A collaboration between Lewis McLain & AI

Jeff Lipton argues that ratios are the starting point of municipal credit analysis, not the end of it. Texas has spent the last decade proving him right — repeatedly, expensively, and in public.

A field guide for Texas issuers, municipal advisors, bond counsel and underwriters · August 2026

In an August 4 Bond Buyer Market Intelligence piece, Jeff Lipton makes a deceptively simple argument: an overreliance on financial ratios “can create a false sense of certainty, obscuring the qualitative factors, structural risks, governance and political issues, and emerging trends that ultimately shape long-term credit performance.” His accompanying illustration is an iceberg. Above the waterline sit the metrics everyone quotes — debt service coverage, debt per capita, days cash on hand, fund balance as a percentage of expenditures, unfunded pension liability. Below it sit governance, legal framework, cyber-threat preparedness, regulatory shifts and political will.

Those five submerged labels come from the article’s illustration; Lipton’s text names others too — climate and physical risk, demographic shifts, pension and OPEB management. This piece organizes around the five, and folds physical risk and demographics into the Texas cases where they actually bit. It is a good metaphor, but metaphors do not move ratings. Cases do. And if you want cases, Texas is the richest laboratory in the country — not because Texas credits are weak (in aggregate they are not), but because Texas runs an unusual number of natural experiments. It has 1,200-odd cities, more than 1,000 school districts, thousands of special districts, a biennial legislature that legislates aggressively into local finance, an Attorney General with a statutory chokepoint on every bond closing, a deregulated power market, a contested water supply, and an electorate that votes on tax rates and bond authorizations several times a year.

Every one of the five factors below Lipton’s waterline has, in Texas, produced a documented, dated, dollar-denominated credit outcome in the last ten years. What follows is an inventory — organized by factor — with what each episode should change about how Texas issuers and their advisors prepare disclosure, rating presentations and investor materials.

Above the waterline — what the ratios measure

• Debt service coverage
• Debt per capita
• Days cash on hand
• Fund balance as % of expenditures
• Unfunded pension liability

Below the waterline — what moved Texas credits

• Governance — Dallas Police & Fire; the Houston corridor
• Legal framework — charter revenue caps; drainage litigation; bond covenants
• Cyber-threat preparedness — 23 entities in one morning; Royal; Play
• Regulatory shifts — SB 13/SB 19; SB 2; SB 1851; the PSF capacity ceiling
• Political will — ballot language; VATRE failures; Proposition U

Factor One Governance: Dallas Police & Fire, and the three notches that never came back

The Dallas Police and Fire Pension System is the cleanest available demonstration that a plan’s governance architecture is a leading indicator and its funded ratio is a lagging one.

By the time the funded ratio told the story, the story was over. DPFP’s funded ratio fell from 72% in January 2011 to 45% in January 2016. But the qualitative tells were visible years earlier, and they were not subtle:

• An investment mandate no ratio captures. Beginning in 2005–06 the board deployed over $1 billion into direct, illiquid, exotic real estate — ultra-luxury homes in Hawaii, Aspen and California, raw land in Idaho and Colorado, and roughly $200 million into Museum Tower in downtown Dallas.
• Counterparty and control failure. The FBI executed a search warrant at the offices of external manager CDK Realty Advisors on April 4, 2016. CDK managed up to $750 million at peak. DPFP later alleged write-downs and losses exceeding $320 million. One Arizona land parcel bought for $27 million in 2006 sold for $7.5 million in 2014. The fund eventually marked its entire real estate book down 32%.
• Assumption drift. DPFP carried an 8.50% assumed return through 2014 against actual market returns of −5.35% (2014) and −8.47% (2015).
• A structural liquidity bomb. DROP balances reached 56% of total plan assets, all available for immediate withdrawal, and had been credited with above-market guaranteed interest.

That last item is the one that matters most, and it is the one least visible in conventional analysis. “Days cash on hand” is a utility metric; nobody computes it for a pension plan. Yet DPFP had, sitting on its balance sheet, a demand liability equal to more than half of assets — held by a participant population that talks to each other, in a city where the funding debate was public.

The run arrived on schedule. After DPFP publicly stated in August 2016 that the shortfall would require benefit cuts, roughly $500 million was withdrawn between August and early December, leaving about $729 million in liquid assets against a stated minimum near $600 million. Mayor Mike Rawlings sued the fund in his personal capacity as a taxpayer. On December 8, 2016, the board voted to suspend all DROP withdrawals.

Date	Agency	Action	Stated rationale
Nov. 2015	Moody’s	Aa1 → Aa2	P&F unfunded liability plus roughly $1B of deferred infrastructure
Oct. 24, 2016	Moody’s	Aa2 → Aa3; Dallas Water Utilities outlook to negative	DWU’s “direct and possibly indirect exposure to unfunded pension liabilities” — despite the charter’s “separate and sacred fund” language
Dec. 9, 2016	Moody’s	Aa3 → A1	The reform plan “has significant implementation risk because it relies heavily on actions of the state legislature and includes only modest increases in cash contributions”
Jan. 11, 2017	S&P	AA → AA−, negative	“The continued deterioration in the funded status of the Dallas Police and Fire Pension negatively affects the City’s creditworthiness”

Note the October 2016 action on Dallas Water Utilities. The DWU indenture is a closed-lien revenue pledge; the charter calls it a separate and sacred fund; the coverage ratios were fine. Moody’s revised the outlook anyway, on the theory that a distressed general government eventually reaches for whatever is nearby. No covenant test captured that. It was a judgment about sponsor behavior.

The durable lesson

Moody’s has never restored Dallas’s pre-crisis rating. As of the last verified action the city’s GO stood at A1 against Aa1 in 2015 — a three-notch impairment that has now outlived the crisis by nearly a decade. Governance failures do not mean-revert on the same schedule as ratios do.

What actually fixed it was a governance change, not a contribution number

HB 3158, signed May 31, 2017, is usually described in terms of its benefit and contribution provisions — DROP capped at ten years, no interest credited in Active DROP, employee contributions at 13.50%, COLAs suspended until 70% market-value funding. Those matter. But the decisive provision was structural: the board was restructured to give the Mayor six of eleven appointments, with two active police and fire trustees and three citizen trustees selected through a nominations committee. Benefit or contribution changes now require a two-thirds vote of all trustees. Sponsor-government control replaced member control.

The unfinished business is instructive too. DPFP’s January 1, 2023 valuation showed 39.1% funding and a projected full-funding year of 2105. That triggered a Funding Soundness Restoration Plan requirement under Texas Government Code §802.2015, due September 1, 2025. The negotiated Funding Agreement was not approved until December 10–11, 2025 — after the statutory deadline — and the Pension Review Board’s February 25, 2026 board packet still annotated the plan “agreement in place, no submission.” As of that packet, Dallas P&F was the only Texas plan immediately subject to a mandatory FSRP.

And the plan’s own actuary put the residual risk in writing. Segal, in the January 1, 2026 valuation:

The Funding Agreement with the City set maximum contribution amounts, which may be less than the actuarially determined contributions, through the Fiscal Year ending September 30, 2054… This methodology contains minimal allowance for future adverse experience through September 30, 2029. If future experience does not match the assumptions used to set the contributions, the unfunded actuarial accrued liability may not be paid off within 30 years.Segal, DPFP Combined Plan Actuarial Valuation as of January 1, 2026

The arithmetic behind that warning: actual city contributions for the fiscal year ended September 30, 2025 were $204.9 million, or 79.3% of the ADC. The 2025 market return was +15.49%. And the UAAL still grew year over year, to $3.73 billion on an actuarial basis. A 15% return year in which the unfunded liability increases is a governance fact, not a market fact.

The Houston counterexample — and its limits

Houston’s SB 2190, signed the same day as HB 3158, is the design most worth studying because it embedded a self-executing governance mechanism rather than relying on future political appetite. Each of the three systems produces an annual Risk Sharing Valuation Study, prepared separately by the system actuary and the city actuary, with a reconciliation protocol when they diverge by more than two percentage points. Contribution rates float within a ±5 percentage point corridor around a fixed midpoint schedule.

The critical clause is what happens above the corridor. If the city rate exceeds the “third quarter line rate,” the city and the board must agree to increase member contributions and make plan changes — and if no agreement is reached by April 30, the pension board must act unilaterally to increase member contributions, cut COLAs, and/or raise the normal retirement age. Boards are prohibited from unilaterally amending or terminating that machinery, and final RSVSs are jointly filed with the PRB.

The outcome, on funded ratios (actuarial basis, FY2016 → FY2024): Municipal 56% → 73%; Police 78% → 92%; Fire 81% → 93%. On market value at FY2024, the fire fund is at 100%. Contribution growth decelerated from double digits pre-reform to 1–4%.

A finding worth internalizing before your next rating presentation

The 2017 Houston reform produced no upgrades — only outlook restorations. Moody’s moved the Aa3 outlook to stable in November 2017; S&P moved the AA outlook to stable in January 2018. Houston has been Moody’s Aa3 / S&P AA / Fitch AA continuously from 2016 to today. Structural reform of this magnitude bought stability, not elevation. Set expectations accordingly.

Factor Two Legal framework: the covenants, charters and court dockets that ratios never see

Lipton observes that “compliance with all legal covenants does not necessarily mean the credit is in good financial health.” The Texas corollary is broader: some of the most consequential constraints on Texas issuers are not in the indenture at all. They are in city charters, in the Election Code, and in appellate opinions.

Houston’s charter cap: $2.9 billion that appears in no ratio

Houston’s revenue cap is frequently misdated. It is not a 2015 measure; it is Proposition 1 (2004), limiting revenue to the lower of prior cap plus population and inflation, or prior revenue plus 4.5%, softened by Proposition H (2006), which permitted an additional $90 million for public safety. FY2015 is simply the first year the cap bound. Cumulative foregone revenue since then: $2.9 billion. On October 15, 2025 the council voted 11–3 to hold the rate at $0.519190; Controller Chris Hollins called it a “self-inflicted shortfall of $53 million.”

S&P named it directly when it moved Houston’s AA outlook to negative in July 2024, citing “limited capacity to raise revenue due to a city charter that restricts property tax increases” — and putting the probability of downgrade at one in three or better. Fitch followed in September 2024, citing the diminished margin of general fund reserves above 15% of spending. S&P restored its stable outlook on June 25, 2026, crediting “substantial progress in materially reducing” the FY2027 gap. Fitch’s negative outlook, however, has now run roughly two years — an unusually long tenure.

A single appellate opinion, $100 million a year

The ReBuild Houston line of cases is the best available illustration of legal-framework risk crystallizing into a hard budget number. In April 2024 the Fourteenth Court of Appeals held the city had unlawfully misallocated funds, requiring no less than 11.8 cents per $100 of valuation less debt service to the dedicated drainage and street renewal fund — an allocation not reducible by the revenue cap. On January 31, 2025, the Texas Supreme Court declined to hear Houston’s appeal. The city had said it would be forced to allocate at least $100 million annually.

An April 2025 phase-in settlement stepped the allocation from 57% to 67% (FY2026), 77% (FY2027) and 100% (FY2028), saving roughly $180 million in the following year and unblocking the FY2026 budget. No coverage ratio computed on January 30, 2025 anticipated any of this.

Preemption, charter amendments and a $650 million judgment

Houston’s firefighter pay dispute is a case study in legal hierarchy determining a dollar figure. Proposition B, a citizen-initiated charter amendment approved by roughly 59% of voters in November 2018, required firefighter compensation “at least equal and comparable by rank and seniority” with police. A district court voided it in 2019; the Fourteenth Court of Appeals upheld it in 2021.

On March 31, 2023, the Texas Supreme Court held that Chapter 174 of the Local Government Code preempts Proposition B — because Chapter 174 measures firefighter pay against comparable private-sector employment while Proposition B measures it against police pay, and “the two rules of decision cannot be reconciled.” The court simultaneously affirmed and remanded the parallel Chapter 174 judicial-enforcement suit. The charter amendment lost; the collective bargaining statute won; the underlying claim survived.

Item	Figure
Back pay (July 1, 2017 – March 1, 2024)	$650,000,000 — $633.24M to the 2024 Refunded Judgment Fund, $16.76M to the Local 341 Medical Trust
All-in cost including 30 years of debt service	~$1.5 billion
Recurring annual cost	~$72 million
Collective bargaining agreement	5 years, FY2025–FY2029; base increases totaling 24%, up to 34% with escalators contingent on new public-safety revenue
Financing	$612.125M GO Refunding Series 2024A, closed July 18, 2024 (issued alongside $122.125M Series 2024B)
Voter approval required?	No. Texas law does not require a vote for judgment bonds

That last row deserves emphasis. Council Member Mary Nan Huffman pushed to place the $650 million on the November 2024 ballot. Mayor John Whitmire defeated the effort, warning it “would likely kill the proposed settlement, rekindle litigation, and result in a much more expensive resolution.” The City Attorney added that failure to pay a court-ordered judgment within a short window would constitute an event of default under covenants on some outstanding city bonds. The legal framework did not merely size the obligation — it dictated the financing structure and removed the political-will variable entirely.

The live covenant question: Houston’s FY2027 utility transfer

Houston closed its FY2027 gap — $209.3 million initial, $25.3 million final — substantially by imposing a new 5%-of-gross-revenue right-of-way fee on the Combined Utility System, worth roughly $104 million. The Finance Director stated the transfer “is subordinate to all debt service paid and, as such, is allowable under the master ordinance.” She also conceded that amendments to the 20-plus-year-old CUS master bond ordinance — to explicitly permit the fee in the flow of funds and to cap the transfer — would form part of a fall 2026 refunding. The Controller has characterized the second phase as requiring bondholder approval.

For municipal advisors and bond counsel

This is exactly the fact pattern Lipton describes: full covenant compliance today, an unresolved documentary question tomorrow, and nothing in the coverage ratio to signal it. If your issuer is solving a general fund problem with an enterprise fund transfer, the master ordinance analysis belongs in the rating presentation — not in the footnotes of a refunding six months later.

Factor Three Political will: Texas votes, and Texas voters have opinions

Lipton’s sharpest line is about the limits of automation: “I would not expect AI to assess the likelihood of political leaders approving future utility rate increases or an electorate voting to approve a school budget.” Texas holds those elections constantly, which means we have a large sample.

Ballot language is a credit variable

HB 3 (2019) added Texas Education Code §45.003(b-1), which requires every school bond proposition to include the statement “THIS IS A PROPERTY TAX INCREASE” — with no exception, even where the tax rate does not change. The Attorney General confirmed on July 30, 2025 that the language is “strictly construed; therefore, school districts may not modify, supplement, or qualify this mandatory ballot language.” Separately, SB 30 (2019) forced stadium seating over 1,000, natatoriums, other recreational facilities, performing arts facilities, teacher housing and technology equipment into standalone propositions.

The inflection arrived on November 2, 2021: 65 of 174 school propositions defeated (38%), and $3.8 billion of $12.1 billion rejected (32%). Fort Worth ISD’s $1.2 billion Proposition A passed by 57 votes, while three FWISD arts and athletics propositions worth roughly $300 million failed — against a 2017 FWISD bond that had passed with over 70%. Temple ISD’s $178 million failed by two votes.

BRB FY	On ballot ($M)	Approved ($M)	Approved %
2016	11,105.2	10,560.9	95.1%
2017	8,605.3	7,042.1	81.8%
2018	13,508.2	11,897.1	88.1%
2021	16,111.0	14,043.3	87.2%
2022	25,345.7	15,692.0	61.9%
2023	40,164.5	33,603.3	83.7%
2024	28,287.5	22,659.1	80.1%
2025	23,558.6	14,853.7	63.0%

A methodological caveat worth stating in any disclosure that cites this series: SB 30 changed the denominator. Forcing severable items into standalone propositions mechanically raises proposition counts and concentrates failures in the newly-severed items. Proposition-count pass rates therefore overstate the deterioration. Dollar-weighted rates are the cleaner series — and they still show two of the last four years below 64%.

The operating-side picture is harder. On November 5, 2024 Texas voters rejected 30 of 52 VATRE propositions, and Houston ISD’s $4.4 billion bond failed. Moody’s, writing on that cycle in February 2025, put the consequence plainly: “Without a main revenue-generating tool, districts will struggle to address key priorities… without relying on financial reserves or cutting expenses.” In November 2025, more than half of VATREs failed again; Magnolia ISD lost all three propositions ($516.9 million), Friendswood ISD all four ($165 million).

And yet — in May 2026, Dallas ISD’s $6.2 billion package, the largest school bond in Texas history, passed all four propositions with over 70% support (Proposition A at 74.6%), amid a statewide cycle that authorized $76.4 billion of new principal. Political will is not a constant. It is a variable that moves with local campaign quality, project mix, and whether the district severed the stadium.

When voters create fixed costs

Political will cuts both ways, and Dallas provides the clearest example. On November 5, 2024, Dallas voters narrowly approved Proposition U — 50.47% — requiring that at least 50% of annual revenue growth go to public safety pensions and police pay, and mandating a force of 4,000 sworn officers against roughly 3,100 at the time. Within about ten days, Moody’s revised the city’s outlook to negative, affirming A1, and noted that the increased contributions “are not expected to meet the tread water level and the plans’ cash flow remains very weak.” Kroll had already revised its AA+ outlook to stable from positive two weeks earlier.

An electorate can impose a permanent claim on revenue growth in a single afternoon. No ratio computed on November 4 contained it.

Statewide propositions reallocate the base

The November 4, 2025 constitutional amendment election passed all 17 measures on turnout just under 16% of registered voters. Three matter for local credit:

• Proposition 13 (79.4%) — ISD homestead exemption to $140,000 from $100,000, with state hold-harmless for districts.
• Proposition 11 (77.7%) — additional 65-plus and disabled exemption to $60,000 from $10,000.
• Proposition 9 (65.0%) — business personal property exemption to $125,000. This one carries an unreimbursed hit to city, county and special district tax bases. The House’s own amendment guide records the objection that “Counties, municipalities, and special districts could have to raise tax rates to cover the loss.”

Also on that ballot: Proposition 4, which dedicates to the Texas Water Fund the first $1 billion of state sales and use tax revenue collected in a fiscal year above a $46.5 billion floor, from FY2027 through FY2047 — up to $20 billion over 20 years, contingent each year on collections clearing that floor. In July 2026 the Texas Water Development Board approved a 2027 State Water Plan estimating $174 billion of investment over the next 50 years. Twenty billion dollars of dedicated funding against that number is a start, not a solution — and the gap is a political-will question that will be re-litigated for two decades.

Factor Four Regulatory shifts: market access is not a ratio

Lipton notes that “at times, demand and market access matter more” than the numbers. Texas has run the most direct experiment in the country on that proposition.

SB 13, SB 19, and the standing letter

SB 13 (fossil fuel “boycott”) and SB 19 (firearm entity discrimination) took effect September 1, 2021. The enforcement mechanism is not the statutes themselves — it is Government Code Chapter 1202, under which the Attorney General’s Public Finance Division must approve every public security issued by any Texas political subdivision before closing. Compliance runs through “standing letters” filed by each bank. The AG can place a standing letter under review and then rescind it, after which the office simply declines to approve any transcript in which that bank is a party. There is no adjudication and no appeal.

The market effect was immediate. Five of the largest muni underwriters exited Texas on the effective date. JPMorgan fell from a top-five Texas underwriter in 2021 to 22nd in 2022; Bank of America fell out of the top 25 entirely. Citigroup underwrote four Texas deals totaling $216 million in the first seven months under the law.

