Texas School Funding Formula Changes Take Effect for 2026–27 School Year
Texas school districts are adjusting to significant changes in the state’s school finance system as provisions of House Bill 2 (HB 2) take effect for the 2026–27 school year.
The legislation changes several components of the Foundation School Program, which determines how state and local funding is distributed to school districts. The Texas Education Agency (TEA) has been issuing guidance and updating funding calculations as districts prepare for the new school year.
What the Changes Mean for Texas Schools and Families
The updated funding structure affects several areas of school finance, including the basic allotment, special education, bilingual education, early education and school safety.
Under HB 2, the basic allotment increases from $6,160 to $6,215 per student in average daily attendance for the 2026–27 biennium. The legislation also increases funding for small and mid-sized districts through changes to their allotment multipliers.
The changes do not mean that every district will receive the same amount of additional funding. State aid is calculated using multiple factors, including student characteristics, attendance, property values and local tax effort.
Special Education Funding Is Changing
One of the more significant changes involves special education funding.
Beginning with the 2026–27 school year, Texas is moving from an instructional-arrangement-based system toward a service-intensity model. Funding will be based more directly on the intensity of services provided to students.
The new system includes eight tiers of service intensity and at least four service groups. State law requires the commissioner to establish the formulas so that the estimated statewide funding under the new system is approximately $250 million greater than what would have been provided under the former special education funding structure, using the applicable basic allotment.
Bilingual and Early Education Funding Also Changes
HB 2 also modifies funding for bilingual and alternative language education programs.
For certain alternative language education models, the legislation establishes funding weights of 0.15 for emergent bilingual students and 0.05 for non-emergent bilingual students, subject to a $10 million-per-biennium limit.
The legislation also changes how funding for full-day prekindergarten is calculated, with the goal of more closely aligning funding with four-year-old prekindergarten enrollment.
Property Values and School Tax Rates Remain Part of the Formula
Local property values continue to play an important role in determining the state and local share of school funding.
TEA’s 2026 guidance on maximum compressed tax rates explains that tax compression affects the balance between state and local funding for a district’s Tier One entitlement, rather than reducing the overall entitlement itself.
Because districts have different property values, enrollment levels and tax circumstances, the financial effect of the changes will vary from one school district to another.
What Happens Next for School Districts?
District administrators and school business officials are continuing to work with updated funding estimates and state reporting requirements.
TEA has indicated that some funding calculations will be updated as additional enrollment, attendance, property-value and tax-collection information becomes available. The agency’s funding reports are therefore subject to updates as the school year progresses.
For parents, teachers and community members, upcoming school board meetings and district budget documents can provide more specific information about how the changes affect individual school systems.
Practical Consideration
The impact of Texas’ updated school finance system will differ by district. Families and community members who want to understand the local effect should review their district’s budget, state funding reports and school board materials rather than relying solely on statewide figures.