Overall Vote Recommendation

Vote No; Amend

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

SB 1 is the General Appropriations Act for the State of Texas for the 2026-2027 biennium. The bill serves as the state’s primary financial plan, detailing the allocation of funds across various government functions, agencies, and services. It provides the legal authority for state spending and outlines revenue projections and restrictions for the upcoming biennium. The House Committee Substitute modifies the Senate-passed version in both magnitude and policy emphases.

Total Appropriations:

The total appropriations for the 2026-2027 biennium is $337.4 billion in all funds or $237.4 billion, representing a 4.9% increase in all funds or an 8.2% increase in state funds, respectively, from the 2024-25 biennium. Since the 2022-23 budget, the changes in appropriations represent a 42.8% increase in state funds or a 27.4% increase in all funds. This budget consists of General Revenue Funds, General Revenue-Dedicated Funds, Federal Funds, and Other Funds, with $153.6 billion appropriated from General Revenue Funds.

General Revenue Funds: $153.7 billion
General Revenue-Dedicated Funds: $7.1 billion
Federal Funds: $100 billion
Other Funds: $76.7 billion

Compared to the Senate version, total spending increased by $1.3 billion, with much of the change driven by new contingent public education allocations and adjustments to border security and transportation appropriations.

Major Funding Allocations by Article:

General Government (Article I): This section covers state administrative agencies, including the Governor’s Office, the Comptroller of Public Accounts, and the Texas Facilities Commission. It also includes funding for agencies that oversee ethics, veterans' affairs, and emergency communications.
- Total Appropriated: $15.3 billion (Senate version: $16.5 billion) 4.5% of budget
  - Major reductions in Texas Facilities Commission due to lapse of one-time border wall construction and pandemic-era funding.
  - Attorney General funding slightly reduced; includes salary increases and litigation support.
Health and Human Services (Article II): As one of the largest portions of the budget, this section provides funding for Medicaid, the Children's Health Insurance Program (CHIP), mental health services, and other public health initiatives. The Health and Human Services Commission (HHSC) and the Department of State Health Services (DSHS) are the primary recipients of funds.
- Total Appropriated: $105.2 billion (Senate version: $103.6 billion) 31.2% of budget
  - Medicaid program: $82.3 billion (Senate version: $80.8 billion) largest allocation in this article
  - Behavioral health services: $10.2 billion
  - Child Protective Services: $4.1 billion
Education (Article III): This article includes appropriations for K-12 public education through the Texas Education Agency (TEA), as well as funding for the Higher Education Coordinating Board, community colleges, and public universities. The budget also covers teacher retirement benefits and school safety initiatives.
- Total Appropriated: $134.6 billion (Senate version: $129.7 billion) 39.9% of budget
  - Foundation School Program: $75.6B (increase of $4.7B), with $9.1B in contingent spending for school safety, literacy, and property tax relief.
  - Higher Education: $29.5B
  - TRS retirement + health: $7.6B
  - Active teacher health care: $450M
  - Higher education funding: $32.6 billion
The Judiciary (Article IV): This article funds Texas courts, judicial agencies, and the Office of Court Administration. It includes appropriations for the Supreme Court of Texas, the Court of Criminal Appeals, and district courts.
- Total Appropriated: $1.2 billion (0.4% of budget)
  - Efficiency savings maintained; slight increases for border case adjudication and court expansion.
Public Safety and Criminal Justice (Article V): This section provides funding for law enforcement and correctional institutions, including the Texas Department of Public Safety (DPS), the Texas Department of Criminal Justice (TDCJ), and the Texas Military Department. It also includes funding for juvenile justice programs.
- Total Appropriated: $20.1 billion (Senate version: $20.6 billion) 6% of budget
  - Texas Department of Criminal Justice: $9.7B; covers correctional officer raises and healthcare.
  - Border security initiatives: $6.5 billion across the Governor’s Office to DPS and Military Dept.
Natural Resources (Article VI): Funding is allocated to environmental and conservation-related agencies, including the Texas Commission on Environmental Quality (TCEQ), the Texas Parks and Wildlife Department, and the Texas Water Development Board.
- Total Appropriated: $7.9 billion (Senate version: $7.96 billion) 2.3% of budget
- Reduced due to the winding down of one-time federal disaster funds and Alamo renovations.
Business and Economic Development (Article VII): This article funds the Texas Department of Transportation (TxDOT), the Texas Workforce Commission, and the Texas Department of Housing and Community Affairs. It includes appropriations for highway construction, job training programs, and economic development incentives.
- Total Appropriated: $48.9 billion (Senate version: $49.2 billion) 14.5% of budget
  - Texas Department of Transportation (TxDOT): $39.9 billion
Regulatory (Article VIII): This section funds agencies that oversee professional licensing, insurance regulation, and utility oversight. Agencies funded include the Texas Department of Licensing and Regulation (TDLR), the Public Utility Commission (PUC), and the Texas Department of Insurance.
- Total Appropriated: $3.0 billion (Senate version: $6.03 billion) 0.9% of budget
  - Funding continues for oversight of insurance, energy, and occupational licensing.
General Provisions (Article IX): This section includes various spending policies, salary classifications, and reporting requirements. It also outlines limits on state agency expenditures and directives for budget transparency.
- Total Appropriated: $738 million
The Legislature (Article X): This section governs the Legislature and its operations.
- Total Appropriations: $540.3 million (0.2% of budget)

