(The Center Square) – Ahead of the legislative session beginning Tuesday, Texas Comptroller Glenn Hegar announced that Texas has a nearly $24 billion surplus – higher than originally projected.
In Hegar’s newly released Biennial Revenue Estimate (BRE), Texas is projected to have $194.6 billion in revenue available for general-purpose spending during the 2026-2027 biennium, higher than originally projected.
In October 2023, Hegar projected Texas 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 last July when giving a budget forecast to the governor and Texas legislature.
In July, 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, The Center Square reported. The current biennium ends August 31, 2025.
Going into the next two-year budget cycle this legislative session, Hegar said, “Texas is in good financial shape and revenue collections will continue to increase in the upcoming biennium.”
However, as was the case ahead of the last legislative session, he said, “Thoughtful consideration of spending decisions, as always, will be crucial to ensure new and existing investments can be funded in the future – that … focus on improving the lives of Texans. Despite positive economic numbers, many of our residents continue to feel the higher cost of groceries, housing and other necessities. The lingering impacts of persistently rising prices mean many are struggling to ensure a bright future for their children.”
The projected $194.6 billion available for general-purpose spending includes 2026-2027 collections of $176.4 billion in general revenue-related (GR-R) funds. They are augmented by an expected 2024-2025 ending GR-R balance of $23.76 billion, the report states.
Of the total, $5.6 billion from 2026-2027 oil and natural gas tax collections are required by statute to be transferred to the State Highway Fund. This is after in 2024, the Texas oil and natural gas industry paid a record $27.3 billion in taxes and royalties, more than the revenues of 34 states, The Center Square reported.
There are no projected reserves to be transferred to the Economic Stabilization Fund (Rainy Day Fund) in the 2026-2027 biennium because its balance also hit a record. For the first time in the fund’s history, the fund balance is estimated to exceed its constitutional cap from the start of fiscal 2026, the report states.
Absent any legislative appropriations, it’s expected to reach a record $28.5 billion by the end of the 2026-2027 biennium. Were it not for constitutional constraints, it would total nearly $32 billion.
The projected ending 2024-2025 budget balance also includes $4.5 billion in unspent contingent appropriations for public school Education Savings Accounts (ESAs) which were never created due to the legislation failing to pass in the last legislative session. Gov. Greg Abbott has prioritized property tax relief and ESAs as top legislative priorities this year.
The budget also includes savings of nearly $6.6 billion from the substitution of federal COVID-related funds for general revenue in the Texas Department of Criminal Justice budget, an increase from a previous estimate.
“The projected ending balance in this BRE comes from different sources than the huge balance of two years ago, and it reflects the fact that lawmakers didn’t spend all the available funds in 2023,” Hegar said. “That decision, coupled with their decision to limit future ongoing costs while still making a number of large and critical investments in our state, has kept Texas in a strong position relative to other states that exhibited less fiscal discipline.”
Texas’ largest revenue source, 61%, is from sales taxes. In 2026-2027, sales tax revenue is projected to reach $94.2 billion. Other revenue projections come from $12.5 billion in motor vehicle-related taxes; $15.7 billion in franchise taxes; $11.8 billion in oil production taxes and $5.4 billion in natural gas taxes.
State revenue from all sources and for all purposes is expected to reach $362.2 billion, including $115 billion in federal receipts and $70.7 billion in other income and revenues dedicated for specific purposes unavailable for general-purpose spending, the report states.
Hegar’s forecast doesn’t include unanticipated one-time or unusual events.
“Potential economic disruption could come from weather-related disasters, the continued wars in Ukraine and the Middle East, China’s economic activities, changes in federal policies, and the possibility that the Federal Reserve must continue restrictive monetary policy efforts to combat resurgent inflation,” Hegar said. “And the only certainty with regard to oil and gas prices is that they are volatile. Absent an economic crisis, however, I project our economy will continue to grow at a rate consistent with historical norms following the profound disruption of the pandemic, the dramatic recovery when COVID restrictions were lifted and the high inflation that accompanied booming economic growth.”