Scarce Resources, Abundant Discord

Budgets are unhappy things, even when oodles of money are available: They're designed to put a collar and a leash on spending. It's worse when there is no money, because you can't feed the dog on the other end of the leash. Even if you don't like dogs, that is unpleasant business.

The budget headed for House debate next week is tough by any standard. At $117.7 billion, it's bigger than the current model, but most of the new money is federal and no area of state government gets the money the experts say they need to do their jobs. You could accurately refer to it as 866 pages of unsteady compromises. The budgeteers are truly concerned about holding it together.

The House always passes a rule that requires amendments that add spending to save the same amount of money elsewhere. This time, the management in the House proposed a rule that kept money inside subject areas, so that no part of the budget would be bled to restore another. They weren't worried about Democrats, either–they were worried, in particular, that Republicans who campaigned on public education would raid health and human services to restore cuts in schools. If those raids are successful (the proposed rule was shouted down by people on both sides), the House will send a lopsided two-year budget to the Senate, which wants fewer cuts in spending and is positioned to ride in as the cavalry and save the day. That's no way to negotiate.

The budget is bigger than the last one, but general revenue spending–the part that really drives this thing–would drop by $3.4 billion under the House Appropriations panel's plan. Some details:

• The budget includes $58.6 billion in general revenue spending. It's actually a little less than that, since the total includes $1.2 billion in contingent funding for schools. If the revenue to cover that doesn't materialize, the Lege would get a choice between school cuts and emergency spending.

• General revenue spending on public education would drop 7.5 percent, according to the Legislative Budget Board. Federal and other funds would help, but spending would still come in below the current budget, and schools will have more students then than now.

• Higher education would take a huge hit in the budget, losing $1 billion in general revenue funding and 4.7 percent overall.

• Health and human services spending would rise 5.5 percent, or $2.1 billion. But that doesn't keep up with rising costs and caseloads. Even with the higher spending, the budgeteers face opprobrium for shutting out children, the weak, and the elderly.

• Public Safety–-prisons and cops and such–would be cut by more than $600 million. Natural resources regulators would lose $218 million, compared to what's being spent in the current budget.

• State employment would drop by about 11,000 people under the proposed budget.

Some of the money in the budget comes from budget tricks, in spite of the running commentary about how much everybody hates that stuff. A mild version: The state scooted a payment that should have gone to mental health/mental retardation contractors in the last budget into this one. They promised to pay it back this time. But they don't have the money, and the subterfuge will continue.

A stronger version is the $1.2 billion pushed into the next budget from the Foundation School Fund. That's the big Kahuna in the public school budget, and on paper, it looks like they'll be spending $8.1 billion during the next school year and only $6.7 billion the year after that. That's the contingency deal mentioned above. They'll get the money if a particular bill passes and produces the savings they claim. Otherwise, they're in trouble.

The October Surprise and Other Details

The House budgeteers want to give the comptroller, the LBB and the governor the power to cut spending after the legislature is gone if there's not enough money to make the budget balance. The comptroller would hand in a report by October 1 and would have two weeks after that to tell the agencies how much she was cutting. Public schools and the teacher and state employee retirement systems would be the only agencies protected from the October trims.

But the knife won't completely miss teachers. The proposed budget cuts the $1,000 per year that goes to public school employees for health insurance to $550 for teachers, nurses, counselors and librarians, $300 for support staff and $200 for part-timers. Even that is a contingent appropriation that depends on passage of another bill.

• Some of the state's hospitals hired economist Ray Perryman to do a study on the local effects of cuts in the Children's Health Insurance Program and Medicaid. His contention is that every $1 drop in state spending on those programs would cut state tax revenues by 47 cents, that local taxes would go up 51 cents, that health insurance premiums in the state would rise by $1.34, that doctors, hospitals and others in the health care business would be stuck providing 53 cents in uncompensated care and that retail sales would drop $1.77.

