FINANCE COMMITTEE BEGINS BUDGET HEARINGS
(AUSTIN) — The Senate Finance Committee on Monday began the first in what will be weeks’ worth of hearings on the budget for the 2026-2027 biennium. Chair and Houston Senator Joan Huffman unveiled the base proposal last week, which would appropriate $332.2 billion, virtually identical to the amount appropriated last session. Similar to the 2023 session, the state is enjoying a strong economy with record sales tax collection forecasts and another robust budget surplus left over from the previous biennium.
State Comptroller Glenn Hegar encouraged Senate budget writers to stick to the careful spending practices that left $23.8 billion in the bank heading into the 89th session.
Despite the positive outlook, Huffman said that the Senate will stick to the conservative budgeting strategies that have put the state in its advantageous position. “Revenue collections are set to return to more normal levels of growth,” Huffman told members. “I ask you to keep this in mind as we craft the next budget, being cautious not to commit short-term spikes in revenue to new, on-going state expenses.” Last session, the legislature used surplus money to pay for one-time investments, and the budget bill filed by Huffman this session includes a number of similar outlays for the next biennium, such as a onetime payment to shore up the state employee retirement system, creation of a brain health institute, and money to clear the backlog of grant requests from volunteer fire departments across the state.
Last session’s $32 billion surplus was the result of record consumer spending, rising inflation, and federal relief funds, but Comptroller Glenn Hegar told members Monday that the current projected $23.8 billion surplus comes from last session’s conservative budgeting philosophy. “How you got here two years ago is vastly different than how you got here this session,” he said. Hegar said his office projects revenue collections moderating back to historical norms over the next two years. This means lawmakers probably won’t have such a good fiscal situation heading into next session. “Modest growth in the economy is not going to produce record surpluses in two and four more years,” he said.
The centerpiece of last session’s legislative package from the Senate was an estimated-$18 billion tax cut accomplished in large part by raising the homestead exemption from $40,000 to $100,000. The actual amount, however, ended up being several billion dollars more than estimated. This was due to a discrepancy between agency calculations, but the result is that Texas homeowners saw a total of $22.7 billion in property tax reductions since 2023. “Congratulations for the taxpayers,” said Houston Senator Paul Bettencourt, who authored last session’s tax relief bill, of the additional $4.7 billion in tax relief. “Now that it’s there, we have not just a constitutional requirement to maintain it, but I think we have a moral imperative to maintain it and to add what we can to it.” The Senate budget includes a proposal to increase the homestead exemption by another $40,000.
Senate budget writers must also account for what will be spent in this session’s supplemental appropriations act. Because the state writes budgets using forecasts, every session the legislature must true up what was forecast with what was actually spent and collected. The Senate budget offers a preview of what will be in this session’s supplemental spending bill. It includes $2.5 billion for water infrastructure, $515.8 million for repair and renovations at state criminal justice facilities, $315 million to pay for emergency operations, and $328.3 million for a new state medical lab.
The Senate will reconvene Tuesday, January 28, at 11 a.m.
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