According to the Legislative Budget Board (LBB), the fiscal implications of HB 2 are substantial, reflecting a significant investment in Texas public education, teacher compensation, and special education services. According to the Legislative Budget Board’s fiscal note, the bill would have a projected negative impact of approximately $7.81 billion on General Revenue-related funds over the 2026–2027 biennium. The annual cost is expected to increase steadily, reaching nearly $4.8 billion by fiscal year 2030.

Key cost drivers include the expansion and enhancement of the Teacher Incentive Allotment (TIA), the creation of new teacher designation tiers, and the establishment of multiple new funding streams under the Foundation School Program (FSP). These include a teacher retention allotment, regional insurance cost offsets, and increased basic allotments with a new "Guaranteed Yield Increment Adjustment." TEA anticipates increasing costs for teacher salaries, including $10 million in one-time payments for newly certified teachers and up to $35 million annually for the Preparing and Retaining Educators through Partnership (PREP) Programs.

Additionally, special education funding reforms represent a major fiscal commitment. Starting in FY 2027, the bill introduces a multi-tiered weighting system and new service group allotments, with a $350 million increase over the baseline projected for that year alone. New programs such as parent-directed grants, day placement program support, and evaluation-based special education funding are estimated to cost hundreds of millions of dollars annually. Several of these programs are designed with future growth and flexibility based on legislative appropriations.

Beyond the Foundation School Program, the bill imposes operational costs on the Texas Education Agency (TEA) and other agencies, requiring new staff and information technology resources to support program implementation, oversight, and data reporting. TEA expects to hire more than 100 new employees and anticipates IT expenditures exceeding $13 million through FY 2027.

In summary, HB 2 represents a sweeping overhaul of public education finance, demanding considerable state investment to support expanded compensation, enhanced instruction, and stronger services for students with disabilities. While its fiscal footprint is large, its proponents frame it as a foundational investment in educational quality and teacher workforce sustainability across Texas.

HB 2, as substituted and reported from the Senate Committee on Education, significantly expands the scale and scope of state involvement in public education without enacting meaningful structural reforms. While the bill contains well-intentioned efforts to improve educator compensation, bolster support for special education, and increase funding parity for charter schools, the breadth of new programs, lack of prioritization, and sweeping centralization of power raise critical concerns regarding fiscal responsibility, accountability, and local control.

The bill commits over $7.8 billion in general revenue across the 2026–2027 biennium and authorizes numerous new funding allotments, grant programs, and administrative mandates—all coordinated centrally through the Texas Education Agency (TEA). Yet, there is insufficient assurance that these dollars will be spent effectively or reach the classroom in ways that directly benefit students. Only a fraction of the increased basic allotment is mandated for teacher pay, and even within that, much of the funding can be used for general compensation purposes across broader staff categories. This introduces a risk that funds may be absorbed into existing bureaucracies without materially improving instruction or outcomes.

Further, HB 2 expands the reach of TEA and the Commissioner of Education by granting extensive rulemaking and discretionary authority over funding formulas, program eligibility, and district compliance. This centralization of power not only weakens legislative oversight but also undermines local governance. For example, the bill allows the Commissioner to unilaterally designate "enhanced teacher incentive allotment schools" and modify special education funding mechanisms, effectively bypassing locally elected boards and community priorities.

On the charter school front, the bill redefines charter schools as equivalent to independent school districts for zoning and municipal regulatory purposes, removing prior requirements that ensured transparency and local input. This preemption of local authority diminishes community self-determination and raises potential equity concerns, particularly in densely populated municipalities where land-use planning is complex and contested.

The bill also adds or expands nearly two dozen grant and support programs, ranging from teacher pipelines to extended school years, many of which require new administrative structures, staff, and oversight mechanisms. Instead of simplifying or reforming existing systems, HB 2 builds layers of new bureaucracy, increasing operational complexity at the state level. This is particularly concerning given the longstanding challenges in managing the state’s public education bureaucracy effectively and transparently.

Even the bill’s promising components, such as performance-based teacher incentives and special education reforms, fall short in execution. The expanded Teacher Incentive Allotment remains difficult to implement in under-resourced districts that lack the capacity to manage designation systems. Meanwhile, special education reforms—though more equitable in concept—are left heavily dependent on future rulemaking and appropriations, leaving uncertainty about long-term viability and outcomes.

In totality, HB 2 represents a dramatic increase in public education spending, regulation, and administrative reach, without commensurate guarantees of improved student performance, efficient resource use, or respect for local decision-making. For these reasons, and in keeping with principles of limited government, fiscal prudence, and accountability to educators and taxpayers alike, Texas Policy Research recommends that lawmakers vote NO on HB 2.

• Individual Liberty: The bill includes a few provisions that give a modest nod to individual liberty, particularly for parents and students. It expands access to certain education options by increasing state support for open-enrollment charter schools, establishes parent-directed special education service grants, and encourages public-private partnerships in prekindergarten delivery. However, these options are narrowly framed within state-defined systems. Parents are not given true control over per-pupil education dollars (such as through universal education savings accounts), and outside of special education, families still have limited ability to choose non-government schooling with public support. Thus, while there are incremental gains in choice within public schooling, individual liberty in education remains highly constrained by state-defined limits.

• Personal Responsibility: The bill attempts to promote personal responsibility through performance-based teacher incentives, such as the expansion of the Teacher Incentive Allotment (TIA) and the designation of "acknowledged" teachers. These systems aim to reward educators based on effectiveness, and districts can gain enhanced status if they adopt rigorous evaluation systems. However, the implementation of these mechanisms is uneven. Many of the incentive programs depend on district-level administrative capacity, meaning teachers in rural or resource-limited areas may be excluded despite strong performance. Additionally, a large portion of the new funding is not tied to performance or merit, diluting the incentive structure. Personal responsibility is thus encouraged in rhetoric, but undercut in practice by systemic inequities and uneven resource distribution.

• Free Enterprise: The bill takes limited steps to open education to market principles. It expands charter school access and facilities funding, supports partnerships with community-based pre-K providers. and it introduces competitive grant programs for teacher preparation. Yet the overall structure of the bill consolidates control within the Texas Education Agency (TEA) and directs most funding through state-administered programs. Many of these grants and initiatives are heavily regulated, with eligibility and administration dictated by state officials. This crowds out the potential for organic market-driven solutions and entrepreneurial innovation in education. In effect, the bill creates a state-managed educational market rather than a truly free one.

• Private Property Rights: A key concern with the bill is its expanded regulatory preemption for charter schools. By amending Section 12.1058(d) of the Education Code, the bill exempts charter schools from many local zoning, permitting, and land-use regulations, without requiring them to certify educational use. While this may streamline construction and development for charters, it overrides local governments’ ability to manage community land use and safeguard neighborhood property rights. Additionally, the bill repeals certain transparency safeguards that previously prevented charter officials from profiting from real estate deals with their schools. These changes raise legitimate concerns about the potential for misuse of public resources and a weakening of local community governance.

• Limited Government: The bill stands in direct opposition to the principle of limited government. It creates or expands at least two dozen state-administered funding allotments, grant programs, and technical assistance initiatives. The Texas Education Agency is granted expansive authority over implementation, compliance, and rulemaking, including the ability to designate funding criteria, approve or disqualify districts from program participation, and modify funding formulas based on administrative discretion. No major existing programs are repealed or consolidated. Rather than streamlining or decentralizing education governance, the bill builds a more complex, expensive, and centralized bureaucracy. It grows both the footprint and cost of the state in public education, while offering limited evidence that these interventions will produce meaningful improvements in outcomes.