Budget

A wealth tax would not have prevented the budget cuts this year, as earlier budget proposals illustrate

The operating budgets enacted this year include $7 billion in savings to funds subject to the outlook over the five-year outlook period. (The outlook period includes revised appropriations for the final year of 2023–25, biennial appropriations for 2025–27, and the estimated cost of continuing those appropriations into 2027–29.) The savings are more than offset by […]

New brief: With New Revenue Package, the Transportation Budget Balances Through 2027–29

To address transportation budget revenue and cost challenges, the Legislature increased transportation taxes and fees. New revenues include the first gas tax increase since 2015 and increases to the retail sales and use taxes owed on several transportation-related transactions. Additionally, beginning in 2027–29, 0.1% of state sales and use tax collections is dedicated to the […]

New brief: The Band-Aid Budget: $9 Billion in New Taxes and $7 Billion in Savings, But No Lasting Solutions

Despite an estimated four-year $8.6 billion maintenance level shortfall—the difference between the cost to continue current services into the next biennium and expected resources—the Legislature increased appropriations from funds subject to the outlook (NGFO) for 2025–27 by a net of $5.913 billion. NGFO appropriations for the upcoming 2025–27 biennium total $77.858 billion, an increase of […]

A rushed process makes for questionable tax policy

After taking action on the budget and tax bills last week, Gov. Ferguson spoke to the press. He said, The revenue that I signed will likely require adjustments in the future. These revenue bills, as you know, moved through the legislative process quickly, particularly changes to the B&O tax and sales tax on services. We […]

Gov. Ferguson’s modest operating budget vetoes are not expected to put the budget out of balance

As I noted last week, Gov. Ferguson signed all the tax bills, except for one provision. He also vetoed several provisions of the operating budget. The final fiscal impact of these changes over four years will be clear when the official budget outlook is adopted June 10. However, it appears that the budget will still […]

New WEIA revenues would be used to supplant other funds for higher education

In 2019, the Legislature imposed a business & occupation (B&O) tax surcharge on certain businesses to help fund higher education. Under current law, 14.3% of collections from the 1.75% B&O tax rate for businesses in the “service and other activities” category is deposited in the workforce education investment account (WEIA). Additionally, all the revenues from […]

Legislature cut $7.020 billion over five years from operating budget (but the cuts are offset by new spending on other programs)

The operating budget for 2025–27 increases appropriations from funds subject to the outlook (NGFO) by 8.2%, compared to enacted 2023–25 appropriations. Net new policy increases of $1.039 billion in 2025–27 include $3.065 billion in reductions and $4.104 billion in new spending. This represents a shift in legislative priorities, as the reductions are entirely offset by […]

Net increases for compensation crowd out funding for other programs

The 2025–27 operating budget, as passed by the Legislature, would increase appropriations from funds subject to the outlook (NGFO) by $5.927 billion (8.2%) over enacted 2023–25 appropriations. Of that, $4.409 billion is the maintenance level change (the cost of continuing current services, adjusted for inflation and enrollment). The remaining $1.039 billion is net new policy […]

Operating budget conference report would increase NGFO appropriations by 8.2%, and revenue package would increase revenues by $9.4 billion over four years

The conference report for the operating budget would appropriate $77.872 billion from funds subject to the outlook (NGFO) in 2025–27. That is an increase of $5.927 billion (8.2%) over enacted appropriations for 2023–25. (The 2025 supplemental would increase 2023–25 appropriations by $751.8 million.) Although the budget does assume significant savings, it doesn’t reduce spending on […]

Are the proposed tax increases necessary to stave off massive cuts to services?

We estimate that the maintenance level (the cost of continuing current services, adjusted for enrollment and inflation) shortfall is about $8.6 billion over the outlook period (FY 2025, 2025–27, and 2027–29). The 2025–27 operating budget problem is not a revenue shortfall, it is the result of legislative spending choices over the past several years. Indeed, […]