Every even-numbered year, the state’s Legislative Budget Board (LBB) publishes a helpful, user-friendly summation of the General Appropriations Act (GAA), otherwise known as the state’s two-year budget. On Wednesday, the LBB published the next iteration—its 2024-25 Fiscal Size-Up.

From a 30,000 ft. level, this new report provides “a comprehensive review of how tax dollars were directed by the Eighty-eighth Legislature during the Regular and Called sessions in 2023.” In other words, it’s a good way to gain a lot of insight into a big document. After quickly perusing it earlier this week, here are 10 things that Fiscal Size-Up makes plain to anyone interested.

  1. Significant spending growth. There’s no way around it—Texas’ 2024-25 budget is big. In fact, the current two-year budget totals $321.7 billion(see 2), which represents a 21.5% increase over the prior biennium’s appropriated amount of $264.8 billion (see pg. 2). Looking only at General Revenue-related monies, policymakers committed $151.3 billion in funding for the current biennium, which marks a 20.5% increase in appropriated-to-appropriated amounts. All of which is to say that the Texas state budget experienced a noticeable uptick this time around. Now, to be fair, there are some mitigating factors. For instance, appropriators did not violate any of the 5 constitutional or statutory expenditure limits that govern the state’s finances. Too, the All Funds total ($321.7 billion) includes contingent spending, as with school choice ($500 million) and energy infrastructure ($5 billion); monies for capital improvement projects, as with transportation ($37 billion); tax relief ($17.6 billion); and things that the state should arguably not be on the hook for, like border security ($5.1 billion). The extent to which those things offset any concern about spending growth is, of course, entirely subjective and dependent on the individual. But from a purely a surface-level analysis that compares the present adopted budget with its predecessor, it’s heft is noticeable.
  2. A Heavy Dose of Federal Funds. Federal financial assistance is one major reason why Texas’ current budget (and all others!) is as large as it is. Especially with pandemic-related aid still flowing the state system (see 15-16), these monies have come to represent a sizeable share of state spending. Consider that federal funds comprise 31.8% of the state’s 2024-25 budget (see pg. 17). While this represents a modest decrease from the prior biennial budget (37.2%, see pg. 16), it is still true that nearly one-third of the state’s budget is dependent on the federal government. This dynamic is bit concerning given Washington D.C.’s obvious lack of fiscal discipline and shaky fiscal position, which might give rise to any number of different problems down the road if not contained.
  3. Stagnant Student Population Growth. One of the largest expenditure items in the state budget is K-12 education. Interestingly, student population growth, measured as average daily attendance, was effectively stagnant from 2020 to 2024. The LBB records the same number of students (5.1 million) in both 2020 and 2024 (see image below from 25). As one might imagine, K-12 expenditures did not maintain a similar trajectory over the same period.
  4. Stayed Within the Lines. It bears repeating that Texas’ budget, while big, stayed within all constitutional and statutory spending constraints (see 31 – 33). As previously mentioned, the state’s finances are subject to several limits, including: “the balanced budget limits which is commonly referred to as the pay-as-you-go limit; the limit on the rate of growth of appropriations from certain state taxes, commonly referred to as the tax spending limit; the limit on tax-supported debt; and the limit on welfare spending. In addition, Texas has a statutory limit on the growth of consolidated General Revenue Funds appropriations (CGR), commonly referred to as the CGR limit. The 2024-25 biennial budget is within all five of these limits.” These limits, while imperfect, help keep the state’s finances moving in a good direction. The fact that the budget remained within the bounds of each active constraint says a lot.
  5. Sales Tax Remains Supreme. Texas’ state sales tax remains the primary tax revenue generator. For the 2024-25 biennium, the state’s sales tax is expected to generate $97.2 billion in revenue, representing 73.5% of total tax collections. The next largest tax revenue stream is the motor vehicle sales and rental taxes, which is projected to yield $14.1 billion for the biennium (see 35).
  6. Low State Tax Burden. In comparison to other states, Texas’ state tax burden remains remarkably low. According to the LBB’s latest report, “For fiscal year 2022, Texans paid $43.77 in state taxes for each $1,000 of personal income, or 65.4 percent of the $66.97 national average…On this metric, Texas ranks as the fourth lowest state in the country.” Of course, this metric excludes important local considerations, like runaway property taxes imposed by cities, counties, school districts, and special districts; but even still, it suggests that, at least on the state level—where spending limits exist—the burden remains relatively subdued, especially as compared to other states throughout the nation.
  7. Huge Population Growth. Among large states, Texas’ population rose by 15.1% from 2012 to 2022, which was second only to Florida’s boom (+15.3%) (see 43). The Lone Star State’s long-term population surge suggests that its low tax, limited government framework is popular and attractive to outside parties—despite the ludicrous rankings and ranting of leftwing sources.
  8. Ample Savings. The state’s Economic Stabilization Fund (ESF), or its ‘rainy day’ fund, is expected to maintain a substantial fund balance when the 2025 Legislature convenes. In fact, “After transfers to the fund based on oil and natural gas production tax revenue, transfers based on 2022-23 unencumbered General Revenue Fund ending balances, interest income, and investment earnings, [the Texas Comptroller of Public Accounts] estimates the ESF to end the 2024-25 biennium with a balance of $23.8 billion.” Such a sizeable, uncommitted fund balance should give heart to Texas lawmakers looking to go big on delivering permanent property tax relief next session.
  9. A Long Time Coming. Texas’ property tax—which is administered exclusively at the local level—rose significantly over the last two decades. In fact, from 2001 to 2021, the LBB recorded a total property tax levy increase of $25.3 billion to $73.5 billion, or an approximately 190% increase (see 54). The largest burden resulted from school districts, which represented well over half of the 2021 total. Of course, recent legislative actions have sought to ease the burden of Texas’ fast-growing property tax, as evidenced by the imposition of a 3.5% voter-approval limit (2.5% for ISDs), the passage of historic tax relief, and increased discussion about eliminating the school M&O tax rate altogether (all of which deserve to be applauded).
  10. Texas Strong. Due in large part to Texas’ reliance on a low tax, limited government framework, the state’s economy continues to boom. Per the LBB’s report: “The Texas continues its strong post-pandemic recovery, with Real Gross State Product (GSP) growth measuring 4.8 percent in fiscal year 2023, the strongest pace of growth in 12 years. Employment levels in Texas also recorded strong growth during fiscal year 2023, increasing at a rate of 4.1 percent, which kept the statewide unemployment rate steady at 4.0 percent during the year.” That’s good news for everyone.

All-in-all, there is much to learn from the state’s latest edition of Fiscal Size-Up, but one thing above all comes across as clear. That is, while Texas may have its challenges (every state does!), there is an avalanche of evidence to suggest that the Texas Model works and is bearing tremendous fruit. It is clear that, if we keep doing what we’ve been doing—with some minor correction—then we will set up ourselves and future generations for unlimited success.