Third Special Spending: Updated Spending Limits Mean More Options for Lawmakers

Update on Spending Caps & Available Funds

Earlier this year, Texas budget watchers marveled at the unusually large $32.7 billion carryover balance available to the Legislature during the regular session. Every Texan advocated for using this historic sum to make investments in our state’s most valuable resource—our people. Instead, lawmakers irresponsibly used the large balance to pay for permanent tax cuts and inhumane border “security” programs. 

After two special sessions this summer focused on property tax cuts, lawmakers returned to Austin in October for the third special called session – and they have even more money than they thought. Keeping up with estimated revenue is important because the Legislature must stay within five specific spending limits prescribed by state law:

  • Pay-as-you-go limit. Appropriations bills must be approved by the Comptroller’s office (CPA) to ensure they are within the constraints of projected revenue. This limit is provided to the Legislature in the Biennial Revenue Estimate before each regular session, and it may be revised in the Certification Revenue Estimate some months after the regular session ends. Additionally, CPA provides an updated figure before each special session.
  • Tax spending limit. Calculated by the Legislative Budget Board (LBB), this cap requires that any spending from tax revenue not specifically dedicated by the state constitution must be commensurate to LBB’s projected growth rate of the state economy.
  • Debt limit. The constitution requires that new state debt cannot exceed 5% of the average unrestricted General Revenue over the past three years.
  • Welfare spending limit. Assistance to needy children and families cannot exceed 1% of the budget.
  • Consolidated GR limit. The newest cap (effective for the first time this year) restricts spending of all general revenue-related funds to a figure adjusted for population growth and inflation.

CPA released its 2024-25 Certification Revenue Estimate on Oct. 5, which also served as the revenue update for the third special session. After accounting for the spending budgeted in the General Appropriations Act and the supplemental appropriations bill, the Comptroller raised his carryover balance estimate from $10.7 billion to $18.3 billion. That number keeps going up; the Comptroller projected a figure of $14.1 billion as recently as June. The ever-rising revenue estimate continues to be driven by robust sales tax, severance tax on oil and gas extraction, and insurance premium tax revenue. As such, CPA is no longer forecasting a recession in 2024.

The tax spending limit, however, proved to be the lowest cap this biennium. After the passage of the budget and supplemental spending during the regular session, LBB calculations increased the tax spending limit from $1.6 billion to $6.0 billion. That’s how much the 88th Legislature can spend in the current special session and any subsequent special sessions during the interim. That money must also cover the 89th Legislature’s supplemental appropriations bill in 2025, which would settle up any extra spending for the current biennium. 

These spending limits can be broken, however. The tax spending limit, the 2024-25 controlling limit, can be broken with a simple majority vote of both houses.

Finally, the Emergency Stabilization Fund (ESF), or the rainy-day fund, continues to balloon with statutorily required deposits. The ESF is so big at this point, around $23.8 billion at the last estimate, that it is expected to hit its cap in this biennium. With a number of unfunded priorities in education, health care, and infrastructure, one can only wonder just how much rain the Legislature is holding out for.

What’s on the table in the third special session?

Voucher schemes and an expansion of the sprawling, militarized border security apparatus, Operation Lone Star (OLS), are the primary agenda items on the governor’s third special session call.

The latest in a series of border security operations over the past two decades, OLS spans several agencies, and its costs continue to climb with little oversight. The 2024-25 state budget appropriated about $5.1 billion for border security to 13 state agencies in all, with most funding going to the Texas Military Department ($2.3 billion), the Department of Public Safety ($1.2 billion), and the Governor’s Office ($1.4 billion). 

For reference, a new, 48-bed Texan Children’s Hospital that’s currently being built in Austin is expected to cost around $450 million. Lawmakers could put the $5.1 billion budgeted for border security to better use by funding 11 new hospitals, given that the number of hospitals at risk of closure has doubled  since 2020. But, critical investments benefiting some of Texas’s most vulnerable residents are clearly less important to Governor Abbott than his cruel, political immigration games. 

In addition to other draconian proposals related to the border this special session, HB 6 would provide the governor with another $1.5 billion for expansion of the border wall. According to Rep. Jetton, the bill’s author, the majority of that funding would be directed to the Texas Facilities Commission (TFC) for  more wall construction and acquisition of private land along the border—a convoluted, complicated, and unseemly process.

Perhaps by design, the spending through the Governor’s office is difficult to trace. Recent stories in the Texas Observer have attempted to track how much has been spent and who has benefited from the border wall, yet much remains unclear. The $1.5 billion currently being proposed is intended to complete the first phase of construction, about 44 miles. But according to testimony on Monday from the governor’s office, TFC’s contractors – who have signed $1.4 billion in contracts – have built only 11.3 miles so far. Eventually, the governor supposedly plans to build barriers along 700 miles of the Texas-Mexico border, which at TFC’s estimate of $25 million per mile would total $17.5 billion.

Although Democrats passionately fought all the governor’s border “security” bills, including HB 6, the House passed them early Thursday morning. Meanwhile, the Senate Finance Committee will soon hear SB 6, a border funding bill with a similarly high price tag. 

As for public education, Abbott’s only stated priority this special session is setting up the voucher scheme he’s been pushing for years. The Senate passed its voucher bill last week (SB 1), which uses the $500 million appropriated in the budget for vouchers to make $8,000 vouchers available to Texas families to pay for private school tuition and related educational expenses.

This program would suck funding out of the school finance system, subsidize families whose children already attend private schools, and directly harm Texas’s public school students and teachers. While the legislation ostensibly caps the voucher program’s cost at $500 million, the governor may transfer more money into the program at any time (in a process known as budget execution), a huge loophole that renders the cap effectively meaningless.

The budget includes another $4 billion for teacher pay raises and increases to the Foundation School Program on top of the $500 million for vouchers. Yet that funding remains unallocated, as it depends on the passage of additional legislation to direct it. The Senate passed a bill (SB 2) that would put some of those investments toward financial relief for public schools, but the Governor is holding such legislation hostage until vouchers are passed by both chambers.

The House’s version, filed on Oct. 20 as HB 1, is a complex bill that combines a voucher program with a number of public school investments. Its future in the House remains unclear. Meanwhile, House Democrats submitted their own plan in HB 177, which among other provisions would provide teachers and other public school staff a $15,000 bonus, while also increasing the basic allotment to $8,947 and indexing it to inflation. While we wait for the bill’s uphill battle against state Republicans, perhaps  the $1.5 billion proposed for the border wall could be used to give Texas’ 370,000 teachers a $4,000 raise instead.

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