The Sustainable Budget Project: Don’t Let Texas Become California

Originally published on Substack. 

​I’ve lived in Texas for 43 of my 44 years. I was born near Houston in November 1981. I grew up in South Houston. I earned my doctorate in Lubbock. I’m raising my family near Austin.
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The only year I lived outside of Texas was during my service in the Trump 45 White House, when my family and I lived in McLean, Virginia.

I’ve spent my life watching Texas become the economic envy of America. People and businesses didn’t move here because government was bigger. They came because taxes were lower, regulations were lighter, housing was more affordable, and opportunity was greater.

The Texas model worked. But success can create complacency. And that’s what concerns me today.
Texas remains one of the strongest economies in America. Yet recent budget decisions suggest policymakers are beginning to drift away from the principles that made Texas successful in the first place.

That’s why the new Sustainable Budget Project⁠ by Americans for Tax Reform⁠ is so important. The project evaluates every state using a simple benchmark: government spending should generally grow no faster than population growth plus inflation. That reflects the average taxpayer’s ability to pay for government without sacrificing economic growth and opportunity.

Texas performs better than many states. But the trend lines deserve attention.

The Good News: Texas Hasn’t Lost Its Fiscal Foundation Completely

One of the most surprising findings from the Texas data in the Sustainable Budget Project⁠ is that Texas remains relatively close to a Sustainable Budget path over the last decade.

Chart 1: Texas Budget Comparison

Unlike many states, Texas did not spend dramatically above population growth plus inflation over the entire 2016-25 period. There were also substantial annual budget growth differences in the first five years of that decade compared with the last five, as highlighted in the following figure.

In fact, ATR’s data show Texas spent less than a Sustainable Budget path on a cumulative basis over the last decade. For state funds, the cumulative amount was about $10,000 less per family of four than the Sustainable Budget benchmark.

That’s worth celebrating. It reflects reforms enacted over many years and the benefits of a growing economy. But it would be a mistake to stop the analysis there.

The Warning Sign Policymakers Shouldn’t Ignore

The decade-long trend looks better than what happened recently. Much better. Over the last two budget cycles, Texas lawmakers had a once-in-a-generation opportunity.

The state collected more than $50 billion in budget surpluses.

Those funds could have been used to permanently reduce the tax burden, accelerate the elimination of school district M&O property taxes, strengthen reserves, or return more money to taxpayers.

Instead, state appropriations surged.

The final 2026-27 budget reached approximately $338 billion in all funds, the largest budget in Texas history. State funds increased by 42% over the last two budget cycles, far exceeding population growth plus inflation.
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Table 1. Texas State Appropriations Comparison

This is where the Sustainable Budget Project becomes so valuable. It doesn’t merely tell us where we’ve been. It helps us see where we’re headed.

Success Is Not a Permanent Condition

One reason Texas has prospered is because it consistently outperformed states that expanded government faster than their economies.

California provides the obvious example.

High taxes. High spending. High housing costs. Heavy regulation. People and businesses voted with their feet. Many came to Texas. But there is no guarantee that advantage lasts forever.
Economic freedom is not self-executing. It must be protected.

As I’ve written before in both my work on sustainable budgets and in “Texas Is Budgeting Like California,” states that allow government spending to grow faster than taxpayers’ ability to support it eventually lose their competitive edge.

Texas is still winning.
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The danger is assuming that means it always will.

What a Sustainable Budget Looks Like

The goal isn’t necessarily austerity. It’s sustainability.

Chart 2: FY2027 Texas Budget Limit

According to ATR’s calculations, Texas could increase state-funds spending from approximately $98.2 billion in FY2026 to about $102.8 billion in FY2027 and remain within a Sustainable Budget framework.

Government can grow. It simply shouldn’t grow faster than population growth plus inflation.

That’s the formula I’ve advocated for more than a decade because it aligns government growth with taxpayers’ ability to pay. It leaves more resources in the productive private sector where innovation, investment, job creation, and rising incomes occur. (GINN ECONOMIC CONSULTING⁠)

Three Lessons for Texas Policymakers

First, don’t mistake past success for future success.

Texas remains a national leader, but recent spending trends should concern anyone who values limited government.

Second, surpluses should buy down taxes through lower tax rates, not grow government.

The best use of surplus revenue is permanent tax relief, particularly the state should reduce and ultimately eliminate school district M&O property taxes, considering the state doesn’t have a personal income tax.

Third, Texas needs stronger spending limits.

Recent reforms improved the state’s expenditure limit, but additional reforms are needed. The strongest path forward is a constitutional spending limit based on population growth plus inflation that covers the broadest possible share of the budget at the state and local levels with surpluses towards lowering taxes. (GINN ECONOMIC CONSULTING⁠)

Closing Thoughts

Texas became the Texas model because policymakers generally trusted people more than government. They restrained spending. They kept taxes relatively low. They allowed entrepreneurs, workers, and families to build prosperity. That formula worked.

The Sustainable Budget Project shows Texas remains in a stronger position than many states. But it also highlights a critical warning. Recent budget growth is moving in the wrong direction.

If Texas continues allowing government spending to grow faster than population growth plus inflation, the advantages that attracted millions of Americans here can fade surprisingly quickly.

Texas doesn’t need bigger government. Texas needs to recommit to the principles that made it successful. Economic freedom. Fiscal responsibility. Sustainable budgeting. And the belief that prosperity comes from people, not politicians.

What Do You Think?
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Should Texas constitutionally limit spending growth to population growth plus inflation