Executive Summary
Texas enters the 2026–27 biennium with the largest budget in its history ($337.4B) and three structural shifts every SLG seller should know. First, cybersecurity is being pulled out of DIR into a brand-new standalone agency — the Texas Cyber Command in San Antonio — changing where security dollars and decisions sit. Second, the Texas Responsible AI Governance Act (TRAIGA) took effect January 1, 2026, putting real guardrails on government use of AI and creating an AI Advisory Council and regulatory sandbox. Third, an historic semiconductor and data-center buildout (TSIF, Meta, Stargate, TI) is turning Texas into national AI infrastructure. For Dell, the buying motion still runs through DIR Cooperative Contracts, and TX-RAMP cloud certification remains a hard gate on anything touching state data.
Where Dell can play
- AI-infrastructure / 'AI factory' demand tied to the Texas data-center and semiconductor boom (PowerEdge, networking, services).
- Stand-up of the Texas Cyber Command in San Antonio — secure compute, infrastructure, and managed services for a greenfield agency.
- Agency AI adoption under TRAIGA guardrails — a chance to lead with governed, on-prem and private-cloud AI for sensitive workloads.
- Endpoint, client, and lifecycle refresh across a record general-government budget.
Dell Action Plan
- Lead the AI-infrastructure conversation: tie Dell ISG / AI Factory offerings to the Texas data-center and semiconductor buildout and the university research-computing buyers.
- Engage the Texas Cyber Command early as a greenfield account in San Antonio — secure compute, infrastructure, and managed services for a brand-new agency.
- Clear the TX-RAMP gate before pursuing cloud/as-a-service deals — confirm the right certification level for any offering touching state data.
- Validate that Dell's DIR Cooperative Contract coverage and resellers are current and correctly scoped for the agencies you're targeting.
- Position governed, private/on-prem AI for sensitive workloads as agencies operationalize TRAIGA.
Budget & Fiscal
Texas budgets on a two-year (biennial) cycle. The 89th Legislature's SB 1 appropriates $337.4B for 2026–27 — roughly $176B in FY2026 and $160B in FY2027 — the largest in state history. There is no single 'state IT budget' line; technology spend is distributed across agencies and a set of named technology and security initiatives funded this biennium.
Technology & security funding this biennium
- Funding figures are biennial (two-year) totals unless noted.
- Cybersecurity dollars are mid-migration from DIR to the new Texas Cyber Command — confirm which entity owns a given program before forecasting.
Agency budget shifts — FY2024-25 biennium, estimated/budgeted (GAA, HB 1, 88th Legislature; incl. HB 500 supplemental) vs. FY2026-27 biennium, appropriated (GAA, SB 1, 89th Legislature, enacted Jun 2025)
All Funds appropriations by agency (LBB Fiscal Size-Up 2026-27 Biennium, per-article 'Appropriations by Agency, All Funds' figures) Statewide: $339.89B → $327.96B (-3.5%). Top 12 movers of 115 agencies.
| Agency | Prior | Current | Δ $ | Δ % |
|---|---|---|---|---|
| Texas Education Agency | $77.17B | $89.97B | +$12.81B | +16.6% |
| Trusteed Programs within the Office of the Governor | $10.79B | $1.72B | −$9.07B | -84.0% |
| Teacher Retirement System of Texas | $13.47B | $8.2B | −$5.27B | -39.1% |
| Health and Human Services Commission | $95.33B | $98.21B | +$2.88B | +3.0% |
| Texas Water Development Board | $3.32B | $455.3M | −$2.86B | -86.3% |
| Texas General Land Office and Texas Veterans Land Board | $4.84B | $2.43B | −$2.41B | -49.7% |
| Texas Facilities Commission | $2.59B | $488.5M | −$2.1B | -81.1% |
| Employees Retirement System of Texas | $2.07B | $27.5M | −$2.04B | -98.7% |
| Texas A&M Service Agencies | $5.25B | $3.9B | −$1.34B | -25.6% |
| Education Programs – Comptroller of Public Accounts | $0 | $1B | +$1B | — |
| Department of State Health Services | $3.33B | $2.37B | −$963.6M | -28.9% |
| Texas Department of Transportation | $40.8B | $39.92B | −$879.3M | -2.2% |
- Prior column is LBB's 2024-25 estimated/budgeted spending (not the originally enacted 2024-25 GAA); fiscal 2025 includes supplemental appropriations from HB 500, 89th Legislature, so one-time supplemental items show as large decreases into 2026-27.
