Introduction
Texas politicians are not keen on having Texans understand how much of their money is being spent and what it is being spent on. The politicians have developed multiple mechanisms to make it difficult for Texans—and especially the voters who elect them—from gaining access to this knowledge. Some of these mechanisms, what we call Shadow Spending—are the subject of this paper.
Texas spends more money from taxpayers and users of government services through Shadow Spending than they do through the regular appropriations process. For example, during Texas’ 2022-23 fiscal biennium, Texas spent $131.2 billion through the regular appropriations process (some of which itself is less than transparent). However, the state spent even more—$142.5 billion—through Shadow Spending mechanisms over which most legislators and voters had little, if any, input.
What is Shadow Spending
Most taxpayers in a fairly conservative state like Texas tend to take a dim view when Texas state and local governments spend a lot of their money. Unfortunately, the result of voter concern has not been a reduction in government spending. Instead, politicians in Texas government have gotten extremely proficient at hiding how much taxpayer money they spend.
We call this Shadow Spending.
We can see one example of Shadow Spending in the 2022-23 state fiscal biennium. The Texas Legislative Budget Board (LBB) reported that the Texas Legislature appropriated $313.4 billion. However, according to the Texas Comptroller, the state spent $399.8 billion during the same period. That 27% difference is a portion of the Shadow Spending.
Another example of Shadow Spending is when Texas politicians manipulate state spending limits to make themselves look more fiscally responsible than they are. This happened in 2023 when the Texas Legislature was flush with cash because of the state’s amazing recovery from the government shut down of the economy in 2020. The politicians had a problem, though. They had more money than they could spend under the Texas Constitution’s tax spending limit, which limits the growth of appropriations from non-constitutionally dedicated state tax revenue to no more than the growth of the state’s economy—generally measured by population growth times inflation.
There were two ways around this. The straightforward way is to use the provision in the Constitution that allows legislators to vote to exceed the tax spending limit; it only takes a majority vote. The problem with this is that this would alert voters to what they were doing. Instead, legislators took the Shadow Spending route by putting $13.8 billion worth of spending on the November constitutional amendment ballot for voter approval. Since the tax spending limit does not apply to the appropriation of constitutionally dedicated state tax revenue, the politicians circumvented the limit and almost none of their constituents were aware of what had happened.
Funding Sources for Shadow Spending
Shadow Spending is paid for using various sources of government revenue. Some of this shows up in the LBB’s reporting, some of it does not. In this section we provide an overview of the different sources of Texas state government spending, including Shadow Spending, and examine how each has grown in recent years, based on available data sources. Each of these comes from state revenue; federal funding is a separate category.
General Revenue-Related Funds
General Revenue-Related (GR-R) funds are a major source of state funding. They generally come from taxes and fees imposed on Texans by the Texas Legislature. The largest of these sources by far is the sales tax, which is expected to provide about $61 billion for the current budget cycle. Also included are motor vehicle taxes, business franchise taxes, lottery proceeds, and investment income from state holdings. These funds generally start from scratch and are replenished each year. The beginning balance is what is left over from the previous budget cycle. This is not generally where we see Shadow Spending. However, some of the GR-R funds are taken by the Legislature for use in Shadow Spending to reduce the amount of money available each session for tax relief and general spending. GR-R funds have increased $81.6 billion, 72.2%, over the last decade.
| Figure 1. General Revenue-Related Funds | |||
| Legislative Session | Beginning Balance | New Revenue | Total |
| 2015 | $2,543,000,000 | $110,435,000,000 | $112,977,000,000 |
| 2025 | $18,167,000,000 | $176,430,000,000 | $194,596,000,000 |
| Increase | $81,619,000,000 | ||
General Revenue-Dedicated Funds
General Revenue-Dedicated (GR-D) funds come from revenue sources that have been dedicated for specific purposes. Sources include revenue from the lottery (the largest source), state parks, certain universities, and game, fish, and water safety permits. The funds play a role in Shadow Spending each year because they usually carry balances from biennium to biennium that cannot be used for general purpose spending. Yet the Texas Legislature instructs the Texas Comptroller to use some of the balances to certify general spending for the purposes of the Texas Constitution’s balanced budget requirement, known as the Pay-as-you-go limit. The amount of this use of dedicated funds varies each biennium. Over the last decade, GR-D funds have increased $850 million, 13%.
