SB 1, the state budget for the 2026-27 biennium, took effect on Sept. 1, 2025. It represents $338 billion in all funds and $149 billion in general revenue spending (the more discretionary portion of the total). From all funding sources, this is a 1.2% increase over the 2024-25 budget, far below the increase in inflation or population. General revenue spending increased by 5.1%, making up for the 6.4% decrease in federal funds versus two years ago.
When writing the budget, the Legislature must keep it under five different limits. This session, the lowest limit was the “pay-as-you-go” limit, which requires that the budget cannot exceed anticipated tax revenue over the next two years. According to the Legislative Budget Board’s post-session analysis, the final budget is $3.9 billion under that limit.
Here are the budget provisions we tracked during the 89th Session, and what we’re looking ahead to for the 90th.
Property Taxes and Housing
- $3.9 billion to new property tax cuts for homeowners and businesses. The Legislature continued its tax-cutting spree this session, with $51 billion in the final budget dedicated to new and existing tax cuts. We opposed more tax cuts, but the final package isn’t bad: a substantial increase in the homestead exemption (to $140,000) and another $60,000 exemption for 65+ and disabled homeowners. This is a more equitable way to cut taxes for homeowners, compared to other options considered this session (appraisal caps, tax rate compression.) Also, the additional boost for older homeowners helps ensure they can afford to stay in their homes as property taxes rise.
- No direct support for renters or added assistance for low-income housing. With widespread concern about housing affordability in Texas, we hoped for some relief for Texas renters (37% of households in the state.) Ultimately, no bills or budget provisions passed that would have offered relief, including a few bills that would have created a new fund for “workforce housing.” Meanwhile, a number of state housing programs built to help low-income Texans will get the same funding as before, even though the federally-funded Homeowner Assistance Fund program ended. Furthermore, a state-funded, low-income housing tax credit program passed by the 88th Legislature received no additional funding in the 89th session. Homeowners dealing with the increasing cost of homeowners insurance also received no help.
Public Education
- $8.5 billion in funding for public schools. For years, and especially since the post-pandemic jump in inflation, our public schools have needed more money. HB 2 appropriated $8.5 billion for a number of different initiatives, including a significant amount for teacher pay, which we and many partners have long advocated for. The new allotment for basic costs is based on enrollment rather than attendance, which is more equitable. However, rather than the complicated provisions of HB 2, we would have preferred a simple and substantial increase in the basic allotment.
- $1 billion for school vouchers. SB 2 was signed into law, effectively bringing a school voucher program to Texas: an outcome we’ve worked to prevent for years. According to the LBB, the annual cost of this program is likely to resemble similar programs in other states, growing to more than $4 billion each year by 2030. Every Texan and our partners will fight the expansion of this program.
Higher Education
- $344 million in additional financial aid for higher education students. The Higher Education Coordinating Board funds a number of financial aid programs to make secondary education more affordable for low-income students, such as the TEXAS grants and TEOG programs. Thousands of eligible students don’t receive the grants simply because the programs are underfunded (and have been for some time.) The budget provides money for those and other grant programs to ensure 67.5% of eligible students get the grants (better, though it should be higher.) The TEXAS grants program – which is for students in financial need at public, four-year universities – saw the biggest boost, with a $284 million (30% increase) over 2024-25.
- $693 million in additional formula funding. HB 8 (88R) made changes to community college funding formulas to incentivize better outcomes for students. The budget provides additional funds to continue the widely-supported changes. For example, $165 million for the Swift program to help students enroll in dual-credit courses at no cost.
- Other higher education funding includes $1.3 billion for the Texas University Fund, $850 million for a Texas State Technical College Endowment, $304 million for graduate medical education expansion, and $410 million for the Texas Research Incentive Program.
- A rider in the prior budget expressing support for diversity in our higher education student body was deleted. While funding was not impacted by this change, it is disappointing to see the Legislature decide abandon their signal in support of diversity.
