In July, Texas' top elected officials directed most state agencies, appellate courts and public universities to cut spending by 3% in their base budget requests for the next two years. Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dustin Burrows said those reductions will help Texas hold a "strong fiscal position" by expanding property tax relief and maintaining public education funding when the legislature returns to Austin next year.
Yet dozens of agency leaders have warned that the cuts, totaling hundreds of millions of dollars, are not sustainable. They would cause Texas residents to lose "essential" services and lead to losses in state revenue, leaders said at the capitol and in budget documents.
At a glance
Texas A&M University System Chancellor Glenn Hegar, a former lawmaker and state comptroller, acknowledged the complexities of state finances before asking budget writers to oppose the 3% cut to his system, which includes 12 universities, eight agencies and other institutions.
"I've spent much of my career working on budgets from the other side of this table," Hegar said during a Sept. 25 hearing on the system's legislative appropriations request. "I understand that every request competes with other important needs and every dollar must deliver a return for the people of Texas."
To avoid impacting student services, the university system plans to shrink several research programs if the funding cuts are enacted, according to university documents.
"We are asking that the 3% reductions be restored for all institutions, so they can continue to protect education and the services students depend on without shifting additional costs to families," Hegar said.
Other government institutions protesting the cuts include the comptroller's office, the attorney general, Texas' Cancer Prevention and Research Institute, state criminal justice agencies and the Texas Commission on Environmental Quality.
What's happening
This is not the first time state agencies have been asked to cut their spending. In the wake of a recession, state leaders mandated 5% cuts to budget requests in 2010 and required 4% cuts due to low severance tax revenues in 2016, according to Rahul Sreenivasan, a fiscal policy analyst at the nonpartisan think tank Texas 2036.
This year, state leaders told agencies in a July 14 letter to submit base requests 3% lower than the funding they currently receive under Texas' $338 billion budget, which covers fiscal years 2026 and 2027. Agencies may ask for more money through "exceptional item requests," which are used to highlight programs that need additional support or explain why the 3% cuts shouldn't be made.
The cuts are slated for fiscal years 2028 and 2029, although there is no guarantee that the legislature will approve such cuts, Sreenivasan said. He noted that lawmakers' first draft of a biennial budget is typically smaller than what ultimately passes. The legislature's only mandatory constitutional duty is to pass a balanced two-year budget every biennium, according to previous Community Impact reporting.
"By building in the 3% cut on the front end, they're forcing agencies to make the case for funding these programs at that higher level," Sreenivasan told Community Impact in an Oct. 21 interview. "Those are decisions that will be made during session."
The cost to Texans
At least 18 state institutions have expressed concerns about the 3% cut to their base budgets. They indicated that cutting funding would damage critical state services or asked lawmakers not to make the cuts, according to a Community Impact review of legislative appropriation requests submitted by those institutions. Budget requests for each state agency, appellate court or university system are available on the Legislative Budget Board's website.
The Texas Health and Human Services Commission has proposed eliminating funding for the state's Children’s Autism Program, which helps families access therapy treatments through community organizations. The HHSC received over $13 million for the autism program in the current budget, but if the agency's budget request is approved, $0 would be spent on the program.
While HHSC officials did not explicitly ask that funding be restored, the budget request cites issues with the demand for autism services exceeding the supply of available providers in parts of the state.
"Children with higher needs and more intense challenging behavior don't have access to the same number of providers as children who are younger and have fewer challenging behaviors," the request reads. "This creates a challenge for the contractors to ensure performance."
Cuts to the state comptroller's office would cost nearly $565 million in tax collections due to reductions in staff and an increase in the amount of time needed to conduct tax assessments, according to the agency's budget request. This would also limit the comptroller's ability to conduct financial audits, putting taxpayers at a higher risk of fraud, agency officials wrote.
"The comptroller is fully committed to protecting Texas taxpayers from frivolous and wasteful government spending," the request reads. "However, the agency would like the Legislature to understand that ... a [3%] cut would naturally result in a decline in its ability to perform core functions, a decrease in tax revenue, as well as a reduction in investigations into tax fraud, tax evasion and other criminal activity."
The Cancer Prevention and Research Institute of Texas said it planned to meet the 3% cut by reducing its investments in grant programs for cancer prevention and research, asking lawmakers to restore that funding in its appropriations request.
Texas State University officials said the 3% reduction would negatively impact its Texas School Safety Center and Advanced Law Enforcement Rapid Response Training program. The university is required to provide safety resources to public schools and community colleges through its school safety center, according to the budget request, while state law mandates that all law enforcement officers complete at least 16 hours of ALERRT training every two years.
The cuts would also "limit our academic advising support areas and may adversely affect graduation rates and student success," Texas State's budget request reads.
Several community colleges, including Austin Community College, Houston City College, Tarrant County College and the Lone Star College System, included the following plea in their appropriations requests: "Colleges respectfully request that the Legislature fully fund the community college formula for Fiscal Year 2028 and Fiscal Year 2029 based on [Texas Higher Education Coordinating Board's] performance forecast. ... Funding at these levels will provide additional certainty for colleges investing in student achievement of credentials of value, including short-term workforce credentials, dual credit attainment and transfer."
Two of Texas' justice agencies, the Department of Criminal Justice and the Juvenile Justice Department, said budget cuts would impact their ability to serve Texans in the justice system.
