Dark Clouds Over Sherwood Forest

Gov. Rick Perry has said on several occasions that he thinks school finance ought to be rebuilt during his administration, which lasts four years, but that he doesn't think the Legislature has either enough experience or enough time to do it during this legislative session.

Legislators are acting like they didn't hear a word of it, pushing school finance legislation in front of the governor's pet issues of medical malpractice liability and homeowner's insurance regulation reform. Both Lt. Gov. David Dewhurst and House Speaker Tom Craddick have moved replacement of the so-called Robin Hood school finance system to the center of the table. Legislation that puts an expiration date on the finance system was the first thing passed by a House committee; it came out of a Public Education panel that had been chosen less than a week earlier and could be up for a vote from the full House by the middle of the month. Insurance and medical malpractice–put on the fast track by the governor with the backing of both legislative leaders–is barely keeping pace.

Craddick has gone a step further, naming five of his committee chairmen to an "informal" working group that will advise him on school finance policy. Since it has no charter, it won't post meetings, hold hearings, or any of that stuff. Some members groused quietly that it includes nobody from San Antonio, from rural Texas, or any Hispanics. It includes Reps. Kent Grusendorf, R-Arlington, chairman of Public Education; Talmadge Heflin, R-Houston, Appropriations; Ron Wilson, D-Houston, Ways & Means; Fred Hill, R-Richardson, Local Ways & Means; and Ken Marchant, R-Carrollton, State Affairs. If school finance is your problem, that hits the major chords: The panel includes the overseers of the budget, any tax bills, major state legislation, and management's top education expert. There's no way to hit school finance meaningfully without major tax restructuring and some budget work.

Virtually everyone has said income taxes are not a possible solution to the school finance problem, but Grusendorf is telling members and everyone else that any and all sources of state tax revenue will have to be considered if the Legislature is serious about moving the costs of schools away from local property taxpayers. He said later that his comments weren't an endorsement of a particular tax.

Sen. Florence Shapiro, R-Plano, Grusendorf's counterpart in the upper chamber, is carrying the same legislation, letting the sun set on Robin Hood in 2005. And the Republicans weren't the first to the scene of the crime: Rep. Craig Eiland, D-Galveston, filed legislation earlier that would do the same thing, but sooner: He wanted to kill Robin Hood by 2004.

The state hasn't messed seriously with school finance since the early 1990s, and that was because the state's courts had ruled that the system then in place to pay for public education wasn't constitutional. Under pressure, they wrote the current law, and the Texas Supreme Court said it satisfied the constitution. A note: That opinion approving Robin Hood was written by now-U.S. Sen. John Cornyn, and didn't impede his political rise from the court to Congress; likewise, Sen. Bill Ratliff, who wrote the thing, has prospered politically in spite of the shouts about the system.

Grusendorf et al are trying to reproduce their own version of the pressure the courts put on the Legislature. It's easiest to leave a law alone, even if you don't like it, than to wade into politically dangerous waters looking for a better law. Opponents, mostly Democrats, want to see the replacement for Robin Hood before they dump it, but the alternatives are so scary to politicians that Grusendorf decided to bet on the force play over the good intentions of the Legislature.

Big Numbers

The governor's State of the State speech, set at this writing for Tuesday, February 11, will give him an opportunity to be specific about some of the cuts he'd like to make to state spending. He might have done that earlier, but the comptroller's office surprised him and everyone else with Carole Keeton Strayhorn's dire revenue forecast a couple of weeks ago.

As you know, he filed a budget full of zeroes–a decision that required programmers to fiddle with computer software that's not designed to print a budget full of goose eggs–because his aides had been writing a budget for someone with a bigger state treasury. (Several news organizations filed open records requests to see what the Guv had been working on, but Perry says the "working papers" are private and has asked Attorney General Greg Abbott for an official opinion.) In the meantime, the governor has had more time to juggle numbers and might be ready to specify his priorities.

Whatever the budgeteers do this year, they need a combination of program cuts, cost savings, revenues, taxes and fees to cover an expected $10.5 billion shortfall. That's the difference between the amount of money Strayhorn expects the state to collect over the next two years, and the Legislative Budget Board's forecast of the costs of continuing the spending patterns that are now in place.

