Though the state budget is introduced early in each legislative session, it’s a bill so big it practically takes all session for lawmakers to finalize it. One of the most important days in the Legislature’s budget-writing process is Budget Day, when the bill is brought to the floor of the House of Representatives, amendments are proposed and voted on, and eventually all 150 members vote on the entire 1000-page bill. It’s the last time the public sees the budget before it heads to conference committee behind closed doors and, eventually, on to the governor for his signature.
With this session’s Budget Day now come and gone, the House and Senate 2026-27 budget bills have both been passed. This is not the last stop; there won’t be one, final “state budget” until the conference committee irons out the differences between the two. But, both bills have evolved since they were first introduced and moved through the hearing process, so now is a good time to take stock.
Before session began, our state’s carryover balance was about $24 billion. This means lawmakers could budget that amount on top of the $155 billion the Comptroller projected the state will have in tax revenue over the course of the next biennium. The final budget cannot exceed that combined amount.
The total has increased from the introduced versions and the two bills have gotten closer; the House bill now stands at $337.4 billion and the Senate’s is $336.1. Of those amounts, the General Revenue portion, or the most discretionary, is $153.6 billion and $153.5 billion, respectively.
According to the LBB, the Legislature has about $2.9 billion left underneath the pay-as-you-go spending limit – the lowest of the five spending limits the Legislature must keep within – which is the controlling limit.
What Happened on Budget Day?
Though 393 amendments were filed in advance of Budget Day, most were withdrawn, suspended, or moved to Article XI – the graveyard – as soon as debate began. Those included many of the controversial amendments from both sides of the aisle. Floor amendments to the budget operate under what’s known as the “put-take rule,” where any new dollars for a program must be taken from an existing source already in the budget.
Republicans aiming to reduce government spending filed many amendments pulling funding from the Lottery Commission and economic development programs in the Governor’s office to pay for more tax cuts. So to invalidate those, House Appropriations Vice-Chair Mary Gonzales authored an amendment early on that zeroed out those programs. (They will surely be reinstated later in the process.)
During debate, members employed other methods to gain an advantage, slow down the process or simply poke the other side, such as calling “points of order” on sections of the budget for violating House rules.
Of those that received a vote, many of Every Texan’s closely watched amendments failed to pass. These included an amendment by Rep. Bucy to expand Medicaid, which led to impassioned floor speeches for and against. (See our explanation below of why we strongly support Medicaid expansion.) A number of smaller amendments also failed that would have directed the state to study or work to improve economic issues impacting working Texans – among them are tariffs, economic stability, and broadband investment which Every Texan is engaged in. The Legislature approved a study on the impact of water desalination to improve our water conservation and management.
In Republicans’ aggressive push to eliminate diversity programs in state higher ed institutions, a series of amendments that would have defunded our largest public universities received some attention late in the night, but they died or were withdrawn. An amendment by Rep. Spiller to expand the private prison industry in Texas also failed. Republicans achieved a victory by beefing up funding for the Thriving Texas Families program (TTF). Formerly called Alternatives to Abortion, this program has been a political flashpoint for several years now, with supporters claiming it reduces abortion rates. The truth is, it is an increasingly expensive program that does not provide the actual health care women need most. The new funding for TTF would create an irresponsible $70 million hole in our Medicaid funding that could not be filled until the next legislative session in 2027.
At this stage, nothing is set in stone. Once the budget goes to the conference committee, some changes may still be made.
Is This a People’s Budget?
In our first year of People’s Budget community engagement, Texans told us they wanted the Legislature to make greater investments in education, health care, and jobs. These are the top three priorities across all demographics and communities, but how do the actual budgets stack up?
Education
Public and higher education are covered in Article III of the budget and comprise about 40% of the total all-funds amount.
First, the good news: After a failed effort last session, the 2026-27 budgets make another attempt to provide additional funding for schools, contingent on the probable passage of HB 2. The proposed funding for this package has risen dramatically since the initial budgets, from $4.9 billion to $7.6 billion. While HB 2 is still being finalized, the current version contains a small increase to the basic allotment tied to property value growth, substantial teacher and staff pay raises, increases to a number of special per-student allotments (compensatory education for low-income kids, bilingual allotment, and teacher incentive allotment), and full-day funding for some pre-K programs. The bill is not perfect but we are very likely to support it.