$300–500MEstimated additional interest borne by Texas issuers on $31.8 billion borrowed in the first eight months (Garrett & Ivanov)

~40 bp Borrowing cost increase for jurisdictions that had previously relied on the exiting underwriters for a majority of issues

3Banks ever formally excluded by state action — Citigroup, UBS and Barclays. The rest withdrew or paused voluntarily

That third figure is worth stating precisely, because the record is routinely overstated. Only Citigroup (SB 19, AG rejection, January 2023), UBS (SB 13, Comptroller list, August 2022) and Barclays (SB 13, AG rescission, January 2024) were ever formally excluded. Goldman Sachs, JPMorgan, Bank of America and Wells Fargo were never banned — they withdrew or paused during review, and JPMorgan, Bank of America, Morgan Stanley and Wells Fargo have all since been affirmatively cleared. The chilling effect was real; the ban was narrow. Both facts belong in the analysis.

The regime is also unstable, which is itself the point. In American Sustainable Business Council v. Hegar, Judge Alan Albright granted partial summary judgment on February 3, 2026, declaring SB 13 facially overbroad under the First Amendment and impermissibly vague under the Fourteenth. Three days later the AG advised bond counsel: “Unless and until the order is stayed, we will not be enforcing or implementing SB 13” — while cautioning that the order did not touch SB 19 and that issuers should not remove SB 13 language from bond documents. On May 29, 2026, the Fifth Circuit stayed the injunction pending appeal. On June 3, the AG resumed enforcement. As of August 2026, SB 13 is back in force with the merits appeal pending.

For issuers timing a transaction

Between February 3 and June 3, 2026, the enforceability of a statute governing your underwriter’s eligibility changed twice. That is not a credit metric. It is a market-access variable with a four-month half-life, and it belongs in your transaction timeline discussion.

The revenue cap, and the sleeper that binds harder

SB 2 (2019) lowered the M&O revenue-growth trigger from 8% to 3.5% for cities and counties and replaced petition-triggered rollback elections with automatic November elections. Fitch’s contemporaneous assessment was that it “could negatively impact Fitch’s assessment of certain local governments’ independent revenue raising ability — a component of one of Fitch’s four key rating drivers in its U.S. public finance tax supported rating criteria.” Moody’s called it credit negative. S&P warned that the constraint “could reduce financial flexibility and stress Texas municipalities’ creditworthiness.”

The constraint compounds, and there is no symmetric recovery mechanism after a downturn. The Legislative Budget Board’s own framing of a proposed further tightening — SB 10 in the 2025 second called session, which would have cut the multiplier to 2.5% — captures it: “Tax reductions relative to current law baseline escalate markedly, as tax levy growth compounds more slowly when limited by the reduced voter-approval tax rate multiplier.” SB 10 did not pass; the Senate Research Center analysis states the motivation plainly (“From 2019 to 2025, municipal and county property tax levies increased at faster rates than ISD property tax levies”). Expect it back in 2027.

But the more instructive 2025 enactment is SB 1851, which bars a city from adopting a rate above the no-new-revenue rate if it is not current on its Local Government Code Chapter 103 annual audit. On May 14, 2026, the Attorney General sent letters to more than 130 cities prohibiting them from exceeding the NNR rate; his office had earlier demanded documents from nearly 1,000 of the state’s roughly 1,200 cities. Manvel, at about 20,000 residents, estimated a revenue loss near $485,000, or 3.5%.

This is a revenue constraint triggered by an administrative failure. For a small city, a late audit is now more binding than the 3.5% cap. Nothing in fund balance, days cash or debt per capita signals it.

Odessa learned the same lesson from the other direction. S&P withdrew its rating on June 6, 2024 and Moody’s on June 18, 2024, citing “insufficient or otherwise inadequate information” because the city had not completed its FY2022 and FY2023 audits. Odessa was assigned a new Moody’s Aa2 issuer rating on June 4, 2026 after completing four years of audits; it has said it will not seek reinstatement from S&P. Two years without a rating — and it was never an oil-price event. Disclosure discipline is credit quality.

School districts: flat funding, falling enrollment, and a guarantee that masks it

Texas ISDs are experiencing the most significant qualitative deterioration in the state, and it is nearly invisible in secondary market pricing because virtually all Texas ISD GO paper trades on the Permanent School Fund’s triple-A guarantee rather than the underlying rating.

The underlying picture, from the agencies:

• Fitch, July 2026: approximately 26% of the Texas public schools Fitch rates have had outlooks revised or underlying ratings downgraded — some by multiple notches — since January 2025. The stated driver is “limited and infrequent increases in the state’s basic allotment… that has often failed to keep pace with rising labor, benefits, and other operating costs.” Fitch adds: “Even districts with a longstanding strong fiscal track record are reporting weaker-than-expected results.”
• S&P, February 2025: negative actions on Texas ISD underlying ratings outpaced positive over the trailing year; median reserves fell to 36.8% of general fund revenue in 2024 from 40.7% in 2023.
• Fitch, March 2026 (national): K-12 districts accounted for 70% of all Fitch downgrades and negative outlook revisions over the trailing twelve months.

The structural cause is a funding formula that has not moved. The basic allotment has been $6,160 since HB 3 in 2019. HB 2 (2025) delivered $8.5 billion — but did not raise the basic allotment; it added a guaranteed yield adjustment fixed at $55 per student through 2027, a sub-1% increase, delivered alongside roughly ten new restricted allotments. Core discretionary per-student operating revenue is effectively flat in nominal terms since 2019 and sharply negative in real terms.

Layered on top: enrollment. TEA reported 5,467,642 students in 2025-26, down 76,613 or 1.4% — only the second year-over-year decline since PEIMS collection began. Eighteen of twenty ESC regions lost enrollment. Texas 2036’s analysis finds 60% of the loss in grades K–5 and projects that under every Texas Demographic Center migration scenario, enrollment shrinks again next year, with roughly 100,000 fewer K-12 students by 2030 under the mid-migration case. Major urban districts have lost 17.3% of students over ten years. And the ESA program — SB 2 (2025), with ~106,660 students awarded from more than 274,000 applicants as of June 2026 — is an additional ADA drain whose magnitude Fitch describes as hard to predict.

The PSF ceiling: a guarantee is only as good as its capacity

The Permanent School Fund Bond Guarantee Program is the largest triple-A rated bond guarantor in the United States, backing more than $143 billion for 900-plus districts at a cost to the district of a $1,500 application fee and no premium. It is also capacity-constrained in a way that is easy to overlook until it binds.

In late 2022 it did. Projected available capacity fell from roughly $3.9 billion at June 30, 2022 to about $26.65 million projected at end-December. TEA rationed rather than closing, prioritizing districts with the lowest property wealth per ADA. Between November 2022 and January 2023 TEA denied $8.4 billion of applications from 56 districts — 92% of the dollar value of all applications in those three months.

The cost was measurable. Austin ISD’s $542 million January 2023 deal, sold unenhanced with underlying Aaa/AAA ratings, priced at a 3.67% TIC — 10 basis points wider than Dallas ISD’s $551 million PSF-guaranteed deal priced the same day, despite Dallas’s lower underlying rating.

Relief came in two steps: an SBOE reserve cut from 5% to 0.25% effective March 1, 2023, and IRS Notice 2023-39 on May 10, 2023, which converted the federal cap from a static $117.3 billion to a dynamic 500% of PSF book value as of each bond’s sale date — raising federal capacity roughly 86% to about $218 billion and flipping the binding constraint from federal back to state.

Metric	Value
PSF cost value	$51.91 billion (unaudited)
IRS limit (5.0x)	$259.57 billion
State capacity limit (3.5x, SBOE rule)	$181.70 billion — binding constraint
Guaranteed bonds outstanding	$143.82 billion
Utilization	79.16% of capacity limit
Projected available capacity	$32.17 billion

Utilization is back to roughly 79%. The good news is that the SBOE retains about 1.5 turns of unused statutory headroom — the multiplier can go to 5.0x by rule, with no federal action required. The qualitative point is that closing that gap is a discretionary act by an elected board, not an automatic one. Against $76.4 billion of new principal authorized in May 2026 alone, that is a governance question worth watching.

Factor Five Cyber-threat preparedness: real risk, no rating action, and why that matters

Texas has been hit harder and more publicly than almost any state, and the honest analytical conclusion is uncomfortable: we could find no Texas issuer that has suffered a rating action attributable to a cyber incident. That is precisely why ratios will never surface this risk — and why it needs separate treatment.

Date	Entity	What happened
Aug. 16, 2019	22–23 Texas local governments	Coordinated REvil/Sodinokibi attack pushed simultaneously through a single managed service provider’s remote-management software. Collective demand $2.5 million; none paid. The state activated its State Operations Center and DIR reported a transition to recovery within a week.
May 3, 2023	City of Dallas	Royal ransomware via a stolen domain service account; intrusion ran April 7 – May 4. Municipal courts closed for weeks; police/fire dispatch support systems, permitting and libraries disrupted. Council approved roughly $8.6 million in recovery spending on Aug. 9. Breach notifications to 30,253 individuals including SSNs and health insurance data. City published a formal after-action review.
Oct. 19, 2023	Dallas County	Play ransomware; county refused to pay and the group leaked stolen documents in November. Notices to 201,404 individuals; two years of credit monitoring offered.
June 2021	Judson ISD	Paid $547,045.61 — among the largest publicly confirmed ransom payments by a U.S. school district. Sheldon ISD paid roughly $207,000 in 2019; Port Neches–Groves ISD paid $35,000.

Three separate Dallas-area entities were compromised by two ransomware crews inside twelve months — the Dallas Central Appraisal District (November 2022, which reportedly paid roughly $170,000), the City (May 2023) and the County (October 2023). A CBS 11 investigation reported that at least 67 Texas school districts suffered a cybersecurity breach over a two-year period.

Moody’s operative framing is liquidity-conditional: “cash-strapped debt issuers with low liquidity and high leverage are more susceptible to the negative credit effects of cyber incidents.” Dallas absorbed $8.6 million against a multi-billion general fund without difficulty. A district or small city with 45 days cash would not. Moody’s also treats the establishment of state cybersecurity commissions — Texas among roughly two dozen states — as a positive credit consideration; Texas transitioned its cybersecurity functions to the new Texas Cyber Command on April 9, 2026.

The disclosure asymmetry

Lipton observes that many audited financial statements show only a footnote line attesting to covenant compliance, and that “Not all financial disclosures, however, include this language.” Cyber is worse: for most Texas issuers there is no line item at all. An issuer with tested backups, segmented networks, cyber insurance and an incident response retainer looks identical, on every published ratio, to one without them. Until that changes, the only way an analyst learns the difference is by asking — which means the only way an issuer gets credit for the investment is by volunteering it.

The Marquee Case Corpus Christi: when a physical constraint becomes a multi-notch downgrade

If you read one Texas case study to internalize Lipton’s argument, make it this one. Corpus Christi is the cleanest example in the U.S. municipal market of a resource constraint producing multi-agency, multi-notch downgrades — with the transmission mechanism running explicitly through customer concentration.

Date	Action
Sept. 2025	Council halts the Inner Harbor desalination campus — Texas’s first seawater desal plant for municipal use — as estimated cost climbs past $1.2 billion; design-build contractor terminated. Moody’s opens review for downgrade.
Oct. 2025	Fitch and S&P revise utility system revenue bond outlooks to negative.
Dec. 11–12, 2025	Moody’s downgrades: GO and sales tax revenue bonds to A1 from Aa2; combined utility enterprise to A1 from Aa3. Negative outlooks. Approximately $2 billion of debt affected.
April 2026	Moody’s opens a second review for further downgrade. Fitch revises the AA issuer rating outlook to negative.
May 2026	S&P downgrades utility system revenue debt two notches to A, CreditWatch negative; revises the AA GO outlook to negative.
June 1–2, 2026	Fitch cuts combined utility system senior lien revenue bonds three notches to A− from AA−, outlook negative.

Moody’s language is worth quoting because it is entirely forward-looking and entirely non-ratio:

The unexpected acceleration of water depletion risk and the narrow window to implement solutions before November 2026, which could trigger a Level 1 Emergency, indicating 180 days until its water supply will be insufficient to meet demand… The magnitude of water stress makes curtailment of industrial operations — a key driver of the regional economy and dependent on the city’s water supply — more likely.Moody’s Ratings, December 2025

Fitch’s framing adds the concentration channel explicitly: uncertainty over potential water curtailments and their revenue impact, “along with industrial customer concentration, could limit the system’s ability to meaningfully improve leverage and coverage metrics.”

Read that carefully. The agencies did not downgrade because coverage had deteriorated. They downgraded because a physical constraint made future coverage deterioration probable, through a customer base that is simultaneously the city’s tax base and its largest water user. This is the definition of a forward-looking qualitative assessment, and no ratio computed in mid-2025 would have flagged it.

The city has since moved — a February 2026 contract negotiation at roughly $978 million, well below prior estimates; 50 MGD secured from the Nueces River Authority’s proposed plant; $1 billion of projects targeting 76 MGD; an $11 million reclaimed water design expansion; and rate increases effective January 1, 2026. Rainfall has pushed the projected Level 1 emergency out to September 2027. But the ratings are where they are.

The Midland–Odessa control group

For a companion lesson in economic concentration, compare Midland and Odessa. Roughly one in five jobs in Midland–Odessa is directly tied to oil and gas — the highest concentration in the country. In the 2016 bust, Moody’s placed eleven Permian-area local governments on review for downgrade — among them Midland, Odessa, Pecos County and seven hospital districts — affecting $477 million of debt.

Same commodity, opposite outcomes. Midland has held AAA/stable through the cycles; Fitch specifically noted that Midland sets aside surplus sales tax receipts into fund balance to avoid dependence on volatile oil revenue. Odessa lost both of its ratings — for late audits. Concentration risk is manageable with countercyclical reserve policy and fatal without administrative discipline. Neither of those is a ratio; both are governance.

Winter Storm Uri: the tail that arrived in four days

One more, because it is the purest demonstration that a February 1, 2021 ratio package contained none of what happened between February 14 and 19.

• Denton Municipal Electric spent roughly $207 million on ERCOT power in about four days. Over the previous three years combined, the utility had spent $237 million on electricity. On one day alone it paid out more to buy power than in the entire prior year. The council moved to expand its debt cap on February 23, 2021, and financed the cost over decades.
• Brazos Electric Power Cooperative — the largest and oldest Texas generation and transmission cooperative, 16 member co-ops, roughly 660,000 end users — received an ERCOT bill of about $2.1 billion for seven days and filed Chapter 11 on March 1, 2021. The plan went effective December 15, 2022 with ERCOT’s claim settled near $1.89 billion. Brazos wound down its power supply business, sold its generation assets, emerged as a transmission-and-distribution-only cooperative, and senior management was required to depart.
• Rayburn Country Electric took the other path, becoming the first utility in Texas to securitize an Uri ERCOT bill — roughly $908 million of senior secured cost recovery bonds priced in early 2022. The securitization allowed Rayburn to avoid bankruptcy.
• CPS Energy sued ERCOT in March 2021 over the $9,000/MWh cap. On June 23, 2023 the Texas Supreme Court held 5–4 that ERCOT is “an organ of government” performing a “uniquely governmental function” and entitled to sovereign immunity, dismissing the suit. San Antonio customers are reported to be recovering at least $418 million through a small monthly rider running roughly 25 years.

The statewide cleanup ran through securitization: roughly $3.5 billion of Customer Rate Relief Bonds issued in March 2023 by the Texas Natural Gas Securitization Finance Corporation under HB 1520 (a proposed state appropriation to retire them was dropped in committee, and the great majority remained outstanding in FY2025), plus $800 million (Subchapter M, November 2021) and $2.116 billion (Subchapter N, June 2022) through ERCOT-sponsored special purpose entities under HB 4492. Press tallies have put total consumer-borne Uri debt near $10 billion.

The stress-testing point

Lipton writes that “even if initial assumptions were valid, perhaps there was a failure to perform appropriate stress testing.” Denton consumed nearly a full year’s power budget in a single day, and close to three years’ worth in four. No days-cash-on-hand calculation anticipates that. The question a Texas public power issuer should be able to answer in a rating presentation is not “what is our coverage?” but “what is our maximum four-day exposure, and what facility covers it?”

The Call to Action: What each stakeholder should do differently

Lipton addresses issuers, municipal advisors, legal counsel, underwriters and investors. Here is the Texas-specific translation.

Issuers

• Get current on your audit. SB 1851 and the Odessa episode make this a rating and rate-setting issue, not a compliance chore. More than 130 Texas cities were barred from exceeding the no-new-revenue rate in May 2026 for this reason alone.
• Disclose your cyber posture affirmatively. Tested backups, network segmentation, insurance limits, incident response retainer, tabletop cadence. No ratio will ever show it, and no analyst can infer it. If you have made the investment, say so.
• Bring your governance changes, not just your numbers. Dallas’s rating cascade stopped when board composition changed. Houston’s reform was rewarded for the automatic backstop, not the contribution schedule.
• Stress test to the tail, and bring the answer. Maximum multi-day commodity exposure. Maximum drought curtailment revenue impact. Largest single-customer concentration. Present the number before you are asked for it.
• Sever the stadium. If you are a school district, SB 30 has already told you what your voters will vote on separately. Design the package around that reality rather than discovering it on election night.

Municipal advisors

• Build the rating presentation around the five submerged factors explicitly, with a slide for each. Agencies are already asking; anticipate rather than react.
• Model the compounding effect of the 3.5% cap over the full projection period, not year one — and model the 2.5% scenario, because SB 10 will be back in 2027.
• Treat underwriter eligibility as a live timeline risk. The enforceability of SB 13 changed twice in four months in 2026.

Bond counsel and disclosure counsel

• Ballot language is now strictly construed. The AG’s July 30, 2025 letter forecloses modifying, supplementing or qualifying the mandatory school bond warning — and SB 1025 (2025) added a parallel “THIS IS A TAX INCREASE” requirement for all tax bond elections.
• Where a general fund problem is being solved with an enterprise transfer, run the master ordinance flow-of-funds analysis before the budget vote, not before the refunding.
• Track appellate dockets that touch revenue dedication. A single opinion produced Houston’s $100 million annual obligation; Midland ISD’s July 2026 challenge to TEA’s authority to set Tier One M&O rates could be the most significant school finance case since 2016.

Underwriters and investors

• For Texas ISD paper, remember what the PSF guarantee is masking. Roughly 26% of Fitch-rated Texas schools have seen negative underlying action since January 2025, with a flat basic allotment and a second consecutive enrollment decline ahead. The guarantee is excellent; the underlying trend is not the same thing.
• Monitor PSF capacity utilization directly. At 79% of the state limit, the buffer depends on a discretionary SBOE rule change.
• Underwrite water supply as a credit factor, not an ESG factor. Corpus Christi lost two to three notches across three agencies in nine months on a resource constraint, and the mechanism was customer concentration.

Closing

Lipton’s conclusion is that “multiple results for the same metric often reflect how stakeholders measure a multi-dimensional canvas of credit risk,” and that “the availability of data is not the issue, but a lack of standardization in how the data is interpreted can impact the credit dynamics.”