Also worth noting is the Debt Service and State Employee Benefits allocated across Articles of SB 1:

State employee retirement system: $1.9 billion
Teacher retirement benefits: $6.4 billion
Debt service payments: $4.6 billion, a decrease of $131.1 million
Full-Time Equivalents (FTEs)l 228,921 (Increase of 4,381 from previous biennium)

Key Budget Considerations:

The public education budget remains a top priority, with significant allocations to school finance and teacher pay adjustments.
Medicaid funding continues to be a major cost driver, with efforts to manage rising healthcare costs while maintaining essential services.
Infrastructure and transportation funding includes continued investment in road maintenance, highway expansion, and rural connectivity projects.
Public safety funding increases support for law enforcement agencies and correctional facilities.
Economic development initiatives are funded to encourage business growth, workforce development, and housing affordability programs.
Total $51 billion in property tax relief (Only $6 billion in new relief efforts, contingent upon legislation)
Federal COVID-19 relief funds are fully exhausted; major backfills in TDCJ and HHSC now require General Revenue.
New spending relies on robust sales tax, oil and gas severance tax, and previous biennium surplus ($24B).

Author

Joan Huffman

Co-Author

Brian Birdwell

Charles Schwertner

Sponsor

Greg Bonnen

Contact the Author

Sen. Joan Huffman

Capitol Phone:

(512) 463-0117

Capitol Office:

EXT E.14

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

The House Committee Substitute for SB 1 outlines a $337.4 billion biennial budget for Texas, representing a 1.3% increase from the 2024–25 biennium (and a $1.3 billion increase from SB1 as it passed the Texas Senate). The budget continues to prioritize public education, healthcare, infrastructure, and border security while remaining compliant with the state’s constitutional spending limits. General Revenue appropriations total $153.7 billion—a 7.7% increase—reflecting both strong state revenue collections but also growing demands on state resources.

A significant fiscal component of the budget is public education, with $134.6 billion allocated across all levels. This includes $75.6 billion for the Foundation School Program (FSP), an increase of $4.7 billion over the previous biennium, aimed at maintaining property tax relief and expanding programs such as school safety and early literacy—much of which is contingent on additional legislative action. Medicaid and related health and human services programs total $105.2 billion, reflecting growing enrollment and medical inflation. The budget anticipates a greater burden on state dollars due to less favorable federal matching rates. Public safety and criminal justice funding is set at $20.1 billion, including $6.5 billion dedicated to border security across multiple agencies.

