A Broader Texas False Claims Act

When government pays a contractor to do specific work, taxpayers should have a practical way to enforce that commitment. If the contractor takes the money, materially fails to deliver, and the paying government does not act, the public financial interest still needs someone able to pursue it.

Texas has a foundation to build on. Its health care fraud law provides a private enforcement framework for covered programs. A broader Texas False Claims Act would extend that approach to other state and local funds, drawing on models already used in other states while adding a defined repayment duty for knowingly retained, unearned performance payments.

Build on what Texas has already done

In 2023, Texas expanded Human Resources Code Chapter 36 beyond Medicaid to include the Children's Health Insurance Program and Healthy Texas Women. That was a meaningful expansion of the state's fraud protections. The next opportunity is to extend a comparable enforcement framework to more public spending. Texas SB 745, enacted text.

The proposal would create a separate general act covering state, county, municipal, school-district, regional, and other local public financial interests, including qualifying contracts, grants, and downstream payments. Chapter 36 would remain the route for its covered health care program misconduct. Tax assessment and collection disputes would be excluded; procurement financed by tax revenue would remain within scope.

Bring broader fund coverage into line with other states

New York's False Claims Act covers claims involving both state and local government funds and allows private people to bring actions on their behalf. Virginia's Fraud Against Taxpayers Act also includes political subdivisions and permits private actions subject to government review. These laws offer established models for broader coverage and private enforcement. New York definitions, New York civil actions, Virginia definitions, and Virginia private actions.

Texas can adopt that broader approach while designing its own rules for local enforcement, recovery allocation, and performance payments. The proposed duty to repay unearned performance payments is a separate Texas policy choice. The package does not claim that every unmet contractual objective already constitutes fraud under other states' laws.

Two paths to accountability

Fraudulent bidding or billing would carry stronger remedies, including treble damages and civil penalties when the required elements are proved. A promise made without an intent to perform could support the fraud path; a later shortfall alone would not prove that the original promise was fraudulent.

The separate performance path would address actual knowledge that payment is unearned because an important, written, binding commitment was materially unmet. It would require disclosure and an opportunity to cure or repay. The basic remedy would be repayment of the unearned portion, interest, and reasonable fees. Concealment, material lies, or knowing refusal to repay without a reasonable good-faith basis after a documented government demand could permit enhanced remedies.

Consider the brief's hypothetical example: a contract pays for 100 completed service units, but only 60 are delivered. A false invoice may support fraud liability. Accurate reporting would not authorize keeping payment attributable to the missing 40 units. The court would apply the agreement's terms and credit actual delivery.

Give taxpayers an enforcement path when government does not act

A private person, represented by counsel, could bring a civil action on behalf of the public financial interest. This is commonly called a qui tam action. The proposal requires a sealed government review period, permits government intervention, and places settlements and dismissals under court review. A successful whistleblower would receive a share of money actually recovered.

Local governments could pursue their own claims. In wholly local matters, the Attorney General would have a defined backstop after a local request, declination, inaction, or a court-supported finding permitting earlier action. Local recoveries would remain payable to the affected local entity after whistleblower awards and applicable fund restrictions, without an automatic percentage transferred to the state.

The proposal also protects research using public-information records and lawful reporting by private and public employees. Records access alone would not disqualify a claim. Those protections would operate within the new act's evidence, confidentiality, and procedural requirements.

Make commitments clear and remedies proportionate

A contract for specified efforts would not become a guarantee of a broader social outcome. Ordinary mistakes, minor shortfalls, aspirational goals, and reasonable, timely disclosed good-faith disputes would not establish the performance-payment violation. Agreed extensions, force majeure, government delay, and risk allocation would receive effect. Partial performance would receive credit.

The new performance duty would apply prospectively to new or renewed agreements and qualifying new commitments in later material amendments. Future agreements would identify binding commitments, measures, deadlines, risk allocation, and payment allocation. Courts would prevent duplicate recoveries and could reduce grossly disproportionate penalties.

The next step is legislative review

A draft has been sent to legislators, asking them to sponsor or co-author a general Texas False Claims Act and request a Texas Legislative Council draft. The legislative package includes a constituent brief, a section-by-section summary, proposed bill text, selected state comparisons, staff questions, fiscal considerations, and a cover email.

The package gives legislators a concrete starting point for extending protections Texas has already chosen to provide. Code placement, constitutional questions, final statutory comparisons, and a fiscal note remain matters for legislative review.