Texas’ Certification Revenue Estimate

Originally published on Texans for Fiscal Responsibility. 

​Record Collections Demand Restraint, Not More Spending

The state’s finances are weakening, and taxpayers deserve permanent relief—not bigger government.The Texas Comptroller’s new Certification Revenue Estimate (CRE)1 confirms what many Texans already know: government has more than enough money, it simply spends too much of it. Acting Comptroller Kelly Hancock certified that the state will have $203.63 billion in General Revenue available for the 2026–27 biennium, funding everything from schools and healthcare to public safety and state agencies.

Lawmakers have already approved $198.97 billion in General-Revenue spending, leaving a $4.66 billion cushion. On paper, that’s a balanced budget. In practice, it reflects how rapidly the state has grown accustomed to record-high spending levels.

Revenues Keep Surging

The CRE shows that Texas will collect $173.4 billion in new general revenue over the next two years—$153.5 billion from taxes and $19.9 billion from other sources such as lottery proceeds, interest, and state fees. That’s only a slight increase from the last biennium, signaling a cooling economy.

Sales taxes remain the backbone of state revenue, projected to bring in nearly $94 billion, or about 60 percent of all tax collections. The franchise (margin) tax will raise $10.9 billion, and insurance taxes will hit $10 billion as higher property values and inflation push up premiums. Energy taxes are a mixed story: oil-production tax revenue will fall 14 percent to about $10 billion, while natural-gas taxes will climb 23 percent to nearly $5.7 billion, driven by LNG exports and data-center demand. Non-tax income will fall sharply as federal pandemic funds disappear, but overall tax growth keeps Texas flush with cash.

A Cooling Economy, Not a Crisis

The Comptroller projects that Texas’ economy will continue to expand, though more slowly than in recent years. Real gross state product is expected to grow 2.3 percent annually, while personal income will rise around 5.6 percent per year. Unemployment is projected to tick up to 4.7 percent by 2027. Energy prices are expected to stabilize near $64–66 per barrel for oil and about $4 per MMBtu for natural gas.

That’s a healthy outlook, but not one that justifies the biggest budget in Texas history. The economy may still be strong, but the Legislature’s appetite for spending is even stronger.

A Record Budget That Outpaces Growth

The 2026–27 budget totals $337 billion across all funds, up more than 40 percent since the 2022–23 cycle—far faster than the zero-growth budget or population growth plus inflation. Even General-Revenue spending alone rose 8 percent, well above the limit that would align with the average Texan’s ability to pay for it.

Appropriations-to-appropriations analysis shows that Texas has repeatedly exceeded the responsible-budget threshold of keeping spending growth below population growth plus inflation. This is how governments lose their competitive advantage: prosperity built on fiscal discipline gives way to complacency and political convenience.

Education and healthcare make up over two-thirds of the budget, yet lawmakers once again avoided structural reforms. Instead, record revenues kept nearly every corner of the state government on autopilot.

The Rainy Day Fund and What It Means

The state’s Economic Stabilization Fund (commonly known as the Rainy Day Fund) is at its constitutional cap—about $27 billion today and projected to reach $28.5 billion by 2027. Because it’s full, excess oil-and-gas money that would normally flow into the fund will stay in the General Revenue account. That creates a tremendous opportunity to return dollars to taxpayers instead of expanding government.

Yet so far, most of that excess has been absorbed into new programs or recurring costs. Out of roughly $51 billion labeled as “tax relief” in the last budget, only about $6 billion represented new property-tax cuts. The rest extended old programs or temporary reductions. Texans deserve better, and they know it. 

The Responsible Path Forward

Texas’ success comes from keeping government restrained, taxes low, and opportunities abundant. The path forward is as clear as ever:

• Limit spending growth at the state and local levels to less than population growth plus inflation.
• Dedicate future surpluses to buy down school-district property-taxes until they reach zero.
• Eliminate carve-outs and exemptions that distort tax equity.
• Conduct regular performance audits to ensure Texans get results, not bureaucracy, for their tax dollars.

If lawmakers restrain spending, Texas can maintain its competitive advantage: a key reason families and businesses continue moving here. 

But if the state keeps overspending, higher taxes or slower growth will inevitably follow.

The Bottom Line
​
The Certification Revenue Estimate shows a state that’s prosperous but undisciplined. Texas doesn’t have a revenue problem—it has a spending problem. With a full Rainy Day Fund, billions in excess collections, and an economy still outpacing the nation, now is the time to act.

By restraining spending and dedicating surpluses to permanent property-tax rate relief, Texas can lead the nation in turning prosperity into lasting freedom.

Because when the government spends less, people truly prosper more.