Estimated Time to Read: 15 minutes
Texas lawmakers returned to Austin in 2025 with another large budget surplus (i.e. overcollected taxpayer money) and a host of competing priorities. While some called for long-term structural tax relief or genuine spending restraint, the result was a 2026–27 budget that broke historical records and codified a significant expansion of government scope and cost. The 89th Legislature also revived and expanded a number of corporate subsidy programs and used massive supplemental appropriations to entrench new state priorities across healthcare, infrastructure, education, and technology.
In Part 4 of our 8-part series, we explore what passed, what failed, and why the 89th session should alarm Texans concerned about limited government, fiscal discipline, and the long-term size of the state.
Bills That Made It
The 89th Legislature delivered a torrent of new spending and created multiple new government programs—some of which passed with bipartisan support, and others that slipped into law with minimal scrutiny. From record appropriations to permanent institutional expansions, these bills reflect a broad ideological and troubling shift: government, not the market, is increasingly seen as the driver of innovation, infrastructure, and economic growth in Texas.
The 2026-27 State Budget, Senate Bill 1
The Legislature passed a $338 billion budget for the upcoming biennium, a 27.6% increase from the 2022–23 budget, and a 43% increase since the 2020–21 cycle. While touted as “fiscally conservative,” the budget’s growth far exceeds population and inflation metrics. It includes only $6.7 billion in new property tax relief, $8.5 billion for public education (including teacher pay raises), $5 billion for the Texas Energy Fund, and $3 billion for the Dementia Prevention Research Institute of Texas, among several other provisions.
Taxpayers should be alarmed. What started as competing proposals from the Senate and House ended in a bloated budget that dramatically expands state government beyond what key measures like population growth and inflation would justify. Despite claims of fiscal conservatism, this final product mirrors the spending habits of progressive states like California more than it does the limited government model that made Texas an economic powerhouse.
Each version of the budget got bigger, not smaller, throughout the process. Lawmakers escalated the budget with every iteration, an unsustainable trend.
Even excluding temporary tax relief, state appropriations still grew more than 30%. Education and healthcare spending surged by over 40%, and public safety grew by nearly 60%. Regulatory functions grew by over 800%. The Legislature also lined up a slate of new constitutional amendments for November’s ballot that could lock in billions more in off-budget spending should Texas voters approve them.
The plan is excessive and structurally unsound. The property tax relief included in the budget is temporary and fleeting, while the new baseline spending levels are permanent. Without structural reforms, Texas taxpayers are at growing risk of long-term fiscal erosion.
The state budget passed the Texas House of Representatives by a vote of 107 to 21, while the Texas Senate passed it by a vote of 30 to 0. The state budget has passed certification by the Texas Comptroller and now awaits the consideration of Texas Governor Greg Abbott (R).
$13.7 Billion Supplemental Spending Bill, House Bill 500
Supplemental appropriations bills are used to adjust or ‘supplement’ the existing state budget between biennial sessions, typically to address unanticipated costs or urgent needs. House Bill 500 (HB 500) was one of the largest such bills in Texas history, appropriating $13.7 billion in General Revenue-related spending to cover a wide array of new or expanded priorities. Some of the items being funded include:
- $1 billion to shore up the state retirement system
- $300 million for a new Space Exploration and Aeronautics Fund
- $150 million for cybersecurity infrastructure in Lubbock
- $150 million for a new mental hospital in El Paso
- $100 million for courthouse preservation
While framed as a one-time capital investment, the scale and scope of HB 500 set a precedent for large supplemental spending as a normalized mechanism for state expansion. The bill lacked meaningful sunset clauses, privatization mechanisms, or restraints on recurring obligations. Though some funding addressed deferred maintenance, much of it reflected discretionary development priorities best left to local or private actors.