- Covers all agency rows in the nine per-article summary tables (Articles I-VIII and X). Excludes statewide employee benefits and debt service line items, interagency-contract deductions, Article IX general provisions, and SB 5 (2nd Called Session, 2025) disaster funding; agency sums therefore run about 3 percent below the published GAA all-funds totals ($347.5B in 2024-25 and $338.2B in 2026-27).
- Teacher Retirement System of Texas (state retirement/TRS-Care contributions) is included as an agency; other benefit lines (Optional Retirement Program, group insurance, Social Security) are excluded.
- SB 3070 (2025) abolished the Texas Lottery Commission and moved its functions into the Texas Department of Licensing and Regulation; LBB shows both biennia under TDLR.
- Article I swings reflect one-time 2024-25 items: Trusteed Programs (Governor) -$9.1B (broadband/economic development funds), ERS -$2.0B (one-time pension contribution), Facilities Commission -$2.1B.
- Some agency groups in Article III are aggregates (General Academic Institutions, Health-related Institutions, Texas A&M Service Agencies, two-year college systems), matching LBB's presentation.
Source: LBB, Fiscal Size-Up 2026-27 Biennium (Dec 2025), Figures 47, 121, 146, 220, 235, 264, 298, 314, 344 · General Appropriations Act, 2026-27 Biennium (SB 1, 89th Legislature)
Initiatives & Policy
Texas Cyber Command3
LaunchedHB 150 (signed June 2025) created the nation's largest state cyber agency, headquartered in San Antonio with UTSA as a partner and led by retired Navy Vice Adm. Timothy 'T.J.' White. It is absorbing DIR's cybersecurity functions in phases — DIR transferred statewide cybersecurity employees and functions on March 1, 2026, with the transition slated to complete by Dec 31, 2026 and people/process/mission integration finalized by Feb 1, 2027 — and stands up a Cyber Threat Intelligence Center, Incident Response Unit, and Digital Forensic Lab serving state and local government. Active hiring for analysts and unit leadership through mid-2026. A greenfield agency means greenfield infrastructure, secure compute, and services needs.
Dell fit80
Budget strength75
TRAIGA — Responsible AI Governance Act5
In effect Jan 1, 2026HB 149 focuses on government use of AI: prohibits manipulative/discriminatory and social-scoring systems, stands up an AI Advisory Council, and opens a 36-month regulatory sandbox. Agencies now need governed, auditable AI — an opening for private/on-prem AI on sensitive data rather than open public models.
Dell fit70
Budget strength45
Semiconductor & Data-Center Buildout8
AcceleratingThe Texas CHIPS Act funds the Texas Semiconductor Innovation Fund (~$948M). Alongside it, hyperscale AI data centers are landing fast (Meta's $1.5B El Paso campus scaling toward 1GW; the multi-site Stargate project; TI's new Sherman 300mm fab). This is the strongest tailwind for Dell AI-infrastructure and ISG demand in the state.
Dell fit90
Budget strength85
TX-RAMP Cloud Security Program6
MandatoryUnder DIR, Texas agencies and public higher-ed may only contract for cloud services that hold TX-RAMP certification (NIST 800-53 Low/Moderate baselines). Certification must be maintained for the life of the contract. Any Dell cloud/as-a-service offering touching state data needs the right TX-RAMP level — a gate to clear early, not at close.
