Why Doesn't Anybody Believe Phil Gramm?

Maybe this will turn out to be a case where the outlanders were caught telling scary stories around the campfire, but there sure are a lot of Democrats talking about challenging U.S. Sen. Phil Gramm. The list of names is growing even as Gramm says he has no intention of stepping down.

Speculation began in earnest when the GOP lost control of the U.S. Senate earlier this year, a change that cost Gramm the chairmanship of the Senate Banking Committee. Recurrent rumors, consistently denied by Gramm and his allies, have him interested in cushy jobs at Texas A&M University, where he used to teach, and in various economist roles in the Federal Reserve and elsewhere. Gramm said he likes being in the political minority and that he wants to run for reelection in 2002. But he's lost a couple of his key staffers and hasn't been a wildly active fundraiser (as in years past), and his stated desire to stay in office is falling on deaf ears. Nobody believes him.

That's plain strange. Gramm has been one of the 900-pound gorillas of Texas politics and now people are messin' with him. But the Democrats see steady erosion of his popularity. They think they're due a beneficial shift in voter opinion in Texas. Some of them think the presence of some well-funded candidates on the Texas Democratic ballot will boost everyone on that ballot. And some of them just have itch because others have the itch. Once someone has highlighted even the possibility of a successful challenge, the race to be the challenger begins. Naming one candidate as a successor brings out the other successors. That's how the list went from none to a half-dozen so fast.

But why do they sense a weakness in the first place?

Before the 1990 elections, somebody did a poll to find out which Texas politicos were the most popular, or the most dangerous in the election booth. The two front-runners were Democrat Jim Hightower, who was then the high-profile agriculture commissioner of Texas, and Gramm, who was still in his first term in the U.S Senate. There was even talk that Hightower ought to run against Gramm in the 1990 elections. But Hightower, in spite of approval ratings right up there next to Rocky Road Ice Cream, decided to run for reelection and didn't even succeed at that. By the time he realized he should get serious about the little-known legislator and party-switcher challenging him, Republican Rick Perry was winning the biggest GOP upset of that year.

Phil Gramm, meanwhile, was walking all over his opponent, Fort Worth state Sen. Hugh Parmer. Gramm outspent Parmer six-to-one and won that election with 60 percent of the vote. That was better than the 59 percent support Gramm got six years earlier against Lloyd Doggett. But after his presidential bid petered out in 1996, his Senate reelection wobbled.

The presidential possibilities and the desire to be in position if Gramm bowled a strike attracted a number of Democrats into the 1996 contest. That attracted two congressmen and a former assistant attorney general. But the surprise winner was Victor Morales, a high school teacher who rode homilies, the last name of a popular sitting attorney general, and a little pickup truck to victory. Gramm spent more than $14 million. Morales raised and spent less than $1 million. But Morales was more interesting and more accessible to reporters and Gramm was bruised from the presidential bid. Gramm's numbers slipped, but he won with 55 percent of the vote.

Gramm enters this election cycle without his committee, without a reasonable chance at a presidential shot, and with some job opportunities. It's also a redistricting year—a year when both parties are chock-full of statewide politicos, big-city mayors and U.S. Reps. looking for promotions.

On Your Mark, Get Set, Speculate!

Former Attorney General Dan Morales says he is "seriously considering" a run for U.S. Senate, and it doesn't matter to him whether Gramm runs for reelection or not (Everyone else we're hearing from is interested, at least publicly, only if Gramm leaves office). Morales, a three-term state House member and a two-time attorney general, decided not to seek reelection in 1998, but he's never lost a statewide race. The plus side: He was popular when he was on the ballot, running toward the front in what used to be a pack of Democrats. He would be an obvious beneficiary of Democratic efforts to turn out unprecedented numbers of Hispanic voters in 2002. And he's not a newcomer to politics; unlike a number of potential candidates up and down the ballot, Morales is a known quantity.

