Pencil in April 19

Gov. Rick Perry isn't going to get a consensus in favor of a school finance plan without calling the Legislature back to town, and his aides are telling other state officials to saddle up for a mid-month special session, with a consensus hopefully to follow. He plans to unwrap a revenue plan – don't go calling it a tax plan or they'll bite you – within the next week. That, along with his incentive plans and his local property tax caps, will form the structure for his call on lawmakers.

They're not lined up in favor of it, for the most part. The local property tax caps are giving local governments gas, and they're communicating vigorously to their local legislators. That's a box for the people Perry is asking for support: Lawmakers want to give taxpayers a break, and the caps on increases in local property taxes are popular with some voters, especially those who've been whipped into a frenzy by talk radio jocks in Houston. Tax caps have been on the table there for at least one election already, and it's a popular idea with those voters.

Local government officials, who'd be cut off from a huge source of tax revenue, are kicking. All but a dozen of the state's 254 counties have passed resolutions against it so far, saying the caps are too restrictive and the protections against new unfunded mandates from the state government are too flimsy. Several have said they want protection against mandates already shipped down to them that haven't been covered completely by local tax hikes. The counties are organized on this issue at the state level; cities are going at it fervently, but in piecemeal fashion. All of them are talking to local legislators, and several legislators we've talked with – most of them Republicans – say they haven't committed to the governor's proposal, largely as a result of the noise at home. For now, they can use the worn political umbrella: saying can't or won't commit until they see an actual piece of legislation.

House Speaker Tom Craddick is not talking publicly, but several folks who've talked to him say he's against holding a special session right now, and that he wants a quick session if there is one at all.

The Senate, which doesn't originate tax bills, is in a safer spot; with a little self-discipline, senators can simply wait to see what the House does, then choose to follow or send it back for another try. Craddick's House members don't have much to gain in a special but have a lot, potentially, to lose. A vote for a tax bill can be deadly in a GOP primary or a special election – just ask Rep. Tommy Merritt, R-Longview, whose Senate bid was undone in part by ads criticizing his proposal to raise sales taxes and use the money to lower property taxes. The guy who put the ads together, David Carney, was consulting for Americans for Job Security, a federal PAC. One of his other clients is Gov. Perry.

In an election, it's easier to frame opposition to a tax bill than support for one. What sounds good in the friendly confines of the Pink Building can be harsh back home. Example: Former Sen. Grant Jones, chairman of the Finance Committee, lost a reelection bid that hinged on his vote in favor of an asset test for people getting nursing home aid from the state. He lost there, but the vote in favor of the legislation – the state budget – was unanimous. Seemed like a good idea at the time.

Couple that with opposition from business groups that don't want to see a split property tax roll, from liberals who are fighting tooth and nail against higher sales taxes, and conservatives who don't like gambling in whatever form. Add in a dash of vitriol from Comptroller Carole Keeton Strayhorn – shoot, make it a gallon – to show everybody what the campaign might look like, and you've got a mess of nervous lawmakers coming to Austin to stare down an issue that's difficult from both a political and a policy standpoint.

No Consensus

Try making a hard decision when you don't have to. Try getting someone else to do it.

Gov. Rick Perry has pitched his plan to business people. To Republican legislators. To other state leaders. To lobbyists. To local officials.

The groundswell has not materialized, but the opposition has. As noted, the locals are fired up against property tax caps, except for schools. They're capped, but get state money to fill the holes.

Businesses have coalesced in their opposition to a split roll property tax, an idea that started (this time) in the governor's office and one of the few ideas Perry has not tried to grind out with his boot. He's not crazy about the business activity tax, though that one has the support of organized Dallas CEOs, Houston business groups, and quietly, Lt. Gov. David Dewhurst.

Perry is not publicly against video lottery terminals at race tracks, which would bring in $1 billion to $2 billion a year, according to the comptroller but which face opposition from some conservatives in the Lege. It'd be pretty easy for lawmakers to raise the tax on cigarettes, and maybe on some other "sins" like alcohol. Those have all been on the table for at least a year. The lawmakers on the joint committee on public education, which has been studying this stuff, listed the possibilities but didn't single out a favorite. As a group, they didn't have one. Perry and legislative leaders are still poking around for new things that aren't ardently opposed by someone somewhere.