Perryman says Medicaid alone is worth 474,420 jobs and $56 billion in benefits to the state. CHIP is smaller but still big: 22,562 jobs and $2.7 billion in economic benefit. Their argument, in short form: The drop in state spending, and the resulting drop in federal spending, would cost local hospitals, doctors and taxpayers more than the cuts would be worth to them as state taxpayers.

• County officials came next, with similar woes. They are afraid to get stuck with the tab if the state stops doing some of the things it does now. One argument: They're funded largely with property tax money, and taxpayers are already screaming about those taxes. If the state cuts funding and the counties make it up, it shifts taxes from sales and other taxes on the state level to property taxes on the local level. They didn't say it directly, but they won't be taking the blame alone. The two biggest program areas they're sweating are health care and criminal justice. The counties have to pick up the tab for unreimbursed care at hospitals if the state won't help. And county jails are dependent, to some extent, on state funding. Their short form: They don't have money, either, and don't want the state's burden to fall on them. A group of Democrats and Republicans from around the state and said they'd support non-tax revenues and possibly even a state tax increase if that's the only alternative.

Rain on the Brain

The emergency appropriations bill–the one that will cover spending already approved for the last two months of this budget cycle–relies on the state's Rainy Day fund as a source of money. Not getting through the end of August in solvent condition would be a crisis, the reasoning goes, and so it's time to tap into the state's savings account. The House budgeteers think so, and they got a nod from the governor–who's been tetchy about that fund–to go ahead.

But Comptroller Carole Keeton Strayhorn isn't happy about it, and seems to be threatening to call a foul at the end of the session if the plan goes forward. Here's her entire statement on the matter, as it was emailed and faxed to us and to other outlets (the bit in italics is her headline): "Comptroller Strayhorn's Response to Legislation Proposing Spending Significant Portion of Rainy Day Fund: Legislators have their responsibilities and I have mine. This is like calling it one-, two-, or three-alarm chili before it's on the table. I have repeatedly expressed my concerns about raiding the rainy day fund, one-time funding sources, and delaying payments. When it gets down to 'lick log' time–certifying the budget–I will not abdicate my responsibility. I will be one tough grandma watching out for Texas."

The Rainy Day fund money can be moved into the general fund and the Legislature has hit savings on a number of other occasions. The budgeteers agree that it's a one-time source of funds, but also believe the deficit in the current budget is a one-time problem. The full House will vote on the emergency bill in a few days.

Money Can't Buy You Love

Overall state tax collections are doing fairly well, all things considered, but sales tax numbers are down and that's got the attention of the forecasters at the comptroller's office.

Sales taxes produce more income for state government in Texas than any other source, and hiccups there shake the whole system. The continued dip on the sales tax chart is what has made those forecasters so pessimistic for the last several months.

The crummy results continued in March: Sales tax receipts were down 2.3 percent compared with March 2002. Results in March 2002 were down 1.5 percent from March 2001. Comptroller Carole Keeton Strayhorn has continuously pointed to the two-year decline as justification for her projections of tightening revenue. Lawmakers fear she is foreshadowing another drop in her revenue estimate, which is the official word on how much money the state will have to spend during the two years starting in September. They've even ventured guesses about how much worse the numbers will get.

Strayhorn hasn't risen to that bait, saying only that she'll stick with her current estimate until and unless conditions change. It might get worse and it might hold. It won't get better, according to her fiscal radar. "Our Texas economy remains weak and there is no turnaround in sight," she said when she revealed the new sales tax numbers.

In the meantime, she's pushing her own recommendations for budget cuts and new revenues as ways to cover what is, for the moment, a $10 billion difference between what is available to spend and what it would cost to continue current services.

• What was supposed to be an "easy" way to get new money into the state treasury is running into heavy opposition from business. The state wants to fiddle with the corporate franchise tax to capture taxes from companies that have organized themselves to cut their tax bills. It's perfectly legal to do that, but the state is losing somewhere in the vicinity of $300 million in taxes, and wants the money. But businesses say the legislation aimed at that problem would raise other taxes as well, and they're squawking loudly about the new taxes in the bill. It's a no-new-taxes year, see? Gov. Rick Perry has said the fixes to the franchise tax wouldn't ruffle his no-taxes promise, but the Texas Taxpayer and Research Association and the Texas Association of Business are fighting it. Keep watching.

