Texas lawmakers have officially released their initial budget proposals for the 2026-27 biennium, unveiling plans for substantial investments in property tax relief, public education, teacher pay raises, and infrastructure development. The two chambers, the Texas House of Representatives and the Senate, have presented their respective budgets, with the Senate taking the lead on the base budget and the House leading on the supplemental appropriations bill. These budgets reflect the priorities that Texas lawmakers hope to address during the 2025 legislative session.
Property Tax Relief Continues to Dominate
Property tax relief remains a central focus of both the Senate and House budgets. With skyrocketing property values causing tax burdens to rise for homeowners, Texas lawmakers have committed to continuing efforts to ease the property tax load on residents.
The Senate’s draft budget, introduced by Finance Committee Chair Joan Huffman (R-Houston), totals $332.9 billion, an $11.6 billion increase from the 2024-25 biennium. A major feature of this budget is the inclusion of $32.2 billion for property tax reductions, aimed at continuing the tax relief initiatives passed during the 2019 and 2023 legislative sessions. The Senate proposes raising the homestead exemption by $40,000, a move designed to reduce the taxable value of primary residences. Lt. Gov. Dan Patrick (R) has gone a step further, proposing to increase the homestead exemption to $140,000—a substantial jump that would significantly benefit homeowners across the state. Additionally, Texas seniors would see a $10,000 boost to their homestead exemption under current state law.
In contrast, the House version of the budget includes $6.5 billion in new property tax relief, though it does not specifically mention the $40,000 homestead exemption increase. Instead, the House has proposed $3.5 billion in new relief, with the exact mechanisms to be determined during the upcoming legislative process. This approach is similar to the disagreement that occurred in the previous legislative session, where the Senate advocated for a larger homestead exemption increase, while the House initially pushed for a combination of measures, including appraisal caps and school district tax rate compression. Ultimately, a compromise resulted in a $100,000 increase to the homestead exemption and $7 billion in funding to compress local school district tax rates, amounting to $13 billion in new property tax relief.
Education and Teacher Pay Raises
Public education funding is expected to be one of the most contentious and crucial topics of the upcoming legislative session. This follows the failure of the House to pass a comprehensive education reform package in November 2023. Both the Senate and the House have proposed between $4.9 billion and $5.3 billion in additional funding for public education, with the Senate’s version including a $1 billion allocation for an education savings account (ESA) program—a controversial proposal that would allow parents to use public funds to send their children to private schools.
One of the most significant components of the Senate’s education funding plan is the inclusion of pay raises for teachers. The Senate’s draft proposes $4,000 pay raises for all teachers, with rural teachers receiving an additional $6,000 boost. This move is designed to address the state’s ongoing teacher shortage, which has been exacerbated by low pay in comparison to neighboring states. In addition to teacher pay raises, the Senate budget earmarks $400 million for school safety provisions, a growing concern as school districts across Texas have been grappling with the need to enhance security measures in the wake of high-profile incidents of violence.
Both the House and Senate budgets also allocate $1 billion to reduce the unfunded liability of the Teacher Retirement System (TRS), which currently stands at $57.9 billion. The move to address TRS's financial shortfall is critical for ensuring the long-term stability of the state’s pension system for educators, providing much-needed reassurance for retired and current teachers.
Infrastructure and Energy Investments
In addition to education and tax relief, both the Senate and House budgets outline significant investments in infrastructure, including water and energy initiatives.
One of the key areas of focus is water infrastructure. With Texas’ rapidly growing population and ongoing drought concerns, the state faces an urgent need to invest in water systems to ensure adequate supply and distribution. Both the House and Senate budgets propose $2.5 billion in funding for water infrastructure projects, which will be crucial for addressing these challenges. State Sen. Charles Perry (R-Lubbock), a vocal advocate for water policy, has been at the forefront of efforts to ensure that the state’s water supply meets the needs of its residents and industries in the coming decades.
Energy development is another major priority in the Senate budget. The proposed $5 billion allocation to the Texas Energy Fund will support low-interest loans for building natural gas power plants, a program that was introduced during the last legislative session. Although the Senate initially proposed $10 billion for the Texas Energy Fund in 2023, the final budget only included $5 billion, reflecting the Legislature’s balancing act between expanding energy capacity and ensuring fiscal responsibility.
Public Safety and Border Security
Public safety remains a top priority for Texas lawmakers, particularly in light of ongoing concerns about crime rates and border security. The Senate budget proposes $6.5 billion for Operation Lone Star, which aims to secure Texas' southern border and address illegal immigration. This funding amount is consistent with what was allocated in the 2024-25 biennium, despite expectations that the state might reduce its spending on border security under the incoming Trump administration. The Senate also includes $403 million in funding for the Department of Public Safety (DPS), which will go toward hiring 560 new commissioned officers to support law enforcement efforts across the state.
Long-Term Fiscal Strategy and Budget Negotiations
Despite the substantial amounts allocated in both the House and Senate budgets, the two chambers are not far apart in terms of overall spending. The budget gap is only about $302 million, suggesting that the final version of the budget will likely be reached through negotiations.
Speaker Dustin Burrows (R-Lubbock) emphasized that passing the budget will be one of the most significant tasks of the session, as it will set the financial framework for all other major pieces of legislation, including school choice and water infrastructure initiatives. He called for a balanced approach, stating that while the House would work to identify additional resources for property tax relief and education funding, lawmakers must also manage taxpayer dollars wisely and eliminate unnecessary spending.
Lt. Gov. Patrick also stressed the importance of adhering to conservative budgeting principles, which he believes will ensure Texas remains on a path to greater prosperity. He added that the state should prioritize one-time spending of surplus funds to avoid long-term structural deficits.
Voter Approval and the Path Forward
Due to state spending caps, which limit how much money can be spent without voter approval, it is likely that lawmakers will need to pass some spending measures that exceed these limits. These will be subject to approval by Texas voters in a statewide referendum scheduled for the November 2025 ballot.
As the legislative session unfolds, negotiations between the House and Senate will intensify, with lawmakers working to find common ground on key issues such as property tax relief, education funding, and infrastructure development. The decisions made in the coming months will have lasting effects on the state’s economic health, its education system, and the daily lives of Texans for years to come.
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