Walks Like a Candidate, Talks Like a Candidate

How 'bout that comptroller of public accounts? Carole Keeton Strayhorn cranked up the volume on her criticism of Gov. Perry, telling the Texas Hospital Association and the Texas Association of Counties that if he can't work out a school finance solution then "we need new leadership willing not to delay, not to cajole, not to offer patchwork proposals packaged in lofty titles."

Strayhorn hasn't said publicly that she wants to run for governor, but she's making all the moves you would make if that were your aim. Look at the heading on the press release about the speech to county officials: "Comptroller Strayhorn Lambasts Governor's 'Callous Disregard' for Children and Working Poor, Inaction on Schools." She said he's stripping local control from local governments. She blamed him for dropping children off the state's health insurance plan for kids. She said he could "release" $583 million she said he's "sitting on" to make up the cuts in that insurance. Strayhorn said he should tell health and human service officials in the administration not to start up an assets test that she said would push "thousands more" children off of that insurance. (Perry's staff said later that no such pot of money exists and that "those most in need are continuing to receive services.")

Her state staff included a stack of news clippings in the package of materials handed out to reporters. One was from the March 6 Dallas Morning News, and had this headline: "Texas Poll: 50% disapprove of Perry/Support at new low; governor, wife blast marital rumors." That package included press materials from last year, when she gave lawmakers low grades for adding what she called $2.7 billion in fees, charges and out-of-pocket expenses.

After her speech, several of the questions were about the 2006 governor's race, and whether she planned to be in it. She says, "all I'm thinking about is being comptroller." Strayhorn didn't offer up any school finance plans of her own, but said she's had her staff working on them for some time. She said any plan she might present at this point would get tossed, and said lawmakers would repeat a line from last session and tell her to worry about her agency's "core responsibilities." But, she said, she plans to "frame the debate" on school finance, and hinted that that will start when a session does.

Perry responded through his press secretary, Kathy Walt, who said he's working on a consensus for school finance. "Never have shrill negative attacks or name-calling educated a child, created a job, cut property taxes, or solved any problem."

The Loyal Opposition

The business lobbyists and legislators we talk to say the split roll property tax is dead. But everybody is still talking about it. The opposition for a time came mostly from the Texas Taxpayers and Research Association, a trade group whose members include some big property taxpayers and other companies that would be hit hardest by such a tax.

They're no longer alone. When it testified before the public school finance committee, the group was joined by the Texas Association of Business, the Association of Electric Companies of Texas, the Texas Chemical Council, the Texas Pipeline Association, the National Federation of Independent Business, the Texas Savings and Community Bankers, the Texas Association of Realtors, the Wholesale Beer Distributors of Texas, the Texas Oil & Gas Association, the American Electronics Association, the Texas Forest Industries Council, the Texas Cable and Telecommunications Association, the Texas Petroleum Marketers & Convenience Store Association, the Texas Bankers Association and the Texas Independent Producers and Royalty Owners. And they were blunt: "The experience of other states has shown that where business property is treated differently, it is treated badly, with effective tax rates from 200 to 500 percent higher than that on homes. The split roll will inevitably lead to higher property tax burdens on businesses, discouraging new investment and stifling job creation."

• The Texas Association of Counties put together a spreadsheet showing what each county would have lost in revenue had Gov. Rick Perry's revenue caps been in place for the five years starting in 1998. Over those five years, all of the counties together would have foregone $616.7 million in revenue. (If you look at it from another angle, that's $616.7 million local property taxpayers would still have in the bank.) The ten biggest hits were in urban and fast-growing suburban counties: Bexar, $18.6 million; Collin, $36.6 million (that county's own estimate is that they'd have lost $43 million); Dallas, $33.4 million; Denton, $14.5 million; El Paso, $14.5 million; Harris, $69.9 million; Hidalgo, $20.8 million; Tarrant, $47.9 million; Travis, $46.2 million; and Williamson, $15.7 million. The association said that's the cap without taking into account a 3 percent cap on home appraisals. That was beyond their computer model, apparently.

