Texas School Funding Bill Explained: Pay, Special Ed, and Safety

Texas House Bill 2, signed by Governor Greg Abbott on June 4, 2025, is an $8.5 billion public education funding law, the largest single school funding increase in state history.¹ About half the money goes to teacher and staff pay raises. The rest is split among special education, school safety, the teacher pipeline, early childhood, and a narrow set of operational costs. Notably, the bill puts only $55 more per student into the basic allotment that funds day-to-day district operations, and a year into implementation many districts are still running deficits.²

Where the $8.5 Billion Goes

The package is built around targeted allotments rather than a broad increase to per-student funding. Roughly $4.2 billion goes to educator compensation, about $834 million to special education, about $430 million to campus safety, and about $1.3 billion to a new restricted operational fund.³⁴ Smaller pots fund the teacher pipeline, early childhood expansion, and reading and math screening in early grades.⁵

HB 2 moved through the Legislature alongside Senate Bill 2, the education savings account program Abbott signed on May 3, 2025. The two were paired politically, and SB 2’s evaluation requirements for private and homeschool applicants now affect how districts spend HB 2 special education dollars.⁶

Teacher and Staff Pay Raises

Pay is the bill’s centerpiece, and it flows through three separate structures.

Teacher Retention Allotment

The Teacher Retention Allotment provides permanent salary increases to classroom teachers with at least three years of experience. The amounts depend on district size:⁵

In districts with 5,000 or fewer students: $4,000 for teachers with three to four years of experience, and $8,000 for those with five or more years.
In districts with more than 5,000 students: $2,500 for three to four years of experience, and $5,000 for five or more years.

The raises must be added to base salaries rather than paid as one-time bonuses, and the Texas Education Agency requires districts to maintain them in future years. First- and second-year teachers are not eligible. An educator can receive a Teacher Retention Allotment raise or a support staff raise, but not both.⁷

Support Staff Retention Allotment

A separate Support Staff Retention Allotment of $45 per student funds raises for non-administrative staff such as counselors, librarians, nurses, custodians, bus drivers, and cafeteria workers.⁵ Districts choose how to distribute the money among eligible staff and are not required to give equal amounts across positions.⁷ At a June 2026 interim hearing, lawmakers heard that the allotment has often failed to reach hourly wage workers.²

Teacher Incentive Allotment

HB 2 expanded the existing Teacher Incentive Allotment, a performance-based pay system tied to student outcomes. A top-rated “Master Teacher” can now receive between $12,000 and $36,000 annually, with the larger amounts going to educators in rural or high-poverty schools.⁸ Districts may also include principals and assistant principals.⁵ By June 2026, the program had distributed $750 million to more than 800 districts and roughly 65,000 designated teachers, and average teacher salary had risen 6.3%, about $4,270.²

What Happened to the Basic Allotment

The basic allotment is the per-student figure that drives most of the Texas school finance formula. It was last increased in 2019.⁹⁸⁴ The statutory ceiling was raised to $6,500, but the actual amount districts receive for the current biennium is $6,215.¹⁰

Instead of channeling the bulk of new money through the basic allotment, the bill created a new Allotment for Basic Costs of $106 per enrolled student, roughly $1.3 billion in total. The funds are restricted to specific operational expenses: transportation, insurance, utilities, employee benefits, and hiring retired educators.⁵ The bill also increased the small and mid-sized district allotment and raised the multipliers used to calculate supplemental aid for those districts.⁸

This structure is the core of the criticism from education advocates. Every Texan testified that adjusting the basic allotment for inflation since 2019 would require an increase of at least $1,300 per student, not $55.⁹ By creating more than ten new restricted allotments rather than boosting the basic allotment, the bill limits districts’ ability to spend money on their most pressing local needs, according to the Intercultural Development Research Association.⁴

Special Education Changes

About $834 million in HB 2 goes to special education, and the bill fundamentally restructures how that money is distributed.⁴ Texas is moving away from funding based on the physical classroom setting a student is placed in, and toward an “intensity of services” model tied to the type and level of support each student actually receives.⁵

The new model takes effect in the 2026-27 school year and uses eight intensity tiers and at least four service groups. Tier 1 applies to students receiving only speech therapy; Tier 8 covers students in residential placement. Tiers 2 through 7 are determined by scoring students across five domains, including curriculum needs, behavior, communication, independent functioning, and personal care.¹¹ During the 2026-27 transition year, districts are guaranteed no less than what they would have received under the old system, and the new framework is expected to add roughly $250 million statewide.¹²