Dell fit65
Budget strength50
Procurement & Competition
The Texas Department of Information Resources (DIR) is the central technology procurement authority. Most state, local, and higher-ed technology buys run through DIR Cooperative Contracts, which let eligible entities purchase from pre-competed vendor agreements without running their own RFP. DIR also delivers Shared Technology Services and Communications Technology Services.
| Vehicle / gate | What it means for Dell |
|---|---|
| DIR Cooperative Contracts | Primary vehicle. Pre-competed; open to state agencies, local gov, and higher-ed. Confirm Dell agreements and resellers are current and correctly scoped. |
| DIR Shared Technology Services (STS) | Data center, cloud, and managed services delivered through DIR for participating agencies. |
| TX-RAMP certification | Not a contract, but a prerequisite gate for any cloud/as-a-service offering touching state data. |
| Key buying entity | Role |
|---|---|
| DIR | Central IT procurement, policy, and (currently) cyber — leads the statewide technology motion. |
| Health & Human Services (HHSC) | Among the largest agency IT spenders; data-heavy modernization. |
| Texas Cyber Command | New buyer for security infrastructure and services; San Antonio. |
| University systems (UT, Texas A&M) | Large independent research-computing and AI-infrastructure buyers. |
Competitive landscape
Texas is a competitive, contract-driven market — incumbents hold DIR agreements across compute, networking, and services. Differentiation tends to come from TX-RAMP-ready offerings, AI-infrastructure capability, and services that map to the Cyber Command and data-center buildout rather than price alone.
Power Structure
| Decision-maker | Why they matter |
|---|---|
| Greg Abbott Governor · State of Texas | Made Cyber Command an emergency item; champions the semiconductor/AI agenda. |
| Tony Sauerhoff7 State CIO & DIR Executive Director · DIR | Confirmed permanent March 2026 (interim from Jan 2026); former Chief AI & Innovation Officer and state CISO. Owns statewide tech direction as DIR sheds cybersecurity to the Cyber Command (functions transferred March 1, 2026). |
| Timothy 'T.J.' White (VADM, USN ret.)4 Chief, Texas Cyber Command · Texas Cyber Command | Abbott appointee (term through Feb 1, 2027); former commander, U.S. Fleet Cyber Command / 10th Fleet. Leads the greenfield agency and its Threat Intelligence, Incident Response, and Forensics units. |
| Tan Parker / Giovanni Capriglione Legislative sponsors · Texas Legislature | Lead authors behind Cyber Command (HB 150) and AI/innovation policy. |
| Legislative Budget Board (LBB) Appropriations & fiscal analysis · State of Texas | Sizes program costs and staffing — useful for forecasting cyber/AI spend. |
News & Signals
Sep 2026
AG Paxton opens investigation into Austin-area (Taylor) AI data center on land once trust-designated as parkland23
Attorney General Ken Paxton announced an investigation into a proposed AI data center outside Austin (Taylor area), where property placed in a trust for future parkland in 1999 changed hands repeatedly before a Delaware company bought it to build the facility. It adds a legal/land-use accountability front to Texas's data-center scrutiny alongside the governor's permitting freeze. For a Dell SLG seller it reinforces a hardening regulatory and reputational climate around Texas data-center siting that adds risk and delay to project pipelines.
Sep 2026
Abbott directs TCEQ to halt ALL data-center permits until ERCOT/TWDB audits complete — expands August moratorium22
Gov. Abbott directed the Texas Commission on Environmental Quality to issue no permits sought by data-center projects, and barred other state agencies from advancing data-center regulatory approvals, until ERCOT completes its grid-interconnection audit and the Texas Water Development Board completes its water-use review. TCEQ owes the governor a compliance update by Oct. 19, and Abbott pledged to work with the Legislature next session to eliminate financial incentives for data-center developers. For a Dell SLG seller this signals a sharp statewide brake on Texas data-center siting and permitting that reshapes the timing, economics and location of compute-intensive workloads.