Another strategy would be to rewrite school finance, restructure taxes and write the new budget all at once. Lawmakers would have a huge hill to climb, but could argue at the end that they did it all to save education. And with Grusendorf's legislation and the current economic situation, they might have to do all of that over the next two years anyway. School finance alone could force it.

Double Your Shortfall, Double Your Fun

Texas school districts raised $13.4 billion from local property taxes in 2000, according to the LBB. That's twice what they collected in taxes ten years earlier. State spending has rocketed, too. But the state's share of the total is lower now than it was ten years ago. The LBB estimates the state will pay 40.7 percent of the cost of public education this year, a modern low point. In 1993, the state picked up 46.1 percent. The Texas share rose as high as 47 percent in the 2000 fiscal year. Another problem: More districts are bumping the state's $1.50 cap on local tax rates and can't raise more money even if they want to. Even without a sunset bill, the school finance system is on its way to extinction or the courthouse, since that tax cap is rapidly becoming a de facto and probably illegal state-set tax rate.

Want to fix it? Here's one extreme: The state could kill local property taxes as a source of funding for public schools and make up the difference with its own money. The current forecasts put the local amount at $15.3 billion this year, so a substitution would save local property taxpayers that much money annually. The state would then have to raise a similar amount to keep the schools where they are now (which would involve dealing with many of those same local taxpayers in their capacity as state taxpayers). Prepare yourself for a gulp: That amount is roughly what the current sales tax produces in a year. And the sales tax is the state's largest single source of revenue.

A tax bill of that size might be a very efficient term limits bill, but survivors and successors would have an easier time balancing spending between districts.

Another extreme: For years, conservative lawmakers have proposed a constitutional amendment that would undercut the basis for the Texas Supreme Court's decisions on school finance. If you change the law, and thus the standard, you can make it legal to have big disparities in what is spent on public schools around the state. Texans with the means to do so could pour more money into their kids' schools, while schools in poorer areas would be kept above some minimum educational standard without triggering equity requirements. Bigger differences in spending between richer and poorer districts would be legal, easing complaints that this system "dumbs down" the better-financed schools to bring up spending at schools with less money.

Putting an expiration date on the current law will force lawmakers to do something with school finance, or to get to the deadline and vote to continue Robin Hood. The opposition thinks it could force lawmakers to vote in a bad piece of legislation just to beat the deadline.

Suing the Investigators

The Texas Association of Business, under investigation by a criminal grand jury in Travis County, filed a federal lawsuit against the head prosecutor, saying he's using the grand jury to get around an order from a different court to lay off the group.

To catch you up: TAB did a heavy mailing on behalf of several Republican legislative candidates in the final days of the election season. They were careful to follow federal case law on electioneering, avoiding the "magic words" that, under federal elections laws, define the difference between informing and influencing voters. Some of the mailers extolled the virtues of Republican candidates. Some of them stuffed Democratic candidates into the woodchopper, but none of them–at least, among those we've seen–told voters what to do with that information.

The message was clear, but didn't use the magic words described in federal case law. Some of the Democratic victims sued TAB, saying the group violated state election laws. TAB didn't reveal the source of the funds it used to print and mail the ads. It didn't file reports listing the mailers as support of a particular candidate. In short, they alleged, it didn't do all of the things you're supposed to do if you get involved in a Texas political race in the normal way. That leaves the question of whether the business group was involved in activities that should have been reported under Texas law. It says no.

On top of the dueling civil lawsuits, Travis County District Attorney Ronnie Earle has, according to TAB's federal lawsuit, been leading a grand jury through the facts of the case to decide whether TAB broke any criminal laws with its election program. The federal lawsuit filed by TAB seeks to stop that criminal investigation, saying it violates free speech and free association protections in the federal constitution. The suit also seeks a "declaration" that the group has a right to conduct the kind of "issue-oriented" ad campaign it ran last year without being forced to file disclosure statements and the like.

