Yes, Texas has a budget surplus. The Comptroller’s October 2025 certification put roughly $203.63 billion on the table for general-purpose spending across the 2026–2027 biennium, an increase over the $194.6 billion projected in January 2025 as actual collections outran the forecast.1Texas Comptroller of Public Accounts. The 2026-27 Certification Revenue Estimate Most of that money, though, is already spoken for. Property tax relief alone consumes about $51 billion of the two-year budget, and the projected ending balance heading into 2028–2029 is just $4.66 billion.
The Current Numbers
Texas plans its budget two years at a time. Before each regular session, the Comptroller issues a Biennial Revenue Estimate that combines projected new tax collections with the balance carried over from the prior cycle. That sum is what lawmakers can appropriate.
For 2026–2027, the January 2025 estimate started at $194.6 billion available for general-purpose spending: $176.4 billion in projected general revenue collections plus a $23.76 billion beginning balance.2Texas Comptroller of Public Accounts. Texas Comptroller Glenn Hegar Releases Biennial Revenue Estimate After the session closed and stronger-than-expected collections came in, the October 2025 Certification Revenue Estimate revised the picture upward. Total available funds rose to $203.63 billion, with the beginning balance restated at $35.26 billion. Of that total, $198.97 billion supports general-purpose spending, and the projected ending balance is $4.66 billion.1Texas Comptroller of Public Accounts. The 2026-27 Certification Revenue Estimate
The 2024–2025 biennium had $188.2 billion available, itself a 26.3% jump over the 2022–2023 cycle.3Texas Comptroller of Public Accounts. Biennial Revenue Estimate 2024-2025 Texas has now posted back-to-back historically large surpluses.
Why the Surplus Exists
Three revenue streams do most of the work.
Sales Tax
Sales tax is the state’s largest source of money. Texas charges 6.25% on most retail purchases, with local jurisdictions layering up to another 2% for a combined maximum of 8.25%.4Texas Comptroller of Public Accounts. Sales and Use Tax In fiscal 2025, sales tax collections hit $49.06 billion, up 4% from the prior year.5Texas Comptroller of Public Accounts. Acting Texas Comptroller Kelly Hancock Announces State Revenue for Fiscal 2025 Because Texas has no personal income tax, more than half of state tax revenue comes from this single source, and the state’s fiscal health tracks closely with consumer spending.
Oil and Gas Severance Taxes
Texas taxes crude oil production at 4.6% of market value and natural gas at 7.5%.6Texas Comptroller of Public Accounts. Crude Oil Production Tax7Texas Comptroller of Public Accounts. Natural Gas Production Tax Severance taxes made up about 8.6% of total state tax collections over the past decade, but they punch above that weight because high energy prices flow simultaneously into general revenue, the Economic Stabilization Fund, and the State Highway Fund. The recent surplus was fueled in part by elevated energy prices and full-tilt Permian Basin production.
Franchise Tax
Texas also collects a franchise tax, sometimes called the margin tax, on businesses operating in the state. It is applied to total revenue minus a deduction for either cost of goods sold or employee compensation, not both. For the 2024–2025 biennium, franchise tax collections were estimated at $12.61 billion, roughly 6% of total tax collections.8Texas Comptroller of Public Accounts. Biennial Revenue Estimate 2024-2025 Biennium Smaller than sales or severance, but steadier.
Where the Money Is Already Going
The 89th Legislature passed a $338 billion two-year budget in 2025 that allocated the bulk of available funds.
Property tax relief was the biggest single line: about $51 billion of the total budget, with roughly $45 billion needed just to maintain cuts enacted since 2019 and the remainder going to further rate compression and a higher homestead exemption. That commitment builds on SB 2 from 2023, which raised the school district homestead exemption from $40,000 to $100,000 and compressed school district tax rates by an additional $0.107 per $100 of assessed value.9Texas Comptroller of Public Accounts. Property Tax Cuts as Large as Texas Those cuts require ongoing state funding to replace the local school revenue they displaced, which is why they eat such a large share of each subsequent surplus.
The 2025 budget also directed:
- $8.5 billion in additional funding for public schools, covering teacher pay raises, special education, and safety requirements
- $10 billion for energy, water, and broadband infrastructure, including $5 billion to double the Texas Energy Fund
- $1 billion for a school voucher program
- Nearly $1 billion to raise base pay for home health attendants
Once you subtract the recurring cost of property tax relief and the new spending commitments, the operating margin is much thinner than the $203.63 billion headline suggests. The projected ending balance is that $4.66 billion figure.1Texas Comptroller of Public Accounts. The 2026-27 Certification Revenue Estimate
The Rainy Day Fund Is Full
The Economic Stabilization Fund, commonly called the Rainy Day Fund, is a constitutionally mandated savings account under Article III, Section 49-g of the Texas Constitution.10State of Texas. Texas Constitution Article 3 Legislative Department – Section 49-g Economic Stabilization Fund It has a constitutional cap set at 10% of non-investment revenue deposited into general revenue during the preceding biennium. For 2026–2027, that cap works out to approximately $26.89 billion.11Texas Comptroller of Public Accounts. Economic Stabilization Fund
The fund hit that ceiling at the start of fiscal 2026 after a partial transfer of $2.05 billion in severance tax revenue. No further transfers will occur in fiscal 2027 or 2028.12Texas Comptroller of Public Accounts. BRE 2026-27 Economic Stabilization Fund Ending Balance The projected ending balance for fiscal 2027 is $28.48 billion, above the cap because it includes investment earnings that accrued before the cap was formally triggered.1Texas Comptroller of Public Accounts. The 2026-27 Certification Revenue Estimate
With the Rainy Day Fund full, severance tax revenue that would have flowed into it is now redirected to general revenue. That inflates the operational surplus while the emergency cushion stays fixed.
What Could Shrink Future Surpluses
The current numbers are strong, but the mix behind them carries real vulnerabilities.
Sales tax revenue depends on consumer spending, which moves with employment, wages, and general confidence. A recession that slows retail activity would immediately hit the state’s largest revenue source, and without an income tax, Texas has no second major revenue leg to soften the blow.
Severance tax volatility is the sharper risk. Research from the Pew Charitable Trusts scored the collective volatility of state severance taxes at 55 for the most recent five-year period, up nearly 50% from the 15-year average. Texas is partially insulated because severance is a smaller share of total collections than in states like Alaska or Wyoming, but a sustained drop in oil prices could still strip billions from the forecast in a single biennium.
Federal policy changes add another pressure point. Pandemic-era relief funding has fully expired, and starting in late 2026, states face new administrative costs for programs like SNAP and Medicaid that were previously subsidized by federal dollars. Texas has more runway than most states to absorb those costs, but the recurring property tax obligation of roughly $45 billion per biennium just to maintain existing cuts leaves less flexibility than the headline numbers imply. If revenue growth plateaus while those obligations keep compounding, future legislatures may face tighter budgets than the current surplus suggests.