Texas will have a $20B surplus next legislative session, comptroller projects

The only bill Texas lawmakers are constitutionally required to pass each session is the biennial budget, which funds state agencies, public and higher education, health and human services, the criminal justice system, state courts, and more.

During the 88th legislative session, lawmakers passed a $321 billion budget for the 2024-25 biennium, which runs from Sept. 1, 2023, to Aug. 31, 2025. They entered that session with a historic $32.7 billion surplus.

In 2023, lawmakers set aside $4.5 billion for teacher pay raises and other public education expenditures, but that money has not been spent. It was tied to a $500 million private school voucher package, which would give families public money to send their children to private schools.

The teacher pay and voucher proposals both died in late 2023 after four special sessions. Lawmakers are on track to approve vouchers in 2025, Gov. Greg Abbott said Nov. 6, after several pro-voucher Republicans were elected to the Texas House.

Abbott, a champion of vouchers, said he was committed to “fully funding” Texas public schools and raising salaries for teachers.

“Some people ... make it sound like you can't have both school choice and robust public schools,” Abbott said. “That's completely false. The reality is we can have the best public schools in America and also have school choice at the very same time. It does not have to be one or the other, and it's wrong to pit one against the other.”

The $4.5 billion is in an account called “dedicated funds,” meaning it can only be used to fund public schools.

What’s happening

If Texas were its own nation, Hegar said Dec. 12, it would be the world’s eighth-largest economy. The state receives money from the federal government, state taxes—such as sales taxes and the business franchise tax—and other sources, according to the comptroller’s office.

“​​The state economy continues to grow, but it's not growing on the same pace that it has been [in recent years],” Hegar said. “Sales tax ... is the biggest revenue source for the state of Texas. Our sales tax revenues are, on average, about 4% increasing from month-to-month right now, with inflation at about 2.7%.”

What they’re saying

State Rep. Caroline Harris Davila, R-Round Rock, said lawmakers need to “be smart” when writing the next budget.

“Part of that is stewarding taxpayer money—when it comes in to us to spend on roads and infrastructure, are we being responsible with it?” Harris Davila said during a Dec. 12 panel hosted by the Austin Chamber. “The numbers [Hegar] threw around sound very big, but if you look across the state at all of the road projects we have going on right now, I mean, it's not enough already. And so I'm constantly trying to figure out with my colleagues, what does the increase in funding look like, and how can we allow that to happen?”

Rep. Donna Howard, D-Austin, said the Legislature also needs to prioritize the state’s water infrastructure, which could include creating a dedicated funding source to prevent future water shortages. About 85% of voters are concerned that Texas may face water shortages in the next 50 years, according to a recent poll by Texas 2036, a nonpartisan policy organization.

“This is a unique opportunity that we won't have again, to set up some kind of, you know, investment fund, like the permanent school fund, like the [state] highway fund—set something up that would be ongoing in perpetuity to help us fund that infrastructure,” Howard said.

Harris Davila, who represents a portion of Williamson County, said some cities in her area have water pipes that are 100 years old.

“Those cities need all the help they can get, and they've never had the tax base to prepare for this type of growth. ... A lot of the people that work in Austin are going to live in those areas, and they need that infrastructure just as much as the businesses moving into that part of town,” Harris Davila said.

Increasing funding for public schools will be another major legislative priority in 2025, the two lawmakers said.

“My big concern is that we are not putting the money into public education that we need to,” Howard said. “I realize that there are reasons that people want to look at different [education] choices. We have some choices, but please understand we have got to fund our schools, and that is much more than what we're doing right now. If we want to have an educated workforce throughout the state, we have got to fund our public schools.”

Harris Davila, who voted in favor of private school vouchers in 2023, said Texas lawmakers “want all kids to have the best education possible.”

“Ninety percent or more of our kids are in public schools,” Harris Davila said. “I mean, that's a huge chunk. So when you're talking to representatives, everyone understands and supports public schools and the work that they do.”