Texas legislature passes largest budget in state history

In the waning days of the 89th Regular Session, Texas lawmakers struck a final deal on a massive $338 billion biennial budget, the only constitutionally required task of the Legislature during its five-month gathering every odd-numbered year. The new budget reflects both the state’s financial windfall from recent historic surpluses and mounting pressure to address long-term challenges in education, infrastructure, and tax relief.

The budget for fiscal years 2026–2027 marks a 1.2% increase in overall spending from the current biennium, factoring in recent supplemental appropriations. Compared to the originally adopted budget two years ago, it represents a 5% increase. Still, general fund spending remains under the state’s population-plus-inflation constitutional spending cap.

Spending has surged over the past several sessions, with the latest budget totaling a striking 36% increase from the 2021 adopted budget. State leaders credit the growth to billions in surplus revenue, but also acknowledge growing demands on public services in a fast-growing state.

Major Priorities: Education, Infrastructure, and Tax Relief

The final deal surpasses the initial spending outlines proposed by both the House and Senate, fueled by major investments in several areas:

$6.7 billion in new property tax relief

$8.5 billion in public education funding

$1 billion to launch an Education Savings Account (ESA) program

$5 billion for the Texas Energy Fund

$2.5 billion for water infrastructure improvements

$3 billion to establish the Dementia Prevention Research Institute of Texas

$3.3 billion in continued border security funding

An additional $3.5 billion was allocated to maintain last session’s property tax relief, as rising property appraisals required more funding to hold tax rates steady. All told, the state is spending over $10 billion in new funds for property tax relief.

A budget rider reallocated $3.1 billion in previously appropriated border security funds to further property tax relief efforts, pending voter approval of expanded homestead exemptions this November—a ballot measure lawmakers expect to pass easily.

The budget also launches a long-term commitment to Texas’ water infrastructure: $1 billion per year will be deposited into a new Texas Water Fund for 20 years, contingent on voter approval of a constitutional amendment later this year.

Education Gets a Boost, but ESA Program Faces Scrutiny

Public education funding was a top priority for both chambers. The $8.5 billion package includes:

$3.7 billion for teacher pay raises

$1.2 billion for school operational support, such as pensions and insurance

$3.6 billion for other school finance reforms and support measures

The $1 billion ESA program, aimed at offering publicly funded education options to around 100,000 students, was one of the most contentious items in the budget. Lawmakers approved the launch with an eye toward expansion, though its future growth and fiscal impact remain uncertain. A state fiscal note anticipates the program could grow to $7 billion by the 2028–2029 budget cycle.

Border Security: Rebalanced, Not Reduced

Despite early talk of potential cuts, lawmakers maintained $6.5 billion for continued border security operations—consistent with previous cycles—even as they anticipated potential reimbursement from the federal government. Congress is expected to approve roughly $11 billion to Texas for border-related expenses incurred over recent years.

Political Reactions: Praise, Skepticism, and Dissent

State Sen. Joan Huffman (R-Houston), the Senate’s budget chief, praised the deal as a reflection of fiscal responsibility amid rising economic pressures.

“Despite pressures from population growth and global economic uncertainties, this budget ensures Texas remains the premier destination for families, businesses, and opportunity,” Huffman said.

Her counterpart in the House, Rep. Greg Bonnen (R-Friendswood), emphasized the budget’s balanced approach:

“SB 1 reflects our core values — staying well below spending limits while investing in priorities like property tax relief, education, and our state’s safety and security.”

While the budget passed unanimously in the Senate, the House saw dissent from 21 members—an ideologically mixed group. Some progressive lawmakers argued the budget didn’t go far enough in education or healthcare, while some conservatives believed the overall size of government had grown too much.

Freshman Rep. David Lowe (R-Fort Worth) was among the loudest critics.

“This budget opposes everything my constituents voted for, including reducing the size of government and the financial burdens placed on hardworking Texas taxpayers,” Lowe said. “Despite a historic $24 billion surplus, the budget failed to allocate enough to reduce Texans’ property taxes.”

Looking Ahead

The budget now awaits the governor’s line-item vetoes, a procedural step before it takes effect on September 1. Several measures within the budget—including homestead exemption increases and the water fund—depend on constitutional amendments that voters will decide in November.

With the Legislature now adjourned, Texans are left with the largest budget in state history, reflecting both a rapidly expanding population and a government increasingly willing to use surplus dollars to tackle big challenges head-on. Whether voters and taxpayers will see this as prudent investment or bloated spending remains to be seen.