Sep 2026
Abbott orders Texas Water Development Board to penalize data centers that fail to report water usage21
On Sept. 14, Gov. Abbott directed the Texas Water Development Board to pursue civil and criminal penalties (Class C misdemeanor referrals to county/district attorneys and TCEQ permit disqualification) against data centers and other major water users that fail to complete the state-mandated water-use survey — after fewer than 30% of surveyed data centers complied over the past three years — and to coordinate with the PUCT and ERCOT on the ongoing data-center audit, with an enforcement update due by Oct. 14. This escalates the state's move from voluntary reporting toward enforced disclosure and ties water-reporting compliance to grid interconnection and environmental permitting. For a Dell SLG seller, tightening state oversight of data-center water and power consumption signals a more governed siting/permitting environment in Texas that shapes the pace and location of private AI/data-center buildout and heightens demand for efficient, well-instrumented infrastructure.
Sep 2026
DIR plans broad cybersecurity co-op RFO for Sept. 16, continuing its move away from branded contracts20
DIR's pre-solicitation notice says a broad cybersecurity products and services Request for Offers is planned for Sept. 16 through the Cooperative Contracts Program, with responses tentatively due Nov. 18 after a Sept. 30 bidder's conference. The notice repeats DIR's stated intent to transition away from branded contracts and publish no future branded solicitations, a policy already in its July 2026 End-User IT Outsourcing pre-solicitation notice. Current branded-contract holders, including OEMs like Dell, are urged to respond to category RFOs such as this one.
Aug 2026
Abbott says Data Center Coalition will comply with his data center standards19
The governor's office announced that the Data Center Coalition will comply with Abbott's data center standards: paying for their own electric infrastructure, disclosing incentives, and detailing power and water use. PUCT and ERCOT must receive and audit this information before projects move forward, so these disclosure rules now shape Texas data-center projects.
Aug 2026
Abbott and National Cyber Director launch Project Watershed 250 for Texas water utility cyber defense18
Abbott and White House National Cyber Director Sean Cairncross launched Project Watershed 250 in San Antonio, connecting Texas water and wastewater utilities with no-cost cyber defense resources from private-sector partners alongside Texas Cyber Command. It points to Cyber Command's growing role with local and critical-infrastructure entities, including under-resourced rural providers.
Aug 2026
DIR 2028-29 budget request seeks about $7.1M for AI, no exceptional items as cyber moves to Cyber Command17
DIR's FY2028-29 Legislative Appropriations Request includes about $7.1 million for AI and no exceptional-item request, while seeking about $1.5 billion for Shared Technology Services and about $15.7 million for data center consolidation. Sellers should expect cybersecurity funding asks to come from Texas Cyber Command rather than DIR, while DIR's STS and consolidation lines stay large.
Aug 2026
ERCOT tells PUCT Abbott-ordered data center audit will cover about 250 to 300 projects16
At a PUCT meeting, ERCOT officials said the verification audit ordered in Abbott's Aug. 3 directive covers about 250 to 300 projects, mostly data centers, and will take several months before any data center is approved for grid connection. Large AI and data-center buildouts in Texas face a longer approval path, which could shift the timing of related infrastructure demand.
Jul 24 2026
Abbott releases PUC/ERCOT ratepayer-protection response; pushes 2027 legislation on data centers15
PUC Chairman Thomas Gleeson's July 17 letter (responding to Abbott's June 10 directive) documented rules already adopted, a May 2026 transmission-cost evaluation, and three rulemakings in progress (interconnection standards, a demand-management reliability service, and transmission-cost recovery), with final cost-allocation rules targeted for December 2026. Abbott released the letter July 24 and is pushing three 2027-session bills: mandatory PUC/ERCOT registration for data centers, expanded Lone Star Infrastructure Protection Act coverage for large computational loads, and clearer PUC authority to impose reliability/curtailment requirements. The 'awaiting PUC action' item from June has resolved into a concrete rulemaking and legislative timeline — new-build data-center economics (and Dell's AI-infrastructure pursuits tied to them) should be underwritten against these emerging cost-allocation and registration rules, not the status quo.
