Lawmakers returned to Austin on Tuesday just one day after the state's chief financial officer unveiled his most optimistic revenue estimate to date. This key number sets a limit on how much budget writers can spend on state services as outlays cannot exceed revenue.

This session's is the biggest ever. State Comptroller Glen Hegar increased his July estimate upwards by billions, projecting $32 billion left in the state treasury when the current biennium ends in September.

When added to expected state income, Hegar told lawmakers that they will have more than $188 billion in state general revenue to work with as they craft the budget for the 2024-2025 biennium.

That number far exceeds last session's initial revenue estimate of $119 billion.

Hegar said the state has bounced back from the pandemic in a big way. "What a two years it has been," he said. "The disruption of the pandemic gave way to vigorous economic growth that kept our state in a national leadership role, helped drive record revenue collections, provided an astonishing cash balance, and left us poised to fill Texas' rainy day fund to the brim for the first time since that fund was created 34 years ago."

Hegar credited Texas' business-friendly economic policies and conservative budgeting philosophy. Increases in energy prices contributed greatly to revenue in the oil and gas sector, but dampened growth in other economic sectors. While the highest rates of inflation in decades stung consumers' wallets, it also increased state tax revenue by 26 percent, doubling the previous record increase of 13 percent.

While recent economic trends show inflation rates normalizing, Hegar said it was still putting downward pressure on Texas businesses and to add to that, his office is predicting a minor economic downturn for the state economy in the coming year.

"We expect a mild recession," he said. "The expected downturn for Texas is relatively shallow and short, but it will not make Texans' lives easier."

Additionally, the Legislature will still have to pass a supplemental budget to true up accounts from the current biennium, which could eat into the projected surplus.

The January numbers are a strong upward revision from Hegar's July 2022 estimate of $27 billion. It was under these still-robust numbers that Lt. Governor Dan Patrick was operating when he laid out his top priorities for the upcoming session at a press conference in November.

"We have an extraordinary opportunity unlike we have ever had before to chart the future of the state of Texas," he said.

Number one on his list was property tax relief. He said he would like to see another increase in the amount homeowners are able to write off the top of their property tax valuation but wants to see a broader plan from legislators. "We need to do more than just the homestead exemption, whether that's a one-time dividend paid to taxpayers - that's a little difficult to do constitutionally - but we need a robust property tax cut for everyone in the state." Patrick said he'd also like to see an increase in the exemption for personal property for small businesses.

Other priorities highlighted by the Lt. Governor included more money for sheriffs in rural counties, ensuring the reliability of the state power grid by increasing the number of natural gas plants in Texas, and continued funding for border security. Patrick also wants legislation to raise the cap on the state's emergency "rainy day" fund, which Hegar predicts will reach its statutory limit in just two years.

Despite the record-breaking surplus and revenue numbers, Patrick told reporters the Legislature would continue its long-time conservative philosophy on state spending.

"It may not be the largest surplus ever, I think California had a larger one, but they weren't very smart. They spent all the money and then they ended up in a big hole," said Patrick. "We're going to be smart. As Governor Rick Perry used to say: 'You don't spend all of the money'."