With $21.2 billion projected surplus, state preparing fiscal biennium budget

(The Center Square) – With the Texas legislature again expected to see another multi-billion-dollar surplus next year, state agencies were issued instructions to prepare their budgets requests. Lt. Gov. Dan Patrick is already suggesting trouble is on the horizon over the issue of school choice.

Last October, Comptroller Glenn Hegar projected the state would have a surplus of $18.29 billion for its two-year budget cycle. “Despite sharply higher interest rates, household budgets stressed by inflation and adverse economic conditions among major trading partners … the Texas economy has outperformed the national economy, and the economic outlook included with this revenue estimate does not assume a recession in Texas,” he said.

In a July 17 letter to Gov. Greg Abbott, Patrick, House Speaker Dade Phelan and state lawmakers, Hegar said net general revenue-related collections were tracking with his office’s 2024-2025 Certification Revenue Estimate with a forecasted surplus of $18.3 billion. Because of funding that was set aside, but wasn’t allocated for an Education Savings Account program the legislature failed to approve last year, the surplus is projected to be roughly $21.2 billion, he said. Projected spending for the state’s portion of Medicaid and the Foundation School Program reduces that amount to $20 billion, he said.

The revised surplus projection comes after Texans overwhelmingly elected pro-school choice candidates in the Republican primary election earlier this year and Texans statewide are increasingly supporting school choice, including wanting the legislature to create Texas’ first ESA program, The Center Square reported .

By comparison, the state had a $32.7 billion surplus in the previous legislative session, The Center Square reported .

In response to Hegar’s revised forecast, Abbott, Patrick and Phelan outlined their budget priorities. In a July 25 letter to state agency heads, judges and chancellors, Abbott and Patrick said, “Texans deserve to know that their tax dollars are used to fund efficient government that serves their needs. We are committed to a budget process that adheres to these principles.”

As they prepare their legislative appropriations requests for the 2026-2027 biennium, the agency heads should consider priorities they outlined for the next appropriations bill. These "include property tax relief; additional funding to support construction and modernization of dispatchable electric generating facilities; operational funding for the mental health facilities authorized by the 88th legislature; and funding for Education Savings Accounts and securing the border.”

On the same day, Phelan sent a separate letter to the same recipients prioritizing property tax relief and border security. He also included instructions for them to follow when submitting their budget requests. He emphasized that “agencies and institutions must continue to be efficient and effective stewards of limited taxpayer resources, and will be expected to fully justify maintaining baseline spending amounts.”

In response, Patrick was quick to criticize Phelan and published the two letters on X, saying, “Renegade Dade Phelan clearly intends to work AGAINST school choice, again, with his Democrat chairs and Democrat members behind him.”

Patrick also took the opportunity to blame Phelan for House Republicans losing their primary races because they opposed school choice. “He doesn’t care about his Republican members or Republican voters who support school choice. What’s the story?” Patrick said.

Patrick also said all three leaders have traditionally issued a budget instruction letter in the summer before the upcoming legislative session, which begins in January. This year, that didn’t happen.

“For weeks this summer, Speaker Phelan sat on the letter Governor Abbott and I sent him for his signature,” Patrick said. “Rumor has it that the Speaker would not sign the letter because school choice was listed as a priority. Looks like the rumor was true. Not surprised.

“With time ticking for agencies to begin their budget planning,” he said he and the governor issued their letter and “moments later, Speaker Phelan issued his own letter with one major difference … He removed school choice as a priority.”

He also claimed Phelan “will work against conservative legislative priorities this upcoming session.”

Phelan responded without attacking Patrick, saying , “This is a routine, technical letter to kick off the budget making process, it is not a bill or a law. Interim hearings are ongoing on all of these issues – including education – and more. The members of the Texas House will drive the budget process and priorities in the session. That is exactly as it has always worked and will continue to work in the Texas House.”

In May, Phelan announced interim charges for the House to consider, including school choice, The Center Square reported . The House Public Education Committee is scheduled to meet next month to address multiple issues, including school choice.

The charge states the committee is to, “Consider issues and matters to increase educational opportunities in Texas to ensure that students and families have increased options to attend a high-quality school, regardless of circumstance. Evaluate the use of education savings accounts in other states and make recommendations for a Texas program, including suggestions on eligibility and prioritization of applicants.”