The minus side: His successor, John Cornyn, has dogged Morales with questions about his handling of the $17 billion settlement the former AG pursued and won from the tobacco industry. The size of the payments to the outside lawyers and allegations of improprieties and possible kickbacks have fluttered around almost every aspect of that case. Morales has denied specific allegations. No charges have ever been filed. Morales says he has heard the rumors of an ongoing federal investigation, but says he is not aware of one and attributes the rumor to politics. It resurfaces, he notes, every time his name comes up in a political context. He also blames Cornyn directly for keeping the rumors of an investigation alive. Here's the line you'll hear if he gets into a race: "Voters are sophisticated, and they can smell politics."

Morales got Richard Gambitta, a friend and political consultant, to run a poll for him. He's not showing all of the details, but what he is showing says 850 registered voters were polled in late May. The respondents were 37 percent Republican, 28 percent Democratic; 74 percent Anglo, 13.6 percent Hispanic and 8.1 percent Black. They were asked whether they recognized various names and whether they were favorably disposed towards them. Gramm scored highest: 93 percent knew him and his positive:negative ratio was 3:1. Gov. Rick Perry had name recognition of 88 percent and a 6:1 ratio. No other Republican names, the pollsters wrote, registered with more than 50 percent.

Morales was known to 74 percent of the respondents and had a 4:1 favorable impression. Former Comptroller John Sharp, who's running for lieutenant governor, hit 61 percent on recognition and about 4:1 on favorability. Former Land Commissioner Garry Mauro's numbers were 56 percent, and 2:1. Morales said the poll included names of several other Republicans, but he didn't include them in the executive summary because, as he put it, he didn't see any reason to help the other side. He didn't say so, but it's probably safe to assume there were a couple of fellow San Antonians—Cornyn and U.S. Rep. Henry Bonilla—on that list.

Morales isn't alone in looking at the seat, and said he expects that and every other statewide post to be contested in the Democratic primaries. Other names in the hat include Dallas Mayor Ron Kirk, who's said publicly he'd be interested in an open seat, but who has told others privately he'd consider a run against Gramm; Democratic Party Chairwoman Molly Beth Malcolm, who told the San Antonio Express-News that she's being encouraged to run by supporters she didn't name; and Victor Morales, who is reportedly considering a rematch. And the Democrats are stealing an old line from former U.S. Sen. John Tower, R-Texas. Morales says the state needs a Democrat and a Republican in the Senate, instead of two Republicans, especially now that the Democrats are in control in that institution.

Don't put all the blame for the Gramm speculation on Democrats, however. Several Republicans, through allies and surrogates, have made certain their names are in the conversation if Gramm decides not to seek reelection. Bonilla has let it be known that he'd be interested. GOP political consultants say a Gramm resignation would probably attract others; most often mentioned are Cornyn and Land Commissioner David Dewhurst.

It's Official: Lawmakers Get Summer Vacation

Congressional redistricting in Texas will be done by the courts instead of the Legislature. Gov. Rick Perry, convinced that lawmakers can't cut a deal on a 32-member congressional map for the state, says officially he won't call a special session. He said he thought that would disappoint Texans, but he wrote that they'd be more disappointed if he spent a bunch of taxpayer money on a legislative session that didn't produce a plan. Lt. Gov. Bill Ratliff said in a statement that he always thought agreement would be tough. House Speaker Pete Laney's statement said the governor's action denies the Lege a chance to debate "a fair and equitable congressional plan" that won approval of the House Redistricting Committee. Texas GOP Chair Susan Weddington said the Legislature blew its opportunity to draw a map and said judges will probably do a better job of it.

Congress Zings Texas Budget for $81 million

The state's revenuers say Congress cost the next Texas budget $81 million when they accelerated the death of the federal tax on estates. The end of the so-called death tax will cost Texas about $300 annually. That change is being done a little at a time for five years, though, so the next budget won't show the full impact. There is no solid estimate of how much the federal change will affect the state treasury until the comptroller's folks get a look at better numbers: They have to estimate, for instance, who might die, how rich they are, and how much the state will collect. It is safe to say, however, that the two-year budget that starts in September 2003 will be as much as $250 million low because of the phase-out of the estate tax (unless lawmakers decide to impose the tax on their own). It might seem like a long way off, but that'll be one of the important numbers in the formula when the Legislature meets in two years to write the next budget.

The $81 million loss to the state this year turned out to be no big deal to budgeteers this time around. That's because the Legislature failed to pass a bill that would have moved the Smart Jobs and temporarily turned off a tax on employers. Smart Jobs stayed where it was, and the employer tax continues. It'll raise, conveniently, about $80 million, according to the tax collectors.