On top of that, the budget includes contingency funding for a number of other education bills that would bring new public education spending to $9.1 billion. This is good news for our educators and public schoolkids across the state, but it doesn’t make up for the chronic underfunding of our schools. In spite of our wealth, we consistently rank among the lowest states in per-pupil spending.
The controversial voucher scheme is still in the budget. The bill implementing the program (SB 2) is advancing, but the real test will be the vote on the House floor. Texans don’t want school vouchers. They are expensive, they benefit a small percentage of Texas’ 5.5 million schoolchildren, and they absorb general revenue that could instead be used to benefit all Texas schools, teachers, and students. For now, both budgets provide $1 billion for the program, but the Legislative Budget Board projects, and we have seen in other states using vouchers, that the annual cost for the program will rise to more than $4 billion annually in just a few years. No amendment was brought to the floor that would have eliminated funding for the voucher program.
Other than the basic allotment changes in HB 2 mentioned above, the budget does not include a substantial increase in the basic allotment – the base amount of money Texas schools receive per student. Simply increasing the basic allotment is the easiest and most effective way for the Legislature to raise funding for all Texas school kids.
In higher education, the budget supports the successful community college formula funding changes implemented last session in HB 8 to incentivize better outcomes for students. Additionally, about $364 million was allocated for higher-ed student financial aid programs through the Higher Education Coordinating Board. This includes $300 million more to the TEXAS grant program to sufficiently support more eligible students, one of Every Texan’s legislative priorities. Lastly the budget invests more in our universities with $1.3 billion for the Texas University Fund, $850 million for a Texas State Technical College Endowment, and $410 million for the Texas Research Incentive Program.
Health Care
Article II, representing our state’s health care agencies, accounts for the second largest portion of the state budget at about 31% of the all-funds total. This budget increases Medicaid and CHIP funding by $6 billion to cover expected caseload growth, while also adjusting to the reduction in federal Medicaid dollars coinciding with the end of the pandemic – an effort to return to post-pandemic normalcy. Meanwhile, spending on behavioral health is down from the 2024-25 biennium as some capital projects (e.g., building or expanding hospitals) are wrapping up.
Every session, Every Texan advocates for Medicaid expansion. In Texas, expanding Medicaid under the Affordable Care Act would provide health coverage to 1.5 million currently-uninsured, low-income Texans. 90% of the cost of Medicaid expansion would be covered by the federal government, leaving the state responsible for approximately $600-700 million. Experts say there would be other economic benefits to Medicaid expansion as Texans with less expensive health care can spend more money on other things. Most Texans want to see Medicaid expanded.
During COVID, Medicaid recipients remained eligible for the program with no reauthorization required. Afterwards, millions of Texans were promptly cut off – many for trivial procedural reasons – during a period known as “unwinding.” Now, the Texas Health and Human Services Commission (HSSC) must clean up the Medicaid rolls. At the urging of HHSC and advocates, the budget allocates about $100 million in new funding to improve technology systems for program eligibility verification (specifically for the system known as TIERS), and to cover 642 temporary workers to carry out the process.
A number of women’s health programs (Healthy Texas Women, Family Planning Program, and Breast and Cervical Cancer Screening) are set to receive increased funding for anticipated caseload growth. The budget also provides a $10 million increase for women’s mobile health units – a respectable amount but less than what HHSC requested.
Other promising items in Article II of the House budget, but not found in the Senate’s, include $110 million for summer EBT for the biennium – school lunches during the summer for low-income kids. There is also $15 million in the budget for the Community Partnership Program, but during the committee process this provision was moved into the purgatory of Article XI and may not make it into the final budget. We should keep pressure on lawmakers to retain those provisions. We wanted to see funding for health-related language access programs, as proposed by a House amendment last session, but that has not appeared.
Jobs and Wages
The Legislature can make the most direct impact on jobs and wages by investing in our 145,000 state workers. Last session lawmakers delivered, as the state agency workforce saw two consecutive 5% pay raises in 2024 and 2025. Yet inflation over the past 10 years has been 27%. To compensate, Every Texan is advocating for another round of across-the-board raises for state workers. So far, budget writers have focused on targeted raises.
Last session, Medicaid community attendants’ pay was raised to $10.20 an hour. This budget increases it to $14.28. Furthermore, attendant wages for certain providers were increased to $17.50. This additional round of increases was somewhat unexpected, and higher than what was introduced in both the House and Senate. We support raises for these essential care workers. As budget negotiations continue, some advocates are still working to ensure that workers in state-supported living centers receive similar pay increases.