• The Texas Municipal League's pitch includes the idea that choking a city's revenue chokes economic development, which eventually chokes the schools. They're trying to protect their ability to exempt taxpayers from property taxes, too, saying it would hurt economic development to stop that practice. They're also rewinding the tape to last session, saying they'll oppose proposals made then that would add to the sales tax for the state while capping what the cities can tax.

• The Mexican American Legislative Caucus is looking at a proposal from its chairman – Rep. Pete Gallego, D-Alpine – that would cap sales taxes at current rates, close the "Delaware Sub" loophole in the state franchise tax that allows corporations to reorganize to duck most or all of those taxes, increase the state's share of the cost of education, "enhance equity", and restore and improve teacher and staff benefits that were cut last session. Gallego didn't say how he'd raise the revenues to do that, but said the group will have a report out in ten days or so that would fill out some of the proposals. Also, he said the governor should call a special session, but said it should start June 1 so that schools will be out and teachers can come watch the debate. Gallego also said the governor and legislative leaders hadn't included the Caucus in any of the conversations seeking consensus, and he pointed out that nearly one-third of the members of the House are also members of that group.

• The House Republican Caucus can't be called opposition in the same way the other groups can, but the lawmakers from that party are distinctly skittish about a session. Call it a rough spot on the road to a solution. Rep. Ruben Hope, R-Conroe, heads that group and says they're "willing to roll up their sleeves and go to work on it." He adds this, though: "If you're asking if we have a consensus, I can't say that we do... the House doesn't work on consensus... we hash it out in committee and on the floor." Hope said they're open to most things other than income taxes, but added that "a lot of folks are not too hopped up about the gambling."

Oops, They Did it Again

What was a 145-vote victory for U.S. Rep. Ciro Rodriguez, D-San Antonio, on Election Day had turned into a 205-vote edge for Henry Cuellar of Laredo by April Fool's Day, and that'll be followed by more recounting, the filing of a state lawsuit, and requests for a federal investigation before Easter.

Two counties that favored Cuellar on the day of the primaries favor him even more now, and account for the turnaround in the results. He asked for a recount a week after the elections, which left him with 24,208 votes to 24,334 for Rodriguez (unofficial results reported to the Secretary of State). That widened to 145 votes in the official canvass, and Cuellar challenged the results. Some astounding recounts flipped the result, and Cuellar was up by slightly more than 200 votes as we went to press.

It's got weird overtones. It's not entirely fair to say, "Well, it is South Texas." But, well, it is. They've got that history dating back to at least LBJ's "landslide" election in 1948, and this just reinforces the stereotype. Cuellar is a former Texas Secretary of State, which means he was the state's top election official at one point in his career. The two counties that turned the election around were both on his end of the district, and none of the other counties produced more than a handful of changed votes. Also, and we include this purely for the weirdness, the winner of this mess will probably be the congressman representing the state Democratic Party's chairman, Charles Soechting. He's ultimately the top dog in this election, since primaries are run by the parties and not the state.

In Zapata County, the recount turned up 304 votes that weren't counted on Election Day. It's normal for a recount to change the totals, but not by much. The 304 "new" votes in Zapata County weren't counted on the day of the elections because a machine broke down. They turned up later, in a manual recount after Cuellar requested and paid for another tabulation. In the original count, Zapata turned in 2,907 votes. The added votes account for 10 percent of the overall vote. Also, all were from early balloting – including in-person and by mail. That means the people who worked the election failed to count one of every six votes cast before Election Day. Of the total, 237 of the new votes went to Cuellar; 67 went to Rodriguez. That netted Cuellar 170 votes and turned the results upside down. Cuellar got 78 percent of the new votes; he got 73 in the original tally.

A Hometown Favorite, with 100% of the (New) Votes

Then came the Webb County recount. That's Cuellar's home county, and people there were really pulling for a hometown congressman, giving him 84 percent of the vote. But the recount results iced the cake: 177 new votes turned up. All of them were from the early voting box. Each and every one of them was a vote for Cuellar. And the recount produced 115 more votes than should have been possible, given the number of people who actually turned up for the elections. Read that again: 115 more votes have been counted in the Webb County part of the congressional than were cast, apparently, in the election. At press time, officials planned to recount their recount again on Sunday, April 4, when they're all bright-eyed and bushy-tailed from Daylight Savings Time.

