87R18036 SCL-F     By: Goldman, Metcalf, Bonnen, Raymond, H.B. No. 1900       Button     Substitute the following for H.B. No. 1900:     By:  Paddie C.S.H.B. No. 1900       A BILL TO BE ENTITLED   AN ACT   relating to municipalities that adopt budgets that defund municipal   police departments.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:   ARTICLE 1. DEFUNDING MUNICIPALITY DETERMINATION          SECTION 1.01.  Subtitle A, Title 4, Local Government Code,   is amended by adding Chapter 109 to read as follows:   CHAPTER 109.  DETERMINATION OF DEFUNDING MUNICIPALITIES          Sec. 109.001.  DEFINITION. In this chapter, "division"   means the criminal justice division of the office of the governor.          Sec. 109.002.  APPLICABILITY OF CHAPTER. This chapter   applies only to a municipality with a population of more than   250,000.          Sec. 109.003.  DEFUNDING DETERMINATION. Except as provided   by Section 109.004, a defunding municipality is a municipality:                (1)  that adopts a budget for a fiscal year that, in   comparison to the municipality's preceding fiscal year, reduces the   appropriation to the municipality's police department; and                (2)  for which the division issues a written   determination finding that the municipality has made the reduction   described by Subdivision (1).          Sec. 109.0035.  INITIAL DETERMINATION.  In making a   determination of whether a municipality is a defunding municipality   under Section 109.003 according to the budget adopted for the first   fiscal year beginning on or after September 1, 2021, the division   shall compare the appropriation to the municipality's police   department in that budget to the appropriation to that department   in the budget of the preceding fiscal year or the second preceding   fiscal year, whichever is greater. This section expires September   1, 2023.          Sec. 109.004.  EXCEPTIONS. A municipality is not considered   to be a defunding municipality under Section 109.003 if:                (1)  for a fiscal year in which the municipality adopts   a budget that is less than the budget for the preceding fiscal year,   the percentage reduction to the appropriation to the municipality's   police department does not exceed the percentage reduction to the   total budget; or                (2)  before the adoption of a budget, the municipality   applies for and is granted approval from the division for a   reduction to the appropriation to the municipality's police   department to account for:                      (A)  capital expenditures related to law   enforcement during the preceding fiscal year;                      (B)  the municipality's response to a state of   disaster declared under Section 418.014, Government Code; or                      (C)  another reason approved by the division.          Sec. 109.005.  TERMINATION OF DEFUNDING DETERMINATION.  A   municipality's defunding determination under Section 109.003   continues until the division issues a written determination finding   that the municipality has reversed the reduction, adjusted for   inflation, described by Section 109.003(1).          Sec. 109.006.  DIVISION DUTIES.  (a)  The division shall:                (1)  compute the inflation rate used to make   determinations under Section 109.005 each state fiscal year using a   price index that accurately reports changes in the purchasing power   of the dollar for municipalities in this state; and                (2)  publish the inflation rate in the Texas Register.          (b)  The division shall adopt rules establishing the   criteria the division uses to approve reductions under Section   109.004(2).   ARTICLE 2. ANNEXATION BY AND DISANNEXATION FROM DEFUNDING   MUNICIPALITIES          SECTION 2.01.  Subchapter Z, Chapter 42, Local Government   Code, is amended by adding Section 42.905 to read as follows:          Sec. 42.905.  EFFECT OF DISANNEXATION FROM DEFUNDING   MUNICIPALITY. (a) In this section, "defunding municipality" means   a home-rule municipality that is considered to be a defunding   municipality under Chapter 109.          (b)  If an area is disannexed from a defunding municipality   as a result of an election required to be held under Section   43.1465, the area is released from the defunding municipality's   extraterritorial jurisdiction and is not included in any other   municipality's extraterritorial jurisdiction.          (c)  A resident in the area may file with a municipality that   is eligible to include the area in its extraterritorial   jurisdiction under this chapter a petition for the area to become a   part of the municipality's extraterritorial jurisdiction. The   petition must:                (1)  comply with Chapter 277, Election Code;                (2)  be signed by more than 50 percent of the registered   voters of the area described by the petition as of the preceding   uniform election date;                (3)  satisfy the signature requirement described by   Subdivision (2) not later than the 180th day after the date the   first signature for the petition is obtained; and                (4)  include a map of and describe the area.          (d)  Except as provided by Subsection (e), on receipt of a   valid petition and if the area has not already been included in the   extraterritorial jurisdiction of another municipality, the   municipality may by ordinance include the area in its   extraterritorial jurisdiction.          (e)  If the municipality receiving a petition under this   section is the defunding municipality that disannexed the area as   described by Subsection (b), the defunding municipality may include   the area in the defunding municipality's extraterritorial   jurisdiction under this section only if the inclusion is approved   by a majority of votes in an election on the issue held in the area.          (f)  If the area is not included in a municipality's   extraterritorial jurisdiction on or after the second anniversary of   the date that the area was disannexed as described by Subsection   (b), a municipality, other than the defunding municipality that   disannexed the area, that is eligible to include the area in its   extraterritorial jurisdiction under this chapter may by ordinance   include the area in its extraterritorial jurisdiction without the   consent of the area.          SECTION 2.02.  Subchapter A, Chapter 43, Local Government   Code, is amended by adding Section 43.004 to read as follows:          Sec. 43.004.  ANNEXATION BY DEFUNDING MUNICIPALITY   PROHIBITED. (a) In this section, "defunding municipality" means a   home-rule municipality that is considered to be a defunding   municipality under Chapter 109.          (b)  A defunding municipality may not annex an area during   the period beginning on the date that the criminal justice division   of the governor's office issues the written determination that the   municipality is a defunding municipality and ending on the 10th   anniversary of the date on which the criminal justice division of   the governor's office issues a written determination in accordance   with Section 109.005 finding that the defunding municipality has   reversed the reduction described by Section 109.003(1).          SECTION 2.03.  Subchapter G, Chapter 43, Local Government   Code, is amended by adding Section 43.1465 to read as follows:          Sec. 43.1465.  DISANNEXATION FROM DEFUNDING MUNICIPALITY.   (a) In this section, "defunding municipality" means a home-rule   municipality that is considered to be a defunding municipality   under Chapter 109.          (b)  On the next uniform election date that occurs after the   date on which the criminal justice division of the governor's   office issues a written determination that a municipality is a   defunding municipality and the time required by Section 3.005,   Election Code, the defunding municipality shall hold a separate   election in each area annexed in the preceding 30 years by the   defunding municipality on the question of disannexing the area.          (c)  The defunding municipality shall immediately by   ordinance disannex an area for which a majority of the votes   received in the election held under Subsection (b) favor   disannexation.          (d)  If an area is disannexed under Subsection (c), the   defunding municipality may not attempt to annex the area before the   10th anniversary of the date on which the criminal justice division   of the governor's office issues a written determination in   accordance with Section 109.005 finding that the defunding   municipality has reversed the reduction described by Section   109.003(1).          (e)  A defunding municipality holding an election under   Subsection (b) may not use public funds on informational campaigns   relating to the election.   ARTICLE 3. TAX REVENUE AND DEFUNDING MUNICIPALITIES          SECTION 3.01.  Chapter 26, Tax Code, is amended by adding   Sections 26.0444 and 26.0501 to read as follows:          Sec. 26.0444.  TAX RATE ADJUSTMENT FOR DEFUNDING   MUNICIPALITY. (a) In this section:                (1)  "Defunding municipality" means a municipality   that is considered to be a defunding municipality for the current   tax year under Chapter 109, Local Government Code.                (2)  "Municipal public safety expenditure adjustment"   means an amount equal to the positive difference, if any, between:                      (A)  the amount of money appropriated for public   safety in the budget adopted by the municipality for the preceding   fiscal year; and                      (B)  the amount of money spent by the municipality   for public safety during the period for which the budget described   by Paragraph (A) is in effect.          (b)  The no-new-revenue maintenance and operations rate for   a defunding municipality is decreased by the rate computed   according to the following formula:          Municipal Public Safety Expenditure Adjustment / (Current   Total Value - New Property Value)          (c)  A defunding municipality shall provide a notice of the   decrease in the no-new-revenue maintenance and operations rate   provided by this section in the information published under Section   26.04(e) and, as applicable, in the notice prescribed by Section   26.06 or 26.061.          Sec. 26.0501.  