Texas’s budget basics

According to the National Association of State Budget Officers (NASBO), Texas’s total expenditures in fiscal year (FY) 2021 were $143.2 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2021 were $2.7 trillion, ranging from $4.7 billion in Wyoming to $512.8 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 $250.7 billion in FY 2019 (the most recent year census data were available), or $8,650 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 $10,161.

Texas’s largest spending areas per capita were elementary and secondary education ($2,042) and public welfare ($1,428). 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 $253.8 billion in FY 2019, or $8,756 per capita. National per capita general revenues were $10,563. 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 ($2,098) and federal transfers ($1,747).

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 (85 Republicans to 65 Democrats) and Senate (18 Republicans to 13 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 2022 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. All senators are therefore 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 on 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 current budget

Governor Abbott has not released a supplemental budget proposal (the state uses a biennial budget) and has not given his state of the state address in 2022.

Texas enacted its FY 2022-2023 biennial budget in June 2021. The enacted budget included $248.6 billion in total spending and $116.4 billion in general fund spending over the two-year period.

Under the American Rescue Plan, Texas will receive $15.8 billion in direct state fiscal aid and $9.1 billion in local government aid from the federal government. As of January 2022, Texas had spent part of its ARP funds on refilling its unemployment insurance trust fund, public health programs, education spending, and public safety.

According to NASBO, Texas’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

• FY 2021: $61.4 billion/$143.2 billion

• FY 2020: $63.1 billion/$136.4 billion

• FY 2019: $55.6 billion/$121.9 billion

For more on Texas’s budget, see

• the Texas Budget and Policy Division (Office of the Governor),
• the Texas Legislative Budget Board,
• the Texas House Research Organization,
• Texas Sunset Advisory Commission.

Texas’s economic trends

Texas’s per capita income (per the Bureau of Economic Analysis) was $59,674 in 2021, ranking 24th among the states. It was below the national average of $63,444, but above the Southwest regional average of $57,647. The state’s median household income (five-year estimate) was $63,826 in 2020, ranking 21st among the states and below the national average of $64,994. Texas’s poverty rate was 14.2 percent in 2020 (five-year estimate), above the national rate of 12.8 percent.

Although Texas’s averages tell a story about the entire state, Texas is composed of diverse localities. For example, the city of San Benito’s median household income was $30,565, and its poverty rate was 32.4 percent; the city of University Park’s median household income was $247,716, and its poverty rate was 3.9 percent.

Texas’s unemployment rate historically follows the trend of the national average. The state’s rate was slightly below the national average following the Great Recession, but it has again paralleled the US rate for the past few years. (See how COVID-19 is affecting state employment and earnings data.)

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Texas, the average unemployment rate in 2021 was 5.3 percent for white residents, 9 percent for Black residents, and 6.9 percent for Hispanic or Latino residents. (This is preliminary data. See the 2020 data for a more detailed breakdown of state unemployment rates by race and ethnicity.)

The major industries that contributed the most to Texas’s gross domestic product (GDP) in 2020 were finance, manufacturing, professional services, government, and wholesale trade. Manufacturing and wholesale trade contributed more to Texas’s GDP than they did to the nation’s and region’s GDP, while finance and government were less important to Texas than they were to the nation and region in 2020.

Looking at more specific industries, among those that accounted for at least one percent of Texas’s GDP in 2019, oil and gas extraction produced far more for the state than for the nation, contributing 6.1 percent to Texas’s GDP and 0.9 percent to the nation’s. Other industries that overperformed in Texas relative to national averages in 2019 were wholesale trade, petroleum and coal manufacturing, mining support, and chemical manufacturing.

Texas’s demographics

As of July 2020, Texas’s population was 29,360,756. That was up 16.2 percent from 2010. The state’s population growth rate was faster than than the nation’s 6.5 percent growth over the same period. The Urban Institute estimates the state’s population will increase 29.9 percent between 2010 and 2030, more than the nation’s estimated growth rate of 16 percent.

Additional resources

• The State and Local Finance Initiative’s Backgrounders explain the tax and spending issues highlighted in these briefs.
• The State Economic Monitor presents updated data and customized visualizations of state economic indicators.
• State and Local Finance Data: Exploring the Census of Governments allow users to sort, customize, and download the Census of Governments State and Local Finance series data featured in these summaries.
• The State Tax and Economic Review series provides quarterly reports on state tax collections and underlying economic trends in all 50 states.
• The Urban Institute’s State Tax Data Subscriptions provide access to up-to-date revenue data in all 50 states.