Jun 2026
DIR launches Texas Design System to modernize state websites (HB 5195)11
New statewide, accessibility-first content library (37 components, standardized templates) mandated by HB 5195 (89R) to standardize agency website/portal modernization. Signals a fresh, DIR-led digital-services and web-modernization workstream across agencies — adjacent pull for services, hosting, and modernization engagements.
Jun 2026
DIR-to-Texas Cyber Command cyber transition confirmed on track12
DIR transferred statewide cybersecurity employees and functions to the Texas Cyber Command on March 1, 2026; the handover is slated to complete by Dec 31, 2026, with people/process/mission integration finalized by Feb 1, 2027. Confirm which entity owns a given security program before forecasting; TX-RAMP still administered under DIR for now.
Jun 2026
DIR 2026–2030 State Strategic Plan pushes AI, cloud, and procurement expansion14
New five-year plan prioritizes responsible AI adoption (guidance, training, pilots, sandbox), legacy-system retirement, DevSecOps, and business-driven cloud. DIR's AI training-certification program is live (57 programs certified as of May 2026). Sets the funding/procurement direction agencies will follow.
Jun 2026
Abbott directs PUC/ERCOT to make AI data centers fund their own grid costs10
Sweeping directive: PUC to act on residential transmission costs by July 31 and require data centers to fully fund grid infrastructure; PUC+ERCOT joint memo due July 17. Six 2027-session priorities (added generation, water reporting, repeal of data-center sales-tax exemptions). Signals tighter siting/cost rules ahead even as the buildout continues.
Mar 2026
Tony Sauerhoff confirmed as permanent State CIO & DIR Executive Director7
Tech direction stabilizes under an AI-forward leader; DIR continues its reorg as cyber moves to the Cyber Command.
Jan 2026
TRAIGA takes effect5
Government-use AI guardrails are now live; agencies need governed, auditable AI approaches.
Sources
- LBB — General Appropriations Act, 2026–27 Biennium
- The Texan — Texas Senate approves $336B 2026–27 budget
- Office of the Governor — Abbott signs Texas Cyber Command into law
- UTSA Today — Texas Cyber Command launch
- Holland & Knight — Texas enacts comprehensive AI governance (TRAIGA / HB 149)
- Texas DIR — Texas Risk and Authorization Management Program (TX-RAMP)
- GovTech — Texas confirms Tony Sauerhoff as State CIO, DIR Leader
- Office of the Governor — Texas Semiconductor Innovation Fund (TSIF)
- Texas DIR — Cooperative Contracts
- Texas Tribune — Abbott directs PUC to make data centers fund their own power (June 10, 2026)
- Texas DIR — DIR Launches Texas Design System to Modernize State Websites (June 9, 2026)
- Texas DIR — Cybersecurity Functions Transition to the Texas Cyber Command (April 9, 2026 notice)
- Texas Cyber Command — Cybersecurity Transition to TXCC
- GovTech Insider — DIR Plan Highlights AI, Procurement and Cloud Expansion (2026–2030 SSP)
- Office of the Governor — Abbott Announces PUC and ERCOT Actions Protecting Residential Ratepayers from Data Center Costs (July 24, 2026)
- The Texas Tribune — Texas will audit up to 300 projects, mostly data centers, after Gov. Greg Abbott's order
- Industry Insider — Texas — DIR LAR Shows Shift From Cybersecurity Expansion to AI
- Office of the Texas Governor — Governor Abbott, National Cyber Director Launch Project Watershed 250 To Defend Texas Water Supply
- Office of the Texas Governor — Governor Abbott Announces Data Center Coalition Commits To Comply With His Data Center Standards
- Industry Insider — Texas — DIR to Release Broad Statewide Cybersecurity Procurement Next Week
- The Texas Tribune — Gov. Greg Abbott orders Texas water agency to penalize data centers that don't report their water usage
- Office of the Texas Governor — Governor Abbott Directs TCEQ To Halt Data Center Permits
- USA TODAY — Texas probes Austin-area data center on land once meant to be a park