It cites grand jury subpoenas sent to TAB president Bill Hammond, to Don Shelton, who works there, and to Bob Thomas of Thomas Graphics, who printed the ads (Conflict Alert: Thomas Graphics prints Texas Weekly, but has no financial interest in it, nor we in them) as evidence of a criminal investigation. And the suit says that "if Hammond is required to comply with these subpoenas," it would constitute a violation of his free speech rights, which are "under siege in both civil and criminal arenas." The suit says Hammond and the others were told not to reveal the existence of the subpoenas, and then accuses the district attorney of telling reporters about the investigation.

The lawsuit asks for a temporary restraining order and then a permanent injunction to stop the criminal investigation. Earle didn't return our calls for comment.

Follow the Bouncing Judges

Advance Rob Junell's marker; the former Democratic state legislator from San Angelo, appointed by President George W. Bush for a federal judgeship, won unanimous approval from the Senate Judiciary Committee and is now up for consideration by the full Senate.

The President gave notice he's appointing U.S. District Judge Edward Prado of San Antonio to the 5th Circuit Court of Appeals, based in New Orleans. That's for the "other" Texas opening on the court; Bush reappointed Texas Supreme Court Justice Priscilla Owen for the other post after the Senate Judiciary Committee voted against her last year, when the Democrats were in charge there. One of the U.S. senators who'll hear the nominations is John Cornyn of Texas, who served with Owen on the Texas Supreme Court, and who was a judge in San Antonio before coming to Austin for the judgeship and then a stint as attorney general.

One more: Before the ink was dry on the Prado nomination, Cornyn and U.S. Sen. Kay Bailey Hutchison recommended Xavier Rodriguez for "a pending federal judicial vacancy" in San Antonio. That's Prado's job, apparently. Rodriguez, appointed by Gov. Rick Perry to the Texas Supreme Court, lost a Republican primary to Steven Wayne Smith last March. Smith went on to win the November election, while Rodriguez returned to San Antonio and told supporters that his first political race was probably his last one. If he's nominated and confirmed, he'll get a lifetime spot on the federal bench.

Thought Fundraising Season was Over?

We scribbled a while back about Victor Carrillo, the newest appointee to the Texas Railroad Commission, who can't serve on that panel until he's been confirmed by the Senate. That's because he was appointed after the legislative session was already underway. Had he been appointed before lawmakers convened, he'd have been allowed to serve while the Senate considered the nomination.

But while Carrillo can't do anything at RRC until the Senate has blessed his appointment, there is an advantage in this timing: He can raise money. State officeholders are barred from raising money during a legislative session, and for the 30 days that lead up to it. But the gurus at the Texas Ethics Commission say that since Carrillo isn't allowed to take office yet, the rule doesn't apply to him. He can hold all the fundraisers he wants until the Senate has acted on his nomination, as long as he files the proper campaign finance paperwork with the state.

One rule still applies: If the Senate doesn't consider his nomination during the regular legislative session, he can't take office. If he'd been appointed before the session and was already serving, the Senate could "vote" against his nomination by simply ignoring it. He (and any other appointee) who doesn't get confirmed in the first session after their appointment loses the appointment.

A Report Card on Taxes

The Texas tax system is well managed, unfair and inadequate to the state's needs, according to Governing Magazine, a trade publication for politicians and government employees. The magazine, in its February issue, takes the state to task for its heavy reliance on the sales tax and on local property taxes, and for a slew of exemptions to those and to the state's corporate franchise taxes that leave gaps in Texas' ability to meet its needs when things are bad. Things are bad (as in many other state budgets), but the Texas tax structure limits the state's ability to pull in the money it needs in times like this, the magazine says. Sales taxes are regressive and Texas depends heavily on them, and that's the reason the magazine gave the state a lone star (of a possible four) for Fairness to Taxpayers. Because it's close to maxed out–at least in the rate–they gave the state a single star for adequacy to take on the current problems in the budget. Texas got three stars for its management of the tax system.

Governing included some rankings: Texas raises more money from state taxes than any states but California and New York; it ranks 48th in state tax revenues (not including local property taxes) per capita; 48th in state tax revenues as a percentage of personal income; and 46th in state and local tax revenues as a percentage of personal income.