Raises for public school teachers are long overdue. Last session, there was widespread acknowledgement that teachers needed raises, but the idea died when it was attached to a voucher bill. So far, the House is keeping school funding and vouchers in separate bills, making clean teacher compensation increases appear more likely. The amount of any raises will ultimately depend on other legislation that is passed.
Related to pay, our state workforce has been experiencing historic turnover. Our law enforcement and criminal justice agencies are among the hardest-hit, with turnover well over 20% among certain agencies and classifications. As we’ve pointed out before, turnover comes with a cost, so targeted raises can be cheaper for the state in the long run. To combat that, the House budget appropriates over $400 million for targeted raises for correctional officers, parole officers, and probation officers.
Finally, wage theft and worker misclassification – businesses designating workers as contractors rather than employees to avoid paying benefits – are big issues in Texas. The Texas Workforce Commission has a mandate to enforce those laws on behalf of all Texas workers, but the agency needs more staffing and resources to do so.
Other Items
Once again, tax cuts were a major priority for lawmakers, who continue to hear from constituents about Texas’ increasing property taxes. Though our People’s Budget conversations did touch on this topic, we found that Texans often expressed it as concern about housing costs. While we understand that property taxes are very high for many Texans, we believe that any tax cuts should be targeted to benefit low-income Texas families and those who really need them the most. This is especially the case when so many other areas of the budget are underfunded, and these proposed cuts rest on our temporary and unusually large carryover balance.
In all, the budget bills include $51 billion to pay for tax cuts put into place since 2019. Within this amount is about $3.5 billion to pay for all-new cuts. The Senate’s budget focused on increasing the homestead exemption, while the House chose to reduce (“compress”) school district tax rates. The final budget is likely to include a combination of both, along with tax cuts for businesses. For more, see Every Texan’s recent analysis of the tax cut proposals and our testimony on HB 8 and SB 4.
The passed budgets retain $6.5 billion for Operation Lone Star, a cruel, ongoing waste of money. This keeps OLS at the same level as passed in the 2024-25 budget. Though that amount is appropriated among 13 different state agencies, about $3 billion of that goes through the office of the governor and is particularly opaque, with little documentation or accountability.
Every Texan supports what we consider to be good investments for the future that will stand to benefit all Texans. Recognizing the importance and fragility of both our water supply and our aging water infrastructure, the Legislature is beefing up the Texas Water Fund by $2.5 billion to help cover improvements. Additionally, the $3 billion set aside to create a Dementia Prevention and Research Institute of Texas, modeled after our state’s cancer research center (CPRIT), will provide jobs and contribute research to help our rising number of dementia patients and their families.
The $2 billion provided for the Texas Energy Fund is opaque. We support renewable energy and are optimistic about its explosive growth in Texas, but do not support our legislature subsidizing the fossil fuel industry.
Every Texan’s Take
Both this session and last, lawmakers have faced an enviable dilemma: more money than they expected. Two years ago our carryover balance – thanks to COVID-19, price inflation, and high sales tax revenue – was about $33 billion. This session we have a $24 billion balance. By contrast, the average cash carryover balance in prior sessions over the past 20 years has been about $3 billion.
As of this post, the economic outlook for the future is highly uncertain and we are not likely to see this much unanticipated revenue for quite some time. Texas is particularly vulnerable to oil price fluctuations and trade shocks. Markets and the economy are highly unstable and unpredictable. According to the Comptroller’s office, our state’s sales tax revenue – more than half of state-source revenue – has already flattened.
For a true People’s Budget, the Legislature should acknowledge that cash carryover balance as a precious, one-time, finite resource to use wisely – either on one-time investments that will have a substantial return, or to catch up on other chronically-underfunded budget items Texans have been waiting for and need.
There are many good investments in this budget: schools, our water infrastructure, our state workforce. The governor’s billions-dollar obsession with vouchers and Operation Lone Star are shameful investments of precious state resources. The high cost of our permanent tax cuts may prove to be highly regrettable investments during our next economic downturn.
Our People’s Budget initiative is a long-term, community effort the size of Texas. Every Texan is worth a high quality public education, accessible health care, and the dignity of a great job. As we continue to prioritize policies that will measurably improve equity in and access to health care, food security, education, and financial security, we invite every Texan to join the collective in support of our mission to ensure we all thrive together.