State budget writers strike deal on $321.3 billion two-year spending proposal

Sign up for The Brief, The Texas Tribune’s daily newsletter that keeps readers up to speed on the most essential Texas news.

This story will be updated.

Texas House and Senate budget writers have struck a deal on a $321.3 billion two-year spending plan that takes advantage of a historic cash windfall to invest unprecedented amounts of money into tax cuts, mental health, state parks, colleges and universities, the state’s energy grid, broadband and water infrastructure, according to documents made public Thursday.

The 1,028-page compromise plan, forged over weeks of negotiations between the two chambers, is expected to get a final vote Friday. Negotiations were led by House Appropriations Committee Chair Greg Bonnen and Senate Finance Committee Chair Joan Huffman, both Houston Republicans.

Known as the General Appropriations Act for the 2024-25 cycle, the joint-chamber compromise on House Bill 1 seeks to spend $144.1 billion in general revenue, including an agreement to spend $12.3 billion in new money for property tax cuts. Some of those funds are tied to bills still in flux in the Legislature or are dependent on voters to pass in a constitutional election later this year.

Combined with a separate supplemental budget agreement that spends just under half of the state’s historic $32.7 billion cash surplus, the new plan would leave billions in anticipated tax revenue untouched at a time when the state has more money coming in than lawmakers are constitutionally allowed to spend, triggering criticism from Democrats that more should have been done for the state’s foster kids, public schools, retired state employees and public health system.

The highly anticipated supplemental proposal revealing spending for this year was also released Thursday by budget leaders. In it, about $15 billion in general revenue will go to a higher education endowment, school safety grants, state employee pay raises, enhanced retirement benefits for teachers, mental health hospitals, border security, flood mitigation and water infrastructure, Medicaid costs, state debt reduction and other items.

The so-called supplemental plan in Senate Bill 30 would add that spending to the state’s current budget, which runs until the end of August.

Legislation supplementing the current budget is a routine task each session and allows budget writers to shore up any differences that appeared in costs and actual revenue during the previous two years.

Both plans are expected to get floor votes in each chamber on Saturday. The chambers must pass the budget as is, with no more changes, if they want to avoid going into a special session to start over on the massive process. After they pass, the bills will go to Gov. Greg Abbott, who has line-item veto power, and to the comptroller to certify that it’s a balanced budget, as required by the state constitution.

Property tax cuts

The proposed two-year spending plan gives the first peek in weeks on where the two chambers stand on their dueling property tax-cut proposals. After weeks of bickering on social media, the House and Senate have agreed to spend $17.6 billion on property tax relief. Of that, $12.3 billion is new spending while $5.3 billion is to maintain tax cuts approved in previous years.

But how exactly lawmakers intend to deploy that money remains to be seen.

Leaders in both chambers agree they should send a certain amount to school districts to cut their tax rates.

They also appear to agree the Legislature should put dollars toward a huge boost in the state’s homestead exemption on public school taxes, the chunk of a home’s value that can’t be taxed by school districts. The Senate had wanted to boost that exemption from $40,000 to $70,000 with an additional bump for seniors.

The House upped the ante by boosting that amount to $100,000 — a Hail Mary to get Senate tax-cut warriors 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.

But the budget released Thursday doesn’t mention the homestead exemption, though it includes enough money to pay for it, according to tax experts. It also doesn’t mention the appraisal cap proposal, which wouldn’t come out of the state budget.

Disclosure: The Texas comptroller of public accounts has been a financial supporter 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.

Stories like the one you just read come to life at The Texas Tribune Festival, the Tribune’s annual celebration of big, bold ideas happening Sept. 21-23 in downtown Austin. For just a little bit longer you can grab a discounted ticket to this year’s event, but act fast — savings end on May 31! Buy now and save.