Texas Higher Education Agency proposes $3.3 billion budget for 2026 to 2027

The Agency Operations Committee (AOC) of the Texas Higher Education Coordinating Board (THECB) convened on July 23, 2025, to discuss key financial matters and the proposed operating budget for the upcoming biennium. The meeting focused on the agency's bond and loan profiles, budget considerations for fiscal years 2026 and 2027, and the implications of recent legislative changes.

The meeting began with a review of the agency's bond and loan profiles. It was noted that loan demand has decreased this year, attributed primarily to the implementation of manageable debt limits. Despite this, the agency successfully completed a bond sale of approximately $100 million. The timing of this sale coincided with federal legislation that introduced uncertainties regarding student loans and the tax-exempt status of bonds. However, the tax exemption for the agency's bonds remains intact for now. The committee discussed the potential future impact of federal changes on loan demand and the agency's ability to maintain competitive interest rates. For the 2025-2026 academic year, the agency will offer a fixed interest rate of 6.3% on student loans, which is lower than the federal direct loan rate of 6.39%.

The discussion then shifted to the agency's operating budget for the 2026-2027 biennium. Chief Financial Officer Anthony Infantini presented the proposed budget, which is set to exceed $3.3 billion, reflecting a significant increase from previous years. The budget includes funding for exceptional items such as financial aid, research initiatives, and technology modernization. Notably, the Texas Research Incentive Program (TRIP) received $400 million to address a backlog of funding needs, although the program itself was repealed to prevent future backlogs.

The committee also addressed the implications of recent legislative actions on the budget. House Bill 300, which increased benefits for the Texas Armed Services Scholarship program, was included in the budget, while funding for the Texas Educational Opportunity Grant (TEOG) was removed due to the lack of accompanying legislation. The meeting highlighted the importance of monitoring the agency's financial health, particularly the balance between interest rates on bonds and loans.

In conclusion, the AOC meeting underscored the agency's proactive approach to managing its financial operations amidst changing federal regulations and state legislative actions. The proposed budget reflects a commitment to enhancing higher education funding in Texas, with a focus on maintaining competitive loan rates and addressing the needs of students and institutions across the state. The committee plans to seek board approval for the budget in the upcoming quarter, ensuring alignment with legislative directives and financial sustainability.