Budget Certification Loophole Extension, House Bill 4488
House Bill 4488 (HB 4488), authored by State Rep. Greg Bonnen (R-Friendswood), extended the use of a longstanding budgetary gimmick, allowing the Comptroller to certify unspent balances from dedicated revenue accounts as available General Revenue. While sold as a fund consolidation measure, the bill retained or exempted dozens of major accounts, enabling lawmakers to inflate the apparent size of the budget without transparency or structural reform.
The bill codifies and extends provisions under Government Code Section 403.095 through 2027, allowing temporary reallocation of otherwise restricted funds to balance the budget on paper. Although the mechanism does not authorize actual spending of these balances, it masks the true fiscal picture and avoids hard budgetary trade-offs. The bill also includes numerous exemptions for politically favored funds, such as the Strategic Bitcoin Reserve and the Quantum Innovation Fund, highlighting the selective nature of its “consolidation.”
Critics argue that HB 4488 reinforces a culture of budgetary sleight-of-hand that evades accountability and enables the Legislature to bypass population-plus-inflation spending constraints without voter transparency. Despite being framed as routine fiscal housekeeping, the bill entrenches unsound budgeting practices that make meaningful fiscal reform more difficult in the long term.
Texas Presidential Library Promotion Program, House Bill 5616
This new state initiative, authored by State Rep. Donna Howard (D-Austin), creates a permanent program within the Texas Historical Commission to support and promote the state’s three presidential libraries: the Lyndon B. Johnson, George H.W. Bush, and George W. Bush libraries. The program includes promotional funding, renovation grants, and the development of a mobile exhibit to bring presidential history into Texas schools and communities.
Critics argue that this initiative misallocates taxpayer dollars by funneling public funds into already well-resourced institutions supported by federal partnerships and private foundations. It creates a politically sensitive precedent by dedicating public money to only select presidential legacies, raising concerns about government favoritism, symbolic spending, and political messaging. With no sunset clause, cap on funding, or requirements for nonpartisan content, House Bill 5616 (HB 5616) is viewed by some as both fiscally unnecessary and ideologically skewed.
While the immediate fiscal impact is limited, the bill codifies a new public role in legacy preservation that could grow over time. In doing so, it drifts from the core responsibilities of state government and contributes to the broader pattern of unchecked expansion seen throughout the session.
Judicial Pay Raises and Lawmaker Pension Boost, Senate Bill 293
Senate Bill 293 (SB 293), authored by State Sen. Joan Huffman (R-Houston), raises the base salary for district judges from $140,000 to $175,000, marking the first increase in over a decade and addressing long-standing concerns about Texas’s low judicial compensation. Because legislative pensions are statutorily tied to judicial salaries, this pay raise also results in a significant boost to lawmaker pensions, raising concerns about optics and political self-dealing.
The bill sparked intra-chamber tension late in the session, with the House initially attempting to decouple lawmaker pensions from the raise. After the Senate rejected that amendment, a compromise was reached: judicial raises would proceed immediately, but the Texas Ethics Commission would assume authority over future pension adjustments starting in 2030. Lawmakers argued the change would promote transparency and remove political incentives from pension decisions.
Critics remain skeptical. The linkage between judicial and legislative pay continues until 2030, giving rise to immediate pension increases for lawmakers. The compromise transfers oversight to a politically appointed commission, raising additional questions about accountability and the potential for quiet, incremental pension hikes over time. SB 293 ultimately reflects a recurring pattern in state fiscal policy: necessary reforms (judicial compensation) entangled with politically sensitive perks (lawmaker pensions), approved at the last minute with minimal public scrutiny.
Texas Moving Image Industry Incentive Fund, Senate Bill 22
Senate Bill 22 (SB 22), also authored by State Sen. Joan Huffman (R-Houston), overhauls and dramatically expands the state’s film and multimedia incentive program, establishing the Texas Moving Image Industry Incentive Fund with a revised funding cap of $300 million per biennium, up to $1.5 billion over the next six years. Administered by the Governor’s Music, Film, Television, and Multimedia Office, the fund operates outside the state treasury, limiting direct legislative oversight.