Sunshine-based Budgeting

Attorney General Greg Abbott says Gov. Perry's never-released drafts for a state budget are public records and should be shared with legislators and reporters and other interested parties. That's a blow to the chief executive, who took the position that the stuff that wasn't released should be kept secret under the cloak of working papers.

Perry's budgeteers were working on a state budget that made a too-optimistic assumption about state revenues. They were surprised, like almost everybody else, when the comptroller's budget estimate revealed state revenues would come in at least $10 billion short of what it would take to keep doing for the next two years what the state is doing now. The governor's budget assumed there would be a shortfall, but underestimated its size. Rather than writing a new budget in just a few days, Perry decided to put a zero next to every item in the budget–something that required reprogramming the computers–and to make a rhetorical play for a "zero-based budget."

Several reporters asked for copies of the last version of Perry's plan before the zeroes went in. Perry said no, and sent a request for an official opinion to Abbott. Abbott, on the eve of the budget vote in the House, answered that the Guv has to show his work.

We don't have the numbers yet and won't for a few days. Aides to Perry say there are thousands of pages to go through to figure out what meets the requests. The budget was in the works but hadn't been shown to Perry, they say (that has the advantage of excusing the governor himself for anything lame-brained in the papers that'll be released to the public). And it was never compiled into the kind of document budget-readers are used to seeing.

The Perpetual Campaign

The grand jury that's been investigating the Texas Association of Business' involvement in last year's Texas House elections won the first round. State District Judge Mike Lynch ruled, with some restrictions, to let the grand jury keep asking questions about TAB and other groups' involvement in those contests. But TAB's lawyers got Lynch to put the inquiry on hold while they're appealing his ruling. They've taken the case to the 3rd Court of Appeals in Austin. The next step, if there is one, would be the Texas Court of Criminal Appeals, and the last allowable stop would be at the U.S. Supreme Court.

If you cut through the legal peanut butter, Travis County District Attorney Ronnie Earle wants speed and the lawyers on the other side, led by Andy Taylor and Roy Minton, want to slow walk the investigation, first to get it out of the spotlight during the legislative session, and then to calm the political types getting ready for races in 2004.

Earle and the grand jury want to know whether and how TAB and other groups coordinated their efforts to get people elected, and whether they did in a legal way. Corporate money is only allowed for so-called "issue advocacy," that doesn't directly recommend how people should vote. In a series of mailers, TAB got about as close to that line as you can get. Earle suspects they crossed it and used corporate money illegally to get a group of candidates, and then a House speaker, elected; TAB says they vetted their work with lawyers and did no wrong. Their guys won fair and square, they say, and the DA ought to leave the election results alone.

They asked Lynch to stop the inquiry, arguing their First Amendment rights of speech and association were threatened. He didn't answer that question, saying any illegal coordination between the corporate advertisers and the campaigns would override the First Amendment questions and leave the grand jury with something worth investigating.

So he let the investigation continue, with conditions. First, the names of non-corporate members of TAB are out of bounds for prosecutors. The list of corporate members and "member-donors" are out of bounds unless the prosecutors can convince a judge there is a link to possible criminal activity. Third, the prosecutors can't subpoena any elected officials without a judge's permission. And fourth, everything has to be kept secret from the public and from people involved in related civil suits unless a judge says otherwise.

• Separately, a self-styled watchdog group called Texans for Public Justice filed a complaint with Earle accusing another group, Texans for a Republican Majority, of failing to report political contributions and expenditures with the Texas Ethics Commission. Folks with TRMPAC, mentioned frequently in the hearings on TAB, contend their reporting met the legal requirements.

