LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION April 6, 2025 TO: Honorable Giovanni Capriglione, Chair, House Committee on Delivery of Government Efficiency FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: HB149 by Capriglione (relating to regulation of the use of artificial intelligence systems in this state; providing civil penalties.), Committee Report 1st House, Substituted Estimated Two-year Net Impact to General Revenue Related Funds for HB149, Committee Report 1st House, Substituted: a negative impact of ($25,062,448) through the biennium ending August 31, 2027. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. General Revenue-Related Funds, Five- Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact toGeneral Revenue Related Funds2026($14,590,033)2027($10,472,415)2028($10,222,415)2029($10,222,415)2030($10,222,415)All Funds, Five-Year Impact: Fiscal Year Probable Savings/(Cost) fromGeneral Revenue Fund1 Change in Number of State Employees from FY 20252026($14,590,033)20.02027($10,472,415)20.02028($10,222,415)20.02029($10,222,415)20.02030($10,222,415)20.0 Fiscal AnalysisThe bill requires disclosure of an artificial intelligence system to consumers; lists the prohibited uses of artificial intelligence; and lists the prohibitions on the capture of biometric identifiers, political viewpoint and other types of discrimination, and certain sexually explicit videos, images and child pornography.The bill empowers the attorney general with the exclusive authority to enforce the chapter and requires the development of an online mechanism on the attorney general's website through which consumers may submit a complaint under the chapter.The bill empowers the attorney general to bring legal action in the name of the state to restrain a person from violating the chapter and allows the attorney general to recover attorney's fees and collect fines for violations.The bill authorizes a state agency to sanction an individual licensed, registered, or certified by that agency for violations of the chapter, including the suspension, probation, or revocation of a license, registration, certificate, or other form of permission to engage in an activity, and monetary penalties up to $100,000.The bill requires the Department of Information Resources (DIR), in coordination with the Texas Artificial Intelligence Council, to administer the Artificial Intelligence Regulatory Sandbox Program, which is intended to provide legal protection and limited access to the market in this state for a person to test innovative artificial intelligence systems without obtaining a license, registration, or other regulatory authorization.The bill requires DIR to coordinate with all relevant state regulatory agencies to oversee the operations of the sandbox participants, and authorizes the council or a relevant agency to recommend that a participant's sandbox privileges be revoked in certain instances. DIR would be required to report annually on the status of the program and provide legislative recommendations.The bill establishes the Texas Artificial Intelligence Council which is administratively attached to DIR and requires administrative support to be provided to the council through a memorandum of understanding.The bill details the powers and duties of the council and requires it to conduct training programs for state agencies & local governments.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION
April 6, 2025
TO: Honorable Giovanni Capriglione, Chair, House Committee on Delivery of Government Efficiency FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: HB149 by Capriglione (relating to regulation of the use of artificial intelligence systems in this state; providing civil penalties.), Committee Report 1st House, Substituted
TO: Honorable Giovanni Capriglione, Chair, House Committee on Delivery of Government Efficiency
FROM: Jerry McGinty, Director, Legislative Budget Board
IN RE: HB149 by Capriglione (relating to regulation of the use of artificial intelligence systems in this state; providing civil penalties.), Committee Report 1st House, Substituted
Honorable Giovanni Capriglione, Chair, House Committee on Delivery of Government Efficiency
Honorable Giovanni Capriglione, Chair, House Committee on Delivery of Government Efficiency
Jerry McGinty, Director, Legislative Budget Board
Jerry McGinty, Director, Legislative Budget Board
HB149 by Capriglione (relating to regulation of the use of artificial intelligence systems in this state; providing civil penalties.), Committee Report 1st House, Substituted
HB149 by Capriglione (relating to regulation of the use of artificial intelligence systems in this state; providing civil penalties.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for HB149, Committee Report 1st House, Substituted: a negative impact of ($25,062,448) through the biennium ending August 31, 2027. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Estimated Two-year Net Impact to General Revenue Related Funds for HB149, Committee Report 1st House, Substituted: a negative impact of ($25,062,448) through the biennium ending August 31, 2027. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Five- Year Impact:
2026 ($14,590,033)
2027 ($10,472,415)
2028 ($10,222,415)
2029 ($10,222,415)
2030 ($10,222,415)
All Funds, Five-Year Impact:
2026 ($14,590,033) 20.0
2027 ($10,472,415) 20.0
2028 ($10,222,415) 20.0
2029 ($10,222,415) 20.0
2030 ($10,222,415) 20.0
Fiscal Analysis
The bill requires disclosure of an artificial intelligence system to consumers; lists the prohibited uses of artificial intelligence; and lists the prohibitions on the capture of biometric identifiers, political viewpoint and other types of discrimination, and certain sexually explicit videos, images and child pornography.The bill empowers the attorney general with the exclusive authority to enforce the chapter and requires the development of an online mechanism on the attorney general's website through which consumers may submit a complaint under the chapter.The bill empowers the attorney general to bring legal action in the name of the state to restrain a person from violating the chapter and allows the attorney general to recover attorney's fees and collect fines for violations.The bill authorizes a state agency to sanction an individual licensed, registered, or certified by that agency for violations of the chapter, including the suspension, probation, or revocation of a license, registration, certificate, or other form of permission to engage in an activity, and monetary penalties up to $100,000.The bill requires the Department of Information Resources (DIR), in coordination with the Texas Artificial Intelligence Council, to administer the Artificial Intelligence Regulatory Sandbox Program, which is intended to provide legal protection and limited access to the market in this state for a person to test innovative artificial intelligence systems without obtaining a license, registration, or other regulatory authorization.The bill requires DIR to coordinate with all relevant state regulatory agencies to oversee the operations of the sandbox participants, and authorizes the council or a relevant agency to recommend that a participant's sandbox privileges be revoked in certain instances. DIR would be required to report annually on the status of the program and provide legislative recommendations.The bill establishes the Texas Artificial Intelligence Council which is administratively attached to DIR and requires administrative support to be provided to the council through a memorandum of understanding.The bill details the powers and duties of the council and requires it to conduct training programs for state agencies & local governments.
