carries uncertain implications for local governments. Since the scale, frequency, and distribution of grants are unknown, it is not possible to estimate the amount of assistance that rural transportation districts or short line rail operators might receive or the potential local financial impact.

While the bill’s stated intent is to promote rural economic development, increase public safety, and reduce highway congestion through improved short-line rail infrastructure, the means by which it seeks to accomplish this—establishing a new state-administered grant program—raises several significant concerns.

First, SB 2366 represents a clear and permanent expansion of the size and scope of state government. It creates a new grant program at the Texas Department of Transportation (TxDOT) and requires the Texas Transportation Commission to engage in rulemaking and ongoing administration of the program. Although the fiscal note suggests initial administrative duties could be absorbed with existing resources, the establishment of a new permanent program logically implies future resource needs and a larger bureaucracy to oversee project evaluation, monitoring, and compliance. Once government programs are created, they are rarely eliminated and often expand over time.

Second, while the bill does not make an immediate appropriation, it explicitly sets up the legal framework for future taxpayer-funded spending, with a $25 million contingency rider already anticipated. This structure makes it easier for future legislatures to direct state resources toward subsidizing private sector projects. Over time, this likely leads to an increased financial burden on Texas taxpayers, particularly if the program grows without tight spending controls or defined limits.

Third, SB 2366 introduces a significant market distortion by selectively subsidizing a small group of private businesses—specifically, short line railroad companies and related transportation districts. While transportation infrastructure improvements may offer broader community benefits in theory, in practice, the grants will directly and disproportionately benefit specific companies. This approach conflicts with the principle of a free market economy, where businesses should succeed based on their value and competitiveness, not based on access to public subsidies.

Fourth, this bill sets a problematic precedent. Creating a dedicated grant program for short line railroads opens the door for other industries to seek similar government subsidies under the guise of economic development or infrastructure modernization. Once the state subsidizes one sector, it becomes difficult to credibly deny other sectors seeking similar treatment, leading to an expanding web of industry-specific subsidies, further undermining free enterprise and limited government principles.

Fifth, while participation in the grant program is voluntary and the bill imposes no new direct regulatory burden on individuals or businesses, the broader regulatory footprint of the state grows as the government becomes more entangled in private infrastructure planning, funding, and oversight. This increases administrative complexity and heightens the risk of political favoritism or inefficient resource allocation.

Finally, the policy approach of SB 2366 contradicts key principles of Limited Government, Fiscal Responsibility, and Free Enterprise. The government’s role should be to create a stable legal and economic framework, not to directly intervene in the private marketplace through subsidies and grants. Infrastructure investment by private operators should be financed through private capital, not taxpayer dollars, particularly when the primary beneficiaries are private businesses rather than the general public.

For these reasons—growing government, increasing taxpayer liability, distorting markets, creating dangerous precedent, and expanding the administrative state—Texas Policy Research recommends that lawmakers vote NO on SB 2366. While infrastructure improvements are important, they should be achieved without expanding government or subsidizing private enterprise with public funds.

• Individual Liberty: The bill does not impose mandates, regulations, or restrictions on individuals. Participation in the grant program by railroad companies or districts is voluntary, and the bill does not interfere with citizens' daily rights or freedoms. Therefore, individual liberty is largely unaffected.
• Personal Responsibility: The bill undercuts the principle of personal and corporate responsibility by shifting part of the financial burden for private infrastructure projects onto taxpayers. In a free society, businesses are expected to maintain and invest in their own infrastructure, taking full responsibility for their operations. When the state offers grants to assist, it reduces the expectation that businesses should fund their own improvements, inviting dependency on government support.
• Free Enterprise: By establishing a government grant program targeting specific private companies (short line railroads), the bill distorts the free market. It creates an artificial advantage for grant recipients over competitors, encouraging businesses to seek government subsidies rather than relying solely on market success. Free enterprise thrives on fair competition without government picking winners and losers, which this bill undermines.
• Private Property Rights: The bill does not interfere with ownership rights or force property changes. In fact, it could arguably support property owners (i.e., short line operators) by providing funds to maintain and enhance their private rail infrastructure. However, this support comes at the public’s expense, and so while property rights are not infringed, the method used to "help" property owners is problematic from a fiscal and limited government standpoint.
• Limited Government: The bill expands the size and role of government by creating a new, permanent grant program at TxDOT, increasing administrative oversight responsibilities, and setting the legal groundwork for future taxpayer-funded appropriations. It represents a clear case of government mission creep: an agency taking on new duties beyond its original scope. True limited government confines itself to essential public functions and avoids subsidizing private industry.