TDCJ officials asked lawmakers to restore $287 million to avoid a loss of more than 1,300 agency employees. The cuts could negatively impact prison security, probation and parole programs, inmate treatment services and diversion programs, according to the agency's budget request.
"A reduction in the incarceration functions would have a profound effect on the agency’s ability to securely and safely house, feed, clothe, rehabilitate and provide healthcare to those inmates incarcerated in TDCJ," the request reads.
The juvenile justice department warned that a loss of $26.5 million would require cuts to local juvenile probation services, support for residential placements and staffing.
Several other agencies also raised concerns about the 3% cuts in their budget requests:
The Texas A&M Forest Service said funding losses would result in less frequent replacement of agency equipment, limit aviation operations and cut some grants for local fire departments. Hegar said restoring funding for the forest service and other agencies in the Texas A&M University System would help maintain "the people, the expertise and the equipment Texas expects to be ready before an emergency occurs."
The Texas Commission on Environmental Quality said it made cuts to grants and "remediation funds," which are used to assess and clean "contaminated sites potentially impacting groundwater," to meet the 3% reduction.
The Public Utility Commission of Texas said restoring funding was necessary to preserve customer assistance programs and provide support to "small water and wastewater utilities."
The Office of the Attorney General said funding cuts would impact the agency's ability to enforce child support policies, investigate and prosecute Medicaid fraud and provide other "essential services."
The Texas Department of Insurance requested that at least one-third of the 3% cut be restored to "enable the agency to maintain critical regulatory activities and remain responsive to consumers amid the demands of a growing market."
The University of Houston said cutting its base funding would limit "UH’s capacity to serve students, recruit and retain high-quality faculty, support research activity, maintain critical infrastructure, and respond to the state's economic and workforce priorities."
The Railroad Commission of Texas wrote that "this reduction was implemented responsibly; however, it affects several core regulatory activities that support public safety, environmental protection, and responsible energy development."
The State Preservation Board, which manages the capitol building, said it needed full funding to continue maintaining the capitol grounds as it wraps up a major renovation project.
Something to note
While the 3% cut to budget requests affects most state-funded institutions and programs, a few are exempt:
Public education funding through the Foundation School Program
The state's new education savings account program
Funding to maintain Medicaid, foster care programs and other social services as required by state law
Funding needed to cover payroll growth in state pension and employee benefit programs
"There are some huge exemptions in there," Sreenivasan said. "So, the squeeze lands on things that are not necessarily in that category—a much smaller portion of the budget."
State leaders pointed to "rising costs of living and homeownership" in their directive, stating that they want to work on "targeted affordability measures and additional property tax reform" during the 2027 legislative session.
How it works
About $51 billion, or 15% of Texas' current budget, is used to drive down property taxes for businesses and homeowners through tax exemptions and other methods. When local property taxes are reduced through state action, the state is required to give school districts money to ensure they do not lose revenue as a result of the lower taxes.
Unless existing property tax exemptions are rolled back, the state will be required to spend that much or more on tax relief in every two-year budget, lawmakers have said.
Some lawmakers have questioned whether Texas can afford to continue increasing tax exemptions, while state leaders and candidates are proposing further tax cuts:
Abbott has vowed to get rid of the property taxes that homeowners pay to their local public school districts—a plan that would cost about $8.6 billion per year, Community Impact reported.
Gina Hinojosa, an Austin state representative running against Abbott in the Nov. 3 election, has said she wants to "end corporate subsidies" to cut and eventually eliminate property taxes for homeowners. Hinojosa has not publicly detailed the specifics and cost of that plan.
"The legislature will still have to find dollars in the budget to continue that [$51 billion] of property tax relief," Sreenivasan told Community Impact. "I think what is up in the air is if there are additional property tax cuts on top of that."
In recent legislative sessions, lawmakers had access to large budget surpluses—about $33 billion in the 2023 session and $24 billion in 2025—when funding property tax relief and other priorities. Those surpluses were due to an influx of federal funding during the COVID-19 pandemic and higher-than-normal sales tax revenues. While a smaller surplus is still expected in 2027, fiscal experts have cautioned that it will not be in the realm of tens of billions of dollars.
The state is also receiving a one-time, $7.5 billion payment from the federal government to cover the cost of recent border security operations, Abbott announced Sept. 18.
"How lawmakers end up deciding to spend that money is another thing to watch for, because that does, at least, relieve some pressure for budget writers this session," Sreenivasan said.
Lawmakers have also floated eliminating a decade-old tax exemption for data centers, which is estimated to cost the state at least $3.2 billion in sales tax revenue over the next two years, according to previous Community Impact reporting.
"The No. 1 issue is that [Texas] needs money," Shannon Halbrook, a fiscal analyst with the progressive think tank Every Texan, said during a July 27 legislative hearing. "Ending the exemption seems to be developing into a consensus position."
Stay tuned
The state comptroller typically releases a biennial revenue estimate, which details Texas' financial health and the amount of money lawmakers can spend in the next two-year budget, one day before a new legislative session. The 2027 session is scheduled to begin on Jan. 12.
Lawmakers will also hold appropriations hearings throughout the 140-day legislative session, during which state agency officials and the public can testify about the amount of money each agency needs.