The feds put in one sneaky provision: The federal estate tax will be phased out over a ten-year period. The states are being forced to phase their taxes out in five years. The reason? The feds get to keep the states' share during the second five years that the federal government collects the tax.

A Non-issue in Texas: The Internet Tax Moratorium

Another tax change in Washington, D.C., won't have any immediate effect in Texas. Congress put a three-year moratorium on new Internet taxes in 1998, and the ban ends in October. If they don't act by then, states will be free to impose taxes on electronic things they don't already tax, like streams of data or time spent online. Texas already has a sales tax on Internet service fees, but that levy was grandfathered into the current federal law. And the state doesn't have any other taxes, apparently, that are affected by the federal law. All of which leads to this: What Congress does in the face of the October deadline won't have much effect here, at least not right away. Texas doesn't have any revenue held in suspense by the federal law; the state wouldn't lose money, or gain money.

The Internet tax ban doesn't include sales taxes on items sold over the net. Federal law prevents the state from requiring out-of-state retailers from collecting and remitting sales taxes (unless they have significant operations here), and that is separate from the Internet tax moratorium. The sales tax law applies to any kind of sales—Internet, catalogue, whatever. It has an odd glitch in it, too: Taxpayers are required to pay sales taxes, but it doesn't make financial sense for the state to collect from each taxpayer. So, technically, the taxes are due, but the out-of-state retailers don't have to pay them. Unless taxpayers volunteer to pay up, the tax never gets collected although it's owed.

One group, businesses that pay sales taxes, has to tell the state about any taxable purchases. And individuals who buy expensive items sometimes get caught, too: They get letters from the comptroller's office asking about purchases—when, that is, the state knows about them.

To Merge or Not to Merge

Supporters of the vetoed Medicaid legislation are poring over law books and talking to attorneys about whether the bill was needed to do all of the things they wanted to do. The biggest and simplest example: It would have merged the Texas Department of Health's Medicaid operations into the Texas Health and Human Services Commission.

Ordinarily, that merger would be dead on arrival with the veto. But budget-writers (a group that includes both the House and Senate sponsors of the Medicaid bill) decided to put the merger into the budget. And they didn't make it contingent on passage of the Medicaid bill, as is standard with other legislation. If you look at the budget, it still provides for the move from TDH to HHSC.

They're not sure what they'll do about it. Legislators and the governor were in support of a merger. Lawmakers wanted oversight of Medicaid, but their oversight was in the bill that got vetoed. They were also in pursuit of a number of federal waivers they said would bring in hundreds of millions of dollars. The governor's aides, without promising to pursue any or all of those waivers, say no new law was needed. They contend the agency and the governor's office already has the power to pursue those things. In fact, a spokeswoman for the governor says the only things that can't be done as a result of the veto are the legislative oversight and a pay raise for an executive that was put in the bill after being inadvertently omitted from the appropriations bill.

Rep. Patricia Gray, D-Galveston, says lawmakers wanted oversight because they don't trust the agencies to tell them what's going on. As an example, she cites a lawsuit that legislators weren't told about until after the judge entered the orders against the state. She said it's possible that the standing committees on health and human service issues will meet regularly during the interim to get reports from the agencies on what's happening with the merger and the waivers.

As for the waivers, Gray said she's particularly worried about money that would have gone to urban hospital districts. Nursing shortages and unreimbursed care are breaking the Harris County Hospital District, and she says some of the provisions in the vetoed bill would have helped.

Interim Studies on Health Care and Medical Costs?

We're not palm-readers or anything, but watch for an interim study on medical costs and/or Medicaid and/or health insurance and/or county hospitals. Those hospitals are getting kicked in any number of ways: Nursing shortages are severe, for one thing. And state and federal payments for medical services don't cover the tab, or don't do so consistently.

That subject area got Lt. Gov. Bill Ratliff in hot water with some of his supporters. Now that the heat of a race for Lite Guv is off, he says those county hospitals are going broke, in part, because "anyone in any economic circumstance can walk in and demand the most expensive services available." If the state doesn't pay for cheaper preventive medicine while it's paying for emergency care, then emergency care is what it will get. And he says the state will "have to start making preventive services available at some level even if it has to be publicly furnished."

