Texas Legislative Budget Board’s Fiscal Size-Up 2024-25: Initial Reaction and Analysis

Originally published at Texas Policy Research Institute. 

The Texas Legislative Budget Board (LBB) has released its Fiscal Size-Up (FSU) for the 2024-25 biennium, providing a comprehensive overview of the state’s budget. This document is essential for understanding how Texas allocates its financial resources and highlights significant fiscal actions taken by the 88th Texas Legislature. Here’s a breakdown of the key points from the FSU and additional insights to provide clarity and context.
The DelayIt is important to note that there was a significant delay in the publication of the FSU this cycle, for reasons unknown. For comparative purposes, here are the release dates of the past few Fiscal Size-Up publications:

• 2024-25: July 2024
• 2022-23: March 2022
• 2020-21: May 2020
• 2018-19: September 2018
• 2016-17: May 2016
• 2014-15: February 2014
• 2012-13: January 2012

Overview of the 2024-25 Biennial BudgetFor reference, we have cataloged the Texas State Budget by Biennium from 1996 to 2025 based on information previously published by the LBB. You can also see that information broken down by Article of the State Budget for the same time period.
Here are the key takeaways from how state lawmakers appropriated taxpayer money in the most recent legislative session:

• Historical Budget Increase:
  • The Texas Legislature passed the largest budget increase in the state’s history in the 88th Legislative Session (2023), with general revenue funds growing by 21.2%, state funds by 32%, and all funds by 21.5%.
  • Though the budget includes a substantial $12.7 billion for new property tax relief (making it the second-largest property tax relief effort in Texas history), property taxes still increased by $165 million.
  • All of this happened with the backdrop of an over $32 billion budget surplus (i.e. over-collected taxpayer money)

• Public Education Funding:
  • State spending on public education increased significantly, with a 33.3% rise in state funds and a 28.6% rise in all funds.
  • This increase elevates the state’s share of public education funding to approximately 50%, though this figure might be slightly inflated due to federal COVID-related funding in the previous biennium.
  • Funding for school administration and support staff outpaces funding for teachers themselves, despite dismal testing results.

Detailed Analysis and RecommendationsVance Ginn, a Ph.D. economist, Founder and President of Ginn Economic Consulting, former Chief Economist at the White House’s Office of Management and Budget (OMB) from 2019 to 2020 in the Trump Administration, and board member of Texas Policy Research, recently shared his initial thoughts on the FSU on Twitter/X.
“You’ll notice that the increase in All Funds, which includes all funding sources, is 21.5% when consistently calculated from initial appropriations to initial appropriations. At the same time, the LBB reports it to be just a 2.7% increase from an inconsistent comparison, which tells us very little about how much our tyaxpayer dollars are being used. This is because the 2024-25 amounts don’t include any supplemental appropriations or other spending that will happen by the Texas Legislature, so it is incomplete and incorrect to compare the two amounts in the FSU without this context.”
Vance Ginn, Ph.D. Twitter/X post, 7.31.2024 @VanceGinnDr. Ginn highlighted several broader points about the FSU, including what it includes, what it excludes, and his concerns leading into the next legislative session in January 2025:

• Budget Comparisons:
  • The FSU documents budget allocations across various articles and funding sources, but comparisons between biennial periods can be misleading. The initial appropriations for 2022-23 include supplemental appropriations and other budget changes, while the 2024-25 figures are based solely on initial appropriations. This apples-to-oranges comparison needs to be understood in context.
  • Consistent comparisons show a 21.5% increase in all funds from initial appropriations to initial appropriations, contrasting with the LBB’s reported 2.7% increase based on an inconsistent comparison. This discrepancy underlines the need for a more accurate representation of budget changes.

• Public Education Concerns:
  • Despite increased funding, there are ongoing concerns about declining student outcomes and stagnant teacher pay. Significant portions of the funding are directed toward facilities, athletics, and administrative costs rather than directly impacting student performance.
  • Future funding should consider these factors, and there is a possibility of reduced spending in the next session due to the recent rapid increases and poor outcomes.

• School Choice and Finance Reform:
  • Universal Education Savings Accounts (ESAs) are proposed as a means to provide school choice without harming public education funding. ESAs could help reduce overall expenditures and lower school district property taxes, aligning with the state’s goal of fully funding education as per the Texas Constitution.

• Spending Excesses and Recommendations:
  • The current budget’s excess spending is seen as unsustainable, necessitating budget cuts in the next legislative session. The Governor is urged to call for a 10% across-the-board cut to prioritize limited government roles and substantial tax relief.
  • Specific recommendations include reducing school district property tax rates and the business margins tax rates incrementally until they reach zero.

ConclusionThe Texas Legislative Budget Board’s Fiscal Size-Up for the 2024-25 biennium reveals significant increases in the state budget, particularly in public education funding. However, a review of the document highlights the need for careful consideration of budget comparisons, the impact of increased funding on education outcomes, and the sustainability of current spending levels. The proposed reforms aim to optimize the allocation of taxpayer dollars, improve public education outcomes, and provide substantial tax relief to Texans.