Texas Budget Surpluses May Be Coming to an End

June 30, 2025 – After several years of record-breaking surpluses, Texas lawmakers may soon face tighter fiscal conditions. According to budget analysts, the expiration of federal pandemic relief funds and a slowdown in sales tax revenue growth could constrain the Texas Legislature’s ability to fund major initiatives in the coming years.

Texas benefited from massive federal aid during the COVID-19 pandemic, combined with surging consumer spending that drove up sales tax collections—the state’s largest source of revenue. These factors helped fuel multi-billion-dollar surpluses that enabled historic investments in infrastructure, property tax cuts, education, and border security.

But that financial cushion is shrinking. Analysts note that the last of the pandemic-era federal funding is set to dry up by 2026, and economic indicators suggest a cooling in consumer activity, slowing sales tax growth. Rising costs, inflation pressures, and population growth will further stretch state resources.

“This could mark the end of the surplus era,” said one legislative budget expert. “We’re entering a more constrained fiscal environment.”

While Texas still enjoys a robust economy and maintains a healthy Rainy Day Fund, lawmakers may face tougher choices ahead—particularly as demands increase for school funding, health care, water infrastructure, and energy grid resilience.

The next legislative session may test how well Texas can adapt to a post-surplus reality.