Ain't Gonna Study War No More

Former Rep. Rick Green, R-Dripping Springs, won't seek a rematch against Rep. Patrick Rose, D-Dripping Springs, next year. In an email to supporters, Green said he wants to spend his time on public speaking and family and such, and won't be in the race in 2004. Green was the only incumbent Republican knocked off by a Democrat last year, and one of only two Republicans to lose in spite of backing by the well-financed trade and political groups that were trying, successfully, to put a GOP majority in the Texas House. He thinks the odds favor a Republican in the district next year. Green writes: "In 2004, the Democrats will not have the inconceivable amounts of money they used against me in 2002 because there is no longer an expensive race for the Speaker’s Chair. It will be a presidential year, with a very popular President George W. Bush at the top of the ticket." Green lost narrowly last year, but got in by a whisker, too, in a district that teeters between the Rs and the Ds. He didn't name any other potential candidates–or mention Rose–in his email.

Totaled

In a rare legislative drive-by shooting, Lt. Gov. David Dewhurst whacked a bill that would have barred automobile insurance companies from owning auto body shops. It would have forced one company, Allstate, to divest itself of a car repair business. Dewhurst said insurers are already barred from steering business to their own subsidiaries and called the bill "a real affront to property rights." A day after the House easily passed the legislation, Dewhurst joked the bill might get a hearing from the upper chamber on June 2. That's the last day of the session and a long time after legislation is viable: "I think this bill's going to have a very difficult time in the Senate."

He said the bill would force at least one company to divest itself of an asset even though it has obeyed the law: "It's not fair. It is probably unconstitutional." It's not unusual for a Lite Guv or a speaker to sit on a piece of legislation, but it is unusual to see them sign their work. Dewhurst unexpectedly announced his opposition to the bill at his regular post-session press conference, surprising reporters who hadn't asked him about it.

We asked around some, and it was apparently a surprise to most of the people who'd been lobbying for and against the legislation, too. On the support side were the Texas Automobile Dealers Association and, a little more quietly, some of Allstate's competitors. On the opposition side, among others, were Allstate and the Texas Association of Business.

Flotsam & Jetsam

• Cable television stations are allowed to put the name and addresses and photos of convicted sex offenders on the tube, so long as they stick to the public information in the state's sexual offender database. That's the official opinion of AG Greg Abbott. He also said the stations can broadcast the "rating number" assigned to an offender to show the level of continuing danger to the community, but only after that number has appeared in legally required newspaper advertising.

• Education groups pushing for full funding for Texas textbooks mounted a creative argument: Without more money than the House Appropriations Committee proposed, students will have to keep using history and social studies books that say Ann Richards is still the governor of Texas. It's a new argument, but it's not a new problem; she left office in January 1995.

• Nobody is jumping up and down and claiming there are enough votes in the Senate, but the House Redistricting Committee dusted off a congressional redistricting bill for a hearing. Chairman Joe Crabb, R-Humble, wouldn't commit to more public hearings when asked by his comrades. So far, the Senate count has been short of the number needed for passage, and House Speaker Tom Craddick said weeks ago he wouldn't ask the House for a vote if the Senate won't play. Still pending: Crabb asked the attorney general if the state must do congressional maps since the maps in force were drawn by a panel of federal judges instead of the Legislature.

• Taxes may be out of the question, but the Texas Department of Parks and Wildlife is considering higher fees for some hunting, fishing, and boat title and registration fees. They'll hold public meetings this month and next. They're talking about increases of up to 20 percent.

• The U.S. Chamber of Commerce says Texas has one of the worst civil liability systems in the country. They rank us 46th. The ranking is based on a poll done for the group by Harris Interactive; they talked to general counsels inside major corporations and then compiled the results. Meanwhile, the state Senate is still hearing from anyone and everyone who wants to talk about tort reform, and the next week will feature a heavy dose. Sen. Bill Ratliff, R-Mount Pleasant, plans three days of hearings and could have a Senate version of the legislation ready soon after the Easter break.

• In the midst of all this business to business and budget stuff, the House passed a bill by Rep. Brian McCall, R-Plano, that could be good news for anyone with an Internet connection to a world that seems to be full of undiscovered and completely safe and convenient ways to enlarge your favorite body parts. The House passed a SPAM bill designed to cut junk email by letting the attorney general and Internet service providers take legal action against spammers.

