Texas

State Fiscal Briefs

September 2020

Texas’s budget basics

According to the National Association of State Budget Officers (NASBO), Texas’s total expenditures in fiscal year (FY) 2019 were $111.8 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2019 were $2.1 trillion, ranging from $4.5 billion in South Dakota to $311.3 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Texas’s combined state and local direct general expenditures were $226.1 billion in FY 2017 (the most recent year census data were available), or $7,983 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

Texas’s largest spending areas per capita were elementary and secondary education ($1,994) and public welfare ($1,347). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Texas’s combined state and local general revenues were $222.6 billion in FY 2017, or $7,858 per capita. National per capita general revenues were $9,592. Texas does not levy an individual income tax or corporate income tax but does have a gross receipts tax. (Census counts this revenue as either general sales tax revenue or selective sales tax revenue.) Texas’s largest sources of per capita revenue were property taxes ($1,872) and federal transfers ($1,620).

Texas’s politics

Governor Greg Abbott, a Republican, was elected in 2018 with 56 percent of the vote. The next gubernatorial election is in 2022.

Republicans control both the House of Representatives (82 Republicans to 64 Democrats) and Senate (19 Republicans to 12 Democrats). Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Texas. All Texas House seats are on the ballot in 2020 because representatives serve two-year terms. Senators serve a combination of two- and four-year terms during each decade’s legislative district apportionment cycle. This 2-4-4 term system ensures all Senate seats are up for election after new legislative district boundaries are drawn. Roughly half the senators are up for election in 2020, and all senators are up for election in 2022.

Texas’s budget institutions, rules, and constraints

Texas uses a biennial budget. The legislature must pass a balanced budget, and is prohibited from carrying a deficit over into the following year. The Texas Constitution further limits spending growth with a budget rule based personal income growth. However, the limit may be overridden with a simple legislative majority. Texas also limits total authorized debt and debt service incurred by the state.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Texas’s recent fiscal debates

  • Texas has debated major property tax reform for decades. Both of Governor Abbott’s predecessors, George W. Bush and Rick Perry, pushed various reform bills with limited success. A major obstacle to the reforms was cutting taxes while still adequately funding K–12 education—a problem that, even without property tax cuts, has repeatedly ended up in Texas courts. To maintain education funding, these major property tax reform bills often proposed replacing the lost revenue with an increase in the state’s general sales tax rate. However, Republicans objected to the tax increase, and Democrats objected to increasing a regressive tax. In 2019, Governor Abbott signed the Property Tax Reform and Relief Act, which aims not to cut property taxes but to slow the growth in property tax revenues. The legislation requires that local governments (excluding school districts) get voter approval before instituting annual increases of property tax revenues of more than 3.5 percent. (The allowable growth is higher for some special districts with very low millage rates.)
  • Governor Abbott also signed major education legislation in 2019. HB 3 included roughly $6.5 billion in new K–12 education spending, including new funds to raise the state’s student-funding formula 20 percent, higher salaries for teachers, more money for districts that want to experiment with merit-based teacher pay, and additional funds for lower-income districts and programs for English-language learners. As part of this education bill, the state also increased its share of public education funding and mandated that school districts lower property tax rates. The governor estimated these local tax cuts will provide $5 billion in property tax relief.

Texas’s current budget

Governor Greg Abbott announced his proposed FY 2020–21 budget in February 2019. The budget included $3 billion for new education spending and included funds for early childhood education, special education, and higher teacher salaries. The governor’s budget and 2019 state of the state address also focused on his plan to allocate $3 billion in property tax relief.

The legislature passed its budget in May 2019. The enacted budget generally followed the governor’s recommendations but included more money than the governor proposed for both new annual education spending ($6.5 billion) and property tax relief ($5 billion).

For more on Texas’s budget, see