Texas agencies prepare 3% baseline-request reductions for 2028-29 budget

Texas state agencies, appellate courts, judicial branch agencies and public higher-education institutions are preparing the next state budget cycle under a directive to reduce their base appropriation requests by 3%.

The requirement applies to requests for the 2028-29 biennium, covering the fiscal years beginning Sept. 1, 2027. It is a budget-planning limit and starting point for lawmakers — not an enacted 3% cut to current 2026-27 appropriations or services.

Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dustin Burrows issued the joint policy letter July 14, 2026, as part of the instructions for agencies preparing Legislative Appropriations Requests, or LARs. The Legislative Budget Board’s budget-submissions portal lists the active 2028-29 instructions for state agencies, higher education, public community colleges and the courts.

Who is covered

The directive covers state agencies, institutions and agencies of higher education, appellate courts and judicial branch agencies. That includes public universities, community colleges and other state-supported higher-education entities that submit requests to the Legislature.

The July 2026 judicial instructions say agencies, institutions of higher education, appellate courts and judicial branch agencies must fully identify required 3% reductions in the “Explanation of Biennial Change” section of affected strategy requests.

That documentation will show lawmakers how an entity would bring its baseline request within the limit. It does not by itself determine which programs, positions, grants or services will ultimately receive less funding.

Baseline requests and exceptional items are separate

The 3% requirement applies to the baseline request. Agencies may seek funding above that level as an “exceptional item,” but the policy letter says they should be prepared to identify lower-priority programs or other savings to help offset the additional costs.

That distinction matters because the request process comes before the 90th Legislature writes the 2028-29 budget. Lawmakers could approve, reject or change baseline and exceptional-item requests during the legislative process.

For Texans, the immediate effect is administrative: agencies and public institutions must build and explain their requests under the new instructions. The eventual effects on staffing, grants, campus programs, court operations and other services will depend on detailed submissions and legislative decisions.

Funding listed outside the baseline limitation

The July 14 policy letter lists several categories outside the baseline request limitation. They include:

Foundation School Program funding needed to maintain full funding of public education under state law;
Bond debt-service requirements;
Funding at fiscal 2027 budgeted levels, plus amounts needed for specified payroll growth affecting state pension systems and employee group benefits, subject to the exclusions and conditions in the policy letter;
Legally required Medicaid and Children’s Health Insurance Program benefits and eligibility;
Foster-care programs, adoption subsidies and Permanency Care Assistance, including projected caseload growth; and
The Texas Education Savings Account program, including projected participation.

These provisions describe how baseline requests should be prepared. They are not a guarantee that lawmakers will leave every related appropriation unchanged in the enacted 2028-29 budget.

Higher education faces a specific planning question

The Texas Higher Education Coordinating Board estimates that applying the directive to its request would reduce its base request by about $77 million over the two-year budget period. THECB officials said the agency expects to seek exceptional-item funding to support student-aid programs and reduce the effect on students and institutions.

Planned exceptional-item requests include support for need-based programs such as the Texas Grant, Texas Educational Opportunity Grant and Tuition Equalization Grant, as well as expanded cohorts and award amounts for programs including Texas Leadership Scholars and the Texas Armed Services Scholarship. Those requests remain proposals, and the Legislature would decide whether to fund them.

The LBB‘s current Fiscal Size-up shows the scale of the system involved. It lists $30.4 billion in all-funds appropriations for public higher education, excluding end-of-article benefits, for the 2026-27 biennium. The total includes general academic institutions, health-related institutions, Texas A&M service agencies, the Texas Higher Education Coordinating Board and two-year institutions.

That figure is context for the current biennium, not the amount automatically subject to a 3% reduction in the next budget. The $77 million estimate applies to THECB’s own anticipated request reduction, not necessarily to every Texas public college or to the entire higher-education budget.

THECB officials have warned that the reduction may not be absorbed entirely through internal operations and that some student and institutional programs could be affected. No student-aid or university-service reduction has been finalized by the directive alone.

What happens next

Agencies and institutions will submit their 2028-29 requests according to the staggered schedule in the LAR instructions. Their filings should show required baseline reductions and separately identify exceptional items.

Those submissions will give lawmakers a more detailed view of possible effects on public colleges, courts, agency staffing, grants and other programs. The Legislature will then decide appropriations for the biennium beginning Sept. 1, 2027.

Residents should not expect an immediate 3% reduction in current state services solely because of the July directive. The practical consequences will become clearer as agencies submit their requests and lawmakers debate which reductions, exemptions and exceptional items to include in the final budget.

Sources

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