| Figure 2. General Revenue-Dedicated Funds | |
| Legislative Session | New Revenue |
| 2015 | $6,524,045,000 |
| 2025 | $7,374,241,000 |
| Increase | $850,196,000 |
Other Funds
Other Funds are a major source of Shadow Spending. Other Funds remain within the state treasury but outside the General Revenue Fund and have been constitutionally dedicated for certain uses. As such, Other Funds still go through the appropriations process but are not subject to the Tax Spending Limit.
In this way, Texas politicians can significantly increase state spending far beyond what the Tax Spending Limit would otherwise allow without being accountable to voters for breaking the limit.
As Figure 3 shows, there has been tremendous increase in the use of Other Funds over the last decade. Other Fund appropriations are up $50.3 billion, 180%, during that time. Much of that increase was the use of Other Funds for funding public education. Other Funds appropriated to the Texas Education Agency increased from $6.9 billion in 2015 to $33.6 billion in 2025, up $26.7 billion, half of the state increase. Another major increase occurred at the Public Utility Commission of Texas, where Other Funds appropriations increased from $1 million to $5.1 billion; this is in addition to another $5 billion in Other Funds that went to the PUC in 2023. Other recent uses of Other Funds include the Texas Water Fund: $3,500,000,000; the Dementia Institute: $3,000,000,000; the Texas Broadband Fund: $1,500,000,000; and the Centennial Parks Fund: $1,000,000,000.
The Legislature constitutionally dedicated these funds—with the approval of voters—in order to avoid the Tax Spending Limit.
| Figure 3. Other Funds | |
| Legislative Session | New Revenue |
| 2015 | $27,856,600,000 |
| 2025 | $78,175,100,000 |
| Increase | $50,318,500,000 |
Funds Held Outside the State Treasury
We noted above that Texas spent 27% more during the 2022-23 biennium than shows up in the LBB’s reporting on legislative appropriations. How can state entities spend money that is not appropriated by the Legislature?
Simple. The Legislature has set up funds with billions of dollars outside the state treasury to be used for this purpose.
| Figure 4. Funds Held Outside the State Treasury | ||||
| 2016 | 2018 | 2020 | 2022 | 2024 |
| $221,257,147,013 | $290,240,449,047 | $311,578,672,968 | $491,815,687,356 | $582,535,566,802 |
| Increase | $361,278,419,789 | |||
Figure 4 tells the story. In 2024, funds outside the treasury totaled $585.2 billion. This is an increase of $361.3 billion, 163%, since 2016. As it has with Other Funds, the Texas Legislature has become significantly more reliant on funding state spending with funds outside the appropriations process.
There are two major problems with this. First, this spending is largely unaccountable to the political process. Not only is the public uninformed about this, but so are the vast majority of state senators and representatives. Those who are most informed about it are those in state and legislative leadership positions. And many of these politicians do not share the same concerns about the growth of government that Texans have.
Second, this process takes billions of dollars out of the biennial political discussion about how state money should be spent. This is also the case with GR-R Funds and Other Funds. One Legislature dedicates millions or billions of dollars to be spent on say, funding Hollywood, building generation, or regulating lawyers, while making it very difficult for the next Legislature—and the people who elected its members—to change these decisions.
Let’s put this in context by examining the 2022-23 biennium, the latest period for which we have complete records. During this period, Texas spent about $131.2 billion in discretionary (GR-R) funds. However, the state spent more—$142.5 billion—from dedicated funds (GR-D, Other Funds, and Funds Outside the Treasury) over which most legislators and voters had little, if any, input.
This is a process dominated by special interests, not by the democratic decisions of voters and their elected representatives.
This is the sixth paper in a series examining the growth of Texas government over the last decade.
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