Revenues for funds subject to the outlook (NGFO) are now expected to be $903 million lower over the outlook period than was forecasted in June. Compared to the June revenue forecast, the estimate for 2023–25 (which ended June 30) decreased by $13 million, to $67.124 billion. The forecast for 2025–27 decreased by $412 million, to $74.343 billion. The forecast for 2027–29 decreased by $477 million, to $79.537 billion.

This year the Legislature adopted a historically large tax package. Economic changes (excluding the legislative tax changes) in the June and September revenue forecasts are expected to reduce revenues by a combined $1.624 billion over the outlook period compared to the revenue assumed in the adopted 2025–27 budget. (The Legislature made several unsustainable choices in the adopted budget, and its balance was tenuous from the start.)

With the reduced revenue forecast, the unrestricted NGFO ending balance for 2025–27 (the current biennium) is negative $421 million. I estimate that the unrestricted ending balance at the end of the outlook period is negative $1.221 billion. Note that these figures include only enacted spending. They do not include any potential changes to the maintenance level (the cost of continuing current services, adjusted for enrollment and inflation) or any potential new policy spending.

It appears that the current fiscal year still balances (and the rainy day fund balance is high enough to cover the shortfall), so there is not necessarily a need for the Legislature to act before the next regular session. It’s also possible that the economy could improve. There will be one more revenue forecast before Gov. Ferguson submits his 2026 supplemental budget proposal, and then another forecast before the Legislature adopts a budget.