The budget includes $4.6 billion in debt service payments. Retirement and health benefit funding totals $8.3 billion for state employees and teachers, including contributions to the Employees Retirement System (ERS) and Teacher Retirement System (TRS), as well as a $450 million allocation for active teacher health insurance to mitigate premium increases. Transportation infrastructure is supported by $39.9 billion, largely driven by Proposition 1 and 7 revenues deposited into the State Highway Fund.

Despite record revenues, the Legislature has exercised partial restraint, keeping spending $10.3 billion below the constitutional “pay-as-you-go” limit. However, fiscal pressure is intensifying as federal COVID-19 stimulus funds have fully expired, requiring General Revenue to backfill previous spending in healthcare and corrections. While the budget includes $51 billion in total property tax relief efforts, only $6.5 billion represents new relief for the biennium, with much of it contingent on legislative enactments. As Texas continues to experience rapid growth, the Legislature may face further demands to balance infrastructure expansion, educational reforms, and taxpayer relief within future budgets.

Vote Recommendation Notes

The Committee Substitute for SB 1 represents a total budget of $337.4 billion (up from $336.1 billion in the passed Senate version) for the 2026-2027 biennium, marking the largest budget in Texas history. This represents a more than 40% increase over just two budget cycles, far exceeding the combined growth of population and inflation. While lawmakers should ensure core government services are funded responsibly, the continued assumption that the previous budget’s spending levels were conservative leads to unchecked growth in government.

Texas has $194.6 billion available for general spending in 2025-2027, including a $24 billion surplus from the previous biennium, which represents a massive overcollection of taxpayer money. Instead of returning these excess funds to taxpayers, the Legislature is increasing spending across nearly every category. Despite this historic surplus, only $6 billion is being allocated to new tax relief efforts, a fraction of what should be returned to the people of Texas.

Why This Budget is Unsustainable

Expanding Government Beyond Taxpayer Means: SB 1 sets an unsustainable precedent by treating previous spending as a baseline and increasing it, rather than defaulting to cuts.
Corporate Welfare & Unnecessary Spending: The budget continues to fund corporate welfare programs, including economic development incentives and subsidies for politically favored industries, rather than prioritizing tax relief or essential services.
Expanded Medicaid & Public Education Spending Increases: Medicaid spending is projected at $82.3 billion, fueled by rising healthcare costs and a shifting burden from federal to state dollars. Public education funding rises to $129.7 billion, despite a lack of meaningful reforms in efficiency or school choice.
Rainy Day Fund at Capacity, Yet No Meaningful Taxpayer Relief: Texas’ Economic Stabilization Fund (Rainy Day Fund) will reach its $28.5 billion cap, meaning excess revenue should be returned to taxpayers instead of being spent on government expansion.

Recommendation for Lawmakers: Default to Cutting, Not Expanding

Lawmakers should not treat the previous biennium’s budget as a starting point but instead adopt a zero-based budgeting mentality, questioning every dollar spent. The focus should be on:

Cutting corporate welfare and economic development handouts.
Reforming Medicaid spending to reduce long-term liabilities.
Curbing runaway public education spending and prioritizing school choice.
Returning more of the $24 billion surplus to taxpayers rather than expanding government.
Resisting new government programs and maintaining strict constitutional spending limits.

Conclusion: A Vote for SB 1 is a Vote for Bigger Government

Rather than prioritizing true fiscal responsibility and taxpayer relief, SB 1 grows government well beyond sustainable levels. Texas must not continue down this path of unchecked spending under the assumption that more government is the default. As such, Texas Policy Research recommends that lawmakers vote NO on SB 1 and instead work toward a budget that reduces spending, returns excess revenue to taxpayers, and shrinks government to a sustainable size.

CSSB1: Budget Amendment Analyses

References

CSSB1: Budget Amendment Analyses

State Budget by Biennium (1996 - 2025)

State Budget by Article/Biennium (1996 - 2025)

Texas Lawmakers Unveil $332.9B Budget Proposal for 2026-27

Texas Comptroller Gives Biennial Revenue Estimate

View Bill Text and Status