- A failed Senate rider to the budget would have effectively ended the Texas Dream Act, which for 24 years has allowed in-state tuition for undocumented students. While the Dream Act survived the session, it was unfortunately invalidated by a federal judge just after the regular session ended.
Health and Food Justice
- $7.3 billion increase for Medicaid and CHIP. This additional funding is primarily for an increase in caseloads following the “unwinding” process, during which more than 2 million Texans were cut off from Medicaid for administrative reasons. Some of those people are able to get back on the rolls as their eligibility is confirmed. Furthermore, this budget required a higher level of state revenue than the last few due to the end of pandemic-era federal matching.
- $393 million increase for eligibility and enrollment, and $107 million for TIERS investments. This additional funding will help to improve the enrollment system, including the TIERS software, which is used by HHSC to verify Medicaid participants’ eligibility. The budget also provides for 642 temporary FTEs over the next two years to clean up the chaos left by the unwinding. Though these amounts are less than HHSC originally requested, and about $100 million less than the initially proposed House budget, we are happy the Legislature chose to make these investments to improve operation of Medicaid and ensure as many eligible people as possible are able to benefit from the program.
- $60 million for 2027 Summer EBT, which was vetoed by the governor. Summer EBT is the program that provides food assistance for low-income families when school is out for summer. An important and inexpensive program, advocates fought hard for it to be provided in 2025 and 2026 and were forced to be somewhat satisfied by a budget rider that provided $60 million for 2027. With the governor’s veto, more kids will now go hungry this summer.
- $446 million for HHSC’s women’s health programs (a $8.4 million increase.) About $7 million of that increase is for the Family Planning Program (FPP), which provides reproductive healthcare and family planning services to eligible, low-income Texans. FPP received $152 million in the 2026-27 budget. Other women’s health programs operated by HHSC – Healthy Texas Women (HTW) and Breast and Cervical Cancer Services (BCCS) – received little to no increase over last biennium’s budget.
- $180 million for Thriving Texas Families. This program, formerly known as Alternatives to Abortion, ostensibly provides counseling – with limited transparency and accountability – to pregnant people and families. It does not address the evidenced need of actual health care to expectant low-income families. The $180 million item represents a $40 million increase over the 2024-25 budget.
- Unfunded priorities remain. Every Texan advocated for several items that existed in the House budget but didn’t make it to the final conference version. These included funding for a study on food deserts, a language access coordinator and study on language access at HHSC-run health programs, and $15 million for the Community Partner Program – a long-defunct program to fund the community-based organizations helping eligible Texans find and apply for health care assistance.
Workforce
- $2.4 billion in All Funds for pay raises for Medicaid community attendants. These medical workers provide all manner of personal aid for Texans receiving Medicaid. Even after an hourly pay raise to $10.20 last session, these workers were still underpaid for the hard work they do. This session, their pay was again raised to $13 an hour. This final amount was a middle-ground compromise between differing proposals from the House and Senate.
- $5.8 million for pay raises for some staff at state-supported living centers. This is in addition to the budget’s $166 million increase to hire more than 2500 new FTEs during fiscal 2026 and 2027 to staff state behavioral health hospitals run by HHSC.
- $363 million for targeted salary increases at Texas Department of Criminal Justice (TDCJ) for correctional and parole officers, plus additional funding for increased health care costs and boosts for local correctional officer salaries.
- $46 million for salary increases for Texas Juvenile Justice Department, targeted to state- and local-level direct care and correctional staff.
- $107 million for child care scholarships to the Texas Workforce Commission. These scholarships will help workers pay for child care, with the Legislature estimating that about 160,000 children will be covered by these funds. Child advocacy groups encouraged the Legislature to fund this program at a higher level to assist the approximately 95,000 families on the waiting list for these scholarships.