CD-28 has 11 counties in it. Almost every recount produced a few previously uncounted votes, but nothing dramatic happened. Cuellar picked up 9 votes in Frio County, and that was the biggest change outside of the stunning new results in the county where he lives and in Zapata, where his mother lives.

It's possible, on paper, for that many votes for one candidate to turn up in two counties, but it's weird, unusual, and clearly a candidate for top ten South Texas election stories to tell the grandchildren. Buck Wood, the Austin lawyer representing Rodriguez, and a veteran of a zillion recounts and election contests, was flabbergasted: "There is no innocent explanation for this... when we first walked into Cuellar-Land, there had been a net change of two votes." Wood said he'll wait for the third count from Webb County, and plans to file suit next week to contest the election in court.

It's a solidly Democratic district, on paper, but the Republicans will have a candidate on the ballot in November. Just who that'll be depends on the runoff between Jim Hopson, who got 48.7 percent in the first round, and Francisco"Quico" Canseco, who got 22.6 percent of the vote. Republicans in that district, in that race, cast about one vote for every five cast in the Democratic primary.

End Runs

Gov. Rick Perry isn't the only state officeholder who's got issues with Comptroller Carole Keeton Strayhorn. Don't forget her war with lawmakers, especially those in the Senate. That amounts to a community of interest, in a way, and the community is interested in keeping her out of the conversation on school finance, as much as it's possible to shut the state's top financial officer out of an issue like public school finance. Normally, lawmakers ask the comptroller for an official opinion on how much a particular tax might raise, or for certification that a particular income stream would cover a particular spending amount. With the distrust in the air, they're looking at workarounds.

As it turns out, there is a way to put numbers on taxes and spending without asking for comptroller permission. It's sloppy, if you're a number-cruncher, but it's legal. Budgeteers can set up a tax, then say the income estimated to come in from that tax should be used for a particular expense. They risk leaving money on the table – a tax might raise more than they need to spend. And they risk overshooting, so that a program they want to fund comes up short when the income stream isn't big enough. It does, however, get them out of asking Strayhorn for a blessing.

• And here's another one, from Perry's executive branch: Strayhorn's staff has been working for months on a report on the state of foster care in Texas. It's supposed to be out any day now, and they're touting it as a blockbuster. That care is the job of the new Department of Family and Protective Services (it had a different name before it was folded into the Health and Human Services Commission) and that agency is rolling out its own list of reforms before Strayhorn has a chance to describe the problems. They're starting a "report card" program to rate foster care facilities, setting up a review of drugs used to control kids in state care, and imposing stricter rules on "licensed therapeutic camps," which are wilderness style camps that are supposed to help foster care children develop.

Flotsam & Jetsam

Remember the noise some Democrats made when House Speaker Tom Craddick put a former legislator on the Texas Ethics Commission, ignoring the Democratic Caucus recommendations? Time for payback: Republicans on the House Elections Committee are asking Attorney General Greg Abbott if Craddick's predecessor, Democrat Pete Laney, ignored the law when he appointed Ralph Wayne to that panel. Wayne, a former legislator who now heads the Texas Civil Justice League, was Laney's predecessor in the House and they're still tight. The request for an opinion, from Rep. Mary Denny, R-Aubrey, says there's no evidence that Laney asked House Republicans for any recommendations, as is required. If it wasn't kosher, they might be able to force Wayne off the panel, nailing a Laney friend and netting Craddick another appointment to the TEC.

• The race to see who is the most Republican Republican in CD-10 continues, and Mike McCaul has called in the big guns. His latest television ads feature not one, but two U.S. senators from Texas. Both Kay Bailey Hutchison and John Cornyn are in the spot to endorse McCaul. He's also got the endorsement of Cornyn's predecessor, Phil Gramm. Ben Streusand, meanwhile, picked up the endorsement of Teresa Doggett Taylor, who finished fifth in that race, and of Harris County Tax Assessor-Collector Paul Bettencourt. The runoff is a turnout game; the district runs from Austin to the Houston suburbs.

• A friend of ours says this is nothing but a great way to waste time, and that turns out to be true: Go to this website – www.fundrace.org – and click on "neighbor search." Put in an address and it'll tell you what the neighbors are doing with their money in the presidential race.