Texas suggests something slightly stronger. In every case above, the data existed. DPFP’s DROP concentration was published. Denton’s power purchase budget was public. The Corpus Christi reservoir levels were on a website. Odessa’s missing audits were conspicuous by absence. The Fifth Circuit’s docket is open to anyone. None of it was hidden — it simply was not in the ratio, and so for a while it was not in the analysis.

The practical implication for a Texas issuer is straightforward and slightly demanding. The information that will determine your credit trajectory over the next five years is information you already possess and are not currently required to disclose. Ratios are the starting point. In Texas, the interesting part starts below the waterline.

Sources

Source article

• Jeff Lipton, “How qualitative credit signals can reveal muni risks before ratios do,” The Bond Buyer, August 4, 2026

Pensions and governance

• City of Dallas, DPFP Overview · DPFP Actuarial Valuation as of January 1, 2026 (Segal) · DPFP Funding Agreement, December 11, 2025
• Center for Retirement Research, Boston College · Institutional Investor, “Dallas Confidential”
• City of Dallas, Moody’s October 2016 action · NBC 5 DFW, S&P January 2017 downgrade · Bond Buyer, Moody’s outlook revision following Proposition U
• Texas Pension Review Board, DPFP plan page · PRB Board Meeting Packet, February 25, 2026 · Tex. Gov’t Code ch. 802 (FSRP)
• City of Houston Annual Pension Update 2024 · SB 2190 enrolled bill analysis · City of Houston, rating agency reaction to SB 2190

Legal framework and litigation

• Texas Supreme Court, Proposition B preemption opinion (March 31, 2023) · City of Houston, firefighter contract financial terms · Official Statement, Series 2024A/2024B (EMMA)
• Bond Buyer, drainage fund decision · Bond Buyer, drainage settlement · City of Houston revenue cap presentation, October 2025
• Bond Buyer, S&P negative outlook · Bond Buyer, Fitch negative outlook · Bond Buyer, FY2027 budget and CUS covenant question
• Texas Supreme Court, CPS Energy v. ERCOT (June 23, 2023)

Regulatory shifts

• Texas Attorney General, All Bond Counsel letters (index of every SB 13/SB 19 determination) · AG letter resuming SB 13 enforcement, June 3, 2026
• Garrett & Ivanov, “Gas, Guns, and Governments: Financial Costs of Anti-ESG Policies” · Bond Buyer, market share effects
• SB 2 (86R, 2019) bill summary · SB 10 (89th, 2nd C.S.) Senate Research Center analysis · Texas Tribune, SB 1851 enforcement
• Odessa American, Odessa regains Moody’s rating

Schools, PSF and political will

• Tex. Educ. Code §45.003 · AG bond counsel letter on ballot language, July 30, 2025
• Texas Bond Review Board, Local Government Annual Report FY2025 · Bond Buyer, November 2021 bond election results
• Bond Buyer, Fitch July 2026 on Texas school ratings · Bond Buyer, Moody’s February 2025
• TEA, Enrollment in Texas Public Schools 2025-26 · Texas 2036, Enrollment Report May 2026
• TEA, PSF Bond Guarantee Program official disclosure, February 26, 2026 · IRS Notice 2023-39 · Bond Buyer, PSF capacity crunch
• Ballotpedia, November 2025 constitutional amendments · Bond Buyer, 2027 State Water Plan

Cyber

• Texas DIR, August 2019 coordinated ransomware attack · Texas DIR, transition to Texas Cyber Command
• Cybersecurity Dive, City of Dallas recovery costs · BleepingComputer, Dallas County breach · EdScoop, Judson ISD ransom payment
• Cybersecurity Dive, Moody’s on cyber and creditworthiness · Bond Buyer, cybersecurity and credit ratings

Water, energy and economic concentration

• Bond Buyer, Moody’s Corpus Christi downgrades · Bond Buyer, S&P downgrades · Bond Buyer, Fitch three-notch downgrade
• Bond Buyer, Texas utilities and Winter Storm Uri · ERCOT, HB 4492 Subchapter M · ERCOT, Subchapter N · TNGSFC Customer Rate Relief Bonds, Series 2023
• Brazos Electric Chapter 11 outcome · KERA, Denton’s Uri power costs
• Dallas Fed, Midland oil and gas employment concentration

This commentary is provided for informational and educational purposes only. It is not investment, legal, tax or accounting advice, and it is not a recommendation to buy, sell or hold any security. Figures, ratings and legal outcomes are current as of August 2026 and are drawn from the public sources linked above; ratings and litigation postures change. Readers should independently verify any figure before relying on it and should consult their own advisors.

A collaboration between Lewis McLain & AI

A reader’s framework for a serious argument about the Iran war

On August 1, 2026, The New York Times published an analysis reporting that, to America’s allies, the war in Iran — now in its sixth month — appears headed toward a strategic defeat. It is a serious piece about a serious question, and it deserves better than either reflexive agreement or reflexive dismissal.

What follows is an attempt to do something the news cycle rarely does: separate the article’s individual assertions, ask what evidence stands behind each one, and assign each a weight. Some of the claims are close to established fact. Some are reasonable inference. At least two are assertions dressed as findings. Treating them all as a single package is how readers end up either overcorrecting or dismissing the whole thing.

The Scoring Convention

Each assertion gets a confidence weight based on the quality of evidence available in the public record — not on whether the conclusion is congenial.

• High (80–95%) — documented by primary sources or independent institutional analysis
• Moderate–High (60–79%) — well corroborated by multiple outlets, some interpretive distance
• Moderate (40–59%) — plausible, contested, or dependent on definitions
• Low–Moderate (20–39%) — asserted with limited supporting evidence
• Unscorable — structured so that no near-term evidence could disconfirm it

The Assertions, Weighed

Why the Headline Claim Is Unscorable

The strongest single objection to the piece is structural rather than factual. Its lead source defines the strategic damage as surviving even the collapse of the Islamic Republic — meaning the thesis holds whether the United States wins outright or loses outright.

An argument that cannot be disconfirmed by the opposite battlefield outcome is not a forecast. It is a frame. Frames can be true and useful, but they should be labeled as interpretive commitments rather than presented with the cadence of a finding.

There is a related problem of definitional drift. The lede promises a military-strategic verdict. The evidence delivered is almost entirely reputational — allies do not trust Washington. That may well be the more important argument. It is not the argument the headline makes.

What the Article Does Not Count

Any honest assessment of a war tallies both ledgers. This one tallies one.

Absent from the piece: Iran’s naval losses, the degradation of its air defenses, the decapitation of its senior command, the cost to its economy, and the fact that Saudi Arabia — reluctant for months — has now entered the conflict on the American side and is organizing a multinational maritime coalition. Whatever those facts add up to, leaving them out is a construction choice, and readers should notice it.

The Strongest Counter-Case, Stated Fairly

Those who reject the “defeat” framing argue roughly this: Iranian conventional military power has been gutted in a way that will take a decade to rebuild; the nuclear program has been set back by years even if not eliminated; regional states that spent two decades hedging between Washington and Tehran have been forced off the fence and onto the American side; and a Gulf security architecture that diplomats failed to build for twenty years is being assembled under fire. On this view, the munitions depletion is a real and serious industrial-base problem — but an industrial-base problem is a budget question, not a strategic defeat.

The counter-counter is equally straightforward: an outcome that requires three or more years of interceptor production to recover from, while China watches, has costs that do not appear on the Middle East ledger at all.

Both of these are arguments. Neither is yet a fact.

Indicators That Would Move the Weights

The discipline that distinguishes analysis from opinion is naming in advance what would change your mind. Some candidates:

Would raise the “defeat” weight:

• Sustained Hormuz transit volumes remaining below roughly half of pre-war levels past year-end
• A NATO or Gulf partner publicly declining a U.S. request for basing or overflight
• IAEA access restored and confirming reconstituted enrichment
• Interceptor inventories forcing an announced drawdown in another theater

Would lower it:

• A verified ceasefire with a monitoring regime
• Saudi normalization proceeding despite the nuclear-deal turbulence
• Iranian leadership fracture or negotiated enrichment suspension
• Hormuz insurance rates returning to pre-war ranges

The Bottom Line

The New York Times reported something real. The munitions data are hard, sourced, and independently confirmed by CSIS, and they are the most consequential paragraph in the piece — more consequential, arguably, than the thesis they are used to support. The credibility argument is serious and should not be waved away because its sources are predictable; allied perception is a real strategic asset, and it can be spent.

But the article is a hypothesis carrying the cadence of a verdict, resting on two named analysts, with one side’s ledger tallied. The right way to cite it is “some prominent analysts argue” — not “the assessment is.”

That distinction is not pedantry. In municipal finance, we would call an 8% variance a material finding requiring root-cause analysis, not a rounding difference — and we would not call it a structural failure either. Foreign policy deserves the same discipline. Name the variance. Weight it. Say what would change the number.

Sources consulted: The New York Times (Aug. 1, 2026); CSIS interceptor inventory analysis (Cancian and Park, July 2026); CNN and Defense News reporting on stockpile depletion; IAEA June 2026 verification and safeguards reports as analyzed by the Institute for Science and International Security; Congressional Research Service IF12106; CNBC and S&P Global Platts on Strait of Hormuz transit and pricing; Associated Press and CNN on the July 2026 Saudi entry into the conflict and the U.S.–Saudi 123 agreement.

A collaboration between Lewis McLain & AI

What the July 2026 intrusions into U.S. water systems mean for Texas cities — and why this is a budget problem before it is an IT problem

---

What actually happened

On the nights of Sunday, July 26 and Monday, July 27, 2026, someone reached into the control systems of more than thirty community water and wastewater utilities in Minnesota. Minnesota IT Services confirmed on July 28 that the activity was coordinated. Four communities were named publicly: Braham, Plymouth, South St. Paul, and Maple Plain. Braham’s water plant went offline. Plymouth disconnected cellular-connected equipment at two water towers and several wastewater lift stations. Maple Plain declared a local state of emergency. Nobody’s drinking water was contaminated.

By Thursday, July 30, the FBI and EPA had issued a joint public service announcement: water and wastewater utilities in at least seven states had reported intrusions since July 27, and some of that activity degraded operations. The agencies declined to name the states. Michigan later confirmed it was among them, with nine municipal systems reporting problems. Wisconsin’s Department of Natural Resources sent its utilities an urgent directive the same week. CISA reported that some incidents had produced boil-water notices and forced utilities into sustained manual operation.

As of this writing, no public water supply anywhere in the country has been shown to have been altered or made unsafe.

How they got in — and why it should worry every small city

This was not an exotic attack. That is the point.

The targets were programmable logic controllers — PLCs — the small industrial computers that open a valve, run a pump, hold a tank level, dose a chemical feed. In the affected systems, those controllers were reachable directly from the public internet. The intruders connected to them using the manufacturers’ own engineering software, running on leased hosting infrastructure, then changed device IP addresses and passwords. That locked operators out of their own equipment and stripped them of monitoring and control. In some cases the result was pressure loss and flooding.

CISA’s advisory AA26-097A, first published April 7, 2026 and updated July 22 — four days before the Minnesota incidents — named the specific gear: Rockwell Automation/Allen-Bradley CompactLogix and Micro850, Schneider Electric Modicon M340, Siemens S7-1200. The July update added a detail worth pausing over: at one confirmed U.S. victim, the attackers modified the controller’s ladder logic to disable safety shutdowns and alarms, so that an unsafe condition could develop without anyone being told.

When the April advisory came out, the security firm Censys counted 5,219 internet-exposed hosts worldwide identifying themselves as Rockwell/Allen-Bradley devices on the standard industrial port. A large share of that exposure traced back not to corporate networks but to cellular carrier connections — which is to say, field equipment. Lift stations. Remote pump houses. Elevated storage tanks. The exact architecture that lets a two-person public works department watch a tank level from a truck at 2 a.m. is the architecture that was exploited.

There was no zero-day here. There was misconfiguration at scale.

On attribution, and the politics of it

Federal officials have said privately that Iran is the leading suspect, consistent with a documented Iranian-affiliated campaign that CISA, FBI, NSA, EPA, DOE, U.S. Cyber Command, and now Treasury have jointly tracked since April. The group has previously been tracked under the CyberAv3ngers alias and tied to the IRGC Cyber Electronic Command — the same actor set implicated in the 2023 Unitronics compromises at U.S. water utilities. There is no apparent financial motive, which argues against ordinary criminals.

Officials have also been careful to say the assessment is preliminary and that definitive forensic proof has not been established. That is normal. Complex intrusion investigations routinely take months, and sometimes never reach a public, authoritative conclusion.

The attribution question became political almost immediately. President Trump publicly rejected the Iran theory and blamed Minnesota’s state government, saying he thought Minnesota was behind it and disputing that an Iranian cyberattack had occurred at all. Governor Tim Walz rejected that and pointed to reductions in federal cyber support. Braham’s mayor, Nate George — a Republican running for state auditor — said federal and local officials on the ground had little doubt about the likely culprit, allowed that the president was entitled to his opinion, and argued the practical obligation now is helping cities harden their defenses.

That last framing is the useful one for those of us who work on city budgets. Whoever turned the knob, the knob was reachable.

Texas has already lived this

In January 2024, a citizen in Muleshoe noticed water pouring off an elevated tank. It was not a stuck valve. Attackers had gotten into the remote login system for the SCADA software through a third-party vendor’s access, and the tank overflowed for roughly 30 to 45 minutes before crews took the machine offline and went to manual. Abernathy had a tank overflow the same period. Hale Center logged something on the order of 37,000 attempts against its firewall over four days and unplugged rather than risk it. Lockney took precautions the same day.

Mandiant attributed the activity to Sandworm, the Russian GRU-linked group, operating through a front calling itself the Cyber Army of Russia Reborn. In July 2024, Treasury sanctioned two of that group’s leaders specifically for the Muleshoe and Abernathy hacks.

Muleshoe has about 5,000 people. Abernathy has under 3,000. Nobody targeted them because they mattered strategically. They were reachable, and that was enough. Security researchers describe this bluntly as adversaries taking low-hanging fruit — vulnerable services sitting directly on the internet.

Texas has been the demonstration case for two years now. The July 2026 wave is the same play run at larger scale by a different flag.

The structural problem is a finance problem

Here is the number that ought to reframe this whole conversation for anyone who works in Texas local government finance.

TCEQ oversees more than 7,000 public water systems serving roughly 29 million Texans. Of 7,053 systems counted in TCEQ’s Sunset self-evaluation, 84% serve fewer than 3,300 people. Of 4,641 community water systems, 3,483 serve fewer than 3,300.

Now set that against federal law. America’s Water Infrastructure Act of 2018, Section 2013 — amending Safe Drinking Water Act §1433 — requires community water systems serving more than 3,300 people to certify a Risk and Resilience Assessment and an Emergency Response Plan to EPA on a five-year cycle, and that cycle explicitly covers cyber threats. Recertification for systems serving 100,000-plus was due March 31, 2025. The 50,000–99,999 tier was due December 31, 2025. The 3,301–49,999 tier — where most Texas cities with a real utility fund actually live — came due June 30, 2026. Five weeks ago.

Everyone below 3,300 has no federal cyber assessment requirement at all. In Texas, that is the overwhelming majority of systems: water supply corporations, small districts, subdivisions, and towns operating with a licensed operator, a part-time clerk, and a SCADA package installed by an integrator a decade ago and touched only when something breaks.

The federal watchdogs have said as much. GAO’s 2024 review found roughly 170,000 U.S. water systems facing cyber risk in an increasingly automated sector. EPA’s Inspector General identified critical- or high-severity vulnerabilities at 97 drinking water systems serving 27 million people.

This is not a technology gap. It is a scale-economics gap. A city of 2,400 cannot carry an OT security program on 800 water connections, and no rate structure that voters will tolerate changes that arithmetic.

Where the regulatory line is moving

EPA tried in 2023 to fold cybersecurity reviews into state sanitary surveys. That rule was stayed in court and withdrawn. The agency has since worked through guidance and existing enforcement authority instead — a May 2024 enforcement alert on cyber gaps, and an October 2025 package including a revised Emergency Response Plan guide, a Cybersecurity Incident Response Plan template, incident-specific checklists, and a procurement checklist.

Meanwhile the states are moving. New York finalized binding cybersecurity regulations for wastewater facilities in March 2026, with mandatory incident reporting effective March 26, 2026, built around EPA’s own guidance incorporated by reference. Wastewater has never been covered by AWIA at all, which makes it the obvious place for states to start. Expect imitation.

At the federal level, CIRCIA will require covered entities — water and wastewater utilities included — to report significant incidents to CISA within 72 hours and ransom payments within 24 hours. Final rules are expected later in 2026. Any utility waiting for the final rule before building a reporting process is choosing to scramble later.

In Texas, the obligations already exist and are older than most people realize:

• 30 TAC §290.46(w) requires public water systems to notify TCEQ immediately, by toll-free number, of unauthorized entry, acts of terrorism, or unauthorized attempts to probe or access proprietary information supporting key activities. The threat hotline is (888) 777-3186.
• Since September 1, 2023, local governments — including municipalities, counties, districts, water authorities, and water supply corporations — must report security incidents to the state within 48 hours of discovery.
• HB 150, signed June 2, 2025, created the Texas Cyber Command as a component of the UT System headquartered in San Antonio, consolidating the cybersecurity functions previously held by the Department of Information Resources. The transfer is phased, with completion required by December 31, 2026. Governor Abbott framed the new agency in part as a response to threats from Iran, Russia, and China against power, water, and communications.
• SB 1034, filed in the 89th session as part of Senator Kevin Sparks’s water package, would have gone considerably further: prohibiting direct internet connection of SCADA systems except through secure VPN, requiring annual employee cyber training, authorizing security assessments and compliance audits, mandating 48-hour incident reporting, and giving retail public utilities access to state network security services, with full SCADA compliance by September 1, 2027. It did not become law. SB 1625, which would have expanded the §290.46(w) reporting list to name cyber threats explicitly, moved through committee but likewise did not reach enactment.

Texas came within one bill of having the strongest water-sector cyber statute in the country. The 90th Legislature convenes in January 2027, and after this summer the politics of that bill look very different.

Now the money — and this is the part cities will not like

The federal funding picture is thinner than the rhetoric suggests.

The State and Local Cybersecurity Grant Program — the $1 billion program from the 2021 infrastructure law that states have used to reach small utilities — expired September 30, 2025, along with the Cybersecurity Information Sharing Act of 2015, the law providing liability protection when utilities share threat intelligence. Both were reinstated November 12, 2025 in the shutdown deal, lapsed again briefly, and are currently extended only through September 30, 2026 under the Consolidated Appropriations Act, 2026. Annual SLCGP funding has already fallen sharply: $374,000,000 in FY2023, $279,000,000 in FY2024, $91,750,000 in FY2025. A ten-year reauthorization has passed the House but the program’s future funding level would be set annually through appropriations rather than guaranteed up front.

CISA also stopped funding MS-ISAC, which now charges fees — pushing out precisely the smallest and least-resourced members who benefited most.

What remains: the Drinking Water and Clean Water State Revolving Funds still carry the additional $11.7 billion each from the infrastructure law, and EPA continues to encourage states to fund cyber resilience projects from them. EPA’s Midsize and Large Drinking Water System Infrastructure Resilience and Sustainability grant program made roughly $9,500,000 available nationally in its most recent round. Against 170,000 systems, that is a rounding error.

Translated into budget language: this is going on your rate base. Plan accordingly, and do not build a capital program that assumes a grant cycle which keeps landing on the continuing-resolution chopping block.

