Relating to the regulation and use of artificial intelligence systems and the management of data by governmental entities, the official text

S.B. No. 1964

AN ACT

relating to the regulation and use of artificial intelligence

systems and the management of data by governmental entities.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2054.003, Government Code, is amended by

adding Subdivisions (1-a), (2-b), (2-c), (6-a), and (11) to read as

follows:

(1-a) "Artificial intelligence system" means a

machine-based system that for explicit or implicit objectives

infers from provided information a method to generate outputs, such

as predictions, content, recommendations, or decisions, to

influence a physical or virtual environment with varying levels of

autonomy and adaptiveness after deployment.

(2-b) "Consequential decision" means a decision that

has a material legal or similarly significant effect on the

provision, denial, or conditions of a person's access to a

government service.

(2-c) "Controlling factor" means a factor that is:

(A) the principal basis for making a

consequential decision; or

(B) capable of altering the outcome of a

consequential decision.

(6-a) "Heightened scrutiny artificial intelligence

system" means an artificial intelligence system specifically

intended to autonomously make, or be a controlling factor in

making, a consequential decision. The term does not include an

artificial intelligence system intended to:

(A) perform a narrow procedural task;

(B) improve the result of a previously completed

human activity;

(C) perform a preparatory task to an assessment

relevant to a consequential decision; or

(D) detect decision-making patterns or

deviations from previous decision-making patterns.

(11) "Principal basis" means the use of an output

produced by a heightened scrutiny artificial intelligence system to

make a decision without:

(A) human review, oversight, involvement, or

intervention; or

(B) meaningful consideration by a human.

SECTION 2. Section 2054.068(b), Government Code, is amended

to read as follows:

(b) The department shall collect from each state agency

information on the status and condition of the agency's information

technology infrastructure, including information regarding:

(1) the agency's information security program;

(2) an inventory of the agency's servers, mainframes,

cloud services, artificial intelligence systems, including

heightened scrutiny artificial intelligence systems, and other

information technology equipment;

(3) identification of vendors that operate and manage

the agency's information technology infrastructure; and

(4) any additional related information requested by

the department.

SECTION 3. Section 2054.0965, Government Code, is amended

by amending Subsection (b) and adding Subsection (c) to read as

follows:

(b) Except as otherwise modified by rules adopted by the

department, the review must include:

(1) an inventory of the agency's major information

systems, as defined by Section 2054.008, and other operational or

logistical components related to deployment of information

resources as prescribed by the department;

(2) an inventory of the agency's major databases and

applications;

(3) a description of the agency's existing and planned

telecommunications network configuration;

(4) an analysis of how information systems,

components, databases, applications, and other information

resources have been deployed by the agency in support of:

(A) applicable achievement goals established

under Section 2056.006 and the state strategic plan adopted under

Section 2056.009;

(B) the state strategic plan for information

resources; and

(C) the agency's business objectives, mission,

and goals;

(5) agency information necessary to support the state

goals for interoperability and reuse; [and]

(6) an inventory and identification of the artificial

intelligence systems and heightened scrutiny artificial

intelligence systems deployed by the agency, including an

evaluation of the purpose of and risk mitigation measures for each

system and an analysis of each system's support of the agency's

strategic plan under this subchapter; and

(7) confirmation by the agency of compliance with

state statutes, rules, and standards relating to information

resources and artificial intelligence systems, including the

artificial intelligence system code of ethics developed under

Section 2054.702, and minimum standards developed under Section

2054.703.

(c) Local governments shall complete a review of the

deployment and use of heightened scrutiny artificial intelligence

systems and, on request, provide the review to the department in the

manner the department prescribes.

SECTION 4. Section 2054.137, Government Code, is amended by

adding Subsection (a-1) and amending Subsection (c) to read as

follows:

(a-1) A state agency with 150 or fewer full-time employees

may:

(1) designate a full-time employee of the agency to

serve as a data management officer; or

(2) enter into an agreement with one or more state

agencies to jointly employ a data management officer if approved by

the department.

(c) In accordance with department guidelines, the data

management officer for a state agency shall annually post on the

Texas Open Data Portal established by the department under Section

2054.070 at least three high-value data sets as defined by Section

2054.1265. The high-value data sets may not include information

that is confidential or protected from disclosure under state or

federal law.

