Estimated Time to Read: 7 minutes
As the Texas Legislature debates Senate Bill 1 (SB 1)—the proposed General Appropriations Act for the 2026–27 biennium—taxpayers should pay close attention. At $336.1 billion in total spending, this is the largest state budget in Texas history. While it covers the usual bases—education, health care, public safety, and infrastructure—the trajectory of this budget reveals a troubling trend: unchecked government growth, unsustainable spending patterns, and missed opportunities to deliver meaningful relief to Texans.
Despite boasting a $24 billion surplus carried over from the previous biennium (over-collected taxpayer money) and a Rainy Day Fund approaching its constitutional cap of $28.5 billion, the Legislature proposes returning just $6 billion in new property tax relief to Texans. That’s a mere sliver of what could be returned. Rather than view this surplus as an opportunity to course-correct or cut unnecessary programs, lawmakers have doubled down on the assumption that more revenue should always lead to more government.
The growth in spending over recent years is staggering. State funds have grown by 42.7% since the 2022–23 budget. Total funds—combining General Revenue, federal dollars, and other sources—have climbed nearly 27%. This far outpaces population growth and inflation combined, which raises serious questions about the long-term sustainability of Texas’ fiscal trajectory.
Where the Money Goes
SB 1 spans ten articles, each covering a different sector of state government. Education, as usual, dominates the budget, claiming $129.7 billion, or nearly 39% of total appropriations. K-12 education funding through the Foundation School Program (FSP) increases to $70.9 billion—an $11.3 billion bump from the previous biennium. In total, K-12 education is appropriated $97.1 billion. It also includes $4.3 billion for potential teacher pay raises, though those are contingent on future legislative action. Higher education funding amounts to $32.6 billion.
Healthcare spending, largely dominated by Medicaid, continues to balloon, with Article II receiving $103.6 billion (30.7% of the total budget). Medicaid alone is allocated $80.8 billion—now accounting for nearly a quarter of the entire budget. That’s a sharp increase fueled by rising costs and the decreasing federal share, as pandemic-era relief funds expire. Yet rather than pursue reforms that might improve outcomes or control spending, the budget assumes business as usual.
Public safety and criminal justice receive $20.6 billion, a 6.1% share of the budget. Notably, $6.5 billion is set aside for border security—a political and policy priority that continues to draw significant investment across multiple agencies. The Texas Department of Criminal Justice sees its budget grow to $9.8 billion, driven by increased correctional officer salaries, higher operating costs, and resumed operations at previously idle units.
Transportation receives substantial funding—$39.9 billion—mostly from dedicated funds like the State Highway Fund and proceeds from Propositions 1 and 7. While infrastructure is clearly a priority, the question remains whether that funding is being deployed as effectively as possible, especially in rural areas where connectivity continues to lag behind urban centers.
Beyond the headline articles, there are also glaring examples of government expansion and inefficiency. The budget allocates $49.2 billion to Business and Economic Development, which includes highway construction but also a host of subsidies and so-called economic incentives. These programs amount to little more than corporate welfare, propping up favored industries with taxpayer dollars rather than promoting a fair and competitive market. One particularly egregious example is the nearly $500 million set aside for film and media production incentives, a dramatic increase meant to attract major studios to Texas with taxpayer-funded giveaways. While popular in headlines, these incentives have a poor track record of delivering lasting economic benefits and serve as a textbook example of government picking winners and losers.
A Budget Built on Faulty Assumptions
One of the most dangerous features of SB 1 is its reliance on previous biennia as the baseline. This continuation budgeting model assumes the last budget’s inflated spending levels—propped up in part by temporary federal funds—should be the new normal. Rather than question the need for every dollar spent, lawmakers seem content to ratchet government up with every cycle.
This is precisely the kind of budgeting that leads to long-term bloat. It abandons the principle of limited government and ignores the basic fact that every dollar spent by the state is a dollar taken from a Texan. Lawmakers should be practicing zero-based budgeting—starting from scratch and justifying each program on its merit—not simply layering new spending atop old.
The budget’s supporters argue that it stays within constitutional spending limits—and technically, they’re right. It comes in under the pay-as-you-go limit, the tax spending limit, and the Consolidated General Revenue (CGR) limit. But fiscal responsibility isn’t about skating just under the cap. It’s about restraining growth to what’s necessary and justifiable, not just legal. The fact that Texas had $194.6 billion in available revenue and still chose to spend nearly all of it shows a lack of discipline.
Missed Opportunities for Relief
With so much money on the table—record revenues, a full Rainy Day Fund, and a surplus—this was the ideal moment for bold tax relief. Instead, only $6 billion in new tax relief is proposed. Compare that to the $24 billion in surplus and the billions more in recurring revenue growth, and it becomes clear that the Legislature is prioritizing spending over the taxpayer.
This token relief pales in comparison to what could have been done. Property taxes remain a top concern for Texans, yet the state has chosen to expand programs rather than return the bulk of surplus revenue to those who funded it in the first place. The $51 billion referenced in the budget as “property tax relief” includes many previous appropriations and is not reflective of a new, bold tax-cutting agenda.
Additionally, the budget makes no serious attempt to rein in corporate subsidies or realign Medicaid in a way that could slow the unsustainable pace of growth. There is no meaningful reduction in state agency bloat or consolidation of overlapping programs. Even the surge in transportation and infrastructure spending comes with few accountability measures to ensure funds are wisely spent.
The Path Ahead: Senate Vote Looming
The Texas Senate is scheduled to take up and consider SB 1 on Tuesday, where it is expected to pass with near-unanimous support. Despite concerns from fiscal conservatives and liberty-minded advocates, the budget’s broad support in the upper chamber suggests that few lawmakers are willing to push back against record spending levels in a surplus year. Once passed, the bill will head to the Texas House of Representatives, where additional amendments and negotiations are likely, but fundamental changes to the bill’s size or structure remain unlikely unless significant grassroots pressure mounts.
The speed and ease with which this historic budget appears poised to move forward reflect how normalized massive spending increases have become in Austin. Without serious reform-minded leadership, Texas risks drifting further from its reputation for limited government and taxpayer stewardship.
A Vote for SB 1 is a Vote for a Bigger Government
At its core, SB 1 represents a missed opportunity. With historic revenue and public support for tax relief, lawmakers had a chance to reset the state’s fiscal trajectory. Instead, they have chosen to entrench the status quo: more spending, more programs, and more power concentrated in state agencies.
This budget might fund core services, but it does so in a way that assumes government expansion is inevitable and even desirable. That’s a dangerous path. If Texas is to maintain its economic vitality and remain a beacon of liberty and opportunity, it must resist the temptation to grow government just because it can.
For all of these reasons, Texas Policy Research recommended lawmakers vote NO on SB 1. Instead, lawmakers should return to the drawing board with a commitment to reduce spending, eliminate waste, prioritize taxpayer relief, and reassert the principles of limited government and fiscal restraint.
Texans deserve better than the biggest budget in history. They deserve a state that budgets like a taxpayer—not an ever-growing leviathan bureaucracy.
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