What belongs in the FY2027 budget

For a Texas city utility fund, the work sorts into things that cost almost nothing and things that need a line item.

Nearly free, do it this month:

• Inventory every internet-reachable OT device, including anything on a cellular modem. Most cities do not actually know. That inventory is also the foundation the RRA, any future state rule, and CIRCIA readiness all silently assume you already have.
• Take PLCs off direct internet exposure. Remote access through a controlled VPN, not an open port.
• Change default and vendor-set device passwords. Require multifactor authentication for remote access.
• Review your integrator and SCADA vendor’s remote access path. Muleshoe was entered through a third-party vendor’s remote login. Contract language matters here as much as firewalls.
• Confirm who calls the TCEQ hotline and who files the 48-hour state report, by name, and make sure they are not the same person who will be running the plant manually that night.

Needs money in the budget:

• Manual-operation capability and drills. Every utility that came through July intact did so by unplugging and running by hand. That is a staffing and training cost, and it is the cheapest resilience you will ever buy.
• Network segmentation between business IT and plant OT.
• Continuous OT monitoring and logging, sized to the system.
• An incident response plan that has actually been exercised with the city manager and at least one council member in the room.
• Cyber coverage review with your risk pool, and a candid look at what your policy excludes for nation-state activity.

And for the smallest systems: regionalization. A wholesale provider or a shared-services arrangement with a larger neighbor can carry an OT security program that 800 connections cannot. That has been the right answer to the small-system problem in Texas for thirty years for operations, compliance, and capital. It is now the right answer for security too.

A closing thought

There is a temptation to file this under exotic threats — foreign intelligence services, industrial control systems, the language of cyberwar. But strip the geopolitics away and what happened in Braham and Muleshoe was mundane. A controller was left where anyone could reach it. A default password was never changed. A vendor’s remote access was never reviewed. Somebody far away tried the door, and the door opened.

Public infrastructure is stewardship in the plainest sense. Somebody built the tank, somebody bonded it, somebody maintains it, and the water is clean tomorrow because a chain of unremarkable people did unremarkable things faithfully. The chain now includes a firewall rule and a password policy. That is not glamorous work, and it will not be in any ribbon-cutting photo. It should be in the budget anyway.

---

Sources

• FBI/EPA joint public service announcement, July 30, 2026
• CISA Advisory AA26-097A, “Iranian-Affiliated Cyber Actors Exploit Programmable Logic Controllers Across US Critical Infrastructure,” April 7, 2026, updated July 22, 2026
• The New York Times, “Scope of Hacks on U.S. Water Supply Widens as Evidence Points to Iran,” August 1, 2026
• NBC News, Engadget, Government Technology, The Record, Cybersecurity Dive — July 30–31, 2026 coverage
• Tenable, “What water utilities need to know about cybersecurity compliance,” July 30, 2026
• WaterISAC advisory summary on AA26-097A; IOActive analysis, July 2026
• CNN, Texas Tribune, and Lubbock Avalanche-Journal coverage of the Muleshoe, Abernathy, Hale Center, and Lockney incidents, April and July 2024
• TCEQ, 30 TAC §290.46(w); TCEQ Sunset self-evaluation, Chapter IX; TCEQ Homeland Security for PWS
• Texas HB 150 (89R); Texas SB 1034 (89R); Texas SB 1625 (89R)
• GAO-24-106744; EPA Office of Inspector General management implication report on drinking water cybersecurity
• FEMA State and Local Cybersecurity Grant Program funding history

A collaboration between Lewis McLain & AI

Florida and Texas have spent eight months trying to convert a political judgment into a legal status. The gap between the two is where the Constitution lives.

In American law, terrorist can be three different things: a political accusation, a factual finding in a criminal case, or a formal status created by statute. The campaign against the Council on American-Islamic Relations depends on treating all three as interchangeable.

On November 18, 2025, Texas Governor Greg Abbott issued Proclamation 41-4241 declaring CAIR and the Muslim Brotherhood “foreign terrorist organizations” and “transnational criminal organizations,” barring them from acquiring Texas land and calling for “heightened enforcement.” Florida Governor Ron DeSantis followed in December with Executive Order 25-244. When a federal judge blocked that order in March, Florida rewrote the rules: House Bill 1471, signed April 6, 2026, created a state designation system carrying criminal, corporate, educational, and contracting consequences. It took effect July 1. Within twenty-four hours, DeSantis announced that CAIR was on the list — and CAIR was back in federal court.

CAIR denies supporting terrorism. It has never been federally designated a foreign terrorist organization. That is not a technicality. Congress gave the designation power to the Secretary of State under 8 U.S.C. § 1189 and wrapped it in procedure: findings, classified-record review, notice to Congress, Federal Register publication, revocation and redesignation, and direct review in the D.C. Circuit. A governor’s press conference does not touch that list. There is a federal track running in parallel — an executive order initiating FTO designation of certain Muslim Brotherhood chapters, a domestic-terrorism label for “Antifa,” and bills in Congress to designate CAIR — but that is precisely the point: the federal process exists, and the states are routing around it.

So the dispute presents two questions that officials keep collapsing into one. May a state criticize CAIR, investigate it, and prosecute any crime it can prove? Obviously. May a state build a parallel terrorism regime that punishes a domestic nonprofit — along with its donors, lawyers, employees, students, and landlords — on an executive determination? That is where the constitutional trouble starts.

What has actually happened

Texas moved first and has moved slowest. Attorney General Ken Paxton sued CAIR-affiliated entities in Collin County district court on February 5, 2026, seeking temporary and permanent injunctions to halt their Texas operations under the state’s terrorism ban, its property prohibition for transnational criminal organizations, and its gang and public-nuisance statutes. CAIR’s Texas chapters, represented by the Muslim Legal Fund of America and CAIR’s Legal Defense Fund, sued Abbott and Paxton in the Western District of Texas in November 2025 and moved for a preliminary injunction on January 22, 2026.

That motion has not been decided. What the court has done is grant the state discovery. On May 7, Judge Alan Albright partially granted motions to compel, ordering CAIR to produce records of foreign donors who gave $5,000 or more in any year from 2021 through 2024, records of foreign recipients of $2,500 or more from CAIR over the same period, and itineraries for executive director Nihad Awad’s travel to nine countries between 2019 and 2023. Abbott called it a win; CAIR pointed out that the court had refused his far broader demand for every donor above $5,000 over a decade. Both characterizations are self-serving, and the episode is a reminder that a designation fight is also a compelled-disclosure fight — a domain where the Supreme Court has demanded exacting scrutiny at least since NAACP v. Alabama in 1958, and reaffirmed it in Americans for Prosperity Foundation v. Bonta in 2021.

Florida moved faster and lost first. Executive Order 25-244 directed state and local agencies to deny contracts, employment, funds, and benefits to CAIR and to anyone providing it “material support,” including “expert advice or assistance.” On March 4, 2026, U.S. District Judge Mark Walker preliminarily enjoined it. His framing was unusually direct: “The question before this Court is whether the Governor can, in a non-emergency situation, unilaterally designate one of the largest Muslim civil rights groups in America as a ‘terrorist organization’ and withhold government benefits from anyone providing material support or resources to the group. This Court finds he cannot.” The evidence of chill was concrete — a production company walked away from a podcast agreement; a federation of Muslim organizations cut CAIR-Florida from a conference. The order was preliminary, not a final judgment on every allegation, and it is now on appeal to the Eleventh Circuit.

HB 1471, now Chapter 2026-28, was the response. Most of the bill is not about designation at all: it bars Florida courts from applying “religious law… specifically includ[ing] Sharia law” or foreign law, and its sponsors sold it on that basis. The designation machinery rode along behind. It lets Florida’s Chief of Domestic Security — the head of the Florida Department of Law Enforcement — recommend that an organization be designated a domestic or foreign terrorist organization, subject to ratification by the Governor and Cabinet on seven days’ written notice, with publication in the Florida Administrative Register and review every five years. The consequences are not symbolic. Knowingly providing material support to a designated group is a felony punishable by up to thirty years, whether or not the support was meant to further anything unlawful, and Florida defines material support to include “any property… or service,” expressly including “expert advice or assistance.” Because the statute reaches anyone who “work[s] under the direction and control” of a designated group, its own staff could face felony exposure for continuing to do their jobs. A designated organization is also treated as a “criminal gang” under Chapter 874. Public colleges must expel students who “promote” a designated group in ways deemed to support violence; private schools taking state money may not hire anyone “affiliated with” one, a term the law leaves undefined. A designated group gets thirty days to sue in the Second Judicial Circuit in Leon County — while a companion public-records exemption limits its access to the evidence used against it. Once challenges are exhausted, the state may move to dissolve the organization, though that power reaches only Florida-incorporated nonprofits, not the D.C.-organized CAIR Foundation.

On July 1, FDLE Commissioner Mark Glass recommended designating CAIR, the Muslim Brotherhood, and “Antifa,” alongside more than ninety foreign entities already designated by the federal government — Tren de Aragua, the Sinaloa and Gulf cartels, Iran’s Revolutionary Guard. The padding is telling: for ninety-odd groups the state is mirroring a federal list built through federal process; the novelty is the domestic additions. CAIR and CAIR-Florida sued within hours, represented by the ACLU, the ACLU of Florida, the SPLC, Akeel & Valentine, and Bondurant Mixson & Elmore. Judge Walker denied immediate emergency relief, holding that he needed further briefing and proof that officials were actually following through. As of mid-July, they were not: the Cabinet had not met, FDLE’s implementing rules were unfinished, and the state told the court it could not give a timeline. The parties were due to report back on July 22. The designation, in other words, has been announced but not imposed — which is itself a fact about how these regimes work. The label does its damage on the day of the press conference.

The doctrinal problem

Supporters of state designation point to Holder v. Humanitarian Law Project, where the Supreme Court upheld the federal material-support ban even as applied to speech coordinated with designated foreign groups. But the opinion contains a sentence its state-level admirers rarely quote: the Court “do[es] not suggest that Congress could extend the same prohibition on material support at issue here to domestic organizations.” The holding rested on the foreign-affairs and national-security posture of federal designation. Lifting the phrase “material support,” attaching it to a domestic nonprofit selected by a politically accountable state official, and assuming the analysis carries over is not a small extension. It is the precise move the Court reserved.

The associational doctrine points the same direction. In United States v. Robel, the Court struck down a bar on Communist-organization members working at defense facilities because it “sweeps indiscriminately across all types of association.” In NAACP v. Claiborne Hardware, it refused to impose liability on nonviolent boycott participants because some in the movement had committed unlawful acts, observing that “guilt by association is a philosophy alien to the traditions of a free society.” Liability requires knowledge of and specific intent to further a group’s unlawful ends. Penalties keyed to “membership,” “affiliation,” or “promotion” do not.

Then there is NRA v. Vullo, decided unanimously in 2024. A New York regulator had pressed insurers and banks to cut ties with the NRA. The Court, building on Bantam Books v. Sullivan, held that government may not use official power to coerce third parties into punishing a disfavored speaker. Walker’s March order was, in substance, a Vullo case: the injury was not what Florida said about CAIR but what Florida told everyone else to do about CAIR. The rule protects the NRA and CAIR on identical terms, which is the point.

Vagueness and due process compound the problem. What does it mean to be “affiliated with” a designated organization? To “promote” one? Fair notice is a constitutional minimum where criminal liability attaches, and it is hard to supply when the evidentiary basis for the designation is itself shielded from disclosure. Secret evidence and post-deprivation review are sometimes defensible in genuine emergencies. They are harder to defend against a thirty-year-old American nonprofit after years of public political conflict.

Federalism supplies the last limit. States prosecute local crime; the national government conducts foreign relations. A state list of “foreign terrorist organizations” that supplements or contradicts the federal one invites preemption and dormant foreign-affairs challenges — Crosby v. National Foreign Trade Council is the obvious analogy. Calling a nonprofit organized under District of Columbia law “foreign” does not fix that.

The model is spreading

Florida and Texas are not isolated. Indiana enacted Senate Bill 256 in March 2026, letting the Governor designate domestic groups and individuals as “affiliates” of federally designated foreign terrorist organizations on a “more likely than not” standard, after Attorney General civil investigative demands. “Affiliate” includes anyone who “acts or acted in any capacity at the order or request” of an FTO — language that could reach purely expressive activity. Designated entities lose state funds, employment, and tax exemption.

Arizona’s HB 2808 would authorize designation where a group’s “ideological alignment demonstrates documented ideological, operational or advocacy alignment” with a federally designated entity — a standard that manages to be circular and boundless at once. Oklahoma has considered two versions of the idea, one keyed to state-law “terrorism,” one to federal designation.

Louisiana is the useful counterexample. SB 388 as introduced would have let the governor designate U.S.-based “foreign terrorist organizations” and imposed contractor certification requirements with long debarment. What passed, effective June 3, 2026, is two pages: it authorizes the division of administration to review whether state contracts are held by a foreign adversary, a federally designated foreign terrorist organization, or their agents. No new designation power, no new list. Keying consequences to an existing federal designation raises far fewer foreign-affairs and procedural problems than a governor-created blacklist, though it can still be applied unconstitutionally.

Not only a Republican temptation

On September 3, 2019, San Francisco’s Board of Supervisors declared the NRA a “domestic terrorist organization” and urged the city to reassess contractors doing business with it. The NRA sued six days later. Mayor London Breed and City Attorney Dennis Herrera then issued a joint memo confirming that the resolution “does not impose duties on City departments, change any of the City’s existing laws or policies,” and that “no department will take steps to assess the relationships between City contractors and the NRA.” The NRA dismissed its suit that November, and both sides claimed victory.

That episode is worth remembering precisely because the politics run the other way. A blacklist built for one enemy is precedent for the next administration’s. Muslim civil-rights groups, gun-rights organizations, racial-justice movements, abortion-rights and anti-abortion networks, environmental activists, and labor organizers will not all hold power at once. Constitutional rules have to survive the rotation.

Governments already have less theatrical tools: state terrorism offenses, conspiracy, racketeering, charitable-fraud enforcement, sanctions compliance, prosecution for threats, arson, or homicide. Texas’s own Civil Practice and Remedies Code already authorizes injunctions against foreign terrorist organizations — but it requires the state to prove the elements in court, which is presumably why a proclamation was more attractive.

The allegations still matter — but labels are not proof

None of this makes CAIR immune from scrutiny. In May 2007, prosecutors publicly filed a list of 246 unindicted co-conspirators in the Holy Land Foundation case; CAIR was on it. Five HLF leaders were convicted of terrorism financing on retrial in November 2008. CAIR was never charged or tried. In 2009 the district court, unsealing an opinion in the dispute over the list, wrote that the government had produced ample evidence of associations among CAIR, other named groups, HLF, and Hamas — but held that publishing the list violated the Fifth Amendment. The Fifth Circuit affirmed the due-process holding in 2010 and pointedly added that those findings “do not amount to a ruling” that the named organizations took part in a criminal conspiracy.

DeSantis has leaned heavily on that 2007 list. It is a strange foundation on which to build a designation, given that both courts to consider it held that publishing the list was itself a violation of due process.

Nihad Awad’s November 2023 remark that he was “happy to see” Gazans “breaking the siege” on October 7 drew a condemnation from the Biden White House; Awad said he was describing rights under international law and that targeting civilians is never acceptable. These are fair subjects for reporting, debate, donor judgment, and — given evidence of a crime — investigation. They do not establish the elements of an offense, and they do not make a supporter, a landlord, or a law student a felon.

Better options

Officials genuinely worried about terrorism have more durable tools. Investigate conduct, not identity, and apply the same evidentiary threshold to Muslim, white-supremacist, anti-government, and left-wing suspects alike. Go to court early: asset restraints, dissolution, and funding cutoffs should follow an adversarial hearing, not a press release. Write narrow definitions tied to intentional assistance for specified violent acts, with carve-outs for advocacy, journalism, legal representation, humanitarian work, worship, and scholarship. Build real review — notice, disclosure of unclassified evidence, a response period, a written decision, time limits, and expedited appeal. Screen vendors for sanctions violations and demonstrated risk under published, viewpoint-neutral rules, not ideological disassociation. And fund what actually reduces harm: threat-assessment teams, hate-crime reporting, victim services, protective security grants.

Residents can apply a short test to any designation: What statute authorizes it? What conduct — not rhetoric — is alleged? What is the burden of proof? Who reviews the evidence? Can the organization respond before penalties attach? Would this official accept the same power in an opponent’s hands?

The bottom line

States are not powerless against terrorism. They can investigate, prosecute, regulate, contract, and coordinate with federal authorities. What they cannot do is substitute proclamation for proof.

A terrorism label wins a news cycle. A conduct-based case, tested before an independent judge under clear law, is what the Constitution requires. If the evidence is real, the government should be willing to prove it. If it is not, the label is not public-safety policy. It is a blacklist.

---

Sources and further reading

• Texas Proclamation 41-4241 (Nov. 18, 2025) and the Governor’s announcement
• Florida Executive Order 25-244
• Order granting preliminary injunction, CAIR v. DeSantis (N.D. Fla. Mar. 4, 2026)
• Florida HB 1471 (2026) — text, history, and analyses
• ICNL, State-Level Terrorism Designation Laws and U.S. Nonprofits (May 2026)
• Florida Phoenix: DeSantis announces CAIR designation (July 1, 2026) and designation delayed (July 14, 2026)
• ACLU case page, CAIR Foundation v. DeSantis
• Complaint, CAIR Texas v. Abbott (W.D. Tex.)
• Texas AG announcement of suit against CAIR and the Muslim Brotherhood
• Indiana SEA 256 (2026) · Arizona HB 2808 · Louisiana SB 388, enacted as Act 764 (2026) · Oklahoma SB 1784 · Oklahoma SB 1536
• 8 U.S.C. § 1189 (federal FTO designation)
• NRA v. Vullo, 602 U.S. 175 (2024) · Holder v. Humanitarian Law Project, 561 U.S. 1 (2010) · NAACP v. Claiborne Hardware, 458 U.S. 886 (1982) · United States v. Robel, 389 U.S. 258 (1967) · Crosby v. National Foreign Trade Council, 530 U.S. 363 (2000)
• Fifth Circuit opinion in the Holy Land Foundation appeal (2010) and summary of the unindicted co-conspirator ruling
• CNN: White House condemns CAIR director’s October 7 comments (Dec. 8, 2023)
• Courthouse News: NRA drops suit over San Francisco “terror group” resolution and SF Examiner on Mayor Breed’s memo

This article is general legal analysis, not legal advice. The Florida and Texas cases are active as of July 31, 2026. The parties in the Florida designation case were due to report to the district court on July 22; the outcome of that report was not publicly available at press time. The March 4 preliminary injunction is on appeal to the Eleventh Circuit (No. 26-10735), and the Texas preliminary-injunction motion filed January 22 remains undecided. Later rulings may change the analysis.

A collaboration between Lewis McLain & AI

A Georgia father goes to prison, and a decade of legal doctrine finally has a spine

On the morning of July 30, 2026, a 55-year-old man in an orange-and-white striped county jail uniform stood in a Barrow County courtroom in Winder, Georgia, and listened to Superior Court Judge Nicholas Primm tell him something no American parent had ever heard from a bench in quite this way.p

“It is clear you failed as a parent,” Primm said. “The weight of your crimes is tethered and tied to the acts of someone else, your son.”

