This report analyzes the Texas state budget for 2004-05, discusses the impact of the fiscal and policy decisions that were made, and serves as a roadmap to the service restorations that must be considered as the economy and state revenues rebound. In addition to the analysis of budget and policy changes in the body of the report, useful information is included in the appendices. Appendix A provides more detailed (i.e., "strategy" or program-level) information about funding changes between 2002-2003 and 2004-2005. Appendix B focuses on the community-level impact of the state budget, with information about the Center for Public Policy Priorities' ongoing effort to collect budget impact stories and a list of representative media stories about the local impact of budget cuts. Appendix C offers a view of the state budget's impact on children. This "Children's Budget" estimates the funding levels and changes for state programs that serve children. Appendix D provide a glossary of acronyms and terms. [Contributing authors to this report include: F. Scott McCown; and Dick Lavine. Additional support for this publication was provided by the Brown, Swalm, and Rockwell Foundations.]