- Our state workers support the essential services relied on by 30+ million Texans. Unfortunately, we did not see one of Every Texan’s priorities come to fruition, another across-the-board pay raise for all state workers. Last session, state workers received a 10% increase in response to higher inflation after the pandemic, yet cumulative inflation since then has hit close to 20%. We advocated for a similar raise this session, and while we appreciate the targeted raises listed above, we were disappointed that more workers did not see an increase.
Other Items
- $3.4 billion for border security, including Operation Lone Star (OLS). Initial drafts of the budget provided about $6.5 billion (identical to the amount budgeted for the 2024-25 biennium) to a number of agencies including primarily DPS, Texas Military Department, and the Office of the Governor. Every Texan has consistently opposed this funding, and we are pleased to see the reduction, especially since the $3 billion decrease is made up of nearly all of the governor’s office funding for OLS. This component was of particular concern, since it has been the hardest to track. The final budget’s unexpected decrease in border funding is likely related to the $13 billion that has been promised from the federal government to reimburse states for their border spending. According to Every Texan’s calculations, the state has spent an estimated $14 billion on the border from 2008 to 2025. We will also be watching a rider in the General Land Office’s bill pattern mandating a study on how to further incentivize landowners’ participation in border security efforts.
- $2.5 billion for water development and infrastructure projects in the supplemental appropriations bill. In the wake of the 2024 adoption of a first-ever state flood plan, the 2026-27 budget nevertheless saw a reduction in funding specifically for flood control and prevention. Meanwhile, the state has spent down most of the $550 million provided in one-time federal funds for recovery from floods that occurred in 2023 and 2024. July’s devastating floods in Central Texas prompted the Legislature to appropriate about $283 million in September for a federal funds match plus grants for flood warning and weather forecasting equipment upgrades.
- $300 million for the Texas Moving Image Industry Incentive Program (TMIIIP), doubling the amount spent last session and creating an automatic, recurring appropriation every biennium for the next decade. Every Texan opposed this item (SB 22) as an unnecessary handout to filmmakers shooting projects in Texas. Particularly objectionable was the bill’s low requirement that workers on incentivized projects be based in Texas, seemingly undermining the point of the bill specifically to grow the Texas film industry. That said, the final budgeted appropriation is only half the initial proposal of $500 million. Technically, $250 million is appropriated to the program in the 2024-25 supplemental and close to another $50 million in the 2026-27 budget.
- $5 billion for the Texas Energy Fund, which is administered by the Public Utility Commission. The Fund was created in 2023 to provide low-cost loans and grants to incentivize the construction of more energy resources for the state’s power grid. With our exponential increases in electricity demand due to the state’s growing population and technology needs, we need more power generation. And with more frequent and costly natural disasters, our grid must be more resilient. While much of the Texas Energy Fund can be used to fund legacy natural gas power plants (code-word “dispatchable”), $2.2 billion of the budgeted funds can be tapped for energy storage and backup power projects, and $1 billion for resiliency projects outside the ERCOT region.
- $3 billion for a fund for a new Dementia Prevention Research Institute of Texas (DPRIT), modeled on the successful cancer research institute (CPRIT) founded in 2007. Creation of the new fund was provided in SB 5 and approved by voters in November.
Does Texas’ State Budget Hit the Mark?
Our first year of People’s Budget engagement told us about what Texans value most in the state budget. Regardless of age, ethnicity, income, or location, Texans’ top three priorities are consistent and clear: healthcare, education, and jobs and wages. Other top priorities for communities around the state are food access, voting rights, fairer taxation, housing affordability, infrastructure, and utilities.
More than 3 in 5 Texans say they believe state lawmakers care more about serving wealthy Texans than trying to engage with and help low-income Texans and communities of color. We want to change that.
While many of the budget items we highlighted above are solid investments in state services that serve the people of Texas, there are also many giveaways to special interests and the wealthy. During the interim, we will continue to engage with Texans, educate them about what’s in the budget, and get their ideas about what the Legislature should do differently.