Historic $321.3 billion Texas state budget heads to governor

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A historic plan to spend $321.3 billion to run the business of Texas over the next two years is headed to Republican Gov. Greg Abbott’s desk — wrapping up an arduous monthslong process near the end of a divisive and politically charged session.

The General Appropriations Act for 2024-25 allocates some $144 billion in state tax money — including half of a historic $32.7 billion surplus — toward tax cuts, mental health access, pay raises for state employees, border security, state parks expansion and the state’s energy grid, plus infrastructure for broadband and water. It stays within constitutional spending limits, fills the state’s emergency coffers and highway funds, and makes payments toward stabilizing the state’s retirement investment fund.

The House passed the budget 124-22 on Saturday after about 30 minutes worth of floor discussion. Senators approved it 29-2 on Friday. Abbott has until June 18 to strike any spending lines from the budget before sending it to the comptroller to certify that it’s a balanced budget, as required by the state constitution.

“This budget addresses the diverse range of needs in our rapidly expanding state,” said Senate Finance Chair Joan Huffman, R-Houston, who helped lead the process with House Appropriations Chair Greg Bonnen, another Houston-area Republican. “With the state experiencing a record-breaking surplus, increasing demands and skyrocketing national inflation, crafting this budget was a challenge because we were obligated to stay under the spending limits and plan for population growth and downturns in the global economy.”

But about $17 billion worth of commitments that lawmakers made in the new budget were snagged in rancorous policy fights between the Texas House and Senate on Saturday night — including proposed teacher pay raises and increases in school funding, which died, and how to administer property tax cuts, which was in danger of dying. Other items, like $1 billion in park funding, are contingent on voter approval in November.

And even though budget writers had more cash than they were constitutionally allowed to spend in the next two-year cycle, the 1,028-page compromise plan offers no new money for employees who retired from state agencies. It offers no funding for the state’s sweltering prisons. It ties billions of dollars in university funding to the passage of bills that haven’t passed yet.

And while it sets aside $4 billion that could be used to increase teacher pay and school funding, budget writers agreed to release the money only if a divisive bill creating a private school voucher program was passed. On Saturday night, that bill died — killing teacher pay raises, denying extra money for schools and likely triggering a special session.

“The teachers are being held hostage to this policy decision when we are actually doing some good things in this budget to increase salaries for everybody else,” state Rep. Donna Howard, D-Austin, a member of the appropriations committee who voted in favor of the bill. “This is a good budget in a lot of ways. I do think our priorities were a little skewed in terms of the property tax cuts as opposed to investing in Texas long term.”

Lawmakers also sent to Abbott a supplemental spending plan that adds more money to the current cycle and spends more than $7 billion of the surplus on things like mental health hospitals and flood mitigation.

Together, the new spending plans would leave about $10 billion unspent, triggering criticism from Democrats that more should have been done for public schools and teachers.

“Money for a property tax cut doesn’t put gasoline in the school bus,” said state Rep. Trey Martinez Fischer, a San Antonio Democrat and member of the budget-writing committee who voted against the budget. “Money from a tax cut doesn’t put new ovens in the cafeteria. It does nothing to fix the leaky roof in the gym or pay more for food service workers and bus drivers. I worry there is no safety net if these contingencies do not come to pass.”

Bonnen said the budgets make “historic investments that will have a lasting impact on the state of Texas” and defended the school funding, calling it the largest increase in school funding between cycles in the state’s history — even if the policy spending that money isn’t passed yet.

Together, the budget bills beef up funding for the Texas Department of Public Safety, including a $380 million training-center upgrade, 50 new troopers and six recruit schools. They add $45.1 million to the secretary of state’s office for election integrity and filing technology upgrades, $650 million to revamp community college funding, $1 billion to expand Texas parks and $381 million to boost rural law enforcement and other projects.

The spending plans also funnel new money into highway planning and design, foster care and rural hospitals.

