Special session update: What we see around budget, spending limit

Since Comptroller Glenn Hegar published his revised revenue outlook ahead of the special session, a number of bills have been filed, with a few already passed out of the Senate. As the dust settles from the activity of the first 10 days, we’re getting a clearer sense of how special session legislation and the budget will interact.

To get us started, here’s a quick recap of our initial takes after the CRE was published.

• Texas is expected to have a cash balance of $18.3 billion at the end of fiscal year 2025, but only $6 billion of this is available to legislators to appropriate before they would have to vote to exceed the tax spending limit with a simple majority vote in each chamber.
• Theoretically, this means up to $10.5 billion — $4.5 billion already allocated from the regular session plus $6 billion under the spending limit — may be spent on education in this special session before reaching the tax spending limit.

Grappling with the tax spending limit

In practice, between making up costs of an anticipated Medicaid shortfall and potential additional expenditures for border security or immigration, approving $10.5 billion in education funding would likely require a vote to exceed the tax spending limit, either during the special session or when the 89th Legislature takes up their supplemental appropriations bill in 2025.

As passed by the Senate, Senate Bill 1 (88-3), which addresses school choice, and SB 2 (88-3), which addresses school finance and teacher pay, together would spend $1.2 billion more than what was allocated during the regular session. This additional $1.2 billion would reduce the remaining spending authority under the tax spending limit from $6 billion to $4.8 billion.

For reference, since 2013, in sessions without the assistance of federal relief funds, the cost of making up the Medicaid shortfall has ranged from $155 million up to $4.5 billion in state funds. Without full information, but drawing from recent and historic trends, it is not a stretch to expect legislators to approve an amount well over 10 digits to cover Medicaid in 2025.

In addition to the main education bills, other big ticket items to watch this special session will involve border security. House Bill 6 (88-3), for example, would allocate $1.5 billion for the construction of a barrier at the Texas-Mexico border. This and other initiatives, if passed, would impact the amount of available funding under the spending limit.

Read more:

• Five quick takeaways from the Comptroller’s new revenue estimate
• Insurance taxes: An unexpected driver behind increased revenues
• Budget conference report is out: Some initial takes

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