The Woodlands Township and Montgomery County must follow a state-mandated code of ethics for any artificial intelligence systems they buy, build or use.

The code, created by the Texas Department of Information Resources (DIR) under Senate Bill 1964, took effect March 18. It requires local governments to ensure human oversight, fairness, accuracy, transparency, data privacy and accountability in AI systems, according to Community Impact. Gov. Greg Abbott signed SB 1964 on June 20, 2025, and the law took effect Sept. 1, 2025.

The rules also require each government entity to designate an AI risk management official and to certify compliance with annual AI-awareness training by Aug. 31, using DIR's reporting form. That first deadline passed. It is unclear whether the township or the county has filed.

Montgomery County commissioners adopted an AI policy in April to comply with the law, Community Impact reported. The county has since embedded the requirements into vendor contracts. A July 1 addendum to a county road construction contract requires contractors to notify the county in writing before deploying any AI system and to cooperate in adjusting or eliminating noncompliant AI use.

Montgomery County took a different approach to spending.

County IT Director Bobby Powell told Community Impact in July that he is holding off on AI investment. Powell said he thinks waiting is "best for the taxpayer."

The Woodlands Township invested $32,147 in AI during fiscal year 2025-26, Township IT Director William Pham told Community Impact in July. The township is testing AI in its Covenant Administration Department to speed up the application process, Pham said, while keeping a human in the loop for compliance checks.

The DIR rules draw a sharper line around what the state calls "heightened scrutiny AI systems." Those are AI tools that autonomously make, or are a controlling factor in making, decisions with a material legal effect on a person's access to government services, according to a DIR policy document. Such systems face additional controls beyond the baseline code.

The code also guarantees residents a path to redress. Tony Sauerhoff, DIR executive director and the state's chief AI officer, said at a Thursday, Sept. 24, conference in Austin that if an AI system makes a wrong decision affecting a Texan, "… that Texan ought to be able to — must be able to — quickly have that fixed," as first reported by Community Impact.

State lawmakers are also considering tightening AI regulations ahead of the next legislative session, which begins in mid-January, Community Impact reported.