Political People and Their Moves

Steve Koebel, who worked in Austin at various times for then-Gov. George W. Bush and for comptrollers John Sharp and Carole Keeton Strayhorn, is coming back to work in Texas for the Gardere Wynne Sewell lobby gang. Koebel has been in Washington, D.C., as a special assistant to U.S. Attorney General John Ashcroft for the last couple of years...

Gov. Rick Perry appointed Rebecca Simmons to sit behind the tall desk in the 408th District Court in Bexar County. She's an attorney at Akin Gump in San Antonio. Simmons replaces Phyliss Speedlin, appointed earlier to an empty spot on the state's 4th Court of Appeals...

Arraigned: Former Attorney General and gubernatorial candidate Dan Morales, who told reporters and a federal magistrate that he is innocent of mail fraud, conspiracy and other charges leveled against him by a federal grand jury. He's been accused of trying to steer money from the state's tobacco settlement to a friend, and separately, of lying on a bank loan application and misusing funds from his state campaign accounts. His co-defendant, Marc Murr, also entered an innocent plea...

Four in a row: U.S. Rep. Ron Paul, R-Surfside, gets the "Taxpayers' Best Friend" award from the National Taxpayers Union. He votes against taxes more than any other member of Congress, according to that group...

Some readers will get this in time, and some won't, but for those who do: A memorial service for the late Sam Attlesey, political reporter for the Dallas Morning News, is set for 2 p.m. Friday, April 11, in the Senate chamber in Austin.

Quotes of the Week

U.S. Education Secretary and former Houston Superintendent Rod Paige, quoted by the Baptist Press News: "The reason that Christian schools and Christian universities are growing is a result of a strong value system. In a religious environment the value system is set. That's not the case in a public school where there are so many different kids with different kinds of values."

Sen. Mario Gallegos, D-Houston, remembering that his mom wasn't allowed to speak Spanish in school and asking whether legislation by Sen. Jeff Wentworth, R-San Antonio, allowing prayer or meditation, would ban similar occurrences now: "How can I presume that that teacher, volunteer, substitute is not going to say something bad to that student if he or she... blurts outs something in Spanish–a religious word in Spanish, or Jewish, or whatever the other faith. So that's my concern."

Michael Moore, whose book Stupid White Men is number one on The New York Times book list and whose Bowling for Columbine, still in theaters, is the top-grossing documentary of all time, on controversy about his anti-war rant at the Oscars: "If you tell a free people they can't hear something, read something or see something, they are going to want to see, read and hear it all the more. So please, boycott the Dixie Chicks, try to start a boycott of Michael Moore, and watch what happens."

Mike Toomey, a former House member and former lobbyist who is now chief of staff to Gov. Rick Perry, hopping on an elevator and ducking questions from a reporter for the San Antonio Express-News: "I'm just a lobbyist."

Former Rep. Bruce Gibson, a Democrat, now chief of staff to Lt. Gov. David Dewhurst, a Republican, asked by the Austin American-Statesman whether he'll revive one of his legislative schemes, which would have wiped out 45 state agencies if lawmakers in 1987 had refused to vote for higher taxes: "Uh, I don't think I'm going to be recommending it to the lieutenant governor."

Sen. Jeff Wentworth, R-San Antonio, telling the Houston Chronicle he supports legislation that would prohibit state recognition of same-sex marriages: "People talked about discrimination as though discrimination is a bad thing. It is something we do all the time. We discriminate in this state against people under 21 years of age buying alcohol. I guess they could say we're discriminating against them. The state has decided it's in their best interest not to purchase alcohol."

Army Specialist Robert Blake of Pennsylvania, upon seeing the New Presidential Palace in Iraq that had been taken over by the Americans, quoted by the Dallas Morning News: "This used to be a nice place. They should make it like a Six Flags or something."

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Texas Weekly: Volume 19, Issue 40, 14 April 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.

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