Colin Gray was sentenced to 15 years in prison. His son Colt had been sentenced two days earlier to life without parole for walking into Apalachee High School on September 4, 2024, and killing two 14-year-old students, Mason Schermerhorn and Christian Angulo, and two teachers, Richard Aspinwall and Cristina Irimie, while wounding several more. Colt was 14 years old on the day of the shooting. The rifle was a Christmas gift from his father.

Colin Gray is the first parent in the United States convicted of murder for a school shooting committed by his child.

What the jury actually found

This distinction matters enormously, and it is the part most likely to get lost in the headlines.

A Barrow County jury convicted Gray in March 2026 on 27 counts — two counts of second-degree murder for the two students, two counts of involuntary manslaughter for the two teachers, plus reckless conduct and cruelty to children. Judge Primm was explicit at sentencing that these were crimes of negligence. Gray was never accused of knowing his son’s plan, helping to plan it, or wanting it to happen. He was convicted for what he failed to do: he bought a 14-year-old an AR-15-style rifle, left it accessible, and did not act on an accumulating record of warnings about the boy’s deteriorating mental state.

“You didn’t get him mental health counseling when it was obvious he needed some,” Primm said. “None of those failures helped your case, but those aren’t why you were convicted.”

That is a narrow and carefully drawn holding, and prosecutors around the country will read it that way. It is not a theory that parents are responsible for whatever their children do. It is a theory that a specific chain of adult decisions — arming a minor, leaving the weapon unsecured, ignoring escalating red flags — can constitute criminal negligence when children die at the other end of it.

The gap between 80 years and 15

District Attorney Brad Smith asked for 80 years. Gray faced a theoretical maximum of 180. His defense asked for 20 years with 10 to serve. Primm imposed 15 years on each second-degree murder count, 10 years on each reckless conduct count, and 10 years for cruelty to children, all running concurrently rather than stacked.

The result landed much closer to the defense’s request than the prosecution’s, and several family members of the victims told reporters afterward that they found it too lenient. Smith had argued in court that Gray was the reason four people are dead, seven were injured, and a 16-year-old boy will die in prison.

Primm addressed that tension directly. “My heart aches for everyone that was there that day,” he told the families. Then: “The law requires that I set aside emotion. I don’t get to sentence with passion.”

Defense attorney Brian Hobbs has said he plans to appeal, which would go to the Supreme Court of Georgia. Nothing here is finally settled.

The line of cases behind it

Colin Gray did not arrive out of nowhere. He is the sixth or seventh significant American case in eight years, and the pattern is worth laying out because the trend line is unmistakable — and so are its limits.

Illinois, 2018 — Jeffrey Reinking. Returned an AR-15 to his son Travis after Illinois State Police revoked the son’s firearm owner’s ID card and after Travis had been hospitalized for psychiatric evaluation. Travis killed four people at a Nashville Waffle House in April 2018. The father was convicted in 2022 of illegal delivery of a firearm to a person treated for mental illness within five years, sentenced to 18 months in March 2023, and lost his appeal in 2024.

Illinois, 2022 — Robert Crimo Jr. Sponsored his 19-year-old son’s firearm application months after police had responded to reports of a suicide attempt and a threat to kill family members. His son killed seven people at the Highland Park Fourth of July parade. Crimo Jr. pleaded guilty in November 2023 to seven misdemeanor counts of reckless conduct: 60 days in jail, two years probation, 100 hours of community service, surrender of his own FOID card and firearms. He served 27 days.

Michigan, 2021 — James and Jennifer Crumbley. The landmark case. Their son Ethan killed four students at Oxford High School with a pistol they bought him days earlier, after school officials called them in the morning of the shooting over his violent drawings and they declined to take him home. Each parent was convicted at a separate trial in early 2024 of four counts of involuntary manslaughter and sentenced in April 2024 to 10 to 15 years. They are still litigating. A judge denied new trials in June 2025, and the Michigan Supreme Court declined to release Jennifer Crumbley on bond pending appeal in July 2025.

Virginia, 2023 — Deja Taylor. Her 6-year-old son took her handgun from a dresser to Richneck Elementary in Newport News and shot his first-grade teacher, Abby Zwerner. Taylor drew 21 months in federal prison on a drug-and-firearm count and two years in state prison for felony child neglect. She was released in May 2026.

Wisconsin, 2024 — Jeffrey Rupnow. The live case. His 15-year-old daughter Natalie killed a teacher and a student at Abundant Life Christian School in Madison in December 2024 before killing herself. Rupnow had bought her the handguns and, by his own statement to investigators, told her the combination to the gun safe was his Social Security number entered backward. He faces two felony counts of intentionally providing a dangerous weapon to a minor causing death and one count of contributing to the delinquency of a child — a combined maximum of 18 years. A Dane County judge refused to dismiss, and a state appeals court denied his challenge on July 8, 2026. Trial is set for March 2027.

Where the doctrine stops

Anyone tempted to read Winder as an unlimited expansion of criminal liability should look at Newport News two months earlier.

Ebony Parker, the assistant principal at Richneck Elementary on the day Zwerner was shot, faced eight felony child neglect counts — one for each bullet in the gun. Prosecutors argued she had both the authority to act and knowledge of the crisis, and did nothing. On May 21, 2026, on the fourth day of trial and after 16 witnesses, Circuit Judge Rebecca Robinson struck all eight counts before the case reached the jury.

“The court is of the legal opinion that this is not a crime,” Robinson said, “not under the common law of Virginia, nor under the code of Virginia.”

Robinson’s ruling is the boundary marker. Courts have proven willing to criminalize the conduct of the adult who put the gun in the child’s hands. They have been considerably less willing to criminalize the conduct of the adult who merely failed to catch it downstream. Parker still faces the consequences of a $10 million civil verdict, which is exactly the point: the civil system and the criminal system are drawing the line in different places, on purpose.

The Texas question

Here is where this gets uncomfortably close to home, and where I think Texans ought to pay attention.

Texas has a safe-storage statute. Penal Code Section 46.13, “Making a Firearm Accessible to a Child,” has been on the books since 1995 and has not been amended since 1999. It makes it an offense to leave a readily dischargeable firearm where a person with criminal negligence knew or should have known a child would gain access.

The penalty is a Class C misdemeanor. If the child actually discharges the weapon and causes death or serious bodily injury, it rises to a Class A misdemeanor — a maximum of one year in county jail and a $4,000 fine. The statute defines “child” as a person younger than 17, which is why it did not reach the Santa Fe High School shooting in May 2018, where the 17-year-old shooter used his father’s shotgun and pistol. The statute also carries four affirmative defenses and a provision barring arrest of a family member for seven days.

Compare the arithmetic. Georgia gave a prosecutor a path to second-degree murder and a jury gave him 27 convictions. Wisconsin gives a prosecutor felony counts carrying 18 years. Texas, on its firearms statute alone, gives a prosecutor one year in county jail. A Texas district attorney facing an identical set of facts would have to build the case on general homicide provisions — criminally negligent homicide is a state jail felony, 180 days to two years — because the firearms-specific offense is a misdemeanor and therefore cannot serve as the predicate felony for felony murder. I am not a lawyer and this is not legal advice, but the structural gap is not subtle, and any Texas legislator who wants to close it knows exactly which section number to pull up.

What this actually means for the people who have to act

For law enforcement, prosecutors, school administrators, and the ordinary citizens who keep noticing things and wondering whether to say something, I think the Apalachee sentencing carries four practical lessons.

Documentation is the whole case. Every one of these convictions was built on a paper trail: text messages, therapy records, school counselor notes, police reports, purchase receipts, safe combinations described to investigators. The prosecutions that succeeded were the ones where somebody wrote it down. The warning was not new information on the day of the shooting; it was the accumulated weight of things that had already been recorded.

Criminal negligence is a real standard, not a rhetorical one. Judge Primm convicted a man who was not accused of wanting anyone dead. That is a genuine shift, and it is a shift that took roughly eight years and a half-dozen prosecutions to establish.

The deterrent runs upstream, not downstream. The message these cases send is aimed at the adult standing in the gun store in December, not at the school employee triaging a chaotic Tuesday morning. Ebony Parker’s dismissal makes that division of labor explicit.

And the sentence itself is a caution against triumphalism. Fifteen concurrent years, with families in the gallery who wanted 80, is what accountability looks like when a judge is doing his job rather than expressing the community’s grief. Gray will likely appeal. The Crumbleys are still appealing two years on. This is not a finished body of law; it is a body of law being built one hard case at a time.

Apalachee High School’s first day of classes was the day after the sentencing.

---

Sources

Atlanta Journal-Constitution, CNN, NBC News, CBS News, Fox News, Al Jazeera, WSB-TV, and Georgia Public Broadcasting reporting on the Colin Gray sentencing, July 30, 2026. Michigan Public Radio, Courthouse News, and CBS Detroit on the Crumbley prosecutions and appeals. CBS Chicago, ABC7 Chicago, and BBC on Robert Crimo Jr. Associated Press, Washington Post, and WKRN on Jeffrey Reinking. Wisconsin Public Radio, PBS Wisconsin, Spectrum News, and AP on Jeffrey Rupnow. CNN, NBC News, WAVY, and VPM on the Ebony Parker dismissal. Texas Penal Code Section 46.13 and PolitiFact Texas on the statute’s scope.

A collaboration between Lewis McLain & AI

On Tuesday, July 28, 2026, U.S. District Judge David Hittner permanently enjoined the City of Houston from enforcing the race-conscious portion of a contracting program the city had operated since 1984. The Midtown Management District, whose board is appointed by the mayor and council, was enjoined on the same terms.

For anyone who works in Texas municipal procurement, finance, or economic development, this is not a Houston story. It is the latest entry in an eighteen-month sequence that has already redrawn state and federal contracting rules, and it arrives with a set of practical questions that every city, county, EDC, and special district in Texas should be able to answer.

What the court actually decided

Gerald (“Jerry”) and Theresa Thompson own Landscape Consultants of Texas and Metropolitan Landscape Management. Their workforce is predominantly Hispanic. Their ownership is white, which excluded them from Houston’s Minority, Women and Small Business Enterprise program and required them to subcontract portions of work they were qualified to self-perform. Represented at no charge by the Pacific Legal Foundation, they filed suit in September 2023, roughly two months after the Supreme Court decided Students for Fair Admissions v. Harvard.

Hittner denied all summary judgment motions in February 2025 and tried the case to the bench over four days in December 2025. His findings of fact and conclusions of law, entered this week, describe the decision as the first to extend the SFFA framework to municipal public contracting.

The reasoning is narrow and it matters. Under strict scrutiny, a government using racial classifications must identify concrete, particularized discrimination and show that the racial remedy is necessary to correct it. Hittner found that Houston had not done so. He pointed to testimony from the city’s own expert that Houston’s 2024 disparity study identified no specific instances of intentional discrimination by city officials or employees in recent years, and that the city had disciplined no one for contracting discrimination. General statistical underutilization, standing alone, did not carry the burden.

That holding is not new law so much as a hard application of old law. City of Richmond v. J.A. Croson Co. has required exactly this since 1989: strict scrutiny, evidence of identified discrimination, serious consideration of race-neutral alternatives, and narrow tailoring. What SFFA changed is the appetite of federal courts to enforce Croson without slack.

What survived

The injunction reaches the race-based components only. Houston and the Midtown district may continue to direct contracts toward small businesses and women-owned businesses. City Attorney Arturo Michel confirmed the city is evaluating an appeal, stated that the ruling does not disturb the city’s Small Business Enterprise Program, and said Houston will abide by the decision as to existing and recently awarded contracts pending further order.

That severability is the single most useful fact in the opinion for other Texas jurisdictions. Programs built as a single undifferentiated ordinance are exposed in full. Programs with a clean architectural separation between small-business provisions and race-conscious provisions can lose the second without losing the first.

The dollars in dispute

Houston awarded roughly $2,500,000,000 in construction, professional services, goods, and other services contracts in fiscal year 2025. Of that, $579,000,000 went to firms certified under the MWSBE program across more than 1,600 separate contracts. Within that $579,000,000, Hispanic-owned firms received 34%, Asian-owned firms 22%, firms owned by white women 17%, and Black-owned firms 14%.

Those percentages explain why the city’s own 2025 council debate was complicated. The disparity study that preceded the trial found no disparity for Asian- and Hispanic-owned firms in certain spending categories, and disparities across all categories for Black-owned firms. Council accepted the study results, declined to narrow the program, and added a veteran-owned small business certification. Mayor John Whitmire argued at the time that visible consensus mattered for the coming litigation.

The reaction, from both directions

Erin Wilcox of the Pacific Legal Foundation framed the outcome as equal protection applying to everyone, and said the Fourteenth Amendment guarantees every owner the same shot at a public contract regardless of race.

Harris County Commissioner Rodney Ellis, who championed the Houston program four decades ago, said the disparities documented then still exist today and that the decision falls hardest on family firms and small contractors. U.S. Rep. Christian Menefee described it as part of a sustained campaign against tools that minority and women business owners use to compete. Carol Guess, chair of the Texas Association of African-American Chambers of Commerce, warned that the greater risk is other municipalities preemptively dismantling their programs to avoid the cost of a court fight.

That last concern is the one with the most direct operational relevance, because it is already happening, and it started before this ruling.

The statewide landscape this ruling landed in

Texas municipal contracting policy has been under simultaneous pressure from three directions since mid-2025.

State level. On October 28, 2025, Acting Comptroller Kelly Hancock suspended all new and renewed Historically Underutilized Business certifications pending legal review, citing Governor Abbott’s January executive order. On December 2, 2025, his office issued emergency rules restructuring the HUB program as VetHUB, limited to businesses owned by veterans with a service-connected disability of 20% or higher. On January 6, 2026, more than 15,000 minority- and women-owned firms were decertified, leaving roughly 500 certified businesses statewide. For scale, HUB firms held 3,634 contracts worth more than $4,000,000,000 in 2024.

Four businesses and a statewide trade association sued Hancock in Travis County district court on March 2, 2026, arguing that the Comptroller exceeded his statutory authority under Government Code Chapter 2161, bypassed the Administrative Procedure Act, and violated Texas constitutional protections including separation of powers. Two more businesses joined on March 13. On April 14, 2026, the court granted a preliminary injunction and ordered the six named plaintiffs reinstated. Other decertified firms were not automatically restored. Permanent VetHUB rules took effect May 12, 2026. The merits remain undecided.

Note the political detail: the 89th Legislature considered and declined to pass bills eliminating the HUB program in the 2025 session. The plaintiffs’ separation-of-powers claim rests squarely on that fact.

Federal transportation. On October 3, 2025, USDOT issued an Interim Final Rule eliminating the race- and sex-based rebuttable presumption of social and economic disadvantage from the Disadvantaged Business Enterprise and Airport Concession DBE programs. Owners must now demonstrate individualized disadvantage by narrative. Every Unified Certification Program entity must recertify its existing DBE roster, and DBE contract goals are prohibited until recertification is complete. On March 19, 2026, the Eastern District of Kentucky dismissed Mid-America Milling Co. v. USDOT as moot, since the rule gave the plaintiffs everything they had asked for, and dissolved the September 2024 preliminary injunction. This reaches TxDOT-funded local projects, DART, Metro, Capital Metro, VIA, and every commercial service airport in the state.

Federal grant conditions. Executive Order 14173 pushed a separate wave, tied not to litigation risk but to grant eligibility. Fort Worth’s council voted 7 to 4 on August 5, 2025, to suspend the Business Equity Ordinance, MWBE requirements in economic development incentive policies, and the standalone Diversity and Inclusion department, after staff warned that roughly $277,100,000 in federal grants was at risk. The city manager estimated a property tax rate increase of about four cents per $100 of valuation would be required to replace that revenue. Fort Worth replaced the program with a Small Business Development Program offering a 5% bid preference on contracts up to $100,000 and a 30% utilization target above that threshold.

Dallas suspended its Business Inclusion and Development Policy in June 2025 and is standing up the Developing Regional and Inclusive Vendor Enterprises framework, a small-business-focused policy grounded in a market utilization study rather than a disparity study, with first-look access, a small business directory, and bonding and technical assistance. Dallas receives roughly $305,000,000 annually in federal grants.

San Antonio discontinued the M/WBE component of its SBEDA program, which had operated since 1989, in late 2025. The city’s 2023 disparity study had found that minority- and women-owned firms accounted for 53% of city-funded contract payments.

Austin, as of late 2025, took the position that its MBE/WBE Procurement Program remained active and compliant, and issued public notice that the state HUB suspension did not affect the city program. That position is now the outlier among the large Texas cities and deserves watching.

Still pending. The Pacific Legal Foundation’s parallel suit against Harris County remains live. Interim County Attorney Abbie Kamin noted that MWBE participation in county contracts rose from 9% to nearly 30% over four years, with nearly $400,000,000 of $1,500,000,000 in program-eligible contracts going to MWBE firms. PLF has publicly identified Port Houston, Metro, Harris Health System, and Houston ISD as entities with comparable programs.

What this means operationally

A district court judgment binds the parties. Hittner’s ruling controls Houston and the Midtown Management District. It is not binding precedent on other Texas cities, and it may go to the Fifth Circuit. But a fully tried case with findings of fact, in the Southern District of Texas, applying SFFA to municipal contracting, is persuasive authority that opposing counsel will cite in the next filing. The practical question for a city manager or finance director is no longer whether the program is defensible in theory. It is whether the city wants to fund the defense.

A short checklist for Texas jurisdictions:

1. Inventory every place a racial, ethnic, or sex-based classification appears. This is broader than the procurement ordinance. Check EDC and CDC incentive policies, Chapter 380 and 381 agreements, bond program participation goals, developer agreements, grant subrecipient terms, and standard contract boilerplate. Fort Worth’s action reached its economic development incentive policy, not just its purchasing rules.
2. Confirm severability. If race-conscious provisions are struck, does the small-business framework survive on its own text? Houston’s did. Ordinances drafted as a single integrated scheme may not.
3. Stop treating a disparity study as a safe harbor. Hittner’s ruling turned in part on the city’s own expert conceding that the 2024 study identified no specific instances of intentional discrimination. Statistical underutilization was the evidentiary foundation of nearly every MWBE program in the state, and this decision holds that it is not sufficient by itself.
4. Build out the race-neutral tools that actually move participation. Contract unbundling, bonding and insurance assistance, prompt payment and mobilization advances, reduced prior-experience thresholds, local and small business preferences, mentor-protégé structures, and best-value evaluation. These are defensible, they are what Croson asked jurisdictions to try first, and they are what Dallas and Fort Worth are now leaning on.
5. Plan for certification churn. Firms are moving among NCTRCA, SCTRCA, the DFW Minority Supplier Development Council, the Women’s Business Council Southwest, SBA size standards, and the federal DBE recertification queue. Vendor lists, reciprocity provisions, and compliance reporting all need review, and small vendors will need help navigating it.
6. Watch three dockets. The Houston appeal, if the city files. The Travis County HUB case on the merits. The PLF suit against Harris County.

The honest bottom line

Whatever a given official thinks about the merits of race-conscious contracting, the compliance environment has changed materially and in one direction. Between the state’s VetHUB restructuring, USDOT’s elimination of the DBE presumption, federal grant conditions, and now a tried-and-decided federal judgment applying SFFA to a municipal program, the legal position of race-conscious municipal contracting in Texas is substantially weaker in July 2026 than it was in June 2025.