Ratliff and others contend that the health care system is in a death spiral: Insurance premiums go up, reducing the number of people who can pay for insurance and increasing the number of people seeking free or subsidized emergency care, which is expensive and pushes up health care costs, which drive insurance premiums.

That was the problem underlying the Medicaid and prompt pay fights during the recent legislative session, and it's one of the potential future battlegrounds for doctors, business trade groups, insurance companies, pharmaceutical companies, the hospitals themselves, and advocates for the uninsured. The state concern—this is where Ratliff and other state leaders come in—is that health care is driving the budget in the way that only education used to do. It's turning up everywhere, pushing state spending in big social programs like Medicaid, adding to premiums for health insurance for state employees, retired teachers, and now, public school employees.

Statistics, Facts, and Other Interesting Objects

For a quick check on how the Texas image is doing out there in the world, we'll note a photograph from the Associated Press that moved on the international wires and got printed in newspapers from here to tarnation. It was a shot of a crowd at The Hague awaiting the arrival of former Yugoslav President Slobodan Milosevic. The man in front was holding up a sign: "Send him to Texas."

• There are 146,855 inmates in the Texas prison system. In July 2000, there were 153,500. That's a drop of 6,645, or 4.3 percent. If all of those convicts lived in one city, that city of stripes would be the 15th largest city in the state of Texas (ranked between Amarillo and Pasadena).

• Great moments in the security business. Gov. Rick Perry will spend part of the summer in Mexico, studying Spanish. His office won't say when and where he's going. But it's a small capitol and word gets around. Rep. Kenn George, R-Dallas, told a reporter from the San Antonio Express-News about his own plans to take an intensive Spanish course this summer. He'll be taking lessons at San Miguel de Allende, a popular retreat for gringos in the state of Guanajuato (the former governor of that state is Vicente Fox, now the Mexican president). San Miguel is the same place, George pointed out to the reporter, where Gov. Perry will be taking his lessons. Don't feel too bad for the security guys; they get paid to hang out in that vacation spot.

• Gov. Perry's face-saving appearance at the Texas Department of Insurance was touted as something that could be attended live or on the Internet. But there were more seats in the real room than in the virtual parlor, and the doors weren't locked. The Internet pipeline was limited to 25 visitors, according to the TDI folks we talked to (after we couldn't get in). And the security firewall on TDI's website apparently kept some folks from listening in. Perry was there to tell regulators to get after insurers who don't pay doctors and other medical providers on a timely basis. That followed the dramatically adverse reactions of some doctors to his veto of legislation that would have let them go after slow-paying HMOs and insurance companies. Some of the governor's advisors were afraid that legislation created new ways for doctors and hospitals to sue companies that don't pay what they owe. If you're dying to hear the speech, it has now been posted on the governor's own website (www.governor.state.tx.us), which can handle more incoming traffic.

• It's impossible to tell whether the U.S. military truly wants to practice on the Texas coastline, but it's becoming clearer that some Texas politicos are against it. Comptroller Carole Keeton Rylander put out a strong statement calling for an economic impact study. You could tell from her choice of words how that study might come out. She didn't come right out and call anyone a moron, but she didn't conceal her position, either. And the Sierra Club jumped in with a new angle just when the story was simmering down: They invited the press to come watch the annual turtle hatch on South Padre.

Political People and Their Moves

Before Bobby Knight got a chance to coach his first basketball game, the guy who brought him to Lubbock from Indiana—Texas Tech Chancellor John Montford—is leaving. The well-regarded Montford, a former Lubbock County district attorney and Texas senator, will leave a week after his fifth anniversary in the job. He helped raise some $500 million for the school and got it on track to join the state's higher ranked universities. He isn't detailing his next move, other than to say he'll be in the private sector and not in politics... Put Dan Gattis on the list of political hopefuls. He's an assistant district attorney in Williamson County and has his eye on a potential new seat in that territory. He'll wait and see what the lines look like, and who the incumbent is (if there is one), but he's talking to consultants and political types in anticipation of a race. If the name seems familiar, think of cows: The other Dan Gattis, the potential candidate's father, is the executive director of the Houston Livestock Show.... Greg Abbott is hiring folks to run his campaign for lieutenant governor. Add Brian Berry to the roster to handle message and broadcast advertising; Rob Allyn for mail and some more of that message stuff; and Bill Tryon to consult on more general matters. They also brought in Sean Hall and Kathy Ward to work on organization...