SECTION 5. Chapter 2054, Government Code, is amended by

adding Subchapter S to read as follows:

SUBCHAPTER S. ARTIFICIAL INTELLIGENCE

Sec. 2054.701. DEFINITION. In this subchapter, "unlawful

harm" means any condition in which the use of an artificial

intelligence system results in a consequential decision that causes

harm to an individual who is a member of a state or federally

protected class in violation of law. The term does not include a

developer's or deployer's offer, license, or use of a heightened

scrutiny artificial intelligence system for the sole purpose of

testing the system before deployment to identify, mitigate, or

otherwise ensure compliance with state and federal law.

Sec. 2054.702. ARTIFICIAL INTELLIGENCE SYSTEM CODE OF

ETHICS. (a) The department by rule shall establish an artificial

intelligence system code of ethics for use by state agencies and

local governments that procure, develop, deploy, or use artificial

intelligence systems.

(b) At a minimum, the artificial intelligence system code of

ethics must include guidance for the deployment and use of

artificial intelligence systems and heightened scrutiny artificial

intelligence systems that aligns with the Artificial Intelligence

Risk Management Framework (AI RMF 1.0) published by the National

Institute of Standards and Technology. The guidance must address:

(1) human oversight and control;

(2) fairness and accuracy;

(3) transparency, including consumer disclosures;

(4) data privacy and security;

(5) public and internal redress, including

accountability and liability; and

(6) the frequency of evaluations and documentation of

improvements.

(c) State agencies and local governments shall adopt the

code of ethics developed under this section.

Sec. 2054.703. MINIMUM STANDARDS FOR HEIGHTENED SCRUTINY

ARTIFICIAL INTELLIGENCE SYSTEMS. (a) The department by rule shall

develop minimum risk management and governance standards for the

development, procurement, deployment, and use of heightened

scrutiny artificial intelligence systems by a state agency or local

government.

(b) The minimum standards must be consistent with the

Artificial Intelligence Risk Management Framework (AI RMF 1.0)

published by the National Institute of Standards and Technology and

must:

(1) establish accountability measures, such as

required reports describing the use of, limitations of, and

safeguards for the heightened scrutiny artificial intelligence

system;

(2) require the assessment and documentation of the

heightened scrutiny artificial intelligence system's known

security risks, performance metrics, and transparency measures:

(A) before deploying the system; and

(B) at the time any material change is made to:

(i) the system;

(ii) the state or local data used by the

system; or

(iii) the intended use of the system;

(3) provide to local governments resources that advise

on managing, procuring, and deploying a heightened scrutiny

artificial intelligence system, including data protection measures

and employee training; and

(4) establish guidelines for:

(A) risk management frameworks, acceptable use

policies, and training employees; and

(B) mitigating the risk of unlawful harm by

contractually requiring vendors to implement risk management

frameworks when deploying heightened scrutiny artificial

intelligence systems on behalf of state agencies or local

governments.

(c) State agencies and local governments shall adopt the

standards developed under Subsection (a).

Sec. 2054.704. EDUCATIONAL OUTREACH PROGRAM. (a) The

department shall develop educational materials on artificial

intelligence systems to promote the responsible use of the systems

and awareness of the risks and benefits of system use, explain

consumer rights in relation to the systems, and describe risk

mitigation techniques.

(b) The department shall develop training materials for

state and local government employees and the general public. The

training materials must be made available on the department's

public Internet website.

(c) The department shall host statewide forums and training

sessions on artificial intelligence systems best practices for

state and local government employees.

(d) The department may:

(1) use money appropriated to the department to

produce materials required by this section; and

(2) contract with a vendor to produce those materials.

Sec. 2054.705. PUBLIC SECTOR ARTIFICIAL INTELLIGENCE

SYSTEMS ADVISORY BOARD. (a) A public sector artificial

intelligence systems advisory board is established to assist state

agencies in the development, deployment, and use of artificial

intelligence systems.

(b) The advisory board shall:

(1) obtain and disseminate information on artificial

intelligence systems, including use cases, policies, and

guidelines;

(2) facilitate shared resources between state

agencies;

(3) consult with the department on artificial

intelligence systems issues;

(4) identify opportunities:

(A) for state agencies to implement artificial

intelligence systems to reduce administrative burdens; and

(B) to streamline the state procurement process

for artificial intelligence systems; and

(5) recommend elimination of rules that restrict the

innovation of artificial intelligence systems.

