The Texas economy continues to be the envy of other states. In January 2025, the Comptroller in his Biennial Revenue Estimate (BRE) for the 2026-2027 Biennium  projected an ending general revenue (GR) balance of $23.8 billion for 2024-2025 biennium, which concludes on August 31, 2025.

 

It is a given that, due to the large surplus, there will be many proposed spending increases in the 89th regular legislation session. It is critical that legislators consider proposals to increase spending (other than spending to finance tax cuts at the local level) with a skeptical eye, in the same manner they would if the state had no surplus at all. The state having a large surplus essentially means taxpayers are being overtaxed during the current biennium; the focus of the 89th Legislature should be on refunding most of those excess funds to the state’s taxpayers.

 

Texas has an opportunity to show that more government is not the way forward. Rather than creating new government programs, growing existing programs, or hiring more public employees, Texas can underscore its faith in the free market by strengthening limits on state and local government spending and permanently lowering taxes. The state’s franchise tax and local property taxes are both unnecessarily burdensome, and should be the focus of any legislative efforts to provide tax relief. Legislation in the 86th, 87th, and 88th legislative sessions delivered reforms that have helped limit the growth of property taxes, but current property tax burdens throughout the state are still high relative to other parts of the country. The Legislature should pursue a number of tax reforms, including buying down school M&O tax rates with surplus state revenue, eliminating or reducing taxes on tangible personal property used in a business, and cutting the franchise tax.