• A UT Law grad in Washington, DC, Caryn Schenewerk, is trying to knock off President George W. Bush in this year's elections and is selling panties to raise money (this is why we chose writing news over writing fiction, folks). She's got a political action committee called Running in Heels and has started a website – WomenAgainstBush.org. Contributors at the $25 level get a pair of panties with a logo and this phrase: "Kiss Bush Goodbye."

Political People and Their Moves

The head of the Texas Employee Retirement System, Sheila Beckett, is leaving that post in June to move to Serbia. Yup, Serbia. After seven years at ERS and 30 in state government, she's taking a position with the U.S. Treasury, which will put her in Belgrade as a resident budget advisor to the Minister of Finance and Economy. It's a one-year contract. Before she goes, Beckett wants to finish setting up new rates and contracts with the state's health providers; premiums may go up next fall for state employee dependent care...

The Texas Eagle Forum's Cathie Adams says she will challenge Republican National Committeewoman Denise McNamara at the state GOP convention in San Antonio in June. Adams doesn't list any gripes with the incumbent, but says she wants to do what she's been doing "from a bigger platform." She touts her experience and ability and says she would concentrate on helping the Party grow its local strength around the state. McNamara is running for another term; the other RNC member from Texas – Tim Lambert of Lubbock – is term-limited this year. One spot's for a man; the other is for a woman... Trish Conrad, late of the Teacher Retirement System of Texas, is now working for Comptroller Carole Keeton Strayhorn; Conrad is the agency's new tax ombudsman... Richard McBride, who went to work for Lt. Gov. David Dewhurst when Dewhurst was land commissioner, is leaving to start a lobby and political consultancy. McBride worked for U.S. Sen. Phil Gramm before joining Dewhurst... The U.S. Senate gave its nod to Alphonso Jackson, the former Dallas Housing Authority director nominated by President George W. Bush to head the U.S. Department of Housing and Urban Development. Jackson has been acting director since late last year; he came on as deputy director shortly after Bush was elected... Texas Supreme Court Justice Steven Wayne Smith pulled himself off a medical malpractice case; the lawyer on one side questioned his fairness after Smith attacked the lawyer, Richard Mithoff, in campaign ads for hosting a fundraiser for Paul Green, who beat Smith in last month's GOP primary... Joshua Kempf, a high school senior from Castroville, is getting a strong dose of Republican politics: He won a free ride to the GOP national convention in New York, where he'll be a page and a larval Republican. He's first in his high school class and on his way to Notre Dame for college – after the trip... Deaths: Dale King, who worked as the field guy in Abilene for U.S. Reps. Omar Burleson and Charlie Stenholm from the mid-1960s to 1990. He was 79.

Quotes of the Week

Comptroller Carole Keeton Strayhorn, ripping into Gov. Rick Perry – his staff later called it a "shrill" and "negative attack" – for "failing" to come up with a solution for school finance: "It is a shame to preach excellence and deliver mediocrity." Later, accusing Perry of balancing the state budget by pushing duties down to local governments: "We effectively have taken a challenge from the state and turned it into a crisis for the cities and counties."

U.S. House Majority Leader Tom DeLay, telling the Houston Chronicle there is no truth to reports that he is preparing for possible criminal charges from a Texas investigation of campaign finance in 2002 elections: " If the law is the standard in the state of Texas, then we have no problems and we don't anticipate a problem... I have not been notified I am being investigated. I have not been subpoenaed."

Randall "Buck" Wood, the lawyer for U.S. Rep. Ciro Rodriguez, D-San Antonio, after recounts in two counties turned Rodriguez' 145-vote win into an apparent 205-vote loss to Henry Cuellar: "This is something the feds are going to have to get involved in."

State Rep. Pete Gallego, D-Alpine, agreeing (sort-of) with Gov. Rick Perry's call for a special session on school finance, even though state leaders haven't reached any agreement on what to do: "I don't believe you can build a consensus when people are 400 miles away. When he wanted a consensus on redistricting, he brought people in for three sessions."

Author and sometimes presidential advisor Karen Hughes, promoting her new book – Ten Minutes from Normal – on The Daily Show, talking about her experiences here and there: "Washington is different from Texas. In Texas, we worked with Democrats."

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Texas Weekly: Volume 20, Issue 40, 5 April 2004. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2004 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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