Billions more for tax relief and border security under budget approved by Texas Senate

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The Texas Senate signed off Tuesday on a $336 billion spending plan for the next two years that would use the state’s overflowing coffers to boost teacher pay, establish a school voucher program and cut property taxes, while staying under state spending caps that will leave billions of dollars unspent.

The upper chamber’s two-year budget draft, approved on a 31-0 vote, would spend more than $153 billion in general revenue, Texas’ main source of taxpayer funds used to pay for core services. That is well under the estimated $195 billion available, according to Comptroller Glenn Hegar, though a constitutional spending limit prevents lawmakers from coming anywhere near that number, unless they take a politically perilous vote to bust the cap.

The budget will now be sent to lawmakers in the House, which is expected to debate and approve its own version early next month.

From there, budget writers from the two chambers will settle their differences behind closed doors before voting on a final balanced budget plan — their only constitutional obligation before the legislative session ends in early June.

“Our economy is strong and continues to grow,” Sen. Joan Huffman, R-Houston and chair of the Senate Finance Committee, said, noting that state revenues were projected to return to more average levels after fueling recent budget surpluses. “We again have the opportunity to make strategic, one-time investments to address long-standing needs of our growing state, as well as return money back to taxpayers in the form of additional property tax relief.”

Senators discussed the budget for two hours before passing it unanimously. Sen. Roland Gutierrez, D-San Antonio, proposed the only amendment on the floor — to put $50 million toward an agricultural loan guarantee program — before dropping it and vowing to ensure the program was funded after negotiations with the House.

The Senate budget proposal aligns closely with the House’s first budget draft, signaling lawmakers are on the same page about how much money to spend and where it should go. But in some cases, the two chambers have different visions for how the money should be deployed. That is the case with the House and Senate’s dueling plans to provide $3.5 billion in new property tax cuts, mirroring a similar divide from two years ago even as the chambers align on the spending amount.

Lawmakers will try to iron out those policy disputes in legislation separate from the budget — otherwise, the money will go unspent.

In all, both chambers’ budget proposals would spend about $336 billion over the next two years, including money from general revenue, federal funds and revenue earmarked for specific uses. That is about $14 billion more than what lawmakers budgeted two years ago, a 4.5% increase. However, the Legislature is expected to approve additional spending for the current cycle — which runs through the end of August — in what is known as the supplemental budget, lessening the year-to-year increase.

The next two-year budget will take effect Sept. 1 and run through the end of August 2027.

Public education

Both chambers would put nearly 70% of the state budget toward health and human services and education, roughly in line with past spending cycles.

In the Senate draft, that includes about $71 billion for the Foundation School Program, the main source of state funding for Texas’ K-12 public schools. More than $4.3 billion would be reserved for targeted teacher pay raises under a Senate bill that proposes salary boosts for instructors based on years of experience and student performance.

Though House leaders have proposed a similar bump in public education spending, they want to put it toward increasing the base amount that schools receive from the state per student — an approach that would direct only some of the funding boost to teacher raises.

Public school teachers and advocates argue that neither proposal is enough to adequately fund local school districts. Base funding from the state for schools has not increased since 2019, in part because a planned hike in education spending got caught up in the fight over school vouchers two years ago. School districts have grappled in recent years with budget deficits, teacher shortages and campus closures.

Gov. Greg Abbott is charging ahead this session on another attempt to enact a voucher program that would allow families to use taxpayer dollars to pay for their children’s private schooling and home schooling. The Senate budget draft sets aside $1 billion for such a program over the next two years, double what was on the table in 2023.

Additionally, the upper chamber’s spending plan devotes $500 million to increasing the state’s school safety funding, up $100 million from the amount proposed in both chambers’ first budget drafts.

Border security

Both proposals funnel $6.5 billion to border security, which would bring total state taxpayer spending on such efforts to nearly $18 billion since Texas launched Operation Lone Star in 2021.

Lt. Gov. Dan Patrick and Gov. Abbott had earlier suggested that they would look to redirect some of the state’s increased border spending toward other issues with President Donald Trump clamping down on immigration through federal directives. But the $6.5 billion earmark largely matches the amount approved for border security this current budget cycle.

Most of the $6.5 billion allocation would go to the governor’s office, which would receive $2.9 billion; the Texas Military Department, which would receive $2.3 billion; and the Department of Public Safety, which would receive $1.2 billion. DPS would also receive another $403 million for 567 new law enforcement officers and 160 support positions.

Abbott has asked the federal government to reimburse the state $11 billion for the costs of border security operations and wall construction during the Biden administration.

Property tax relief

Additionally, both chambers have budgeted $6.5 billion for new property tax cuts. Of that, $3 billion is slotted to go to local school districts so they can bring down their tax rates, a cost that lawmakers already committed to in prior tax-cut legislation.

Each chamber has different plans for how to use the remaining $3.5 billion. The Senate, under Patrick’s direction, would put much of it toward increasing the state’s homestead exemption, which lowers the amount of a home’s value that can be taxed to pay for public schools. The Senate tax-cut package would boost that exemption from $100,000 of a home’s taxable value to $140,000.

The House plan, meanwhile, would send most of the $3.5 billion to school districts to further drive down tax rates, a method known as “compression.” That approach would spread the benefits to homeowners and business owners, all of whom pay property taxes, while the Senate plan would channel more of the relief directly to homeowners.

Whichever approach wins out, the new tax cuts come on top of more than $44 billion both chambers are slated to spend to maintain existing tax relief approved since 2019. The combination of new and existing tax cuts will cost an estimated $51 billion over the next two years, according to state budget analysts.

Water and energy

Lawmakers have also proposed dedicating nearly $10 billion to the state’s energy, water and broadband infrastructure.

Both chambers have agreed to spend $5 billion to double the Texas Energy Fund, a low-interest taxpayer-funded loan program meant to incentivize the development of gas-fueled power plants.

Lawmakers have also proposed $2.5 billion for the Texas Water Fund, with the House including the funding in its supplemental budget for the current spending cycle, rather than including it in the upcoming two-year budget. House and Senate leaders are on board with a plan to dedicate $1 billion a year toward water projects amid Texas’ looming water shortage, though they are debating how much to use for creating new water sources versus repairing and upgrading aging infrastructure like water pipes.

And both chambers want to pump $2.4 billion into the Texas Broadband Development Office to expand internet access to the estimated 7 million residents who aren’t yet connected.

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