AUSTIN, TEXAS (May 7, 2025) — A new report from the Lyndon B. Johnson School of Public Affairs at The University of Texas at Austin finds that Texas Emergency Services Districts (ESDs) should consider maintaining significantly higher financial reserves to protect emergency services from the growing threats of extreme weather, economic volatility and political change.
The report, Texas Emergency Services Districts: Financial Reserves Study, was authored by Dr. Martin J. Luby, director of the LBJ School’s Center on Municipal Capital Markets, with contributions from LBJ graduate students. It offers the first best-practices framework designed specifically for the financial limitations and risk exposures that ESDs in Texas must navigate.
ESDs support or directly provide vital fire and emergency management services across Texas, yet they operate with more limited taxing authority and less spending flexibility than most other local government entities. The new report shows these constraints make it critical for Texas ESDs to maintain robust financial reserves as an essential risk management tool.
“ESDs face unique financial constraints and rising risks, yet there has not been clear guidance on how much they should hold in reserves,” said Luby. “This new report from the LBJ School fills that gap by offering a framework that ESD leaders, policymakers and stakeholders can use to make informed, data-driven decisions about financial preparedness.”
The policy report presents several key findings, including:
- Higher Reserves Are Essential: ESDs should maintain reserves equal to at least six months of operating expenses—higher than some current recommendations for general-purpose governments.
- Case Study Stress Tests: Analysis of ESDs in Travis County, Bexar County and Harris County shows that reserve levels of 180+ days are needed to weather major disruptions.
- Changing Federal Context: A March 2025 executive order from President Trump shifting disaster preparedness responsibilities to state and local governments underscores the growing importance of self-reliance in funding emergency response.
- Stakeholder Preferences Vary: While bond investors and rating agencies generally prefer higher reserves, some taxpayers and elected officials push for lower reserve levels in favor of spending or tax cuts. The report emphasizes the need for clear communication to reconcile these competing priorities.
- No One-Size-Fits-All: The report does not prescribe a universal reserve level but instead offers a framework for each ESD to assess its own risk and determine an optimal strategy.
Texas now experiences more billion-dollar weather disasters than any other state, according to the National Oceanic and Atmospheric Administration (NOAA), with nearly 200 such events since 1980 and the annual average jumping from just over four to nearly 14 in the past five years. As extreme weather events become more common and fiscal uncertainty grows, the study emphasizes the need for local governments to reevaluate their financial resilience strategies. ESDs in particular must prepare for disruptions while maintaining uninterrupted emergency services in their communities.
Read the full report here: Texas Emergency Services Districts: Financial Reserves Study
ABOUT THE LBJ SCHOOL’S CENTER ON MUNICIPAL CAPITAL MARKETS
The Center on Municipal Capital Markets (CMCM) at the Lyndon B. Johnson School of Public Affairs at The University of Texas at Austin focuses on advancing expertise in municipal capital markets. With growing infrastructure needs, CMCM provides specialized education and training for students, government finance professionals and the public. Through graduate programs, research and outreach, the center enhances knowledge in municipal finance and supports both emerging and experienced professionals.
ABOUT THE LYNDON B. JOHNSON SCHOOL OF PUBLIC AFFAIRS
The LBJ School of Public Affairs at the University of Texas at Austin is one of the nation’s premier public policy schools, uniquely positioned within a top-tier research university, the State Capitol and one of America’s most innovative cities. Founded in 1970 by President Lyndon B. Johnson to expand access to the halls of power, the school offers a range of nationally ranked degree programs that prepare students to take on society’s most pressing challenges. The LBJ School also provides career development and leadership training to emerging policy leaders and operates numerous research centers that develop solutions to complex local, state, national and global challenges.
MEDIA CONTACT
Paul Corliss
Chief Marketing Officer
LBJ School of Public Affairs
The University of Texas at Austin
lbjmedia@austin.utexas.edu | 512.232.4406
###