Counting to 45

The House Republican Caucus, in a secret vote, undid a loud bid from Rep. Sid Miller, R-Stephenville, and elected Rep. Ruben Hope, R-Conroe, to head the group. The number two spot went to Rep. Elizabeth Ames Jones, R-San Antonio. Freshman Rep. Linda Harper-Brown, R-Irving, was named the group's treasurer. Miller announced a couple of weeks ago that he had locked up enough votes to win the chairmanship, and said separately that he expected his toughest challenge to come from Jones. But Hope, who was in the race early and then sat back to see how committee assignments would fall, prevailed when it came time for the election. There are 88 Republicans in the House, and it took 45 or more votes to win. Miller had said he'd been promised "more than 40 votes."

That group also decided to put up $20,000 toward modifications to the Speaker's apartments behind the House chamber. Those rooms were redone as part of the renovation of the Capitol in the early to mid-1990s, but Speaker Tom Craddick wants to use the space for more public receptions and other events and is raising money from private concerns–the caucus and various donors–to make changes in some furnishings and the like.

Flotsam and Jetsam

An insurance reform bill filed in the House a week ago now has a Senate counterpart, and 11 of the Senate's 12 Democrats have signed on as sponsors. The bill, identical to legislation filed by Rep. Steve Wolens, D-Dallas, a week earlier, would require insurance companies to win the prior approval of state regulators before changing their rates. Two years ago, some of the larger insurance companies said they'd prefer "file and use" regulation that would let them tell regulators about rate changes and then to put them into effect unless the state objected within a specified time period. The proposed legislation from the Democrats would require insurance companies to file underwriting guidelines with the state, which would then make them public; ban "credit scoring," where companies decide whether to provide and how to price insurance based on a customer's credit history; and end "cherry picking," where companies write profitable types of insurance but avoid others, by requiring them to offer all of their lines wherever they offer any of them.

• Coming soon to a legislative wrestling mat near you: Senate Bill 377 by Ken Armbrister, D-Victoria. It's known in the trade as this session's "Bell Bill," and it drew more press releases in support and in opposition on the day of its filing than anything else so far. To oversimplify, SBC wants broadband services pulled off of the list of things it has to lease to competitors under the watchful eye of regulators. The company wants those services separated for regulatory purposes from other "basic" phone services. Competitors don't like it and say the law would allow the company to monopolize DSL services and then to use that monopoly to increase its market power to sell basic services. We'll write more later, but this promises to be one of the bigger business-to-business fights of the session.

• The State Auditors Office says National Heritage Insurance Company, an EDS subsidiary that has run the Texas Medicaid program for several years, improperly charged the state $15.8 million during the 2001 fiscal year. NHIC lost the contract in the last bidding round to a company called ACS.

• True to form, the two sitting Texas Railroad Commissioners don't agree on how to respond to the call for spending cuts from Gov. Rick Perry and legislative leaders. Michael Williams, the chairman at RRC, sent a letter to the governor listing $1,715,197 in cuts he'd prefer, including $923,624 by delaying new vehicle purchases, and $789,773 from hiring freezes and "other salary savings." In his letter, he lists the $999,000 in savings suggested by Commissioner Charles Matthews, who would save the money in site remediation and well-plugging cuts. Since there's nobody in the third chair, neither proposal can get the necessary two votes needed to make the cuts. They agreed on the first $3.1 million in cuts, but can't get to the $3.4 million requested by the leadership.

Annex to Political People and Their Moves

Former state representative and Texas Railroad Commissioner Jim Nugent will be back on the state payroll soon–as general counsel to the House Ways & Means Committee. The chairman of that panel is Rep. Ron Wilson, D-Houston, and when both were in the House, Nugent–a rules wizard–trained Wilson to be a rules wizard. They remain close, and Wilson asked the former commissioner to come help him get through a session that could well involve a big tax bill.

• V.A. Stephens, who left Gov. Perry's policy shop a while back to work for the White House Council on Environmental Quality, is back. She's a lobster this time, for Dallas investor and GOP funder Albert Huddleston, and will be working on school finance and protection of Caddo Lake.

• Nate Blakeslee, who broke the original stories on the Tulia drug bust scandal for the Texas Observer, is leaving that paper to write a book on the subject. The busts were conducted by a law enforcement official with a controversial background, and have raised questions–and several investigations–about whether they were aimed at real criminals or were racially motivated...

