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How could Texas spend its record $32.7 billion surplus?

By Karen Brooks Harper, Yuriko Schumacher and Alex Ford, The Texas Tribune

How could Texas spend its record $32.7 billion surplus?” was first published by The Texas Tribune, a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.

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$32.7 billion.

Thanks to taxpayers, that’s the whopping budget surplus Texas will have toward the end of 2023.

Your Texas lawmakers are required — per the state’s constitution — to pass a balanced budget. They can spend any amount of the surplus before the 2022-23 biennium ends Aug. 31, or they can add all or part of it into the 2024-25 budget. Or they can do nothing with it at all. Exactly how they decide to use this enormous windfall is now the central conversation before the Texas Legislature.

Need help wrapping your head around such a large number? Let’s break it down in simple terms.

Just how large is the $32.7 billion budget surplus?

The number won’t be finalized until after the receipts are all in later this year and legislators determine how much of it they want to spend in the current budget cycle before the end of August.

The cash surplus grew over the past 18 months because of historic growth in tax collections by the state.

As COVID-19 pandemic restrictions ended, Texas’ tax coffers saw soaring economic growth that boosted the state’s revenue when consumers picked up on their spending. Spikes in energy prices and the highest rate of general price inflation in 40 years also caused state tax collections to surpass what was expected when lawmakers approved the last budget.

Because the Texas Legislature meets every two years, its budget covers two years of state spending, not one.

So when the 2022-23 budget was passed two years ago, the projected state revenue for that two-year time frame was about $119 billion. The total estimated general revenue-related funds for the 2022-23 biennium is now $149 billion.

Think about it this way: If the state of Texas were a household making $40,000 a year, it would earn $80,000 over two years.

Now imagine that during that time, the household gets some unexpected cash, perhaps a generous bonus. So over that same two years, the household actually brought in about $97,500 instead — about 22% more than expected. That’s an average of $731 in extra money every month that they could spend during the next two years. These funds could be used to build a savings account, make bigger rent or mortgage payments, purchase a car or pay for child care.

Texas’ surplus is bigger than the entire budget of many other states.

Texas’ $32.7 billion surplus is about the size of the budget of South Carolina. It’s larger than the budgets of 24 states.

Texas’ overall budget is the third biggest after California and New York, and followed by Illinois, Pennsylvania, and Florida, according to a 2022 survey conducted by the National Association of State Budget Officers.

It’s bigger than the economy of some metropolitan areas in Texas.

The budget surplus is bigger than the 2021 gross domestic product, or the total output of goods and services, of 18 metropolitan areas, including McAllen, Corpus Christi, and Beaumont-Port Arthur, according to the U.S. Bureau of Economic Analysis. Only six metropolitan areas — Dallas-Fort Worth, Houston, Austin, San Antonio, Midland, and El Paso — had higher GDPs.

Most people can’t relate to a number as big as $32.7 billion. So let’s scale it down to financial situations that touch Texans’ lives.

If the $32.7 billion surplus were distributed equally, every Texan would get $1,088.

According to the U.S. census, Texas is home to an estimated 30 million people. If the surplus were passed out equally to every Texas, everyone would get about $1,088.

How many avocados could each Texan buy with $1,088?

Texans love guacamole, so let’s break this down using avocados. According to the Hass Avocado Board, the average price of an avocado in Houston was $0.79 in 2022. If we were to take that price, the budget surplus could buy 41 billion avocados — which would mean 1,378 avocados for every Texan. That’s more than three avocados per day for a year.

If the $32.7 billion surplus were distributed equally to every Texas household, every household would get $3,192.

According to the U.S. census, Texas has an estimated 10.2 million households. If the surplus were passed out equally to every Texas household, each one would get about $3,192.

How many months of groceries would that pay for?

Inflation is driving up food prices and leaving Texans with high grocery bills. What would happen if the budget surplus went toward groceries? The Bureau of Economic Analysis estimates that the individual Texan spends $3,471 a year on groceries, and that adds up to $9,719 per year for the average household size of 2.8 people. If each Texas household received $3,192 from the budget surplus, it would cover their grocery bill for just under 4 months.

For how long could the budget surplus cover rent?

The population in Texas has boomed over the last several years, and so have Texas rents. The Legislature is considering property tax reductions for homeowners, but what would happen if the budget surplus went to renters, instead? The average monthly rent in Texas is $1,146, and there are approximately 3.8 million households that pay rent in Texas. If the budget surplus were disbursed equally among all Texas renter households, they would each get $8,490. That would cover their rent for seven and a half months.

How many electric bills would that cover for every household?

The average residential electricity rate in Texas was 14.77 cents per kilowatt-hour in October 2022, data from the U.S. Energy Information Administration shows. The same agency found that in 2021, the average electricity usage in Texas was 1,262 kilowatt-hours per month — that would put the average Texas household’s monthly electricity bill at about $186.

If every Texas household received $3,192 from the budget surplus, it would mean they could pay about 17.1 months — more than a year and five months — of electricity bills.

If the surplus went to gas money, how far could every Texas driver go?

The average gasoline price in Texas was $2.96 per gallon during the week of March 6, according to data from the U.S. Energy Information Administration. That means the budget surplus could buy about 11 billion gallons of gasoline.

Additionally, U.S. Environmental Protection Agency data shows the average fuel economy per gallon for all vehicles in 2022 is about 26.4 miles. The 11 billion gallons of gasoline would be able to power a car for 292 billion miles. As of August 2021, there are about 25.1 million vehicles registered in Texas, which, if split equally, would mean every car would have enough gas to travel 11,634 miles.

That means Texas car owners could drive about…

How many school lunches would that buy?

According to the School Nutrition Association, the median school lunch price as of November 2022 was $3 for high- and middle-school students, and $2.75 for elementary school students.

State education data shows that 1.6 million high school students, 1.2 million middle school students, and 2.4 million elementary school students were enrolled in the 2021-22 school year. One day of school lunches for every Texas student would cost about $14.9 million. The $32.7 billion budget surplus would cover school lunches for 2,190 school days.

Texas schools have 180 instructional days every year, so that would mean the surplus is big enough to pay for every Texas student’s lunch for 12 years and 30 school days — almost from kindergarten to high school graduation.

What about giving raises to Texas teachers?

State education data shows there were 370,431 teachers in Texas during the 2021-22 school year. Their minimum annual salaries ranged from $33,660 for a beginning teacher to $54,540 for a teacher with 20 or more years of experience during the 2022-23 school year.

For a teacher just starting their career, the $32.7 billion budget surplus would give, at minimum, a 9.3% salary raise throughout a 20-year career. That would mean that a new teacher’s starting salary would start out at $37,588 and reach $59,612 in their 21st year — a total of $87,435 more money over the course of 20 years.

Realistically, what will this money actually be spent on?

For the record, there is no discussion among lawmakers about spending the surplus on most of the things in the above list, teacher pay raises being the exception. Other ideas gaining traction include spending $15 billion on property tax reductions as well as large investments in water and broadband infrastructure, rural health care, reworking the public school funding formula, state employee pay raises, improvements to the grid, investing in mental health services and other large projects. Legislators will spend the next few months debating what to spend the state’s revenue on before voting on a final budget to send to the governor near the end of May.

Disclosure: Texas Comptroller of Public Accounts has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

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