BILL ANALYSIS Senate Research Center C.S.S.B. 427 89R18113 DNC-D By: Hinojosa, Juan "Chuy" Local Government 3/13/2025 Committee Report (Substituted) AUTHOR'S / SPONSOR'S STATEMENT OF INTENT Timely and accurate financial reporting is essential for ensuring the transparency, accountability, and efficient use of public resources by local government entities. The Texas Local Government Code currently mandates that political subdivisions (e.g., municipalities, counties, and other local governmental entities) file or publish their annual financial statements. These statements are crucial for maintaining public trust, ensuring fiscal responsibility, and making decisions about the allocation of state resources. However, when these entities fail to meet their financial reporting obligations, it undermines public confidence and hinders effective oversight. C.S.S.B 427 establishes a link between compliance with financial reporting requirements and eligibility for state loans or grants. Specifically, political subdivisions that fail to file or publish the required annual financial statements will not be eligible for state financial assistance for the fiscal year in which they failed to meet the reporting requirements. C.S.S.B. 427 also specifies that each application for a state program must include a statement notifying the applicant of this requirement and require the political subdivision to demonstrate compliance in the manner prescribed by the state agency administering the loan or grant. Exception for Noncompliance Due to a Declared Disaster: Subsection (e), Pages 2-3. Creates an exception so that political subdivisions affected by disasters as defined in Section 418.004, Government Code, are not penalized under S.B. 427. To qualify for the disaster exemption, political subdivisions affected by disasters must notify the granting agency and provide plan for compliance. The requirements for written notice, official documentation, and a compliance plan ensure that political subdivisions do not exploit the exception to avoid transparency. Water Districts Added: Subsection (c), Page 2. Adds water districts (districts and authorities created under Section 52, Article III, or Section 59, Article XVI, of the Texas Constitution) by tying their financial reporting obligations to the requirements of the granting agency. Instead of mandating reporting requirements, it delegates authority to state agencies administering grants or loans (e.g., the Texas Commission on Environmental Quality or the Texas Water Development Board) to define appropriate financial reporting standards for water districts. Explanation: With the billions of dollars the state has already invested and will continue to invest, the addition of water districts ensures that water districts cannot avoid financial transparency while still receiving state funds. C.S.S.B. 427 amends current law relating to the eligibility of certain political subdivisions to receive a state loan or grant following the political subdivision's failure to comply with certain annual financial reporting requirements. RULEMAKING AUTHORITY This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 140, Local Government Code, by adding Section 140.014, as follows: Sec. 140.014. ELIGIBILITY FOR STATE LOANS OR GRANTS FOLLOWING FAILURE TO COMPLY WITH CERTAIN ANNUAL FINANCIAL REPORTING REQUIREMENTS. (a) Defines "annual financial statement or report" and "disaster." (b) Provides that a political subdivision that fails to file or publish an annual financial statement or report as required by law, except as provided by Subsection (e), is not eligible to receive a state loan or grant under a state program for the political subdivision's fiscal year in which the political subdivision was required to file or publish the statement or report. (c) Provides that a political subdivision created under Section 52 (Restrictions on Lending Credit or Making Grants by Political Corporations or Political Subdivisions; Authorized Bonds; Investment of Funds), Article III (Legislative Department), or Section 59 (Conservation and Development of Natural Resources; Development of Parks and Recreational Facilities; Conservation and Reclamation Districts; Indebtedness and Taxation Authorized), Article XVI (General Provisions), Texas Constitution, except as provided by Subsection (e), is not eligible to receive a state loan or grant in a fiscal year in which: (1) the political subdivision is required by financial reporting requirements prescribed by the agency administering the state loan or grant to publish a financial statement or report; and (2) the political subdivision fails to file or publish the financial statement or report described by Subdivision (1). (d) Requires that each application for a state program for which a political subdivision is prohibited from being eligible for a loan or grant under this section include a statement notifying the applicant of the requirement of this section and require the political subdivision to demonstrate compliance in the manner prescribed by the state agency administering the loan or grant. (e) Provides that Subsections (b) and (c) do not apply to a political subdivision that fails to file or publish a financial statement or report because of a disaster and that provides certain documentation to the agency administering the state loan or grant. SECTION 2. Makes application of this Act prospective to January 1, 2026. SECTION 3. Effective date: September 1, 2025.