The bill grants the Governor’s Office wide discretion to approve or deny funding for productions, including the ability to reject applications for content that portrays Texas or Texans “in a negative fashion” or contains “obscene or politically charged” material. Critics argue these subjective filters create an ideological gatekeeping mechanism that chills free expression and politicizes public funding.
Supporters claim the measure will help Texas compete with other states like Georgia and New Mexico for large-scale media productions. Detractors view the bill as a “Hollywood handout,” subsidizing a powerful and often culturally oppositional industry. During the floor debate, opponents questioned why conservative lawmakers would use taxpayer dollars to support an industry that mocks their values.
With the Senate’s concurrence on House amendments, the bill awaits the Governor’s signature. Despite assurances that the funding had already been allocated in the budget, SB 22 marks a major policy shift: ideological corporate welfare, minimal oversight, and the use of public funds to influence cultural production in Texas.
Expansion of JETI Grants to Education Technology, HB 322
Though framed as workforce investment, House Bill 322 (HB 322), authored by State Rep. Ryan Guillen (R-Rio Grande City), broadens the allowable uses of Jobs and Education for Texans (JET) program grants to include not only start-up costs but also acquisition, implementation, and ongoing maintenance of education technology. This reorientation transforms JET from a capital startup program into a recurring technology subsidy pipeline for schools and public institutions. The bill also clarifies that grants may now support technology infrastructure tied to CTE programs, leading to certifications or degrees in high-demand fields.
Critics warn that HB 322 expands a model of taxpayer-subsidized education delivery that undermines local initiative and crowds out private innovation. By funding operational costs like technology upkeep, the bill sets a precedent for budget creep and deepens institutional dependency on state grantmaking. It continues the trend of using JETI-aligned frameworks to distribute subsidies through non-competitive mechanisms, reinforcing Texas’s growing reliance on government-led economic development rather than market-driven investment.
Texas Quantum Initiative, House Bill 4751
House Bill 4751 (HB 4751) establishes a new public program to develop quantum technology, administered through the Governor’s Office and governed by a seven-member political appointee board. Authored by State Rep. Giovanni Capriglione (R-Southlake), HB 4751 creates a new fund, supports grants to private companies and universities, and adds permanent staff. While modestly funded at first, the lack of sunset provisions, open-ended fund structure, and state-led industry coordination make it a clear case of taxpayer-funded corporate welfare and planning.
Texas Pharmaceutical Initiative Expansion, House Bill 4638
House Bill 4638 (HB 4638), authored by State Rep. Greg Bonnen (R-Friendswood), restructures and extends the Texas Pharmaceutical Initiative (TPI), expanding the state’s role in prescription drug manufacturing, distribution, and therapeutic services. While originally framed as a cost-saving governance tweak, the bill repositions the state as a full-service pharmaceutical provider capable of competing with private drug companies. It establishes new board appointments, expands operational authority, and extends the program’s lifespan from 2025 to 2031.
Despite neutral fiscal notes in the short term, the bill authorizes infrastructure investments and services that could expose taxpayers to long-term costs. Critics warn that HB 4638 undermines market-based solutions, crowds out private innovation, and entrenches state-run healthcare services under the guise of efficiency and access. It expands bureaucracy, invites mission creep, and reflects a broader shift toward public-sector dominance in medical research and distribution.
Bills That Did Not Make It
Not all spending-related proposals cleared the finish line. Some of the most aggressive efforts to expand corporate tax incentive programs or relax oversight of subsidy frameworks failed to gain final approval. While these defeats represent small wins for fiscal restraint, they also preview the battles that are likely to return in future sessions.
Expanded JETI Incentives for ‘Priority Projects’, House Bill 105
House Bill 105 (HB 105) sought to supercharge the Texas Jobs, Energy, Technology, and Innovation (JETI) program by defining a new “priority project” category, projects committing at least $750 million in initial investment, and exempting them (and electric generation projects) from core accountability measures like job creation and demonstrating that the tax break was pivotal to their investment decision.
