Texas State Budget FY2026 Analysis

Texas spent $338.0 billion across all funds in FY2026, or $10,659 per resident. All-funds spending counts the general fund, federal grants, and dedicated state funds together — the fairest basis for comparing states, since they differ widely in how much they route outside the general fund.

The general fund — the discretionary portion the legislature actually debates — was $149.0 billion, or 44.1% of total spending. The remainder is largely federal grants (Medicaid above all) and dedicated revenues such as fuel taxes earmarked for highways.

Reserves in the rainy day fund stood at $28.5 billion. Because nearly every state is constitutionally required to balance its operating budget, reserves rather than borrowing are how states absorb revenue shortfalls in a downturn.

Texas is midway through its 2026-27 biennium under Senate Bill 1, the General Appropriations Act signed by Governor Abbott and effective September 1, 2025. The budget appropriates $338 billion in all funds and $149 billion in general revenue — about 1.2% above the 2024-25 budget in all-funds terms, below combined inflation and population growth, and within all four constitutional spending limits. Tax relief is the single largest commitment: $51 billion is dedicated to new and existing property tax cuts, of which $3.9 billion funds new relief for homeowners and businesses. Public education receives $8.5 billion in new funding through House Bill 2, a large share for teacher pay, while a separate $1 billion launches the education savings account program created by Senate Bill 2. Other marquee items include $3.4 billion for border security including Operation Lone Star, $2.5 billion for water development and infrastructure, a $7.3 billion increase for Medicaid and CHIP, and $344 million in additional higher-education financial aid. The revenue backdrop remains strong: the Comptroller's October 2025 Certification Revenue Estimate projects $203.63 billion available for general-purpose spending in 2026-27, up 1.7% from the prior biennium, with a $4.66 billion balance available for certification at the end of fiscal 2027. The Economic Stabilization Fund is projected to end fiscal 2027 at a record $28.48 billion — at its constitutional cap, so it receives no new transfers during the biennium. Abbott exercised line-item vetoes on items he deemed unnecessary, legally questionable, or contingent on failed legislation.