BILL ANALYSIS
Senate Research Center C.S.S.B. 427
89R18113 DNC-D By: Hinojosa, Juan "Chuy"
Local Government
3/13/2025
Committee Report (Substituted)
Senate Research Center
C.S.S.B. 427
89R18113 DNC-D
By: Hinojosa, Juan "Chuy"
Local Government
3/13/2025
Committee Report (Substituted)
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Timely and accurate financial reporting is essential for ensuring the transparency, accountability, and efficient use of public resources by local government entities. The Texas Local Government Code currently mandates that political subdivisions (e.g., municipalities, counties, and other local governmental entities) file or publish their annual financial statements. These statements are crucial for maintaining public trust, ensuring fiscal responsibility, and making decisions about the allocation of state resources. However, when these entities fail to meet their financial reporting obligations, it undermines public confidence and hinders effective oversight. C.S.S.B 427 establishes a link between compliance with financial reporting requirements and eligibility for state loans or grants. Specifically, political subdivisions that fail to file or publish the required annual financial statements will not be eligible for state financial assistance for the fiscal year in which they failed to meet the reporting requirements. C.S.S.B. 427 also specifies that each application for a state program must include a statement notifying the applicant of this requirement and require the political subdivision to demonstrate compliance in the manner prescribed by the state agency administering the loan or grant. Exception for Noncompliance Due to a Declared Disaster: Subsection (e), Pages 2-3. Creates an exception so that political subdivisions affected by disasters as defined in Section 418.004, Government Code, are not penalized under S.B. 427. To qualify for the disaster exemption, political subdivisions affected by disasters must notify the granting agency and provide plan for compliance. The requirements for written notice, official documentation, and a compliance plan ensure that political subdivisions do not exploit the exception to avoid transparency. Water Districts Added: Subsection (c), Page 2. Adds water districts (districts and authorities created under Section 52, Article III, or Section 59, Article XVI, of the Texas Constitution) by tying their financial reporting obligations to the requirements of the granting agency. Instead of mandating reporting requirements, it delegates authority to state agencies administering grants or loans (e.g., the Texas Commission on Environmental Quality or the Texas Water Development Board) to define appropriate financial reporting standards for water districts. Explanation: With the billions of dollars the state has already invested and will continue to invest, the addition of water districts ensures that water districts cannot avoid financial transparency while still receiving state funds.
Timely and accurate financial reporting is essential for ensuring the transparency, accountability, and efficient use of public resources by local government entities. The Texas Local Government Code currently mandates that political subdivisions (e.g., municipalities, counties, and other local governmental entities) file or publish their annual financial statements. These statements are crucial for maintaining public trust, ensuring fiscal responsibility, and making decisions about the allocation of state resources. However, when these entities fail to meet their financial reporting obligations, it undermines public confidence and hinders effective oversight.
C.S.S.B 427 establishes a link between compliance with financial reporting requirements and eligibility for state loans or grants. Specifically, political subdivisions that fail to file or publish the required annual financial statements will not be eligible for state financial assistance for the fiscal year in which they failed to meet the reporting requirements.
C.S.S.B. 427 also specifies that each application for a state program must include a statement notifying the applicant of this requirement and require the political subdivision to demonstrate compliance in the manner prescribed by the state agency administering the loan or grant.
Exception for Noncompliance Due to a Declared Disaster: Subsection (e), Pages 2-3.
Creates an exception so that political subdivisions affected by disasters as defined in Section 418.004, Government Code, are not penalized under S.B. 427.
To qualify for the disaster exemption, political subdivisions affected by disasters must notify the granting agency and provide plan for compliance. The requirements for written notice, official documentation, and a compliance plan ensure that political subdivisions do not exploit the exception to avoid transparency.
Water Districts Added: Subsection (c), Page 2.
Adds water districts (districts and authorities created under Section 52, Article III, or Section 59, Article XVI, of the Texas Constitution) by tying their financial reporting obligations to the requirements of the granting agency.
Instead of mandating reporting requirements, it delegates authority to state agencies administering grants or loans (e.g., the Texas Commission on Environmental Quality or the Texas Water Development Board) to define appropriate financial reporting standards for water districts.
Explanation: With the billions of dollars the state has already invested and will continue to invest, the addition of water districts ensures that water districts cannot avoid financial transparency while still receiving state funds.
C.S.S.B. 427 amends current law relating to the eligibility of certain political subdivisions to receive a state loan or grant following the political subdivision's failure to comply with certain annual financial reporting requirements.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 140, Local Government Code, by adding Section 140.014, as follows:
Sec. 140.014. ELIGIBILITY FOR STATE LOANS OR GRANTS FOLLOWING FAILURE TO COMPLY WITH CERTAIN ANNUAL FINANCIAL REPORTING REQUIREMENTS. (a) Defines "annual financial statement or report" and "disaster."
(b) Provides that a political subdivision that fails to file or publish an annual financial statement or report as required by law, except as provided by Subsection (e), is not eligible to receive a state loan or grant under a state program for the political subdivision's fiscal year in which the political subdivision was required to file or publish the statement or report.
(c) Provides that a political subdivision created under Section 52 (Restrictions on Lending Credit or Making Grants by Political Corporations or Political Subdivisions; Authorized Bonds; Investment of Funds), Article III (Legislative Department), or Section 59 (Conservation and Development of Natural Resources; Development of Parks and Recreational Facilities; Conservation and Reclamation Districts; Indebtedness and Taxation Authorized), Article XVI (General Provisions), Texas Constitution, except as provided by Subsection (e), is not eligible to receive a state loan or grant in a fiscal year in which:
(1) the political subdivision is required by financial reporting requirements prescribed by the agency administering the state loan or grant to publish a financial statement or report; and
(2) the political subdivision fails to file or publish the financial statement or report described by Subdivision (1).
(d) Requires that each application for a state program for which a political subdivision is prohibited from being eligible for a loan or grant under this section include a statement notifying the applicant of the requirement of this section and require the political subdivision to demonstrate compliance in the manner prescribed by the state agency administering the loan or grant.
(e) Provides that Subsections (b) and (c) do not apply to a political subdivision that fails to file or publish a financial statement or report because of a disaster and that provides certain documentation to the agency administering the state loan or grant.
SECTION 2. Makes application of this Act prospective to January 1, 2026.
SECTION 3. Effective date: September 1, 2025.