AUSTIN – Texas House and Senate budget writers filed the first drafts of the next state budget Wednesday, calling for more than $150 billion in general revenue spending over the next two years in GOP-driven efforts that prioritize property tax relief, school choice and border security.
The proposals offer lawmakers their first glimpse into leadership’s fiscal priorities as they begin hammering out a two-year plan to spend money raised from fuel and sales taxes and franchise taxes collected on alcohol.
The bills include $6.5 billion for Gov. Greg Abbott’s Operation Lone Star border security program and related measures in other state agencies – matching the program’s funding from the current cycle and topping the nearly $5 billion that lawmakers allocated in the 2023 regular session.
They also recommend investing billions in property tax reform – building on cuts instituted two years ago – as well as cybersecurity, water and infrastructure, state troopers, dementia prevention and research, and rural broadband programs.
“We have an obligation to the people of Texas to make investments that will keep Texas as the best place to live, work, and raise a family,” Senate Finance Committee Chair Joan Huffman said in a statement. “The base budget is a starting point, and I look forward to working with my colleagues to develop a conservative and sustainable budget that addresses our needs and strengthens our economy.”
The separate bills, each almost 2,000 pages, were filed by Huffman and House Appropriations Chair Greg Bonnen. Both are Houston Republicans in their third session leading the budget.
The state budget spends money collected separately by the state and the federal governments. Lawmakers have the most d iscretion over how money collected by the state from its residents – known as general revenue – can be spent. Federal funding is typically tied to specific initiatives or uses.
House Bill 1 proposes $335.7 billion in state and federal spending, including $154.1 billion in general revenue spending. Senate Bill 1 recommends spending $332.9 billion in all funds, with $151.6 billion in general revenue spending for the cycle, which begins in September and ends in August 2027.
House Speaker Dustin Burrows, R-Lubbock, applauded the House effort and urged lawmakers to seek “additional resources within the budget to deliver even greater property tax relief and additional funding for classrooms and teachers.”
“Debating and passing the budget will be one of the most important undertakings of the session, as it will determine the financial boundaries under which we operate when considering all other major legislation, including school choice, water infrastructure, and more.” Burrows said in a statement.
Budget writers also recommended additional spending for the current 2024-25 budget, to be covered by the surplus. The supplemental budget is filed every session to tie up loose ends in the current cycle.
The House and Senate bills propose adding money to the Medicaid program to make up for anticipated increases in cost and enrollment. They also propose expanding state laboratory capacity, facility expansion and upgrades at the Texas prison system, replacing old state vehicles and making a one-time $1 billion legacy payment to the Employee Retirement System’s unfunded actuarial liabilities to reduce long-term interest.
The legislation comes a week after Texas Comptroller Glenn Hegar told lawmakers they have $194.6 billion in state tax money to spend, including $23.8 billion in money left over from the current budget and an Economic Stabilization Fund – known as the state’s rainy day fund – that will be full, with a balance of $28.5 billion, for the first time in its 35-year history.
Hegar anticipates $176.4 billion will be collected from residents and businesses, mostly from sales taxes, oil and gas severance taxes, and taxes collected on fuel and alcohol. Some 61% of the total is expected to come from $94 billion in sales taxes, a 9% increase over the current cycle.
The proposals for the next biennium leave more than $40 billion of that money on the table, as yet unspoken for as lawmakers start negotiating a compromise spending plan.
Two years ago, lawmakers began the session with more than $32 billion in surplus cash, a number that eventually rose to nearly $40 billion after vigorous growth in the state economy and an increase in gas and sales prices, among other factors.
The current cycle’s $321.3 billion budget includes $144 billion in state tax spending.
“It’s no secret that the Texas economy is thriving,” Huffman said. “While remaining fiscally conservative and keeping strategic investments, we can address the needs of our growing state while keeping an eye on the future.”
Lawmakers are limited by the Texas Constitution in how much the budget can grow between two-year cycles. The Texas Legislative Budget Board has set that limit for the next cycle at nearly $10 billion for general revenue, based on an anticipated 8.93% growth rate in the Texas population and economy. Both bills are below the limit.
The constitution sets how much must be spent in specific areas, such as education and highway projects. Most of the budget, some years up to 80%, is already dedicated to mandatory programs, limiting lawmakers’ discretion over how it’s spent.
The constitution, which limits how much can be stashed away in rainy day funds, also requires lawmakers to pass a balanced budget during every regular biennial session, spending no more than Texas anticipates collecting in revenue.
Lt. Gov. Dan Patrick said in a statement Wednesday that 70% of the entire budget – state and federal funds – is allocated to education and health care, two areas that typically take up most of the budget.
The Senate bill “maintains our promise to Texans by keeping our state on a conservative path to greater prosperity,” said Patrick, who oversees the Senate. “Conservative budgeting principles used in SB 1 ensure that state government does not grow faster than population times inflation.”
State Rep. Armando Walle, a ranking Democrat on the House Appropriations Committee, praised the House version of the budget for supporting flood infrastructure and some safety net programs but worried it won’t go far enough to help families in need.
“We again have historic amounts of money we can spend, and so many essential services that need investment,” said Walle, D-Houston. “First and foremost are our neighborhood schools and educators. But Texas families are also looking to the Legislature for leadership to make child care affordable and accessible, to modernize flood control and drinking water infrastructure, and to make it a little easier to put food on the table.”
Over the next several weeks, House and Senate budget writers will hear testimony by hundreds of witnesses offering suggestions on where the money should go.
Each chamber will pass its version of a bill in early spring, to be followed by weeks of private negotiations between the House and Senate. The final compromise, known as the General Appropriations Act, is expected to be sent to Gov. Greg Abbott for his signature in May.
While the versions that emerge throughout the process are likely to differ in significant ways from these first drafts, including in their bottom lines, here are the highlights of the proposals in each chamber:
Senate Bill 1:
- $6.5 billion in new property tax relief.
- $5 billion to fully fund the Texas Energy Fund
- $4.85 billion to increase teacher compensation pending the passage of legislation that provides an across-the-board teacher pay raise with additional salary increases for rural districts.
- $6.5 billion to maintain support for Operation Lone Star.
- $3 billion for a new fund to support the Dementia Prevention and Research Institute of Texas, a top priority for Patrick.
- $402 million for 567 new state troopers.
- $509 million for emergency preparedness.
- $2.5 billion for water and flood infrastructure.
House Bill 1
- $6.5 billion in new property tax relief and $26.3 billion for the ongoing cost of tax cuts made in 2023.
- $4.85 billion in new public education funding.
- $1 billion for education savings accounts, a voucher-style program.
- $6.5 billion for border security across several state agencies.
- $1.1 billion to secure public data and address cybersecurity threats.
- $1.7 billion in federal funds for broadband access.
- $402 million for 600 new state troopers.
- $2.5 billion for water infrastructure projects