The programs that survive this period are going to be the ones built on small business size standards, local presence, and capacity building, with the goals grounded in market availability rather than racial classification. Cities that have not yet done that inventory should start it before the next bid package goes out.

A collaboration between Lewis McLain & AI

What the fight over data centers reveals about the fastest, cheapest way to make people love each other

---

There is a moment, early in almost every land-use fight, when a stranger becomes a friend.

It happens in a folding chair. Someone leans over during the third hour of a zoning hearing and says something like can you believe this guy, and the person next to them — a person they have never met, whose politics they’d have found repellent at a dinner party — says no. No I cannot. And something clicks into place that would have taken a year of shared hobbies to build.

Social psychologists have a name for what just happened, and a body of evidence about how well it works. In 2006, Jennifer Bosson, Amber Johnson, Kate Niederhoffer and William Swann published a paper with the deceptively cheerful title Interpersonal chemistry through negativity. Across two surveys and an experiment, they found that discovering you share a negative attitude about a third party predicts liking a stranger more strongly than discovering you share a positive one — at least where the attitudes are not already strongly held. Shared dislike is a faster solvent than shared affection. It draws the in-group boundary in one stroke, flatters both parties, and — because most people are careful about voicing contempt — signals a level of candor that ordinary agreement doesn’t.

The paper’s most unsettling finding is the last one: participants seemed largely unaware the effect was operating on them.

I want to trace that effect through a live case — the American fight over AI data centers — because it is unusually well documented, unusually fast-moving, and because it has now run far enough to show you the whole arc. Not the arc from apathy to activism. The arc from activism to something else.

A note on method: the specific incidents below are real and sourced. The folding-chair scene above, and the composite passages marked as such, are illustrative — assembled from the recurring texture of these fights rather than any single meeting.

---

Stage one: the lawn sign

The mildest form of the bond is a sign.

Drive through Loudoun County, or Mason County, Kentucky, or the ring roads outside Atlanta, and you’ll see them: hand-lettered, coroplast, a mix of fonts that betrays a dozen different households ordering from a dozen different print shops. NO DATA CENTER. The Soufan Center, which has spent a year monitoring anti-data-center discourse, notes almost as an aside that you now see these signs from the highway across large stretches of the country.

A sign is a low-cost, high-visibility declaration of the boundary. It says: there is a we, and you can tell who’s in it. It is also, crucially, an invitation. Two neighbors who have exchanged nothing but nods for eleven years now have a subject.

The grievances underneath are not manufactured. Water consumption and contamination, electricity costs shifted onto ratepayers, grid strain, noise, the loss of farmland, eminent domain for transmission lines that serve the facility rather than the town. A Gallup poll in May 2026 found roughly seven in ten Americans oppose a data center being built in their area — higher opposition than for a nuclear plant. Data Center Watch counted at least 75 projects worth around $130 billion blocked or delayed by local opposition in the first quarter of 2026 alone.

This is what functioning civic life looks like. People noticing an imposition and organizing against it. Nothing in what follows should be read as a claim that the grievance is fake.

The claim is narrower, and stranger: the grievance is not what does most of the bonding work. The enemy does.

---

Stage two: the twenty-seven-hour meeting

On the morning of December 12, 2023, the Prince William County Board of Supervisors in Virginia opened a hearing on the Digital Gateway — a 2,100-acre data center campus proposed for the corridor between the Manassas National Battlefield and Conway Robinson State Forest.

The meeting ran more than twenty-seven hours, ending in the late morning of December 13. More than two hundred people spoke, in person and online. The final vote was 4–3, with one abstention, in favor.

Twenty-seven hours is not a deliberative procedure. It is an initiation rite.

Consider what it does to the people in the room. Sleep deprivation. Shared physical discomfort. A visible out-group at the front of the room with the power to ignore you. Repeated public testimony in which each speaker restates the collective position in their own words — a mechanism social psychologists have studied since Stoner’s 1961 “risky shift” finding, generalized by Moscovici and Zavalloni in 1969 under the heading of group polarization: when like-minded people deliberate together, they don’t average toward the middle. They move further out. Cass Sunstein calls the specific case of self-selected like-minded groups enclave deliberation, and the pattern is robust — the enclave exits more extreme than any individual entered.

Twenty-seven hours of enclave deliberation, capped by a 4–3 loss, is close to an optimal recipe for converting a policy disagreement into an identity.

The Digital Gateway rezoning was later voided in Circuit Court, upheld unanimously by the Virginia Court of Appeals in March 2026, and the project finally died in July 2026 when the last developer withdrew its appeal. The opponents won. But by then the coalition they’d built had long outgrown the parcel it was built to defend.

---

Stage three: the enemy of my enemy sits down next to me

Here is where the bonding effect starts producing things that ought to be impossible.

The anti-data-center coalition in 2026 includes Democratic Socialists of America chapters and Steve Bannon. It includes Extinction Rebellion and Marjorie Taylor Greene. An activist group called Humans First, which organized a national day of protest, was reportedly seeded by AI-safety-motivated effective altruists and then handed off to America First conservatives — a lineage that makes no sense on any conventional political axis.

A DSA organizer in Corpus Christi, describing on a national call what she was hearing from self-described “MAGA mommies” in her area, relayed it about as plainly as the psychology allows:

“I’m not scared of the socialists. I have more in common with them than I do with any of the people making these decisions.”

That is a socialist’s account of what a conservative told her, which makes it a paraphrase filtered through an ally who was recently an opponent — and that fact is itself the evidence. The sentence had to travel across the old boundary to reach us.

Read that again as a technical statement. She is describing a re-categorization — Gaertner and Dovidio’s common in-group identity model, in which two previously antagonistic groups dissolve their boundary by discovering a superordinate one. It is one of the most reliable interventions in the prejudice-reduction literature. It is, in most contexts, a good thing.

The catch is that the superordinate identity here is defined negatively. The new “we” is not people who want X. It is people who are not the people making these decisions. And a group defined by what it is against has no internal mechanism for deciding when it has gotten what it wants.

Muzafer Sherif demonstrated both halves of this at Robbers Cave in 1954. Manufacture a competition between two groups of boys and you get instant, ferocious in-group cohesion — flags, names, raids, contempt. Then he showed you could dissolve it, but only with superordinate goals: tasks neither group could accomplish alone. Cooperation, not contact, was the solvent.

The data center coalition has the first half. It has no supply of the second.

---

Stage four: the moral upgrade

Composite scene, drawn from the recurring pattern:

By month eight the Facebook group has four thousand members and a moderator who did not exist as a public person a year ago. The early posts were about setback distances and decibel readings. The current posts are about what kind of person votes for this. Somebody has started making graphics. Somebody has found the county supervisor’s business address. The word “corruption” enters the vocabulary and does not leave, and it is not always wrong, and it is never again subject to evidentiary standards, because the group has already decided.

This is the transition that matters, and it is visible in the real record.

In May 2026, the progressive outlet More Perfect Union took Representative Alexandria Ocasio-Cortez to Morgan County, Georgia, to meet residents who said a Meta data center’s construction had fouled their water. Days later she held up two jars of brown water while questioning an EPA water administrator at a House oversight hearing. The video went viral.

That jar is a masterpiece of moral communication, and I mean that without cynicism — the residents’ complaint appears to be real and it deserved the amplification. But notice what the jar does that a groundwater table cannot. It converts a regulatory dispute into a moral violation, and moral violations are the single most transmissible category of content in a networked information environment. Rathje, Van Bavel and van der Linden, analyzing 2.7 million posts from news outlets and members of Congress, found that content about the political out-group was by far the strongest predictor of sharing — stronger than emotional language, stronger than anything about one’s own side. The platforms are not neutral carriers of this material. They are selection pressure on it.

The Soufan Center’s own monitoring caught the compounding directly. Their dataset shows a baseline of anti-data-center discourse with a sharp surge beginning in April 2026 that then stayed elevated, and they describe the mechanism precisely: each new incident now “generates much greater secondary amplification than it did earlier in the year — meaning once a story breaks, they compound onto each other, feeding back into the information environment and causing secondhand outrage.”

Secondhand outrage. That is the load-bearing phrase. At this stage most of the anger in the system no longer belongs to anyone whose water it was.

---

Stage five: the official becomes the enemy

Saline Township, Michigan. Population about 2,300. Farmland. In 2025 a developer proposed a $16 billion data center campus tied to the Oracle–OpenAI Stargate build-out.

The township board denied the zoning change. The developer sued. Facing legal exposure that residents were told worked out to something like $29,000 per household over a decade, the board settled. Recall petitions went up against three members.

On May 13, 2026, at a packed board meeting, Treasurer Jennifer Zink announced her resignation in tears, citing death threats. Among them, she said, were wishes that she die of Lyme disease. The township clerk described similar harassment. Zink’s resignation took effect May 29.

A study published in April 2026 by West Point’s Combating Terrorism Center identified the shift underneath this: grievance is migrating from tech executives to local officials, because data centers are what makes AI physical, and they concentrate its costs at the municipal level. The CEO is an abstraction three time zones away. The county treasurer shops at your grocery store.

Ballotpedia’s mid-year tally counted 58 local officials across seven states facing data-center-related recall petitions — roughly 17 percent of all recall efforts in 2026, a record year.

That is democracy working, and I want to be clear that recalls and elections are exactly the right instrument. But a woman crying at a folding table in a room of two thousand three hundred neighbors, resigning an unpaid-ish rural office because strangers wished disease on her, is not a policy outcome. It is what happens when a coalition that formed around an enemy runs out of enemy and finds a nearer one.

---

Stage six: the far end

The last stage is small in volume and impossible to unsee.

On April 10, 2026, prosecutors say Daniel Moreno-Gama threw a Molotov cocktail at the San Francisco home of OpenAI chief executive Sam Altman, then traveled to the company’s headquarters and threatened to burn it down and kill the people inside. Four days earlier, at around 12:45 a.m., Indianapolis City-County Councilman Ron Gibson found thirteen rounds had been fired into the front door of his home — he and his eight-year-old son were unhurt — after he publicly backed a data center in his district. A handwritten note reading “No Data Centers” was left on the doorstep. In June, a disrupted plot to kill senior government officials at a White House event was, per the charging documents, motivated by a grab-bag of grievances that included “water-guzzling data centers.” In July, Extinction Rebellion activists in Amsterdam threw balloons of hydrogen peroxide and acetic acid at a hyperscale construction site expected to house Microsoft.

The Soufan Center is careful, and their caveat deserves full weight: explicit, credible threat rhetoric remains a small fraction of anti-data-center content, most of which is ordinary, lawful, and often well-founded civic opposition. Most direct threats target infrastructure rather than people. Much of what looks violent online is posturing — fire GIFs, guillotine emojis, deliberate misspellings to dodge moderation, the verb “luigi-ed” deployed in a register that is clearly rhetorical.

But note the shape of the ladder. Lawn sign. Hearing. Coalition. Moral frame. Recall. Threat. At no point does anyone cross a line. Each rung is a small, locally reasonable step from the one below it, taken in the company of people who have become your friends because you took the previous one together.

That is the mechanism. Not radicalization as a leap — radicalization as a series of loyalty payments.

---

What the bond is actually made of

Swann, one of the co-authors of the negativity-bonding paper, later developed a theory called identity fusion: the state in which the boundary between personal self and group self becomes porous, so that a threat to the group is processed as a threat to the body. Fused individuals, in his research with Jetten, Gómez, Whitehouse and Bastian, show markedly elevated willingness to fight and to sacrifice for the group.

The path from sharing a negative attitude with a stranger to fusion is not long, and every stage above is a step along it. Which is the uncomfortable point of this essay:

The properties that make common-enemy bonding so good at building community are the same properties that make it bad at stopping.

It is fast, because contempt is high-information. It is cheap, because it requires no shared positive vision — only a shared negation. It is durable, because the enemy can always be found to be doing something new. It is portable, because when this data center is defeated the coalition does not disband; it looks for the next imposition, and it will find one, because there is always one. And it is self-concealing — Bosson’s participants had no idea it was happening to them.

None of this makes the coalition wrong. On the merits, a great deal of the anti-data-center case looks strong: ratepayers really are being asked to subsidize private compute, water really is being drawn from stressed aquifers, and the NAACP — represented by Earthjustice and the Southern Environmental Law Center — filed suit in April 2026 over twenty-seven methane turbines running without permits in Southaven, Mississippi, powering xAI’s Colossus 2 next to predominantly Black South Memphis neighborhoods carrying asthma burdens far above state and national norms. You do not need a psychological account of group dynamics to explain why people are angry about that. You need an air permit.

But being right is not protection. Sherif’s boys at Robbers Cave each had, from the inside, entirely adequate reasons to despise the other cabin.

---

What holds

If the diagnosis is right, the interventions are unromantic and mostly structural:

Keep the enemy institutional. A coalition aimed at a permitting process behaves differently from one aimed at a named treasurer. The moment the target acquires a face and an address, the escalation ceiling rises.

Insist on a positive ask. “No data center” has no completion condition. “Facility-funded grid upgrades, metered water disclosure, a 55-decibel property-line cap, and a decommissioning bond” does. Concrete demands can be met, and a coalition that can be satisfied is a coalition that can stand down.

Manufacture superordinate goals. Sherif’s actual finding, the one that gets forgotten in favor of the flashier half: cohesion built by conflict dissolves only under cooperation neither side can do alone. Genuine co-design — communities with real authority over siting, water and cost allocation, not consultation theater — is the only known solvent. It is also, notably, what several jurisdictions have started reaching for: New York’s statewide hyperscale moratorium, the Netherlands’ two-site restriction, Amsterdam’s freeze on new construction until 2030. Whatever else those are, they are attempts to put the decision somewhere a person can reach it.

Watch for the moment the meeting becomes the point. When attendance stays high after the vote is won — when the Facebook group’s engagement metrics are healthier than its policy agenda — the bond has decoupled from the grievance and is now sustaining itself.

The folding chair is not a trap. Some of the best civic energy in the country right now is being generated in exactly those rooms, and the neighbor you meet there may well become a real friend.

Just be honest about the introduction. You did not meet over a shared love of anything.

---

Sources

Reporting and data

• Gallup: Americans Oppose Data Centers in Their Area (May 2026)
• The Soufan Center: A Year of Monitoring — Anti-Data Center Narratives and Threats (July 21, 2026)
• The Soufan Center: Violent Threats and Data Center Resistance Accelerate (May 5, 2026)
• Data Center Watch: Q1 2026 report
• WTOP: Digital Gateway data center project dies after final developer withdraws appeal
• Virginia Lawyers Weekly: Court upholds block on Prince William Digital Gateway
• Data Center Dynamics: Prince William supervisors vote in favor of Digital Gateway rezoning
• 404 Media: Township leader resigns in tears over OpenAI data center death threats
• Planet Detroit: Saline Township treasurer resigns over data center death threats
• WFYI: Indy councilor Ron Gibson’s home targeted in shooting
• NPR: Molotov cocktail thrown at Sam Altman’s home
• Newsweek: Data Center Backlash Turns to Threats and Violence as Anger Spreads
• Ballotpedia: Recalls hit a record high this year, in part due to data center recall efforts
• CTC Sentinel, April 2026 (Combating Terrorism Center at West Point)
• Earthjustice: xAI sued for illegal power plant
• Rep. Ocasio-Cortez presses EPA Assistant Administrator Kramer
• Data Center Dynamics: Extinction Rebellion pelts data center site with acid-filled balloons
• The New Republic: And Now, MAGA Have Joined the Anti–Data Center Movement
• Democratic Left: How DSA Organizes Against Data Centers
• CMS Law-Now: Netherlands restricts hyperscale data centre siting

Research

• Bosson, J. K., Johnson, A. B., Niederhoffer, K., & Swann, W. B. (2006). Interpersonal chemistry through negativity: Bonding by sharing negative attitudes about others. Personal Relationships, 13, 135–150.
• Rathje, S., Van Bavel, J. J., & van der Linden, S. (2021). Out-group animosity drives engagement on social media. PNAS, 118(26).
• Swann, W. B., Jetten, J., Gómez, Á., Whitehouse, H., & Bastian, B. (2012). When group membership gets personal: A theory of identity fusion. Psychological Review, 119(3), 441–456.
• Sherif, M. et al. (1961). Intergroup Conflict and Cooperation: The Robbers Cave Experiment.
• Gaertner, S. L., & Dovidio, J. F. (2000). Reducing Intergroup Bias: The Common Ingroup Identity Model.
• Moscovici, S., & Zavalloni, M. (1969). The group as a polarizer of attitudes. Journal of Personality and Social Psychology, 12(2), 125–135.
• Sunstein, C. R. (1999/2002). The Law of Group Polarization. Journal of Political Philosophy, 10(2), 175–195.

Composite scenes are marked as such in the text. All named incidents, figures and quotations are drawn from the sources above.

A collaboration between Lewis McLain & AI

Austin ISD, the Texas Takeover Machine, and the Arithmetic Underneath It

Status as of July 29, 2026

---

Three middle schools in Austin — Burnet, Dobie, and Webb — are waiting on a letter grade.

Sometime in mid-August the Texas Education Agency will publish campus accountability ratings for the 2025-26 school year.

If any one of those three earns a fifth consecutive failing mark, state law stops being permissive and becomes mandatory.

The commissioner of education must then either order the campus closed or replace Austin ISD’s elected board of trustees with a board of managers of his own choosing.

There is no third option written into the statute. There is no discretion to wait another year.

That describes the fifth-largest school district in Texas, in the capital city, roughly a mile from the Capitol itself.

It is also, at this point, an unremarkable situation. Seven other districts have traveled this road in the last decade, four of them in the last nine months.

What makes Austin worth studying is not that the state might intervene.

It is that the intervention is arriving on top of a fiscal collapse that has nothing to do with test scores, and that the two problems are now feeding each other in ways the statute never anticipated.

The trigger, precisely

The mechanism dates to House Bill 1842 in 2015, now codified in Chapter 39A of the Education Code.

When a single campus receives five consecutive unacceptable annual ratings, the commissioner’s authority to intervene converts to an obligation.

An F counts. So do three consecutive D ratings, which the accountability system treats as equivalent.

One campus in a district of eighty thousand students is sufficient.

The trigger is not districtwide performance, though the commissioner routinely cites districtwide performance when explaining his decisions.

Burnet, Dobie, and Webb have each carried four consecutive unacceptable ratings dating to the 2018-19 school year.

Austin ISD spent the past eighteen months trying to interrupt that count.

The 1882 gambit and how it failed

Senate Bill 1882, passed in 2017, offers districts a bargain.

Hand a chronically failing campus to an approved external operator — a charter network, a nonprofit, a university, a governmental entity — and the district receives additional state funding plus a two-year pause on accountability consequences and state intervention at that campus.

It is the only reliable off-ramp in the accountability system, and districts facing the five-year cliff have used it repeatedly.

Beaumont ISD placed Fehl-Price Elementary with Third Future Schools under exactly this provision.

Austin ISD went looking for a partner and found one bidder.

The Texas Council for International Studies, a nonprofit, was the sole organization to submit a proposal to operate all three middle schools.

Trustees approved the partnership in March 2026, over objections about the speed and transparency of the process, and applied to TEA for 1882 benefits.

On May 28 the agency denied the application.

TEA’s letter held that an operating partner must satisfy three criteria: at least three years of operating experience before assuming a campus, a record of managing multiple campuses over multiple years, and demonstrated significant improvement in campus academic performance.

TCIS satisfied two of the three. The agency found no established track record of improvement, and concluded the organization did not qualify as a partner with the capacity to turn campuses around.