LIMITATION ON TAX RATE OF DEFUNDING   MUNICIPALITY. (a) In this section, "defunding municipality" means   a municipality that is considered to be a defunding municipality   for the current tax year under Chapter 109, Local Government Code.          (b)  Notwithstanding any other provision of this chapter or   other law, the governing body of a defunding municipality may not   adopt a tax rate for the current tax year that exceeds the lesser of   the defunding municipality's no-new-revenue tax rate or   voter-approval tax rate for that tax year.          (b-1)  Notwithstanding Subsection (b), if a municipality is   determined to be a defunding municipality according to the budget   adopted by the municipality for the first fiscal year beginning on   or after September 1, 2021, the governing body of the defunding   municipality may not adopt a tax rate for the current year that   exceeds the least of the defunding municipality's no-new-revenue   tax rate or voter-approval tax rate for that tax year, the preceding   tax year, or the second preceding tax year. This subsection expires   September 1, 2023.          (c)  For purposes of making the calculation required under   Section 26.013, in a tax year in which a municipality is a defunding   municipality, the difference between the municipality's actual tax   rate and voter-approval tax rate is considered to be zero.          SECTION 3.02.  Subchapter F, Chapter 321, Tax Code, is   amended by adding Section 321.5025 to read as follows:          Sec. 321.5025.  DISTRIBUTION OF TRUST FUNDS TO DEFUNDING   MUNICIPALITY. (a) In this section, "defunding municipality" means   a municipality that is considered to be a defunding municipality   for the current state fiscal year under Chapter 109, Local   Government Code.          (b)  Notwithstanding Section 321.502, the comptroller may   not, before July 1 of each state fiscal year, send to a defunding   municipality its share of the taxes collected by the comptroller   under this chapter during the state fiscal year. Before sending the   defunding municipality its share of the taxes, the comptroller   shall deduct the amount reported to the comptroller for the   defunding municipality under Subsection (c) and credit that   deducted amount to the general revenue fund. Money credited to the   general revenue fund under this subsection may be appropriated only   to the Department of Public Safety.          (c)  Not later than August 1 of each state fiscal year, the   criminal justice division of the governor's office shall report to   the comptroller for each defunding municipality the amount of money   the state spent in that state fiscal year to provide law enforcement   services in that defunding municipality.   ARTICLE 4. MUNICIPALLY OWNED UTILITIES IN DEFUNDING MUNICIPALITIES          SECTION 4.01.  Subchapter B, Chapter 33, Utilities Code, is   amended by adding Section 33.0211 to read as follows:          Sec. 33.0211.  RATES AND FEES CHARGED BY CERTAIN MUNICIPALLY   OWNED UTILITIES. (a) This section applies only to a municipally   owned utility that is located in a municipality that is considered   to be a defunding municipality under Chapter 109, Local Government   Code.          (b)  The governing body of a municipally owned utility may   not charge a customer:                (1)  at a rate higher than the rate the customer was   charged or would have been charged on January 1 of the year that the   municipality was determined to be a defunding municipality;                (2)  any customer fees in amounts higher than the   customer fees the customer was charged or would have been charged on   January 1 of the year that the municipality was determined to be a   defunding municipality; or                (3)  any types of customer fees that the customer was   not charged or would not have been charged on January 1 of the year   that the municipality was determined to be a defunding   municipality.   ARTICLE 5. TRANSITION PROVISIONS; EFFECTIVE DATE          SECTION 5.01.  Chapter 109, Local Government Code, as added   by this Act, applies only to a budget adopted for a fiscal year that   begins on or after the effective date of this Act.          SECTION 5.02.  Sections 26.0444 and 26.0501, Tax Code, as   added by this Act, apply beginning with the 2021 tax year, except   that Section 26.0444(c), Tax Code, as added by this Act, does not   apply for the 2021 tax year.          SECTION 5.03.  Section 321.5025, Tax Code, as added by this   Act, applies only to a distribution of municipal sales and use tax   revenue to a municipality in a state fiscal year that begins on or   after the effective date of this Act.          SECTION 5.04.  (a) Section 33.0211, Utilities Code, as   added by this Act, applies only to a proceeding for the   establishment of rates for which the governing body of a   municipally owned utility has not issued a final order or decision   before the effective date of this Act.          (b)  A proceeding for which the governing body of a   municipally owned utility has issued a final order or decision   before the effective date of this Act is governed by the law in   effect immediately before that date, and that law is continued in   effect for that purpose.          SECTION 5.05.  This Act takes effect September 1, 2021.