(c) The department shall provide administrative support for

the advisory board.

(d) The advisory board is composed of eight members as

follows:

(1) six members representing state agencies,

including one member representing an agency with fewer than 150

employees, appointed by the governor or the governor's designee;

and

(2) two public members with expertise in technology,

appointed by the governor or the governor's designee.

(e) Advisory board members serve two-year terms. Advisory

board members may be reappointed.

(f) Advisory board members are not entitled to compensation

or reimbursement of expenses for service on the advisory board.

Sec. 2054.706. ARTIFICIAL INTELLIGENCE SYSTEM SANDBOX

PROGRAM. (a) In this section:

(1) "Eligible entity" means an eligible customer under

Section 2054.0525.

(2) "Program" means the program established by this

section that is designed to allow temporary testing of an

artificial intelligence system in a controlled, limited manner

without requiring full compliance with otherwise applicable

regulations.

(3) "Vendor" means a person registered with the

department as a contractor to provide commodity items under Section

2157.068.

(b) The department shall establish and administer a program

to support eligible entities in contracting with vendors to engage

in research, development, training, testing, and other

pre-deployment activities related to artificial intelligence

systems to effectively, efficiently, and securely assist the entity

in accomplishing its public purposes.

(c) The department shall create an application process for

vendors to apply to participate in the program. The application

process must include:

(1) a detailed description of the artificial

intelligence system proposed for participation in the program and

the system's intended use;

(2) a risk assessment of the system that addresses

potential impacts on the public; and

(3) a plan for mitigating any adverse consequences

discovered during the system's testing phase.

(d) A vendor participating in the program shall, with

oversight by the department, provide eligible entities with secure

access to an artificial intelligence system used in the program.

(e) The department shall provide to vendors and eligible

entities participating in the program detailed guidelines

regarding the exemption from compliance with otherwise applicable

regulations provided by the program.

(f) The eligible entities and vendors shall submit

quarterly reports to the department that include:

(1) performance measures for the artificial

intelligence system;

(2) risk mitigation strategies implemented during

system testing;

(3) feedback on program effectiveness and efficiency;

and

(4) any additional information the department

requests.

(g) Not later than November 30 of each even-numbered year,

the department shall produce an annual report and submit the report

to the legislature summarizing:

(1) the number of eligible entities and vendors

participating in the program and the program outcomes; and

(2) recommendations for legislative or other action.

(h) Notwithstanding Section 2054.383, the department may

operate the program as a statewide technology center under

Subchapter L.

(i) The department shall share information and resources

for the program with any other department program established to

allow a person, without holding a license or certificate of

registration under the laws of this state, to test an artificial

intelligence system for a limited time and on a limited basis.

Sec. 2054.707. DISCLOSURE REQUIREMENTS. A state agency

that procures, develops, deploys, or uses a public-facing

artificial intelligence system shall provide clear disclosure of

interaction with the system to the public as provided by the

artificial intelligence system code of ethics established under

Section 2054.702. The disclosure is not required if a reasonable

person would know the person is interacting with an artificial

intelligence system.

Sec. 2054.708. IMPACT ASSESSMENTS. (a) A state agency that

deploys or uses a heightened scrutiny artificial intelligence

system or a vendor that contracts with a state agency for the

deployment or use of a heightened scrutiny artificial intelligence

system shall conduct a system assessment that outlines:

(1) risks of unlawful harm;

(2) system limitations; and

(3) information governance practices.

(b) The state agency or vendor shall make a copy of the

assessment available to the department on request.

(c) An impact assessment conducted under this section is

confidential and not subject to disclosure under Chapter 552. The

state agency or department may redact or withhold information as

confidential under Chapter 552 without requesting a decision from

the attorney general under Subchapter G, Chapter 552.

(d) The department shall take actions necessary to ensure

the confidentiality of information submitted under this section,

including restricting access to submitted information to only

authorized personnel and implementing physical, electronic, and

procedural protections.

Sec. 2054.709. ENFORCEMENT. (a) If a state agency or

vendor becomes aware of a violation of this subchapter, the agency

or vendor shall report the violation to the department, if

applicable, and the attorney general.

(b) The attorney general shall:

(1) review a report submitted under this section or a

complaint reported through the web page established under Section

2054.710; and

(2) determine whether to bring an action to enjoin a

violation of this subchapter.

