Background: Following the Master Settlement Agreement, state tobacco prevention spending peaked in 2002, but has subsequently been diminishing annually. This study compared the influence of 2004 Texas tobacco program budget cuts on school practices a year after funding loss. Methods: Three school groups were compared: continuously funded for a 2-year minimum (n = 109), funded but discontinued (n = 123), and never funded (n = 70). Among the 123 schools with discontinued funding, differences were examined based on funding cut decision level (state or local). Written responses to surveys based on the Centers for Disease Control and Prevention (CDC) School Health Education Profile Tobacco Module were received from 49% of health coordinators and 58% of principals. Results: Principals and health coordinators from continuously funded schools reported more 1) tobacco instructional activities; 2) teacher training; 3) student cessation support; 4) program leadership; 5) a district advocate; 6) interest in tobacco use prevention education; 7) use of evidence-based programs and CDC-recommended teaching methods; 8) involvement of school staff; 9) student tobacco cessation programs at school and community; 10) family involvement; and 11) staff development funding. Previously funded schools approached profiles of those never funded. Few differences were noted among schools with funding loss due to state or local decisions. Conclusion: The continuously funded schools consistently were better positioned to positively reach their students with effective tobacco programs. Funding reductions were associated with rapid reductions in programming. Results emphasize the need for early programmatic initiation of capacity building skill development to ensure implementation and retention of health programs during fiscally challenging circumstances. (Contains 2 tables and 2 figures.)