Texas’ top elected officials on Wednesday instructed state agencies, appellate courts and universities to cut spending by 3% in their budget requests for the next two years “as a starting point for budget deliberations.”
Gov. Greg Abbott, Texas House Speaker Dustin Burrows and Lt. Gov. Dan Patrick, who oversees the Senate, issued the guidance, framing the move as a way to keep Texas fiscally conservative and create wiggle room to fund priorities such as property tax cuts.
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K-12 public education funding and the state’s new private school voucher program are exempted from the 3% cut, according to the guidance, as is funding needed to maintain various social programs required by state law and to cover payroll growth in state pension systems and employee benefits.
“Texas leads the nation with a strong economy and responsible governance that puts families first,” Abbott said. “This guidance protects our historic investments in public education and teachers, delivers even more property tax relief and makes the cost of living more manageable for Texas families through strict standards of efficiency and accountability from every state agency.”
In 2025, the Legislature signed off on a $338 billion budget that will cover spending through August 2027, about a 5% increase from the previous two-year budget. Lawmakers had a $24 billion budget surplus to work from.
More than one out of every seven dollars of the current biennium’s budget — $51 billion — was allocated to property tax cuts, expansions to which Abbott has made a top priority for next session.
Wednesday’s 3% cut directive applies to the budget requests agencies will submit for next year’s legislative session, when lawmakers will approve a new state spending plan covering September 2027 through August 2029.
Abbott, who is seeking a fourth term as governor this year, kicked off a series of policy proposals meant to improve affordability at a campaign stop in Houston later on Wednesday, when he announced plans to help homeowners fortify their roofs against extreme weather to reduce home insurance costs and to allow car insurance companies to consider Texans’ safe driving records in calculating their rates.
State Rep. Gina Hinojosa, the Democratic nominee for governor, has proposed drawing $17 billion from the state’s rainy day fund to send each Texas household a $1,500 check, accusing Abbott of “hoarding” money in the account. As of November 2025, the fund — essentially a savings account meant to help Texas weather difficult economic conditions — sat at a record $24.8 billion.
Lara Anton, a spokesperson for the Texas Department of State Health Services, said it is “fairly common for state agencies to receive these types of directives” as part of their process for making legislative appropriations requests every two years.
“We will be evaluating our budget and include the 3% reduction in the LAR currently due in mid-August,” Anton said in a statement.
The directive comes as some Texas public colleges are already cutting costs amid rising expenses, enrollment declines and uncertainty over federal research grants.
State schools have kept undergraduate tuition and fees flat since the 2023-24 school year, limiting one way they have historically offset state funding cuts.
UT Arlington, UT Tyler and the University of North Texas have offered employee buyouts. UNT also announced plans to cut or consolidate more than 70 academic programs as it works to close a $45 million budget shortfall driven by declining international student enrollment and reduced state funding.
Texas lawmakers budgeted $23.9 billion in general revenue for higher education in the state’s 2026-2027 spending plan, 3.5% more than in the previous two-year budget cycle, according to the Legislative Budget Board.
State and local funding for Texas public colleges came out to $14,879 per full-time-equivalent student in 2025, above the national average of $12,082, according to the State Higher Education Executive Officers Association. But at Texas four-year schools, it was $7,288 per student, below the national average of $11,151.
A 3% reduction is not unusual in higher education budgeting, but it would force university leaders to decide what to protect, said Ruth Johnson, vice president of consulting at the National Association of College and University Business Officers.
Some schools may spread reductions evenly across departments, while others could shield certain programs or services and impose larger reductions elsewhere, she said.
Universities would likely first leave vacant positions unfilled and cut travel, professional development and equipment purchases, Johnson said. Students could see larger classes and fewer staff available to help them. Schools could use their cash reserves as a temporary stopgap, she said, but donor restrictions often prevent universities from tapping endowments for general operations.
The effect of spending cuts would likely have the biggest effect on regional public universities and community colleges, which typically operate on leaner margins than large research universities, said Ben Cecil, deputy director of higher education policy at Third Way, a national public policy think tank.
Universities have survived larger cuts during and after the 2008 financial crisis, he noted. However, rising costs, enrollment pressures and uncertainty over other funding make the choices more difficult now.
“It’s manageable in the sense that there’s not really a choice, unfortunately,” Cecil said.
Terri Langford contributed to this report.