89TH LEGISLATIVE SESSION BEGINS WITH ROSY ECONOMIC OUTLOOK

(AUSTIN) — Legislators will once again have billions of dollars left over from the last biennial budget as they move into the 140-day lawmaking session that began Tuesday. State Comptroller Glenn Hegar delivered his biannual revenue estimate Monday, and like in 2023, budget writers will have record revenue and a large surplus to work with as they decide how to allocate funds for the next two years. “I told everybody it was unprecedented, it was historical and I made a big deal that this was ‘once-in-a-lifetime’”, said Hegar, referring to 2023’s revenue estimate. “Yet here we are with another very large, record carry-over balance.”

The 2025 biennial revenue estimate is just slightly less – about 1.1 percent lower – than in the previous session, though total state revenue is expected to be higher than two years ago. The difference is entirely in the size of the cash carryover balance, that surplus of money allocated but unspent by lawmakers working in the 88th session. Hegar said the state will have about $23.8 billion in the bank as they open session, significantly less than last session’s $32 billion surplus but still the second largest carryover in state history. He said that the state is expected to outpace last biennium’s revenue, almost all of which comes from tax collections, by six billion dollars, up to $194.6 billion in non-dedicated general revenue. When combined with dedicated and federal funds, lawmakers will have around $362 billion to allocate towards state services this session.

Last session’s record-busting surplus, said Hegar, was the result of a roaring economy coming out of pandemic restrictions, inflation increasing prices – and sales tax collections – and rafts of federal aid dollars. This session’s surplus, he said, can be attributed to smart fiscal decisions made by lawmakers two years ago who used the money to pay for one-time infrastructure investments into broadband, water, higher education, and state parks. He also said the state should have the money to cover a new school choice program, Lt. Governor Dan Patrick’s top priority for the session. “I don’t know exactly where the Legislature is going to land on [school choice], but I do think they will probably pass something,” said Hegar. “I think we can afford whatever the Legislature decides.”

Conroe Senator Brandon Creighton was sworn in as President Pro Tem for the 89th regular session. In his acceptance speech, he reflected on his life’s journey at the state capitol, which began as a messenger in the early 1990s.

Hegar said that the Texas economy will continue to normalize following the disruptions of the COVID pandemic, showing robust but slower growth in gross state product and state tax collections, and slowing inflation. He did warn of increasing cost-of-living issues, which must be dealt with if the state is going to continue to grow. “Texas benefits from being a magnet for businesses looking to expand and citizens seeking a better way of life, but we must ensure people can afford the cost of living here,” said Hegar. One of the major contributors to the recent increase, he said, are rising insurance rates. For some homeowners, said Hegar, property tax payments combined with home insurance premiums can equal their monthly mortgage payments.

Patrick said in a statement Monday that he intends to leverage the state’s economic strength to pursue more tax cuts among other Senate priorities. “With this surplus, my first focus is to continue to cut property taxes and increase teacher salaries, along with making smart, one-time investments to ensure our budget is sustainable moving forward and that our state is prepared for the future, as we did with last session’s surplus,” he wrote. Patrick also wants to use the money to add power capacity to the state electric grid, a position he says he shares with Governor Greg Abbott. Heading up that effort will be Houston Senator Joan Huffman, who is entering her second session as chair of the Senate Finance Committee, which will write the Senate proposal for state spending for the next biennium. That panel will begin open hearings in the next few weeks.

The Senate will reconvene Wednesday, January 15, at 11 a.m.

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