Methodology
The Department of Information Resources indicates an additional eight full-time equivalent (8.0 FTEs) positions are required to implement the legislation, totaling $1,072,996 in each fiscal year. Additional FTEs include: 2.0 Systems Analysts VII to act as technical subject matter experts that are high level AI intelligence technologists ($344,544 per fiscal year); 2.0 Programmers VI to be technology implementors that can coordinate the testing and evaluation of systems in the sandbox ($344,544 per fiscal year); 1.0 Compliance Analyst IV to act as subject matter expert on AI policy and risk and privacy ($114,099 per fiscal year); 1.0 Contract Specialist V as subject matter expert on procurement and contracting ($85,869 per fiscal year); 1.0 Program Management Specialist III as a program coordinator ($113,278 per fiscal year); and 1.0 Technical Writer II to craft the annual report to the Legislature and assist in the creation of requirements and procedures ($70,662 per fiscal year).The Office of the Attorney General (OAG) indicates an additional twelve full-time equivalent (12.0 FTEs) positions are required to implement the legislation, totaling $1,269,060 in each fiscal year. Additional FTEs include: 1.0 Assistant Attorney General VI ($165,850 per fiscal year), 1.0 Assistant Attorneys General V ($150,773 per fiscal year), 2.0 Assistant Attorneys General III ($205,960 per fiscal year), 1.0 Compliance Analyst II ($70,662 per fiscal year), 1.0 Data Analyst V ($102,980 per fiscal year), 1.0 Data Analyst III ($75,376 per fiscal year), 1.0 Investigator V ($75,376 per fiscal year), 2.0 Legal Assistants V ($171,738 per fiscal year), 1.0 Programmer VI ($137,066 per fiscal year), and 1.0 Systems Administrator VI ($113,278 per fiscal year).Associated retirement, social security, group insurance, and agency payroll contributions for 20.0 FTEs would be $700,743 per fiscal year. Associated equipment, supplies, travel and operating costs for 20.0 FTEs are assumed to be $159,692 in fiscal year 2026, and $98,754 each year thereafter.Additionally, OAG would require $4,000,000 annually to retain consulting and testifying experts with specialized knowledge in artificial intelligence systems such as machine learning engineers for the investigation and litigation of cases involving complex evidence and issues, as well as $250,000 in each year of the 2026-27 biennium for IT Staff Augmentation Contracts through DIR for project management.The bill authorizes OAG to bring action in the name of the state to restrain a person from violating the chapter and allows the attorney general to recover attorney's fees and collect fines for violations. However, the amounts and timing of any administrative penalty revenue and the recovery of reasonable fee and expense revenue by OAG are unknown. As such, the fiscal impact cannot be determined.The bill administratively attaches the AI Council to DIR, and requires DIR to provide administrative support to the Council. This analysis assumes any administrative costs incurred by the Council could be absorbed using existing resources.
Technology
According to DIR, technology costs are expected to be $3,000,000 per fiscal year. This includes $1,000,000 in each fiscal year for estimated professional service costs for security and compliance audits, as well as vendor and agency support for the AI Sandbox. This cost will depend on the number and type of AI system participants invited in the sandbox program. Costs per instance of AI in the sandbox could range from $50,000 to $400,000. Also included is $2,000,000 per fiscal year for cloud service costs for hosting and computing for the regulatory sandbox program.According to the Office of the Attorney General, technology costs include one-time costs of $4,137,542 in fiscal year 2026 and a recurring cost in each FY 2026-2030 of $80,862. One-time costs include the development of a consumer complaint mechanism, automated notice generation, case management and enforcement tools, and various IT equipment. Annual recurring charges cover data center services, voice lines, and additional licensing through Salesforce and Box.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.
Source Agencies: b > td > 116 Sunset Advisory Commission, 212 Office of Court Administration, Texas Judicial Council, 302 Office of the Attorney General, 304 Comptroller of Public Accounts, 313 Department of Information Resources, 320 Texas Workforce Commission, 352 Bond Review Board, 452 Department of Licensing and Regulation, 503 Texas Medical Board, 529 Health and Human Services Commission, 582 Commission on Environmental Quality, 601 Department of Transportation, 710 Texas A&M University System Administrative and General Offices, 720 The University of Texas System Administration
116 Sunset Advisory Commission, 212 Office of Court Administration, Texas Judicial Council, 302 Office of the Attorney General, 304 Comptroller of Public Accounts, 313 Department of Information Resources, 320 Texas Workforce Commission, 352 Bond Review Board, 452 Department of Licensing and Regulation, 503 Texas Medical Board, 529 Health and Human Services Commission, 582 Commission on Environmental Quality, 601 Department of Transportation, 710 Texas A&M University System Administrative and General Offices, 720 The University of Texas System Administration
LBB Staff: b > td > JMc, RStu, LCO, CSmi, CMA, NV, SD, KTw
JMc, RStu, LCO, CSmi, CMA, NV, SD, KTw