Texas Border Reimbursement Opens Door to Property Tax Relief

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Texas’s $7.5 billion federal border security reimbursement has created yet another opportunity to reduce property taxes.

Gov. Greg Abbott (R) says he wants to direct much of the money to property tax relief while continuing to fund border operations. How much taxpayers ultimately benefit will depend on the decisions lawmakers make when the 90th Legislature convenes in January.

The reimbursement restores part of the money Texas taxpayers already spent. That gives lawmakers a choice: use the recovered funds to reduce the tax burden, or let them fund more spending.

What the Texas Border Security Reimbursement Covers

Gov. Abbott announced on September 18 that the U.S. Department of Homeland Security (DHS) had approved $7.5 billion to reimburse Texas for border security costs. The award comes through the State Border Security Reinforcement Fund created in the federal One Big Beautiful Bill Act. Texas submitted its application in June.

The reimbursement follows years of Operation Lone Star (OLS) spending on National Guard deployments, Department of Public Safety (DPS) personnel, border barriers, and enforcement technology. It recovers part of those past expenditures rather than establishing a permanent source of state revenue.

Texas is also seeking additional reimbursement from a separate $3 billion Department of Justice (DOJ) fund. Abbott hopes to secure 75 percent of that money, which would bring the combined reimbursement to approximately $9.75 billion, close to the $10 billion total he has described. That additional award remains a goal, so lawmakers should not build spending commitments around it before it arrives.

Key Takeaways From Abbott’s Announcement

At an October 2 event at the Governor’s Mansion, Abbott said he wanted to dedicate “as much as possible to property tax relief,” with the final allocation to be worked out with lawmakers. Comptroller Don Huffines (R) has made a similar case, pointing to the reimbursement and continued sales tax growth as a foundation for relief next session.

The first takeaway is that Gov. Abbott’s remarks express a preference, not a plan. They do not establish a tax reduction, set an amount, or specify how relief would be delivered. Those decisions belong to the Legislature, and the answers will determine how much of the $7.5 billion actually reaches taxpayers. Recent interim hearings have shown how many questions remain about the cost and design of the next round of relief.

That is important because Abbott has made property tax reform the centerpiece of his reelection campaign, and his platform embraces several reforms TPR supports. Yet history demands skepticism. Past sessions delivered surplus-funded buy-downs alongside record spending, and property tax burdens kept climbing.

The second takeaway is that property tax relief will compete with border spending for the same dollars. Abbott said Texas must plan for continued border security funding over the next four years, and he expressed confidence the state can do both. Every dollar committed to future border operations is a dollar unavailable for relief, so the split matters.

That makes it important for lawmakers to reassess future border spending on its own merits. Reimbursement for earlier operations does not establish what Texas needs to spend going forward. That decision should reflect current conditions, federal responsibilities, and the effectiveness of state programs.

Lasting Texas Property Tax Relief Requires Spending Restraint

A one-time reimbursement can help Texas move toward lower property taxes, but permanent reductions require funding that remains available after the federal money is spent, as well as spending discipline.

The risk is that recovered dollars get absorbed by a budget that is already growing too fast. The state funds budget rose about 42 percent over the last two budget cycles, while population growth plus inflation rose about 25 percent, and the 2026–27 budget set another record. Of more than $51 billion lawmakers claimed as tax relief that session, only about $6 billion represented new cuts. The long-term budget trend shows why a windfall should not become a baseline.

If lawmakers use the reimbursement to help buy down school district maintenance and operations (M&O) tax rates, they will need a plan to sustain those lower rates in future budgets. Otherwise, a reduction funded with one-time money would leave a gap that later legislatures must fill.

The design of relief matters, too. The school district homestead exemption has grown from $15,000 to $140,000 for most homeowners, yet exemptions shift the tax burden among property owners rather than reduce it. Renters, businesses, and other non-homestead property owners receive no direct benefit. Rate compression lowers the tax rate itself and reaches every category of property owner, as Texas Policy Research (TPR) explained in recent testimony to the House Committee on Ways and Means and in its testimony on increasing the homestead exemption.

Lawmakers should evaluate proposals by how much they reduce the overall property tax burden and whether they advance a sustainable path toward eliminating school M&O property taxes. That goal is part of the Texas Liberty Compact, and TPR has outlined how Texas can replace property taxes over time.

State relief also needs protection against local spending growth. Property tax levies continued climbing in 2025 despite state investment in relief, extending a decades-long rise in local levies. Without tighter local spending limits, increases in local tax collections can erode the savings taxpayers were promised. Abbott’s own plan calls for capping local spending growth at the lesser of population plus inflation or 3.5 percent, and any relief funded by the reimbursement should be paired with that limit.

What Lawmakers Should Do Next Session

State leaders have already directed most agencies to request 3 percent less in their base budgets for 2028–29, though that guidance exempts many of the largest cost drivers and does not guarantee actual spending reductions. The reimbursement should not loosen even that modest restraint. As the 90th Legislature prepares to write the next budget, lawmakers should treat the reimbursement as taxpayer money returned, not as a new revenue stream. That means directing as much of it as possible toward rate compression, pairing any buy-down with a plan to sustain it, and holding local governments to spending limits that keep relief from being absorbed.

The reimbursement gives Texas more room to act. Whether it produces lasting property tax relief will depend on lawmakers treating recovered taxpayer dollars as an opportunity to reduce government’s claim on Texans’ homes and businesses, while keeping future spending commitments within sustainable limits.

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