The Texas House and Senate have released their initial budget proposals, showcasing that the chambers are mostly in agreement but divided on how to deal with property tax relief and education funding.
Lt. Gov. Dan Patrick kicked off the day by announcing the Senate budget proposal. It includes $32.2 billion to extend the 2024-2025 biennium’s tax cuts, raising the homestead exemption to $140,000 for adults and $150,000 for seniors, and additional tax compression.
The homestead exemption is the amount of money that a homeowner can deduct from the value of his or her house before it is taxed. Currently, the exemption is $100,000 for adults and $110,000 for seniors.
Tax compression, meanwhile, is an intentional act to lower the tax rate by “buying it down.”
In Texas, the process centers around general revenue funding—primarily from state sales tax—which is then given back to local jurisdictions so they can decrease local property tax rates.
“SB 1 maintains our promise to Texans by keeping our state on a conservative path to greater prosperity,” stated Patrick. “Conservative budgeting principles used in SB 1 ensure that state government does not grow faster than population times inflation. Like the budget for the current biennium, Texas must prioritize one-time spending of our surplus.”
“This will keep our state’s economy the envy of the nation and the world,” he added.
The Senate proposal also includes $5.3 billion in additional funding for public education, including a $4,000 raise for all teachers and an additional $6,000 for rural teachers.
Another $1 billion is allotted for the anticipated school choice program spearheaded by Gov. Greg Abbott. In early 2024, Abbott successfully backed the primary challengers of several House Republicans who voted against his November 2023 school choice proposal.
Patrick has listed passing school choice as a top priority this session.
State Sen. Joan Huffman (R-Houston), recently named chair of the Committee on Finance, filed the Senate proposal on Wednesday morning. She said she was “grateful for the opportunity to work with Lt. Gov. Dan Patrick and my Senate colleagues on this complex undertaking of crafting a state budget” for the 2026-2027 biennium.
“It is no secret that the Texas economy is thriving. By remaining fiscally conservative and making strategic investments, we can address the needs of our growing state while keeping an eye on the future,” stated Huffman. “In the coming weeks, the Senate Finance Committee will hold daily public hearings on the budget to hear from state agencies, stakeholders, and the public.”
The Senate budget proposal totals $332.9 billion in federal and state funds, a decrease of $55.3 million for a zero percent change. That includes $234.4 billion in state funds, a hike of $9.7 billion for a 4.3 percent increase.
Other key parts of the Senate proposal include $6.5 billion for border security, $402 million for new Department of Public Safety troopers and enforcement personnel plus equipment, and an additional $5 billion for the Texas Energy Fund.
It was referred to the Finance Committee on Wednesday afternoon.
Following Patrick’s announcement, House Speaker Dustin Burrows (R-Lubbock) announced the first House budget proposal, promoting it as “substantially identical” to the Senate’s preliminary budget.
State Rep. Greg Bonnen (R-Friendswood) officially filed the proposal on Wednesday morning, signaling that he will likely continue to chair the House Committee on Appropriations.
“Debating and passing the budget will be one of the most important undertakings this session, as it will determine the financial boundaries under which we operate when considering all other major legislation, including school choice, water infrastructure, and more,” wrote Burrows.
“Accordingly, the budget will be considered on the House floor as soon as practical, and during this process, I would urge my colleagues in the House to identify additional resources within the budget to deliver even greater property tax relief and additional funding for classrooms and teachers.”
The House proposal does not raise the $100,000 homestead exemption. Instead, it focuses on tax compression, providing $3 billion to create an additional 6.8 cents of rate compression on top of the existing 10.6 cents of rate compression.
Further property tax relief, amounting to $3.5 billion, is also contingent on new legislation. Overall, with the contingent $3.5 billion included, the House proposal contains $6.5 billion in new tax relief.
The proposal additionally provides $4.85 billion in new education funding, contingent upon school finance legislation. More than $60 billion is allotted to fund student enrollment, $400 million is given for school safety improvements, and $450 million is given for the Teacher Retirement System.
Like the Senate, the House proposal includes $1 billion for school choice. While the House’s congruency with Abbott’s school choice program remains unclear, its inclusion in the budget indicates a major concession by the more moderate body.
In addition to changes in property tax and education funding, the House proposal allocates $6.5 billion to border security, $1.1 billion to address high-risk cybersecurity threats, and $765 million for public safety.
Overall, the House proposal includes $335.7 billion in federal and state funds.
The budget proposals were released slightly over a week after Texas Comptroller Glenn Hegar released his office’s 2026-2027 Biennial Revenue Estimate, the first step in the state’s budgetary process.
Hegar’s report revealed that Texas had $176.4 billion in general revenue-related funds, which primarily consist of sales tax collections and other sources, such as energy taxes. It also found that the state had a surplus—or beginning balance—-of $23.76 billion.
Some of that surplus is allocated in the preliminary budgets towards property tax relief. However, Andrew McVeigh, president of Texans for Fiscal Responsibility, told Texas Scorecard that it was not enough.
“While Texas taxpayers were over-taxed by roughly $24 billion, this $6.5 billion in relief isn’t even one-third of the surplus, and taxpayers are rightly frustrated,” McVeigh said of the House proposal.
“Not only that, but it seems the Texas Senate is doubling down on a form of relief known as the ‘homestead exemption,’ which has proven to be ineffective: providing temporary relief at best, and no relief at worst,” he continued. “The legislature should reject this failed form of property tax relief and focus on a combination of spending caps and buying-down rates to provide the lasting relief that Texas families deserve.”