Districts now also receive $1,000 per disability evaluation conducted, and the college, career, and military readiness outcomes bonus for graduating special education students doubled from $2,000 to $4,000.¹³ Educators have noted that actual evaluation costs range from $1,000 to $5,000, and the bill does not reimburse reevaluations.¹⁴ Testimony at the June 2026 hearing added that the new voucher program under SB 2 requires districts to evaluate private school and homeschool applicants for disability-related eligibility, pulling time and resources from enrolled students.²

Safety, Teacher Certification, and Early Childhood

HB 2 roughly doubled campus safety funding to $20 per student and $33,540 per campus, up from $10 per student and $15,000 per campus, for a total safety allocation of about $430 million.⁵³

The law also addresses Texas’s reliance on uncertified teachers, who make up about 11.8% of the workforce.² Districts must phase out uncertified teachers in core subjects by the 2029-30 school year. Teachers hired without certification in recent years can earn a one-time $1,000 bonus if they obtain formal credentials by the end of the 2026-27 school year. The bill also creates $10,000 stipends for aspiring educators in teacher residency programs and $3,000 stipends for those in traditional or alternative certification routes.⁵

On early childhood, HB 2 expands free pre-K eligibility to include children of teachers employed by a district and includes policy changes to help districts fund full-day pre-K. The education commissioner must also establish reading and math screening tools for students in kindergarten through third grade, with students identified as falling behind receiving additional tutoring support.⁵

Is It Working? Early Implementation and District Budgets

A year in, the picture is uneven. TEA reported that enrollment losses, driven in part by immigration declines, cost districts approximately $650 million in funding.² Several large urban districts have faced significant shortfalls. Austin ISD confronted a $181 million deficit and eliminated hundreds of positions. El Paso ISD faced a nearly $53 million gap and considered declaring a financial emergency. Crystal City ISD reportedly had less than $500 in its bank account.¹⁵

Smaller districts reported that the $106 per student for basic costs fell well short of actual operational expenses; stakeholders at the June 2026 House Public Education Committee hearing estimated the real need at closer to $600 per student.² Navarro ISD officials noted that the $55 per-student allotment increase did not offset utility costs that have risen 60% since 2019 or teacher retirement contributions that have increased 62% since 2021.¹⁵ Committee members also criticized the TEA for issuing late corrections to “hold harmless” funding formulas, which disrupted budget planning at districts including Houston ISD and Dallas ISD.

State special education funding is estimated to be falling short by $1.69 billion to $2.5 billion. Teacher attrition stands at 12.1%, above pre-pandemic levels of roughly 10%.²¹⁶

Stakeholders and committee members at the June 2026 hearing broadly agreed that HB 2 did not “fix” school finance. Legislators indicated that a follow-up “clean-up” bill will likely be needed during the 90th Legislative Session to address remaining funding gaps, the support staff allotment’s failure to reach hourly wage workers, and the rising insurance premiums eroding the value of the new raises.²

1
Office of the Texas Governor. Governor Abbott Signs Record Public Education Funding, Teacher Pay Raise Into Law
2
Texas AFT. House Public Education Committee Interim Hearing: HB 2 Redux
3
Office of the Lt. Governor. Lt. Gov. Patrick, Speaker Burrows, Senate and House Leaders Issue Statement on School Finance Legislation
4
IDRA. Texas School Funding: Major Elements in House Bill 2
5
Texas Tribune. Texas Public Education Schools Funding Bill Explained
6
Raise Your Hand Texas. 89th Legislative Recap
7
ATPE. HB 2: Understanding the TRA and SSRA
8
Texas Education Agency. HB 2 Implementation: Foundation School Program Funding Formula Changes
9
Houston Public Media. Texas $8.5B School Funding Plan Is Headed to Abbott’s Desk
10
Texas Legislature. HB 2 Bill Analysis
11
TEA. Intensity of Services Special Education Funding Model Resources
12
TEA. Special Education Funding Updates
13
TEA. HB 2 Implementation: Special Education Program and Funding Updates
14
KUT. Austin AISD School Funding, Teacher Layoffs
15
Texas Tribune. Texas School Funding, Teacher Quality, Special Education
16
The Texan. House Bill 2 Teacher Pay Raises Spark Mixed Reactions From Texas Educators