The Senate Committee on Water, Agriculture and Rural Affairs met on May 11, 2026, to examine a routine but sometimes controversial municipal budgeting practice: the transfer of revenue from water and wastewater utilities into general funds for unrelated services.
Chaired by Senator Charles Perry (R-Lubbock), the committee is assessing whether the Legislature should cap these transfers to ensure ratepayer dollars remain dedicated to the state’s deteriorating water infrastructure.
The inquiry follows a sharp decline in the state’s water infrastructure grades, which fell to a D+ for drinking water and a D- for wastewater in the American Society of Civil Engineers’ (ASCE) 2025 Texas Infrastructure Report Card. These “payments in lieu of taxes” (PILOT transfers) are often used by cities to balance general budgets without increasing property taxes.
However, critics and engineering advocates argue that diverting these funds creates capital starvation, contributing to a maintenance backlog that has seen boil-water notices double between 2019 and 2023.
According to the official interim charge, the committee is directed to “assess the impact of such transfers on delays in projects, infrastructure maintenance backlogs, and water loss mitigation”.
Data from the ASCE report provides a stark backdrop for the hearing: public water systems forced to restrict use to avoid shortages increased twelvefold in recent years, alongside a rise in water-quality violations.
While the 89th Legislature and Texas voters previously appropriated $1 billion toward water supply and infrastructure grants through House Bill 500, a 2024 survey by the Texas Water Infrastructure Network suggests a multibillion-dollar funding gap persists.
The proposal to limit these transfers faces pushback from municipal leaders. The Texas Municipal League (TML) characterizes inter-fund transfers as a long-standing tool of municipal finance that allows for local budgetary flexibility.
Beyond utility transfers, the committee also reviewed the state’s inventory of desalination facilities and preparedness for the New World screwworm, a parasitic threat to the Texas livestock industry.
The committee will compile its findings into a formal report ahead of the 90th Legislative Session in January, including recommendations to ensure ratepayer funds are “dedicated exclusively to the sustainability and security of Texas water systems.”