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Texas has an unprecedented budget surplus. What can be done with the billions of dollars?

The Texas Capitol building in downtown Austin.
Gabriel C. Pérez
Estimates put the state’s budget surplus as high as $35 billion.

When the Texas Legislature meets for the first time this year on Tuesday, the state will be in a position it has never been in before.

The state’s budget surplus is unprecedented, with estimates showing it to be at least $27 billion, and possibly as high as $35 billion.

Why is it so high?

Daniel Sánchez-Piñol, an economist with the conservative think-tank Texas Public Policy Foundation, said it’s all due to inflation.

“A lot of it comes from the sales tax, and because we are living in a high-inflation environment, that means the prices have gone up,” Sánchez-Piñol said. “And every time we make a purchase, we are paying the sales tax.”

Property tax relief

So, the question for many is: What can the state do with the money it has?

Republicans say they want to use part of the money to provide property tax relief.

“I want all the members to understand this great opportunity that they have in the House and the Senate to craft the future of Texas,” Lt. Gov. Dan Patrick told reporters in Austin last month when he unveiled his priorities.

Texas homeowners have been dealing with rising property taxes for years, and for Patrick, helping homeowners is his top priority.

Sánchez-Piñol said his group is also lobbying for property tax relief. The foundation is calling for the Legislature to use the surplus to buy down what’s called school maintenance and operation property taxes.

“The school district would lower the property tax depending on how much the state would buy down the property tax for them,” Sánchez-Piñol said.

But Texas can’t allocate all its extra money to this. Spending caps only allow the state to spend about $12.5 billion of the surplus.

For progressive groups, that means lawmakers should instead focus on what they consider to be a more pressing issue.

Education and the basic allotment

Eva DeLuna Castro, a state budget analyst for the left-leaning think tank Every Texan, said the state first needs to address the basics.

“It’s not a surplus when we have so many needs that are unmet,” DeLuna Castro said. “And there are so many things that the Legislature needs to invest in.”

She said public education is in dire need of funding. She is proposing that the Legislature boost per-pupil funding in the state — also called Basic Allotment.

“2019 was the education session when the state finally stepped up and took a bigger responsibility for paying for our schools,” DeLuna Castro said. “So, the state steps up and raises that Basic Allotment to $6,160. That’s where it’s been since then — since the fall of 2019.”

Brian Woods, the superintendent of Northside Independent School District in San Antonio, also wants the Legislature to increase the basic allotment. He said doing so would give teachers, counselors, nurses and librarians an automatic pay increase.

Woods said the Legislature doesn’t have to pick and choose — it can prioritize both property tax relief and education.

“Those that would paint a picture of property tax relief or help for schools are creating a false dichotomy because that is not true,” Woods said. “You can do both in an environment where the state has such a massive surplus.”

Sergio Martínez-Beltrán is the former Texas Capitol reporter for The Texas Newsroom.
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