More Political People and Their Moves

Eric Andell, a Democrat who lost a reelection race for the 1st Court of Appeals in Houston last year, will move to Washington, D.C., as a special advisor to U.S. Education Secretary Rod Paige, the former Houston school superintendent. Andell will be a legal advisor to Paige... Gary Johnson is the new guy to blame for the Texas prison system. Johnson has been working for the Texas Department of Corrections since 1973, and was the number two to Wayne Scott, who's retiring. The head of the parole division, Victor Rodriguez, was the only other inside candidate among the five finalists... Appointments: Gov. Rick Perry tapped Gilbert Herrera of Houston and Macedonio "Massey" Villareal of Missouri City to the General Services Commission. Herrera is an investment banker and former Houston Parks Board member, among other things. And Villareal is a consultant who is also active in Houston business groups... The Texas Commission on Alcohol and Drug Abuse gets a new commissioner, a new chair and a reappointment. Perry named Corpus Christi City Councilman John Longoria to the board, renamed Beverly Barron of Odessa, and picked board member Robert Valadez of San Antonio to head the agency... Perry named Dr. Gilberto Aguirre to the Vocational Nurse Examiners Board. He's an ophthalmologist and professor at the UT Health Science Center in San Antonio... The governor named three folks to the Texas Aerospace Commission, a little-known agency that might find itself in the middle of discussions about a future Texas spaceport. The list includes Richard Azar of El Paso, Colonel (ret.) Richard "Larry" Griffin of Hunt, and Holly Steger Stevens of Georgetown. Azar is a pilot and businessman. Griffin is a Kerr County commissioner. And Stevens is a lobbyist for American Pacific Corp... Rufino Carbajal Jr. of El Paso and Garold Base of Plano are the Guv's latest picks for the state's Credit Union Commission. Carbajal heads the West Texas Credit Union and Base heads Community Credit Union... Deaths: Former El Paso County Judge Pat O'Rourke, who was hit by a car while riding his recumbent bicycle. He left county office in 1986 and unsuccessfully attempted a comeback in 1998. O'Rourke was 58.

Quotes of the Week

President George W. Bush, visiting the Jefferson Memorial: "Well, it's an unimaginable honor to be the president during the Fourth of July of this country. It means what these words say, for starters. The great inalienable rights of our country. We're blessed with such values in America. And I—it's—I'm a proud man to be the nation based upon such wonderful values."

Lite Guv hopeful Gil Coronado of San Antonio, telling the Austin American-Statesman that he is not fond of the term "Hispanic": "I don't really like that word. I don't like any word with 'panic' in it."

Gov. Rick Perry, in a July 3 letter to Lt. Gov. Bill Ratliff and House Speaker Pete Laney: "After visiting with both of you, and after reviewing the efforts of your respective redistricting committees, it is now clear to me that the Texas Legislature is not currently able to reach a consensus on a new congressional plan... I, therefore, have decided that it is not in the best interest of our state to call a special session at this time."

Texas prison spokesman Larry Todd, contending that a guard shortage at a West Texas prison is not the underlying cause of two violent attacks on nurses: "Is there a risk because of the lower number of officers? We don't think so, but psychologically everybody knows that we're short-handed."

Terry McAuliffe, chairman of the Democratic Party, telling Houston Democrats that the national folks will stop sucking money out of the state without putting any back in: "The days of the national party not paying attention to Texas are over. I promise you today I'm going to provide the resources you need to do your job better next time around."

Austinite Ellen Weed, quoted in her local paper after a popular neighbor's home-based bait business was shut down by city inspectors: "I don't understand why the city has the resources to shut down a worm farm, but they can't do anything about the crack houses."

Texas Weekly: Volume 18, Issue 4, 9 July 2001. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2001 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited. One-year online subscription: $250. For information about your subscription, call (800) 611-4980 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.