Texas has no centralized system for tracking the federal grants flowing to its more than 5,500 local governments, according to a new policy report that recommends creating an Office of State Sovereignty to scrutinize those funds before they are accepted.
The report, authored by Texas Public Policy Foundation (TPPF) researchers James Quintero and Ben Crockett, argues that federal grants can include conditions that influence Texas policy, increase government spending, and create long-term fiscal dependence.
In 2023, Texas’ state and local governments received a combined $84.3 billion in federal aid, according to the report’s analysis of data from the U.S. Census Bureau. Excluding state to local transfers, federal aid accounted for between 32 and 44 percent of Texas state government revenue and between three and six percent of local government revenue. Texas’ reliance on federal aid was greater than the national average based on this data.
Quintero and Crockett warned that federal grants also come with conditions that influence state and local policy and potentially increase government spending.
Among the examples cited in the report are federal awards to Fort Worth’s Diversity, Equity, and Inclusion program and an Environmental Protection Agency grant to Dallas for an environmental justice initiative.
Fort Worth received nearly $5 million through 14 federal awards for its program, while Dallas received $652,662 from the EPA.
The financial impact of federal funding can extend beyond the grants themselves. Fort Worth estimated that replacing its federal funding would require a 19.8 percent increase in the local property tax rate.
While Texas already has some mechanisms for monitoring federal assistance at the state level, the TPPF report says those systems are incomplete.
The Legislative Budget Board’s “Top 100 Federal Funding Sources in the Texas State Budget” report excludes categories including disaster aid, higher-education funding, Medicaid supplemental payments, and in-kind federal contributions.
Quintero and Crockett further argue there is no centralized authority that consistently tracks the amount, purpose, cost, policy conditions, and consequences of grants received directly by local governments.
A 2022 Federal Reserve Bank of St. Louis estimate noted that Texas had 5,533 local governments, second only to Illinois, making the state’s fragmented approach to grant oversight especially significant.
To address the issue, the TPPF report proposes reconstituting the Office of State-Federal Relations as an Office of State Sovereignty. This would serve as Texas’ central authority for reviewing and applying federal assistance. The office would evaluate grant applications for their fiscal impact, consistency with state law, and conditions attached to federal funding.
The office could also create a public database detailing federal funds received across the state and conduct cost-benefit analyses of major funding streams. This would allow for an annual assessment of Texas’ vulnerability to changes in federal funding.
The proposal would not eliminate Texas’ cooperation with the federal government, but instead seek to ensure that federal funding is accepted transparently and on the state’s terms.
