Overall Vote Recommendation

Yes

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

SB 427 amends Chapter 140 of the Texas Local Government Code by introducing Section 140.014. The bill establishes financial accountability requirements for political subdivisions, including municipalities, counties, and other local government entities. Specifically, it mandates that any political subdivision failing to file or publish an annual financial statement or report as required by law will be ineligible to receive state loans or grants for the fiscal year in which the noncompliance occurs.

The bill defines "annual financial statements or reports" to include financial disclosures required by various sections of the Local Government Code, ensuring a broad application across different types of local entities. However, an exception is provided for instances where noncompliance is due to a declared disaster, as defined by Section 418.004 of the Texas Government Code. Additionally, state agencies administering loan or grant programs must include notification of this requirement in application materials, ensuring that applicants are aware of the eligibility conditions.

The Committee Substitute for SB 427 refines the originally filed bill by clarifying eligibility rules for political subdivisions seeking state loans or grants. While both versions share the goal of enforcing financial accountability, the substitute version expands ineligibility criteria to include political subdivisions created under Section 52, Article III, and Section 59, Article XVI of the Texas Constitution if they fail to meet financial reporting obligations. This ensures that all relevant entities are held accountable for financial transparency.

A key improvement in the substitute bill is the addition of a disaster exception, which was absent in the original version. Under the revised bill, political subdivisions that fail to file required financial reports due to a declared disaster (as defined by Section 418.004 of the Government Code) will not be automatically disqualified from receiving state financial assistance. This change introduces flexibility and ensures that local governments facing emergencies are not unfairly penalized.

Additionally, the substitute bill strengthens the loan and grant application process by requiring applicants to be explicitly notified of the financial reporting requirement. While the original bill simply mandated compliance verification, the revised version includes more structured application requirements, allowing administering agencies to enforce compliance more effectively.

Author

Juan Hinojosa

Sponsor

Denise Villalobos

Contact the Author

Sen. Juan Hinojosa

Capitol Phone:

(512) 463-0120

Capitol Office:

CAP 3E.6

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

The fiscal implications of Senate Bill 427 are minimal at the state level, as determined by the Legislative Budget Board (LBB). The bill does not create new spending obligations or revenue sources for the state, nor does it require the establishment of new programs or administrative structures. Instead, it enforces compliance with existing financial reporting laws by making non-compliant political subdivisions ineligible for state loans or grants. As a result, no significant fiscal impact on the state budget is anticipated.

However, at the local government level, the bill may have financial consequences for municipalities, counties, and other political subdivisions that fail to comply with required financial reporting. These entities could lose access to critical state funding, potentially affecting their budgets and financial stability. This could be especially impactful for smaller or financially distressed local governments that rely heavily on state aid for infrastructure, public services, or economic development initiatives.

The bill indirectly incentivizes better financial management and reporting compliance among local governments, which could lead to improved fiscal accountability over time. While some political subdivisions may face short-term funding challenges due to ineligibility, the long-term effect is expected to promote greater transparency and responsible financial governance at the local level.

Vote Recommendation Notes

Texas Policy Research recommends that lawmakers vote YES on SB 427. The bill enhances transparency and accountability in local government finance by making state loans and grants conditional on compliance with annual financial reporting requirements. This measure ensures that state resources are allocated only to political subdivisions that demonstrate responsible financial stewardship.

The bill strikes a balance between enforcement and fairness. It includes a disaster exemption, preventing local governments affected by declared disasters from being unfairly penalized. Additionally, by adding water districts and authorizing relevant state agencies to enforce financial reporting standards, the bill closes potential loopholes and ensures that all entities receiving state funds are held to the same level of accountability.

The fiscal impact is minimal at the state level, but non-compliant local governments may face funding restrictions, which serves as an incentive for financial discipline. The bill aligns with conservative principles of limited government, fiscal responsibility, and transparency, making it a strong candidate for legislative approval.

View Bill Text and Status