This week, the Texas House and Senate laid out their initial funding proposals for the 2026-27 biennium in budget bills HB 1 and SB 1. These bills are the first milestone in this session’s long road to passing the next state budget, which will go into effect Sept. 1 of this year.
Texas’ more than 200 state agencies and IHEs presented their budget requests to the Legislative Budget Board last fall, which informed the drafting of these bills. The House and Senate will now debate and pass their own versions before combining them later in session. The bills are currently in sync and appropriate over $150 billion in general revenue and around $330 billion in total.
As a prelude, Comptroller Glenn Hegar released his Biennial Revenue Estimate last week, providing an official projection of expected tax revenue over the next two years. See our response here. Like last time, the numbers were big. With a carryover balance of $24 billion and robust revenue projections, the Comptroller anticipates that the Legislature will have $195 billion in available revenue for general-purpose spending.
That limit, known as the pay-as-you-go limit, is one of five spending constraints on the Legislature as they write the budget. The week before, the LBB calculated two others that apply to certain parts of the budget: the tax spending limit ($110.2 billion) and the consolidated GR limit ($134.9 billion). These are derived from the agency’s calculated growth rate of the state economy accounting for population growth and inflation: 8.93% this session. The Legislature must comply with all these statutory and constitutional limits unless it votes specifically to override them.
In keeping with those limits, the initial House and Senate budget bills propose spending of nearly equal amounts – $330 billion in all funds and $150 billion in general revenue. These are nominal increases over the last budget, but are in line with typical growth from one biennium to the next.
Two of the biggest topics of conversation this session are closely linked – school funding and property tax cuts. We were looking for the balance. Would more money be put into schools than property tax cuts, or vice versa? And what would that choice reveal about the Legislature’s spending priorities?
Our schools are hurting from chronically low funding levels – among the lowest in the nation per-pupil – while continuing to recover from the pandemic without any extra federal funding, in addition to stagnant teacher and staff pay. Last session, the Legislature set aside $4 billion to help, but it was never spent to help schools because it was linked to a controversial voucher program. This time, both House and Senate budgets propose $4.9 billion in additional spending for schools (most of which comes from last session’s $4 billion that was never spent.) In general, SB1 is more prescriptive, with riders allotting funds specifically for teacher pay increases and lower taxes on businesses.
Additionally, both budgets provide $1 billion to fund a K-12 public school voucher program, with the details to be determined. This is twice the amount planned in the 2023 bill that ultimately failed to pass. Vouchers are fundamentally bad for Texas families and our public schools. Voucher program costs in states like Florida and Arizona are skyrocketing, upending state budgets while primarily benefiting wealthy families – whose kids often are already enrolled in private schools – that don’t need the extra help.
On the other hand, both bills offer $6.5 billion in new property tax cuts, $3.5 billion of which will be provided by pending legislation. Though the method of those cuts remains unspecified in the House, the Senate proposal would increase the homestead exemption to $140,000.
With this budget, the cumulative cost of permanent tax cuts since 2019 has now topped $51 billion – a figure highlighted by both chambers in their press releases. A majority of these cuts come from automatic “compression” that reduces taxes more and more over time. Our schools and our state simply cannot afford more across-the-board property tax cuts. These permanent, automatic cuts harm our state’s fiscal health for the long term. Any tax cuts under consideration must be targeted to help renters and low-income Texans.
Other highlights of the budget bills include:
- In health care, both the House and Senate propose increased wages for Medicaid community attendants. This is a positive step, as it would provide additional wage increases on top of the increases found in the 2024-25 budget. The House version specifies that pay would increase to $12 per hour, which still does not meet living wage standards for Texans. The bills would also provide more funding for youth mental health initiatives. We are still comparing the budget bills to review the other special requests made by our health care agencies and to what extent the Legislature is funding those requests.
- In higher education, Every Texan has advocated for greater funding for need–based grants for college students under the TEXAS and TEOG programs. The TEXAS program was appropriated about $100 million more but other programs are kept at 2024-25 funding levels.
- Every Texan has advocated strongly for across-the-board pay increases for state workers. In fiscal 2024 and 2025, state agency staff received 5% increases each year. While much appreciated, those raises are still below the inflation we have all experienced in recent years. Some staff positions in agencies experiencing very high turnover – particularly health care and criminal justice agencies – would be reallocated to provide higher pay, but neither budget bill offers another across-the-board raise.
- The budgets provide $6.5 billion in border security funding across several agencies, similar to 2024-25 appropriations and on top of more than $4.7 billion in the 2022-23 biennium. Of the new amount, just under $3 billion would flow through the governor’s office, with insufficient publicly available recordkeeping and accountability.
- Finally, the bills include $2.5 billion for water infrastructure projects, a smart investment for the future of our state as our population and water demand continue to grow.
The Senate Finance Committee has already scheduled hearings over the next several weeks to begin analyzing their budget bill and hear testimony. We will continue to offer analysis and recommendations, paying special attention to the priority items highlighted in the Every Texan Policy Roadmap and the priorities Texans expressed in our People’s Budget community conversations last year.