Austin ISD said it would submit additional evidence and seek reversal. It did not get one.

On July 20 the district announced that it and TCIS had jointly agreed to end the partnership altogether, effective July 31.

The partnership had been operational for roughly three weeks.

Whatever protection the district hoped to build is gone. The August ratings will land without a cushion.

The Paredes maneuver

Meanwhile a fourth campus entered the picture.

On July 22 the district announced the immediate closure of Paredes Middle School before the start of the 2026-27 school year, attributing the decision to slow academic progress.

Education Austin, the district’s labor organization, said district leaders had told them Paredes was expected to draw a fourth consecutive failing rating in August.

Read that sequence in statutory terms rather than press-release terms.

Closing a campus is one of the two remedies the commissioner may impose at year five. A district that closes a campus at year four removes the trigger before it can fire.

This is not cynicism on Austin’s part. It is the only unilateral tool the district has left.

It is also a tool with a known limitation.

Fort Worth ISD closed Leadership Academy at Forest Oak Sixth Grade before TEA released the campus’s fifth F, and district leaders initially believed the closure had resolved their exposure.

Commissioner Mike Morath’s letter said otherwise. The closure did not relieve the agency of its obligation to intervene, and did not address the systemic deficiencies underlying the chronic underperformance.

Fort Worth is now under a state-appointed board.

The statewide map

Houston ISD has been governed by an appointed board of managers since 2023, triggered by Wheatley High School.

Superintendent Mike Miles, installed by the commissioner, executed a sweeping academic overhaul: prescribed curriculum, rapid pacing, restructured staffing, revised testing calendars, concentrated in the New Education System campuses.

State exam results improved.

Enrollment fell by more than thirteen thousand students, which complicates any clean year-over-year comparison of performance.

Morath extended the intervention in June 2025 through June 1, 2027, citing progress but insufficient progress.

Houston is now recommending the closure and consolidation of twelve campuses for 2026-27, citing enrollment decline and facility costs.

Four more districts moved into state control across late 2025 and 2026.

Fort Worth ISD, nearly 68,000 students and the second-largest takeover in state history, received its notification letter in October 2025. A conservator, Christopher Ruszkowski, was installed in November.

On March 24, 2026, Morath appointed a nine-member board of managers, chaired by former congressman and Sid W. Richardson Foundation head Pete Geren.

He named Peter B. Licata, most recently superintendent of Broward County, Florida, as superintendent.

Karen Molinar, a thirty-year district veteran, applied for her own job and withdrew. More than 280 people applied for the board. The new board held its first meeting April 1.

Fort Worth is separately phasing in the closure of eighteen campuses through 2029, and carries a projected deficit of approximately $49,800,000 against $904,000,000 in expenditures.

Beaumont ISD received its letter in December 2025, triggered by two campuses.

Beaumont has been here before. The state intervened a decade ago over financial scandals, and the district regained local control only in 2020.

Connally ISD, also December 2025, triggered by Connally Elementary and Connally Junior High.

Lake Worth ISD, also December 2025, triggered by Marilyn Miller Language Arts Academy. Morath noted that every campus in the district had earned a D or an F in 2024-25.

Counting current and imminent interventions, eight districts sit under some form of state governance.

Over his decade as commissioner, Morath has ordered seven district takeovers on academic grounds and closed two campuses outright: Snyder Junior High in Snyder ISD, since reopened under a new framework, and Travis Elementary in Midland ISD, which Midland handed to a charter operator.

The demographic pattern in the trigger campuses has become a central argument in the policy debate.

Across the six campuses that triggered the four most recent takeovers, between 80 and 97 percent of students were economically disadvantaged, against a statewide figure near 60 percent.

Black and Hispanic students constituted the dominant majority at every one.

Critics read the geography — Houston, Fort Worth, Beaumont, now Austin — as intervention concentrated in large, Democratic-leaning cities serving low-income students of color.

Proponents read the same list as the state finally refusing to tolerate campuses where two-thirds of children cannot read or compute at grade level.

Morath has pointed to comparably sized and comparably situated districts producing better results.

Now the deficits, which are the larger story

Austin ISD’s accountability problem will be decided by one letter grade in August. Its financial problem is structural, and it is worse.

Trustees adopted an $887,000,000 general fund budget for 2026-27 on a 7-1 vote after a late-night session.

Closing the gap required $205,000,000 in gross cuts, or $192,000,000 net once teacher raises and other new costs were absorbed.

The reductions touch more than 580 positions, transportation, and library staffing, with a last-minute reversal preserving full-time librarians at every campus.

The district also expects to sell approximately $60,000,000 in property to reach balance.

It has said it must find roughly another $60,000,000 by the 2027-28 budget.

The trajectory of the estimate matters as much as the estimate.

District budget materials describe a projected 2026-27 gap of $181,000,000, and an expectation of closing 2025-26 with a $49,000,000 deficit despite roughly $54,000,000 in in-year cuts and efficiencies.

KUT reported in June that the projected deficit had grown to approximately $95,000,000, about five times what officials had forecast a year earlier.

Those figures describe different fiscal years and different measurement points, and the district has revised them repeatedly since February.

That kind of movement in a single budget cycle is itself a finding.

A district whose deficit estimate multiplies several times over within a year does not have a forecasting problem at the margin. It has one at the foundation.

The fund balance tells the same story more plainly.

Board policy calls for maintaining 20 percent of operating expenditures in reserve. Trustees temporarily lowered that floor to 15 percent for 2024 through 2027.

The current year is projected to close at roughly 10 percent.

Superintendent Matias Segura’s framing was blunt: without a budget that begins rebuilding reserves, the district’s capacity to serve students is at risk.

And Austin is a recapture district.

The adopted budget contemplates $1,480,000,000 in revenue from Austin taxpayers and $630,000,000 forwarded to the state under Chapter 49.

Roughly two of every five local property tax dollars leave the district.

Ten campuses were closed by trustee vote in November 2025. Paredes makes eleven.

A districtwide boundary and enrollment review, deferred in July, arrives in the spring. District leaders have not ruled out more closures.

The same condition, statewide

Austin is not an outlier. It is a large, well-documented instance of a statewide condition.

Dallas ISD adopted a deficit budget of approximately $104,000,000 for 2026-27 while forwarding an estimated $73,000,000 in recapture.

That is up from roughly $60,000,000 the prior year, and is projected to reach $100,000,000 by 2027-28.

Fort Worth adopted at a $49,800,000 deficit. Judson ISD closed four campuses against a $37,000,000 shortfall.

Clear Creek ISD stood up an accelerated budget sprint team against $27,000,000.

In San Antonio, a review of a dozen districts this summer found all but three cutting expenses for 2026-27.

In El Paso, a mid-course change in the state’s hold-harmless methodology cut that pool from $800,000,000 to $450,000,000, pushing districts that had expected balance into deficit.

District officials there identified roughly ten districts statewide disproportionately affected by the way the formula interacts with homestead exemptions.

Segura’s line about Austin — that it is happening everywhere in Texas — is not deflection. It is descriptively accurate.

Four forces, converging

First: a basic allotment that has not moved in real terms

House Bill 2 in 2025 appropriated $8,500,000,000, the largest single-session increase in recent memory.

It raised the basic allotment from $6,160 to $6,215 — the first increase since 2019, an adjustment of 0.89 percent against six years of accumulated inflation.

Roughly $4,200,000,000 went to teacher and staff retention allotments paid per qualifying employee rather than per student.

Another $1,300,000,000 went to a new fixed-cost allotment for utilities, insurance, transportation, and TRS contributions, with the balance to special education, pre-K, safety, and other categorical purposes.

HB 2 also stripped the 2019 requirement that 30 percent of any basic-allotment increase flow to teacher and staff pay, routing compensation through the new allotments instead.

The design decision is the story. The Legislature funded specified activities generously and the general-purpose formula almost not at all.

Districts received real money they could not redeploy against the deficits they actually have.

Second: enrollment

Texas public school enrollment fell 76,613 students, or 1.4 percent, in 2025-26.

That is the first non-pandemic decline in about four decades, and only the second recorded decline since 1987-88.

Hispanic students accounted for 81 percent of the loss.

Economically disadvantaged enrollment fell 2.3 percent and emergent bilingual enrollment fell 4.1 percent, both faster than the overall rate. Sixty percent of the loss came in kindergarten through sixth grade.

Texas 2036 projects the decline could reach 100,000 by 2030, and notes its own model may understate it.

State aid follows average daily attendance. Payroll follows signed contracts.

Enrollment loss therefore produces revenue loss immediately and cost relief slowly, if at all.

Austin ISD attributes part of its own enrollment decline to the current immigration enforcement environment.

Third: education savings accounts

The Texas Education Freedom Accounts program launches with the 2026-27 school year under a $1,000,000,000 appropriation administered by the comptroller.

More than 274,000 students applied for the first year and nearly 96,000 were invited to participate.

State data indicate at least 43 percent of approved students previously attended a Texas public school. How many convert is not yet known.

The 2025-26 enrollment decline predates the program entirely, which cuts both ways.

It means the decline cannot be blamed on ESAs. It also means ESA effects are additive to a decline already underway.

Fourth: the property tax side

This is where the picture becomes recognizable to anyone who works in Texas local finance.

The state has committed roughly $51,000,000,000 in the current biennium to buying down school M&O rates.

Senate Bill 4 raised the mandatory school homestead exemption from $100,000 to $140,000, effective with the 2026 tax year.

SB 23 raised the additional over-65 and disabled exemption from $10,000 to $60,000, producing a combined $200,000 school exemption for those homeowners.

A separate HB 8 delivered a one-year additional maximum compression rate reduction of $0.0331 per $100 for 2025.

SB 10 lowered the voter-approval multiplier from 1.035 to 1.025 for most taxing units beginning in 2026.

Every one of those actions is a defensible tax policy choice on its own terms.

Cumulatively, they narrow the local revenue base while the state’s replacement funding flows through formulas that have themselves become more prescriptive.

They also arrive in a year when some districts are absorbing declining taxable values.

The interim charges now pending in both chambers, and Governor Abbott’s proposal to lower the homestead appraisal cap from 10 percent to 3 percent with five-year reappraisal cycles, point toward further compression rather than less.

Where the two problems meet

The connection between the deficits and the takeovers is not thematic. It is operational, and it runs through school closures.

Closing campuses is the primary lever a large district has for structural savings, because the savings sit in facilities and staffing.

Austin closed ten schools in November 2025 for fiscal reasons, and closed Paredes in July for accountability reasons — three weeks after ending the partnership that was supposed to protect three other campuses.

Fort Worth is closing eighteen campuses on a phased schedule driven by a deficit, while operating under a takeover triggered by a campus it had already closed.

Houston, five years into state governance, is consolidating twelve. Judson closed four.

The same instrument is being used to balance budgets and to manage accountability exposure at the same time.

The campuses that qualify on both counts tend to be the same campuses: small enrollment, aging plant, high-poverty attendance zones, low ratings.

This produces an uncomfortable loop.

Fiscal pressure concentrates the highest-need students into fewer, larger campuses. Concentration and disruption do not typically improve near-term ratings.

Ratings drive intervention. Intervention, at least in the Houston case, accelerates enrollment loss, which worsens the fiscal position of the district the state now runs.

Nobody designed this.

It is what happens when an accountability statute written in 2015 and a school finance structure reshaped in 2019, 2023, and 2025 operate on the same districts at the same time without reference to each other.

What to watch

Mid-August: campus ratings for 2025-26.

STAAR results released in June showed Burnet, Dobie, and Webb gaining four to five percentage points in on-level math — real improvement that still leaves passing rates low enough that a fifth failing rating remains the likely outcome.

Fall: appeals. Ratings are not final until appeals are resolved, and districts have used this window aggressively. Fort Worth appealed.

After the appeals: the notification letter, if the trigger fires. Fort Worth’s came in October 2025. Beaumont, Connally, and Lake Worth received theirs in December.

Late 2026 into early 2027: conservator, board of managers, superintendent.

TEA rarely changes governance mid-year, and the Fort Worth sequence — October letter, November conservator, March board and superintendent — is the most likely template.

Opponents organizing under the Keep Austin Schools Local banner are telling supporters an announcement could come as early as November 2026, with control transferring as early as January 2027.

Houston’s takeover was delayed by litigation. Austin would likely face a shorter path, because the courts have already upheld the state’s authority.

Longer term, an accountability discontinuity is coming.

HB 8 from the 2025 second called session eliminates STAAR and replaces it with three shorter assessments at the beginning, middle, and end of the year, effective 2027-28. Only the end-of-year instrument counts toward ratings.

The same bill requires annual A-F ratings, bans Not Rated designations, requires TEA to announce accountability changes by July 15 each year, refreshes cut scores every five years, expands the agency’s intervention authority, and directs that challenges to accountability decisions be resolved promptly.

TEA will write the assessment on which its own intervention authority depends. Representative Gina Hinojosa of Austin raised that objection during debate and lost.

What a five-year consecutive-failure count means across an instrument change is a question the statute answers less clearly than one would like.

A closing assessment

The fair summary is that both sides of this argument are describing something real.

Roughly half of Texas public school students read and do math at grade level.

At the campuses that have triggered these interventions the figures are far worse, and they have been worse for five consecutive years, through multiple locally designed turnaround plans.

Adults holding elected office have had a decade to fix Burnet, Dobie, and Webb and have not.

The state’s position — that indefinite local patience is itself a decision, made at the expense of children who get one shot at eighth grade — is not a bad-faith position.

At the same time, the state is removing elected boards in districts whose fiscal capacity the state has itself substantially constrained.

A basic allotment frozen in real terms for seven years. Replacement revenue routed through allotments districts cannot redeploy.

A local tax base narrowed by four rounds of exemption increases and rate compression. Recapture obligations that rise as local values rise.

And a new ESA program drawing students, and their ADA revenue, out of the system beginning this fall.

Austin ISD is sending $630,000,000 to Austin and cutting $205,000,000 at home in the same fiscal year.

Telling a district to produce better outcomes under those conditions, and replacing its board when it fails to, is a coherent policy only if one believes governance was the binding constraint.

That is an empirical claim, and after five years of Houston it remains contested: test scores up, enrollment down thirteen thousand, community trust unresolved.

What is not contested is the direction of travel. Eight districts, one commissioner, a mandatory trigger, and a mid-August rating release.

Austin’s turn is likely next. The district will meet it with a 10 percent fund balance, eleven closed campuses, 580 fewer positions, and no partnership.

Sources

Reporting and documents consulted include: Austin Current (May 28, June 15, July 15, and July 20, 2026, plus the budget explainer of April 20, 2026); KUT News (May 28, July 21, and July 22, 2026); The Texas Tribune (May 28, 2026; January 27, 2026; August 15, 2025; June 2, 2025; March 15, 2023); The Austin Chronicle (June 4, 2026); KVUE (May 28, 2026); The Texan (May 29, 2026, and July 2026 on statewide deficit budgets); Axios Austin (June 10, 2026); Community Impact (July 2026 on adopted budgets, May 12, 2026 on enrollment).

Also: Austin ISD budget and TEA update pages; the Fort Worth ISD budget presentation of June 2026; TEA news releases and letters on Fort Worth ISD governance dated March 24, 2026; TEA correspondence on HB 2 retention allotments; Fort Worth Report, KERA, NBC 5, and CBS Texas on the Fort Worth intervention; Spectrum News (December 12, 2025 and January 27, 2026); KFDM on Beaumont ISD; San Antonio Report (July 2026); El Paso Matters (April 27, 2026); the Texas 2036 enrollment report of May 2026; IDRA and Raise Your Hand Texas analyses of House Bill 2; Bracewell and Linebarger summaries of 89th Legislature tax changes; Office of the Governor special session materials; and the Keep Austin Schools Local campaign site.

Caveat on one figure: the Dallas ISD deficit and recapture numbers were cited in June 2026 by state Representative Gina Hinojosa. Treat them as advocacy-sourced pending confirmation against the district’s adopted budget.

United States Economic Report — July 2026 | Public-source data via FRED

I’m going to have AI update this link no less than once per week.

Do you find it helpful?

Any suggestions?

Many thanks!

Lewis

What if the Worst Drought Metric is Wrong?

A collaboration between Lewis McLain & AI

Texas is about to spend $174 billion on a bet about the weather. The bet is priced against seven dry years from the Eisenhower administration. What happens if that is the wrong benchmark—in either direction?

Every five years, Texas produces one of the most ambitious infrastructure documents in America: the State Water Plan. The Draft 2027 State Water Plan, released for public comment in April 2026, recommends roughly 6,700 water management strategies and 3,000 projects at a capital cost of $174 billion—more than double the $80 billion price tag of the 2022 plan. Voters have already begun writing the checks: in November 2025, Proposition 4 passed, dedicating up to $1 billion a year in sales tax revenue—as much as $20 billion over two decades—to the Texas Water Fund.

Nearly every number in that plan rests on a single foundational assumption, written into the state’s planning rules: the future will be no drier than the past. Specifically, no drier than the worst drought in the roughly 130-year instrumental record—the “drought of record.”

It is worth asking a question the plan itself never asks out loud:

What if that metric is wrong?

It could be wrong in two directions. It could be too strict—an expensive over-preparation for a freak event that may never repeat, in which case Texans are overpaying by tens of billions of dollars. Or it could be too lenient—a benchmark that tree-ring scientists, the state climatologist, and one very thirsty coastal city all suggest is already obsolete.

The interesting thing is that we can put rough numbers on both possibilities. This essay tries to do that.

The Metric: Planning for the Worst Thing That Ever Happened

Texas water planning law requires the state’s 16 regional planning groups to calculate how much water every city, utility, irrigator, and factory would have “during drought of record conditions”—and then to find strategies to close any gap.

The planning rules in 31 Texas Administrative Code Chapter 357 require regions to evaluate existing supplies that are “legally and physically available” for use during the drought of record, using the state’s official water availability models.

For most of Texas, the drought of record is the monster of 1950–1957—seven consecutive years of failed rains that, as the Texas Water Development Board puts it, remains the worst statewide drought in Texas history in both duration and intensity. It is the drought that killed farms, emptied small towns, and prompted the creation of the modern water-planning system in the first place.

The mechanics matter here.

The drought of record is not merely a historical reference. It is the input to a specific calculation called firm yield: the maximum amount of water a reservoir could have delivered every year, without fail, through a repeat of that drought.

Firm yield is what a water supply is “worth” in the plan. Change the benchmark drought, and every reservoir in Texas is suddenly worth a different amount of water—on paper, overnight, without a drop of rain falling or failing to fall.

As Matt Nelson, the Texas Water Development Board’s deputy executive administrator of planning, described the design philosophy to the Texas Tribune, the plan contemplates supplying enough water during the worst drought that has ever occurred in each region of the state, without restricting water use to the public—even if every region experienced its worst drought simultaneously.

Under that standard, the Draft 2027 State Water Plan finds Texas short 3.6 million acre-feet per year in 2030, growing to 5.8 million acre-feet per year by 2080 if nothing is built.

The 2022 plan described the equivalent 2070 shortfall as more water than Lake Livingston, Amistad Reservoir, and Lake Travis can hold combined when full.

The stakes of doing nothing are stated plainly. The Texas Water Development Board estimates that a severe drought without new supplies could leave about one in four Texans without enough water, with economic losses of as much as $177 billion a year within 50 years.

The drought of record, therefore, is not a trivia answer.

