Texas is projected to have $194.6 billion available in general revenue to fund the business of the state over the 2026-2027 biennium, a slight decrease from the last budget cycle, Texas Comptroller Glenn Hegar said Monday in his biennial revenue estimate to state lawmakers and leaders.
The estimate comes one day before the Texas Legislature convenes on Tuesday for the start of the 2025 legislative session. The only thing lawmakers are constitutionally required to do during the 140-day session ending on June 2 is pass a balanced budget, one that spends no more than what is estimated to be available.
This year’s estimate reflects a 1.1% drop from the amount of funds available during the 2024-25 biennium, when lawmakers were flush with a “once-in-a-lifetime” cash balance, Hegar said. The drop is attributable to a smaller beginning balance compared to the previous budget cycle, not a drop in state revenue. Tax collections are projected to rise, and for the first time, the state’s Economic Stabilization Fund — also known as the rainy day fund — is expected to exceed its constitutional cap. As a result, lawmakers have more money than is typical for general purpose spending.
Still, Hegar said lawmakers should make thoughtful financial decisions that focus on improving Texans’ lives.
“Despite positive economic numbers, many of our residents continue to feel the higher cost of groceries, housing and other necessities. And the lingering impacts of persistently rising prices mean many are struggling to ensure a bright future for their children,” Hegar said in a Monday statement accompanying the budget estimate.
The estimate includes an anticipated $176.4 billion in new revenue, most of which comes from sales and energy tax collections and can only be spent in the upcoming budget cycle. Sales tax collections are projected to increase by 9% from the previous two-year period, reaching $94.2 billion the next two years.
The estimated funds also includes $23.8 billion expected to be leftover from the 2024-25 biennium. Part of those leftover dollars include $4.5 billion that were earmarked for public education and education savings accounts but were not used because lawmakers failed to reach a compromise to enact a voucher-like program.
This year, lawmakers are expected to prioritize passing a private school voucher program that uses taxpayer dollars to help pay for students’ private schooling. Lt. Gov. Dan Patrick, who presides over the Texas Senate, has called on Gov. Greg Abbott to declare school vouchers an emergency item to give lawmakers a jumpstart on pushing the bill through the Legislature. Lawmakers cannot pass any bills within the first 60 days of the session unless it has been labeled an emergency item by the governor.
Monday’s estimate could change as economic forecasters receive new information. Weather-related disasters, the wars in Ukraine and the Middle East, China’s economic activities, and changes in federal policy could all cause economic disruption, Hegar said.
“Absent an economic crisis, however, I project our economy will continue to grow at a rate consistent with historical norms following the profound disruption of the pandemic, the dramatic recovery when COVID restrictions were lifted and the high inflation that accompanied booming economic growth,” Hegar said in a Monday statement.
State revenue from all sources and for all purposes is expected to reach $362.2 billion. Part of that includes $115 billion the state is expected to collect in federal funds which goes toward dedicated purposes such as Medicaid and other federal programs including disaster assistance. The state will also collect about $70.7 billion in other fees, also reserved for specific purposes.
Credit: by By Pooja Salhotra, Texas Tribune