• Sherry Sylvester, who was reporting on politics at the San Antonio Express-News until a few weeks ago, will soon resurface as a media critic. She's starting up a web-based publication, funded with a grant from the conservative Lone Star Foundation, that will analyze the scribblings of the state's major newspapers. We'll let you know when the Texas Media Watch goes online.

Political People and Their Moves

Dr. Charles Bell, executive deputy commissioner at the Texas Department of Health, is leaving that agency, but he'll still be right in the thick of it, working at the Health and Human Services Commission as deputy commissioner for health services... Former House parliamentarian Sharon Carter moved to HHSC to work with Albert Hawkins and company; she's the agency's associate commissioner for external relations... Lt. Col. Frankie Waller, the assistant director of the Department of Public Safety for the last two years, is retiring at the end of the month. He started with highway patrol in 1970 and worked his way up the food chain over the last 30 years... List him as interested in directing the Texas Lottery: Reagan Greer, a GOP activist who lost his reelection bid as district clerk of Bexar County in November. Among the clues: Lottery commissioners changed the job requirements to allow candidates who, like Greer, have no college degrees... The head of the Texas Alcoholic Beverage Commission, Rolando Garza, resigned suddenly after unspecified complaints from another agency employee. He'd been in the top job for less than two years... Wesley Duncan moves to Sen. Rodney Ellis, D-Houston, as a legislative aide, after a stint in the private sector. He was a House aide last session. Also, legislative troubleshooter Rick Svatora is back in the Ellis camp after a foray into the consulting business... Jennifer Ransom Rice, late of the state comptroller's office, is going to the Senate as press secretary for Sen. Florence Shapiro, R-Plano... MALDEF–the Mexican American Legal Defense and Education Fund–hired Selena Solis, a former litigator for the U.S. Equal Opportunity Employment Commission, for its legal staff. She was with Texas Rural Legal Aid in Weslaco... Deaths: Richard Morehead Sr., bureau chief of the Dallas Morning News for 36 years (until 1978) and author of several books, including Richard Morehead's Texas and 50 Years in Texas Politics. He was 89.

Quotes of the Week

Sen. Mario Gallegos, D-Houston, recounting for the full Senate a visit to NASA's Florida facilities last year that included a look at one of the space shuttles: "I was able to see Columbia, as close as me to you, Mike [Jackson, the senator whose district includes NASA] and we got to see the tiles. I'm not a mission specialist, but everything looked intact to me."

Rep. Kent Grusendorf, R-Arlington, on what it would take to overhaul the state's unpopular school finance system: "Most experts have concluded we cannot get a permanent solution without some type of tax restructuring. Everything should be on the table, and we should have an intellectual debate about the issues."

Ohio economist Richard Vedder, who did a series of reports on Texas taxes for the Texas Public Policy Foundation, speaking at that group's recent conference in Austin: "You should sell the Alamo to the Mexicans before implementing an income tax."

House Speaker Tom Craddick, on the early push for school finance reform, quoted by the San Antonio Express-News: "Almost every House member I'm talking to, their basic deal is they've got to have a vote on Robin Hood to go home and run for re-election."

Sen. Bill Ratliff, R-Mount Pleasant, telling the San Antonio Express-News what he thinks of a bill that would put an expiration date on the state's school finance law: "I won't be in favor of sun-setting it without something to replace it. I never have been much of a fan of holding a gun to my own head." Grusendorf, in the Houston Chronicle: "I'd rather have our own imposed deadline than a court-imposed deadline. This is the responsible approach to move the issue front and center and deal with it."

Eva DeLuna Castro of the Center for Public Policy Priorities, quoted in the San Antonio Express-News on the idea of cutting recently added programs like children's health insurance: "We always had a bunch of huge jugs of milk in the refrigerator, and the boys would drink most of it until there was a little bit left. Then, whoever drank the last little bit was blamed for drinking all the milk."

Bruce Gibson, chief of staff to Lt. Gov. David Dewhurst, telling the Austin American-Statesman about Gov. Rick Perry's push to get him to take the job with Dewhurst: "I said, 'But I've got four kids.' He said, 'Well, I've got two.' And I said, 'Well, yeah, but you get government housing.'"

Texas Weekly: Volume 19, Issue 31, 10 February 2003. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2003 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.