It is the denominator of the entire $174 billion program.

Direction One: What if the Standard Is Too Strict?

Here is the version of the question a skeptical taxpayer might ask:

The 1950s drought was, by definition, an outlier—the single worst stretch in the recorded history of the state. Why size a permanent, multi-hundred-billion-dollar infrastructure program to the outlier?

What would happen if Texas planned to the second-worst drought instead? Or the third?

For most of the state, the rankings are approximately these:

1. The drought of 1950–1957.
2. The drought of 2011, the driest twelve consecutive months ever measured statewide, within the broader 2010–2015 dry period.
3. The drought that ended in 1918, which held second place for nearly a century until 2011 surpassed it.

The Texas Water Development Board has never published this counterfactual, so the following figures are the author’s estimates, built from the plan’s own arithmetic.

The benchmark drought mainly governs surface water—the firm yields of the state’s nearly 200 major reservoirs and the reliability of river diversions. Together, those sources account for roughly 7 million acre-feet per year of drought-rated supply.

Groundwater availability, which provides about half of the state’s supply, is governed primarily by aquifer depletion, desired future conditions, permits, and regulatory limits. It would change much less under a different drought benchmark.

Shorter, sharper droughts such as 2011 or 1917–1918 place less stress on multi-year reservoir storage than seven consecutive dry years. Firm yields calculated against those shorter events would therefore be meaningfully higher.

We also have a real-world calibration for how much one “rank step” between droughts may be worth.

When the 2008–2016 drought surpassed the 1950s drought on the lower Colorado River, the Lower Colorado River Authority reduced the firm yield of the Highland Lakes from approximately 600,000 acre-feet per year to about 500,000 acre-feet per year.

One step in the drought rankings changed the yield of a single reservoir system by roughly 17 percent.

Apply that scale statewide, and the estimates look something like this:

Benchmark	Reduction in Identified Need	Approximate Gallons	Estimated Capital Avoided
Second-worst drought, 2011	0.7–1.5 million acre-feet per year, or 12–26% of the 5.8 million acre-foot gap	230–490 billion gallons per year	$16–$34 billion, plausibly as much as $45 billion
Third-worst drought, 1917–1918	1.0–2.2 million acre-feet per year, or 17–38% of the gap	330–720 billion gallons per year	$23–$50 billion, possibly more

The dollar figures scale from the draft plan’s own average of roughly $23,000 in capital cost for each acre-foot per year of new supply: $174 billion buying approximately 7.6 million acre-feet per year of strategies by 2080.

The upper ends reflect the likelihood that the projects eliminated by a relaxed standard would be the most expensive marginal projects—new reservoirs, long-haul pipelines, and seawater desalination facilities.

The honest answer to the skeptic, therefore, is yes.

The drought-of-record standard is plausibly “costing” Texas somewhere between $20 billion and $50 billion in infrastructure that a second- or third-worst benchmark might deem unnecessary. It may also be responsible for roughly one-quarter to one-third of the identified water gap—a few hundred billion gallons a year.

But notice what that framing conceals.

Those billions would not truly be saved. They would be wagered.

A plan sized to the second-worst drought delivers exactly its promised reliability until the day a 1950s-scale drought returns—an event that has already happened once in the instrumental record and, as the evidence suggests, many times before it.

At that point, the unbuilt gap reappears not as a line item in a state plan but as empty intake pipes.

The relevant number would stop being $30 billion in avoided capital and become as much as $177 billion per year in economic damages.

The drought-of-record standard is, in effect, an insurance policy. Arguing that it is too strict is arguing that Texas should self-insure against a catastrophe it has already experienced.

That might still be a defensible argument—if the evidence suggested that the 1950s represented a freak upper boundary.

The evidence points in the opposite direction.

Direction Two: What if the Standard Is Too Lenient?

The Tree Rings Say the Record Is Too Short

The instrumental rainfall record in Texas extends only to the 1890s.

To see further into the past, scientists read tree rings—and what they find is uncomfortable.

In a landmark 2011 study published in the Texas Water Journal, Malcolm Cleaveland, Thomas Votteler, David Stahle, Richard Casteel, and Jay Banner reconstructed drought conditions across Texas back to the year 1500 using baldcypress, Douglas-fir, and post oak chronologies.

Their conclusion was direct: several extended droughts of the past were longer or more intense than the 1950s drought. Severe, decadal-scale droughts had occurred in Texas at least once a century since the 1500s.

They concluded that the continued use of the 1950s drought as a worst-case planning scenario was questionable.

The deeper paleoclimate record is worse.

Tree-ring networks across North America document a 16th-century megadrought described by researchers as the most severe and sustained drought event of the last 500 years—and perhaps the last 1,000 years when looking back to A.D. 1200.

That drought persisted for roughly 40 years in some locations. It extended from Mexico across the American Southwest and into Texas. It coincided with catastrophic epidemics and the failure of early European colonies.

The drought of the 1950s lasted seven years.

The paleoclimate record contains droughts four and five times that long.

In statistical terms, the “drought of record” is the worst draw from a sample of only about 130 years. The full distribution, visible in tree rings, contains substantially worse outcomes.

Planning to the sample maximum and calling it the worst case is not necessarily conservatism.

It may simply be an artifact of a record that is too short.

One River Basin Has Already Lived It

This is not merely hypothetical.

On the lower Colorado River, the drought that began in 2008 surpassed the 1950s event and became the new drought of record for the basin. Six of the ten lowest inflow years into the Highland Lakes occurred after 2008.

The Lower Colorado River Authority responded by reducing the firm yield of the Highland Lakes by about 100,000 acre-feet per year—from approximately 600,000 to 500,000 acre-feet.

Every downstream plan based on the older number had, in hindsight, been planning against the second-worst drought without knowing it.

Texas planning rules now explicitly recognize this possibility. When updated hydrological models identify a new regional drought of record, future plans must absorb it.

The benchmark is therefore not a fixed constant of nature.

It is a low-water mark that keeps getting broken.

The 2011 drought displaced 1917–1918 as the second-worst statewide event. The 2008–2016 drought surpassed the 1950s in the Colorado River basin.

Each new record reveals that the previous “worst case” was not the worst.

Corpus Christi Is the Case Study Nobody Wanted

Then there is Corpus Christi.

During 2025 and 2026, the city came closer to an outright water-supply failure than almost any large American city in recent memory.

Inside Climate News summarized the problem bluntly: unrealistic assessments of the region’s reservoir system helped turn drought conditions into an emergency.

The region’s own 2026 water plan acknowledged that a repeat of the drought of record would already produce an immediate shortage for the City of Corpus Christi, the area’s major water provider.

That shortage could grow if a new drought of record occurred.

That is exactly what began to happen.

The city’s water officials watched reality outrun the model. The region was rapidly approaching drought-of-record conditions. The reservoirs were declining faster than prior calculations had predicted, during a period of intense heat and prolonged dryness.

Robert Mace, executive director of the Meadows Center for Water and the Environment at Texas State University, drew the broader lesson.

Beginning in the 1990s, something appeared to change in the weather of South Texas. Droughts became hotter and longer. In addition, the tree-ring record showed periods drier than anything in the instrumental record.

His conclusion was simple:

Communities should plan for droughts worse than the drought of record.

The Physics Have Changed Beneath the Benchmark

Even a perfect repeat of the rainfall totals from the 1950s would no longer produce the same amount of usable water.

That is one of the most important weaknesses in the current metric.

It may hold rainfall constant while failing to hold temperature constant.

Higher temperatures dry soils more quickly. As soils become hotter and drier, a smaller share of rainfall reaches rivers, streams, and reservoirs as runoff.

Hotter and longer summers also remove more water from reservoir surfaces through evaporation.

The state climatologist’s Extreme Weather in Texas report, produced with Texas 2036, projects that by 2036 Texas will average about 3 degrees Fahrenheit warmer than the late-20th-century norm. The state may experience approximately twice as many 100-degree days as the 2000–2018 average, along with roughly 7 percent more summer evaporation.

On broad, shallow Texas reservoirs, evaporation is not a rounding error.

It is one of the largest uses—or losses—of stored water in the state.

Yet the state’s planning models remain heavily backward-looking.

Surface water is among the water supplies most vulnerable to climate change. But incorporating explicit climate projections into the official planning framework has proven politically and technically difficult.

The institutional response is that the five-year planning cycle continually updates the models as conditions change.

That defense has merit—but it also carries a dark implication.

A benchmark that updates only after a catastrophic drought breaks the old record is a system that learns by failing.

Lake Travis had to fall toward historic lows before the Highland Lakes were repriced.

Corpus Christi had to approach a day-zero emergency before its yield assumptions were publicly described as unrealistic.

The metric may be self-correcting, but it is self-correcting in the way a smoke alarm that sounds only after the fire has spread is self-correcting.

Meanwhile, demand is not waiting politely.

Texas data centers already consume an estimated 25 billion gallons of water annually. Some projections suggest consumption could rise dramatically over the next several years.

Whether that growth is fully reflected in long-term regional demand forecasts remains uncertain.

The Nonlinearity Trap

Why “25 Percent Worse” Does Not Mean 25 Percent Less Water

Suppose the tree rings and climatologists are right and Texas eventually faces a drought meaningfully worse than the 1950s—perhaps one with inflows 25 percent lower.

The natural intuition is that available supplies would decline by about 25 percent.

That intuition is wrong.

Reservoir yield can fall faster than inflow.

Evaporation does not decline when inflows decline. During a hotter drought, evaporation may increase.

Multi-year carryover storage—the entire purpose of a major reservoir—is precisely what a longer drought exhausts.

Junior water rights on fully appropriated rivers may not decline gradually. In the most severe conditions, they may be reduced to zero.

On the Rio Grande, researchers have estimated that legal water rights may total as much as twice the volume of water physically available in the river.

As Samuel Sandoval Solís of the University of California, Davis, has observed, dams do not create water. A reservoir without sufficient rainfall and runoff can become an expensive monument to assumptions that no longer hold.

Using the plan’s own figures, a drought with inflows approximately 25 percent worse than the benchmark could plausibly reduce firm yields by 35 to 50 percent.

That would remove approximately 2.5 million to 3.5 million acre-feet per year from the state’s drought-rated surface-water supply.

That is roughly 800 billion to 1.1 trillion gallons every year.

The projected 2080 gap would grow from 5.8 million acre-feet per year to somewhere between approximately 8 million and 9.3 million acre-feet per year.

Here is the detail worth sitting with:

Because the $174 billion program is sized to the 1950s benchmark, even if every one of its approximately 3,000 projects were built on schedule, Texas could still be 2.5 million to 3.5 million acre-feet per year short during such a drought.

Closing that residual gap from the expensive end of the supply curve—using seawater desalination, long-distance pipelines, and other high-cost strategies—might cost approximately $25,000 to $40,000 for each acre-foot per year of additional capacity.

That implies another $60 billion to $140 billion in construction.

The real program cost could rise from $174 billion to somewhere between approximately $235 billion and $315 billion.

The asymmetry between the two kinds of error is now visible.

If the metric is too strict, Texas may overspend by $20 billion to $50 billion on projects that provide real, though potentially redundant, reliability.

If the metric is too lenient, Texas may face shortages measured in trillions of gallons, economic damages of as much as $177 billion per year, and a supplemental construction bill larger than the estimated cost of over-preparation.

When the consequences of being wrong are that lopsided, the rational bias runs toward a stricter benchmark—not a weaker one.

What Would a Better Metric Look Like?

None of this means the drought-of-record standard was a mistake.

For the Texas of 1957, it represented a triumph of empiricism:

Plan for the worst event ever observed.

The problem is that “ever observed” turned out to be a moving target, viewed through a narrow historical keyhole, in a climate that no longer sits still.

Hydrologists call the broken assumption stationarity—the idea that the statistical characteristics of the past will continue to describe the future.

The field’s verdict was summarized in the title of a famous 2008 Science paper:

“Stationarity Is Dead: Whither Water Management?”

Several possible replacements are already emerging within the Texas planning system.

Safe Yield

Plan to the drought of record plus a margin—perhaps one or two years of additional demand held in reserve.

Region C, which includes the Dallas–Fort Worth area, has long incorporated a version of this approach. Some Texas regions already plan for conditions worse than the official drought of record.

Corpus Christi also nominally adopted a safe-yield approach. Its crisis demonstrates that a safety margin works only when the underlying firm-yield numbers are realistic.

Drought-Worse-Than-Record Scenarios

Since rule changes adopted after the 2011 drought, regional planning groups may examine how their plans would perform under droughts worse than the historical record.

At present, this is often treated as a narrative or sensitivity exercise.

It could instead become a sizing requirement.

The state could require each region to demonstrate which supplies would fail, when they would fail, and how much additional capacity would be required under defined worse-than-record conditions.

Paleo-Informed Benchmarks

The tree-ring reconstructions already exist.

They are peer-reviewed, date-specific, and directly relevant to the question of long-duration drought.

Instead of planning to the worst drought since approximately 1895, Texas could establish a benchmark based on the worst reconstructed drought since 1500.

Such a standard would capture the once-a-century, decadal-scale droughts that the instrumental record misses.

The Cleaveland team’s evidence has been available in the Texas Water Journal since 2011.

Climate-Adjusted Hydrology

Texas could take the historical drought of record and rerun it at projected future temperatures.

The state could model the 1950s rainfall pattern using the evaporation rates, soil-moisture conditions, and runoff relationships expected in 2036, 2050, or 2080.

This approach would preserve the political simplicity of a historical benchmark:

“We are planning for something that already happened.”

At the same time, it would correct the physical dishonesty of pretending that the same rainfall would produce the same water supply under a warmer climate.

Probabilistic Planning

The most ambitious option would be to abandon the single-scenario benchmark entirely.

Texas could instead size its infrastructure around an explicit reliability target—perhaps a 1-in-100 annual probability of system failure.

Flood planners, engineers, insurers, and some western water agencies already use probability-based approaches.

This would make the insurance-policy nature of water planning explicit.

Legislators and citizens could debate how much reliability they are willing to purchase rather than inheriting the answer from a drought that occurred during the Eisenhower administration.

The Metric Is Not a Fact. It Is a Bet.

Here is the strange truth at the bottom of the question:

The drought of record was never merely a measurement.

It is a policy choice wearing a measurement’s clothes.

It is a decision about how much catastrophe insurance Texas should purchase, expressed as a historical statistic so that no one has to defend the policy choice directly.

Asked plainly—what if the metric is wrong?—the numbers provide a reasonably clear answer.

If it is wrong because it is too strict, Texas might spend $20 billion to $50 billion on projects that later appear redundant.

That is real money. It is roughly comparable to the entire amount Proposition 4 could dedicate to water infrastructure over two decades. It deserves serious scrutiny.

But the infrastructure would still exist. It would still provide redundancy, flexibility, and reliability.

If the metric is wrong because it is too lenient, Texas could face shortages measured in trillions of gallons, economic losses measured in hundreds of billions of dollars, and the discovery that a city’s water mathematics was fiction at precisely the moment those calculations were needed most.

Zapata County, the Highland Lakes, and Corpus Christi have each provided a preview.

The tree rings, the thermometers, and a repriced river basin all suggest that the second kind of error is not a remote tail risk.

Severe, long-duration droughts have occurred in Texas at least once a century for approximately five hundred years.

And the current century is still young.

The drought of the 1950s earned its title honestly.

But “the worst drought on record” was always a statement about the length of the record—not necessarily about the limits of drought.

Texas is betting $174 billion that the record is long enough.

The safest thing that can be said about that bet is the same thing the scientists said fifteen years ago:

It is questionable—and the direction of the error, if there is one, is unlikely to be in Texas’s favor.

References

Primary Planning Documents and Data

• Texas Water Development Board, Draft 2027 State Water Plan—Water for Texas, Phase 1, April 2026.
• Texas Water Development Board, 2027 State Water Plan portal.
• Texas Water Development Board, 2022 State Water Plan—Water Supply Needs chapter.
• Texas Water Development Board, Regional and State Water Planning Rules, 31 TAC Chapter 357 reference pamphlet.
• Texas Water Development Board, Regional Water Planning Frequently Asked Questions.
• Texas Water Development Board, Drought in Texas: A Comparison of the 1950–1957 and 2010–2015 Droughts.

Paleoclimate and Drought Science

• Cleaveland, Malcolm K.; Votteler, Thomas H.; Stahle, David K.; Casteel, Richard C.; and Banner, Jay L. “Extended Chronology of Drought in South Central, Southeastern, and West Texas.” Texas Water Journal, Vol. 2, No. 1, pp. 54–96, 2011.
• Stahle, David W., et al. “Tree-Ring Data Document 16th Century Megadrought Over North America.” Eos, Vol. 81, No. 12, 2000.
• Milly, P.C.D., et al. “Stationarity Is Dead: Whither Water Management?” Science, Vol. 319, pp. 573–574, 2008.
• U.S. Geological Survey, A Historical Perspective on Precipitation, Drought Severity, and Streamflow in Texas During 1951–1956 and 2011, 2013.
• Archfield, Stacey A., and Vogel, Richard M. “Reliability of Reservoir Firm Yield Determined from the Historical Drought of Record,” 2005.
• Nielsen-Gammon, John, et al., and Texas 2036, Extreme Weather in Texas, 1900–2036.

Reporting and Analysis

• Erin Douglas, “Texas’ Plan to Provide Water for a Growing Population Virtually Ignores Climate Change,” Texas Tribune, October 31, 2022.
• Dylan Baddour, “Texas’ Refusal to Plan for Climate Change Created a Crisis in Corpus Christi,” Inside Climate News, June 25, 2026.
• Sierra Club Lone Star Chapter, “It’s Official: The Draft 2027 State Water Plan Is Out for Public Comment,” April 28, 2026.
• Community Impact, “Cost to Prevent a Texas Water Crisis Has More Than Doubled to $174B, State Says,” May 20, 2026.
• Texas Water Newsroom, “What to Know About the Texas Drought” and “Planning for Enough Water Supply During Drought.”
• Lower Colorado River Basin Coalition, “LCRA: Current Drought Worst on Record for Central Texas,” February 25, 2015.
• Texas Tribune, “What to Know About Texas’ Looming Water Crisis,” March 13, 2025.
• Texas Water Foundation, “Voters Approve Prop 4—Dedicating $20B to Water Infrastructure,” November 2025.
• Texas+Water, Texas State University, “outlook+water: 89% of Texas Is in Drought,” April 7, 2026.
• Texas Comptroller of Public Accounts, “Texas’ Water Demands Could Outpace Supply in Parts of Texas by 2070,” September 2023.

Note on the Counterfactual Estimates

The figures in the second-worst and third-worst drought benchmark table, along with the 25-percent-worse drought scenario, are the author’s estimates.

They are derived from published Texas Water Development Board totals, including the projected 5.8 million acre-foot 2080 shortage and the approximately $174 billion cost of strategies producing about 7.6 million acre-feet per year of supply.

They also incorporate the Lower Colorado River Authority’s approximately 17 percent firm-yield reduction following the repricing of the Highland Lakes and the standard nonlinear behavior of reservoir firm yield under reduced inflows, extended drought duration, and higher evaporation.

The Texas Water Development Board has not published an official statewide sensitivity analysis showing how the identified water-supply gap would change under second-worst, third-worst, paleo-drought, or climate-adjusted benchmarks.

One acre-foot equals approximately 325,851 gallons.

Open or save the painting separately⁠