Authored by State Rep. Ryan Guillen (R-Rio Grande City), the bill would have revised wage standards and loosened site selection requirements, undermining the intent of the JETI program to incentivize only transformative, mobile capital investments. Its backers, including industry trade groups and economic development advocates, touted it as a modernized growth tool. Opponents from across the spectrum called it a giveaway to politically connected industries and a revival of the worst features of the now-expired Chapter 313 program.
The Legislative Budget Board projected short-term costs of roughly $10 million escalating to $146 million annually by FY 2035. The Foundation School Program would absorb those losses, leading to a decade-long General Revenue hit of more than $470 million. The bill failed to advance amid growing skepticism over corporate welfare and its misalignment with principles of limited government and taxpayer fairness.
Fortunately for taxpayers, HB 105 never passed the Texas House of Representatives, despite being put on a calendar to be considered.
Weakened Oversight for JETI Agreements, Senate Bill 2322
Senate Bill 2322 (SB 2322), authored by State Sen. Phil King (R-Weatherford), would have eliminated the “compelling factor” requirement, intended to ensure that tax abatements are only awarded when truly necessary, for certain energy projects. By making it easier for companies already planning to locate in Texas to receive abatements, the bill risked converting a competitive incentive into a corporate windfall.
The bill also refined Comptroller criteria under JETI, requiring projects to demonstrate sufficient tax revenue to offset district losses, preserve the compelling-factor test (for most projects), and ensure true Opportunity Zone alignment. Carve-outs for utility projects nonetheless reduced evidentiary requirements, allowing a broad range of high-capital applicants to qualify with less oversight.
SB 2322 removed procedural safeguards while expanding eligibility for many, particularly energy-related applicants. The Legislative Budget Board estimated Foundation School Program liabilities rising from $0.8 million in FY 2027 to $27 million by FY 2031.
Though improvements were made, critics argued that the carveouts and oversight rollback allowed expanded tax breaks without adequate fiscal accountability. The bill reinforced the corporate welfare trend, exposing the state to greater fiscal risk while reducing transparency and public scrutiny.
Though SB 2322 passed the Texas Senate by a vote of 20 to 11, it was never taken up by the Texas House of Representatives in time before key deadlines.
Political Takeaways/Trends
The 89th session saw an unprecedented expansion of the Texas budget, both through the regular appropriations process and via massive supplemental bills and new off-budget funds. While lawmakers pointed to inflation and infrastructure needs to justify spending, much of the new outlay went to corporate incentive programs, politically favored industries, and new state agencies or boards.
Critics across the ideological spectrum noted that the Legislature increasingly relies on budget gimmicks, constitutionally dedicated funds, and economic favoritism to sustain growth in state involvement. Bills like HB 322 and SB 22 show how corporate welfare is evolving, not just as tax relief, but through grant programs, fund creation, and embedded ideological gatekeeping.
Despite the budget’s record size, there was no significant structural reform of state fiscal policy, nor meaningful efforts to restrain or prioritize. The state continues to grow faster than population plus inflation, and without new checks, Texas risks repeating the fiscal trajectories of the high-tax, high-spending states it once sought to contrast.
Conclusion
The 89th Legislature’s approach to government spending signals a departure from the Texas Model of limited government. With a $338 billion budget, a $13.7 billion supplemental spending bill, and billions more in off-budget incentives and constitutional funds, the state is rapidly expanding its role in infrastructure, education, health care, economic development, and even historical preservation.
While some spending addressed deferred maintenance or legitimate infrastructure needs, most of it reflects a growing belief that state government, not individuals, communities, or markets, is the engine of innovation and prosperity. Programs like SB 5 and HB 4751 establish permanent agencies and funding structures for areas already well served by private sector efforts. Meanwhile, budgetary maneuvers like HB 4488 ensure that fiscal restraint will remain elusive.
Texans concerned with limited government, free enterprise, and responsible budgeting should take note: the 89th session did not just expand spending, it entrenched a philosophy of state-led growth and centralized decision-making that will shape Texas for years to come.
Other Policy Briefs in the Series
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