The budget includes giving the Texas Education Agency $1.1 billion this year to award grants to school districts and another $300 million directly to school districts.

Property tax cuts

The House and Senate agreed to spend $17.6 billion on property tax relief — $12.3 billion of that in new spending and $5.3 billion to keep up existing cuts.

But lawmakers haven’t agreed on what exactly those tax cuts should look like. Both chambers want to pump more state dollars into public schools so school districts can cut their tax rates. They also appear to agree that lawmakers should raise the amount of property value homeowners can claim as exempt from public school taxes — from $40,000 to $100,000.

But the Senate so far has refused to accept a House proposal to lower the state’s annual cap on how much taxable home values can grow each year from 10% to 5%, and to extend that benefit to businesses. That proposal wouldn’t come out of the state budget.

New money for university tuition freeze

​​Before the start of the legislative session, university systems proposed that they would keep tuition flat for two years if the state provided an extra $1 billion in funding for expensive areas such as employee health insurance, the program that provides free tuition to children of veterans and an increase for regional comprehensive universities.

In the compromise, state lawmakers allocated a few hundred million less than proposed — and stipulated that the extra funding is contingent on the Legislature passing two bills designated as priorities by Lt. Gov. Dan Patrick that would address the future of faculty tenure and ban diversity, equity and inclusion offices at public universities. The tenure legislation is on its way to the governor. An agreement on the anti-DEI bill is expected to win approval in both chambers on Sunday and then head to the governor.

Texas lawmakers also included $3 billion in the supplemental budget for a new endowment to fund non-flagship universities that are trying to improve their research operations and rise in the national rankings.

The Texas University Fund is contingent on legislation and needs to be approved by voters in November. It would create the fund for the University of Houston, Texas Tech University, Texas State University and the University of North Texas, with the opportunity for universities who don’t access money from the separate Permanent University Fund to eventually qualify for the funding if they reach certain academic goals.

No increase for state retirees 

Budget writers declined to fund any pay increase — either a cost-of-living adjustment or an extra paycheck this year — for Texas’ 123,000 retired state employees, even as the proposed budget plan allocates billions in surplus cash on pay bumps for almost every other employee in the public sector, including retired teachers and active state employees.

Teacher pay is still in negotiations, but the compromise includes a 5% pay bump for current state employees this year and next year. Another $5 billion provides retired teachers with a one-time payment and a cost-of-living adjustment after legislation creating that raise was sent to the governor on Friday.

But how much retired teachers will get is unclear as lawmakers have not struck a deal.

The upper chamber originally wanted a $7,500 one-time payment for retired teachers age 75 and older, a 4% increase to their checks if they’ve been retired for more than 10 years and a 2% increase if they retired between late 2013 and before the end of 2021.

Meanwhile, the House calls for a $5,000 one-time payment to retired teachers age 70 or older and a 6% increase to retirees’ monthly checks if they retired before 2004, a 4% increase if they retired between 2004 and 2014, and a 2% increase if they retired between 2015 and 2021.

Asking voters to approve broadband 

The budget includes $1.5 billion for a broadband infrastructure fund to help pay for development and funding of broadband and telecommunications services across the state, but the measure relies on voters to approve it in a November constitutional election.

Legislation creating the fund had allocated $5 billion, but the newest budget stops short of that. An estimated 7 million Texans don’t have access to high-speed broadband internet access.

New youth lockups and no funds for prison A/C

The chamber had proposed spending $545 million for prison air conditioning. The relentless Texas heat has baked prisoners to death, likely contributed to severe staff shortages and cost taxpayers millions of dollars in wrongful death and civil rights lawsuits. But senators, who offered no money toward the project, won in conference negotiations. No money was set aside to install air conditioning in prisons.

The final budget includes $200 million to build new youth lockups under the ever-troubled Texas Juvenile Justice Department. Children have been imprisoned in dire conditions due to severe understaffing in Texas’ five youth prisons. The new units would be for girls, violent teens and those with the most severe mental health needs.