(c) If the attorney general, in consultation with the

department, determines that a vendor violated this subchapter, the

attorney general shall provide the vendor with a written notice of

the violation.

(d) If a vendor fails to respond or cure the violation

before the 31st day after the date the vendor receives the written

notice under Subsection (c), the state agency shall provide the

vendor with a notice of intent to void the contract. The vendor may

respond and seek to cure the violation before the 31st day after the

date the vendor receives the notice of intent.

(e) If the vendor fails to cure the violation before the

31st day after the date the vendor receives the notice of intent to

void the contract under Subsection (d), the state agency may void

the contract without further obligation to the vendor.

(f) If the department determines that a vendor has had more

than one contract voided under Subsection (e), the department shall

refer the matter to the comptroller. Using procedures prescribed

by Section 2155.077, the comptroller may bar the vendor from

participating in a state agency contract.

Sec. 2054.710. ARTIFICIAL INTELLIGENCE SYSTEM COMPLAINT

WEB PAGE. (a) The attorney general shall, in collaboration with

the department, establish a web page on the attorney general's

Internet website that allows a person to report a complaint

relating to artificial intelligence systems, including:

(1) instances of an artificial intelligence system

allegedly unlawfully infringing on the person's constitutional

rights or financial livelihood; or

(2) the use of an artificial intelligence system that

allegedly results in unlawful harm.

(b) A complaint submitted on the web page created under

Subsection (a) must be distributed to the department.

(c) A person who submits a complaint on the web page created

under Subsection (a) may request an explanation from the

department.

(d) The attorney general shall post on the attorney

general's Internet website information that:

(1) educates persons regarding the risks and benefits

of artificial intelligence systems; and

(2) explains a person's rights in relation to

artificial intelligence systems.

(e) If the attorney general, in consultation with the

department, determines that the complaint is substantiated and a

violation of this subchapter occurred, the attorney general may

seek enforcement under Section 2054.709.

(f) Not later than November 30 of each even-numbered year,

the attorney general shall submit to the legislature a report

summarizing the complaints received under this section, the

resolutions of the complaints, and any enforcement actions taken.

Sec. 2054.711. STANDARDIZED NOTICE. (a) Each state agency

and local government deploying or using an artificial intelligence

system that is public-facing or that is a controlling factor in a

consequential decision shall include a standardized notice on all

related applications, Internet websites, and public computer

systems.

(b) The department shall develop a form that agencies must

use for the notice required under Subsection (a). The form must

include:

(1) general information about the system and data

sources the system uses; and

(2) measures taken to maintain compliance with

information privacy laws and ethics standards.

(c) For the purposes of this section, any health care

service by an academic medical center, state owned hospital, public

hospital or hospital district organized under Article IX of the

Texas Constitution or under Texas Health and Safety Code may

satisfy their disclosure requirements by including a generalized

statement in the patient consent forms that an artificial

intelligence system may be used in the course of their treatment.

Sec. 2054.712. EFFICIENT USE OF RESOURCES. The department

shall coordinate the activities under this subchapter and any other

law relating to artificial intelligence systems to ensure efficient

system implementation and to streamline the use of department

resources, including information sharing and personnel.

Sec. 2054.713. RULES. The department shall adopt rules to

implement this subchapter.

SECTION 6. (a) As soon as practicable after the effective

date of this Act, the Department of Information Resources shall:

(1) adopt rules necessary to implement Subchapter S,

Chapter 2054, Government Code, as added by this Act; and

(2) develop the outreach program and form required by

Sections 2054.704 and 2054.711, Government Code, as added by this

Act.

(b) As soon as practicable after the effective date of this

Act, the office of the attorney general shall establish the web page

as required by Section 2054.710, Government Code, as added by this

Act.

SECTION 7. This Act takes effect September 1, 2025.

______________________________
______________________________

President of the Senate
Speaker of the House

I hereby certify that S.B. No. 1964 passed the Senate on

April 28, 2025, by the following vote: Yeas 31, Nays 0; and that

the Senate concurred in House amendments on May 30, 2025, by the

following vote: Yeas 30, Nays 1.

______________________________

Secretary of the Senate

I hereby certify that S.B. No. 1964 passed the House, with

amendments, on May 28, 2025, by the following vote: Yeas 104,

Nays 6, one present not voting.

______________________________

Chief Clerk of the House

Approved:

______________________________

Date

______________________________

Governor