Texas Senate Bill SB 1851

Texas 2025 - 89th Regular

• Filed: 3/4/25
• Out of Senate Committee: 4/7/25
• Voted on by Senate: 4/16/25
• Out of House Committee: 5/9/25
• Voted on by House: 5/10/25
• Governor Action: 5/24/25

Caption

Relating to the penalty for noncompliance with certain audit requirements by a municipality.

Summary

SB 1851 creates a new penalty for municipalities that fail to comply with existing local government audit and financial reporting requirements. Under current law, municipalities must have their records and accounts audited, prepare an annual financial statement, and file that statement and the auditor’s opinion with the municipal clerk within 180 days after the end of the fiscal year. The bill authorizes a person to file a complaint with the attorney general alleging a violation of those requirements. If the attorney general determines a municipality has not completed the required audit or filing, the municipality is barred from adopting an ad valorem tax rate above its no-new-revenue tax rate for the applicable tax year and for later tax years until it comes back into compliance. The bill applies only to tax years beginning on or after its effective date, September 1, 2025.

Impact

The bill amends Chapter 103 of the Local Government Code by adding Section 103.005, tying municipal tax-setting authority to compliance with annual audit and financial statement obligations. It does not change the underlying audit deadlines themselves, but it creates a state enforcement mechanism that can restrict a municipality’s property tax rate if it misses those deadlines. The practical effect is to pressure municipalities, municipal clerks, and local auditors to complete and file required financial documents on time, and it gives the attorney general a formal role in determining noncompliance.

Sentiment

The bill appears to have generally favorable support, as reflected by unanimous Senate passage and a substantial House majority. The voting history suggests broad agreement with the goal of improving municipal financial accountability and transparency. However, the House vote also shows meaningful opposition, indicating some concern about the severity or practicality of using tax-rate limits as a penalty.

Contention

The main point of contention is the enforcement mechanism: instead of a fine or administrative remedy, the bill conditions a municipality’s ability to raise property taxes above the no-new-revenue tax rate on timely audit compliance. Supporters likely view this as a strong incentive for transparency and fiscal discipline, while opponents may see it as an inflexible penalty that could constrain local budgets and affect essential municipal services, especially if delays are caused by administrative or auditing issues rather than intentional noncompliance. The attorney general’s complaint-and-determination role may also raise concerns about state oversight of local tax decisions.