New funds for water infrastructure and flood prevention

A new state water fund intended to jumpstart massive water supply projects and fix aging water infrastructure across Texas would receive $1 billion in the supplemental budget if the idea is approved by voters this fall.

Lawmakers included $550 million for coastal barrier projects and the “Ike Dike,” a huge gate system proposed in the budget draft for the mouth of Galveston Bay. Another $625 million in the supplemental budget would go toward Texas’ Flood Infrastructure Fund to finance flood-prevention projects included in the state’s first flood plan.

Funding the fight against fentanyl

Lawmakers appropriated $18 million over the next two years for opioid overdose prevention, education and overdose reversal medication. Most of those funds would be used to purchase opioid overdose reversing drugs like naloxone for first responders and educators who interact with people at high risk of overdose, particularly fentanyl.

Lawmakers focused on stiffening criminal penalties for those who sold or distributed the powerful synthetic opioid fentanyl instead of public health efforts to tackle a growing overdose death crisis in the state. Still, the funding for overdose reversal medication was a win for public health and drug policy experts.

No cash for attorney general’s whistleblower lawsuit

Budget writers had already declined to pick up the tab for Attorney General Ken Paxton’s $3.3 million settlement with whistleblowing former employees who were fired for reporting allegations of misconduct by Paxton.

In both the supplemental budget compromise and the 2024-2025 spending plan, lawmakers added additional language banning Paxton from using funds from his office budget to pay the settlement.

Paxton’s budget request was met with an investigation into the allegations, launched in March by the House General Investigating Committee. On Saturday, the House voted to impeach Paxton and turn him over to the Texas Senate for a trial.

No rate relief, but maybe more power plants

Legislators removed a provision from the supplemental budget that could have helped some electricity and gas customers in Texas who are paying off debt from the 2021 winter storm. Power prices and natural gas prices spiked during that disaster. Some gas utilities and electric cooperatives used ratepayer-backed bonds to cover the costs and passed the bill on to ratepayers. Legislators had considered using $3.9 billion from the budget surplus to help pay that off, but issues arose on how to do so fairly.

The budget still sets aside $5 billion from the general revenue fund to be used for a proposed program to provide low- or no-interest loans for the construction of natural gas-fueled power plants and bonuses for getting them connected to the grid within a certain time frame. The loan program still must be approved by both the House and Senate, which have yet to agree on the detailed differences between their proposals.

Mental health services

In response to the mass shooting of 19 elementary children and two teachers a year ago in Uvalde, lawmakers allocated $33 million for a behavioral health center in the region — one of many communities in the state that are historically underserved for mental health services.

An additional $3 billion will be poured into state behavioral health services over the next two years, most of which will be used during the current budget cycle to renovate or build new mental health state hospitals, part of a 2015 strategic plan to address the waitlist in county jails for inmates who need psychiatric treatment.

Funds will also go to increasing the salaries at state hospitals, veterans’ mental health services, community treatment programs and innovation grants. The budget for next cycle also includes $3.7 million each year to fund telepsychiatry consultations for rural hospitals.

Alternatives to abortion

In the first budget since the near-total banning of abortion in Texas, legislators allocated $140 million over the next two years to the Alternatives to Abortion program, an increase of $40 million from last session — in addition to $25 million to be paid into the program this summer.

The program, which disburses funding to nonprofits that provide services to pregnant and parenting Texans, has been criticized over the years for its lack of accountability. Democratic lawmakers have called for that funding to instead be sent to existing women’s health programs.

A bill that would move this program under the auspices of the Health and Human Services Commission, and also remove the requirement that 75% of the programs it funds use evidence-based strategies and programs, has passed both chambers and is headed to the governor.

Brian Lopez, Joshua Fechter, Jolie McCullough, Erin Douglas, James Barragán, Jayme Lozano Carver and Emily Foxhall contributed to this story.

Disclosure: Texas Tech University, University of Houston and University of North Texas have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

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