Snake Eyes

Lt. Gov. David Dewhurst and House Speaker Tom Craddick were correct six weeks ago, and now the state has been treated to a live-action demonstration: The Texas Legislature is nowhere near a consensus on how to fix — or even whether to fix — school finance. Gov. Rick Perry's ambitious gamble fell flat when lawmakers decided the rewards weren't worth the risks.

The disagreements in the House were louder, but they tend to meet in the open while the Senate has made a habit of secret negotiations in back rooms. Both bodies, according to their own members, were in deep disagreement over just what should be done to the state's education and education funding systems. They were also out of tune with each other, and with Perry, who is now deciding whether to call lawmakers back for a fifth special session.

The school finance session fell deathly ill on its final Friday and was declared dead the following Monday. The state's top three leaders said they were setting up two study groups on education reforms and school finance, each with small numbers of senators and representatives to try to come up with something politically palatable to legislators and to Perry, who nixed the biggest money-raising ideas in both the House and the Senate. The special legislative session called by the governor on school finance ended in dissonance, with legislators and the governor staking out opposing positions on the size of property tax cuts the state can afford, on how much money should be added to the state's education budget, and on whether any or all of that should be paid for with taxes or fees or gambling or some combination of those things, and over the central question of whether to try a big, permanent fix or a patch job that would placate voters and the courts for a couple of years.

The House voted against adding slot machines at racetracks, but left a mess of legislators and lobsters and others wondering if the measure might pass if it was tried again with the right spin on it (that dynamic might change again, with revelations that Perry had the Texas Lottery Commission paying a Las Vegas law firm to draft that legislation before he publicly proposed it or called the session). Sales tax increases were opposed by some legislators, but they can be raised without super-majorities in the House and Senate and are probably still on the table. But sales taxes weren't in the governor's proposal and his chief political consultant famously (at least among Texas politicians) whipped Rep. Tommy Merritt, R-Longview, in a recent special Senate election for Merritt's proposal to raise a basketful of sales taxes to finance big cuts in school property taxes. The property tax cut never made the ads, somehow, and the results gave some lawmakers the heebie-jeebies.

The House tried a payroll tax, but Perry was against it during the session and says he remains so today. The Senate was working on a business tax when time ran out last week that would extend the current corporate franchise tax to almost all businesses, with a deduction for each employee to make it fairer to organizations with lots of workers. The governor hasn't had a straight-up look at it, but his nose is wrinkled. Asked as the session died whether the work done in the House and Senate on broad-based business taxes had changed his view of those levies, he said simply, "No."

Likewise, legislators didn't appear to have any appetite for his idea of splitting business and residential property tax rolls in order to lower residential taxes by 25 cents now and promise businesses a dime now and more relief later. Business taxes, sales taxes and slot machines are the only politically feasible big-money options available to lawmakers. And if the aim is to make significant reductions in school property taxes, some mix of those things will be required.

Sand in the PR Machinery

In addition to exposing fault lines on funding sources, an end-of-session press conference held by Perry, Lt. Gov. David Dewhurst and House Speaker Tom Craddick spotlighted differences between the three on the timing and need for another special session on school finance.

Perry wants a school finance solution voted out before the end of August. That's the last date, according to his aides, that the Legislature could put a constitutional amendment on the November ballot. And if a school finance measure is to include a constitutional amendment and be put in place in time for the tax cuts to be felt by voters before Perry's next election, that constitutional amendment probably needs to be on the November ballot. Perry told a Fort Worth audience last week that he intends to seek reelection in 2006 — a win would make him the first 10-year governor in state history — and he's got two potentially serious opponents. Comptroller Carole Keeton Strayhorn has been loudly critical of Perry for months and is widely expected to run against him. And supporters of U.S. Sen. Kay Bailey Hutchison have been encouraging her to run for governor in 2006. She consistently has said she's not thinking about it, taking care not to foreclose the possibility.

It would be nice, from the governor's standpoint, to deliver a property tax cut to voters in January 2006, when their bills are due, and then ask for their support against any Republican challengers two months later. He said he's willing to stick around on school finance as long as it takes — there's the traditional gubernatorial threat there, to keep calling lawmakers back until they do his will — but said he would prefer not to leave it to the courts. "It will be very difficult to have anything on the November ballot if we wait," Perry said. "If we can come up with an appropriate solution over the course of the next few weeks, then why not do it now, and tell the courts to take a breather, take a vacation, we took care of our own business."

Craddick, meanwhile, told reporters that he'd like to wait for a district court ruling on the current challenge to the state's school finance laws. Such a ruling would give lawmakers a sounding on how the courts feel about the issue, and would also give them an incentive to act. The implication is that they don't have such an incentive at the moment, and that that's why they didn't do anything to solve the school finance puzzle in the last month. "So, with the governor, if we can come up with a solution that we can, both the House and the Senate can agree on, then hopefully do away with the court suit, that would be great. But if not, if we dangle out there, I'm not sure that getting it done right is as important as getting on the ballot in November," he said.

Dewhurst clearly thinks this can all be worked out, and that if senators and House members are tossed into a room and made to work, they'll get a solution. He's with Perry on the August deadline. "I'd much rather lay out a plan now and reach consensus on it that solves school finance rather than being reactive," Dewhurst said. "At the end of the day, we're going to come up with what we think is fair regardless of what the court rules." He had senators burning midnight oil last week in search of a compromise. They didn't reach one, but they didn't fall into noisy disarray, either.

The Senate looked better than the House, but the discombobulation in the lower chamber disguised the depth of dissent among senators, who have some of the same disagreements for some of the same reasons. Some have more districts that import money than export. Some don't like sales taxes. Some like only sales taxes. They were having similar internal disagreements over business taxes, sales taxes, fees, gambling, appraisal caps, and so on. The House gave senators a reason not to vote, or even to expose their disagreements in detail, and they came out smelling like roses. (Dewhurst promised at that fractious press conference that the meetings of the special committees will be open, unlike the Senate's deliberations during the special session, and some of those differences might be more apparent as a result).

What the Senate Didn't Vote On

A week after the House sent them a broken school finance bill, the Texas Senate packed it in, saying they've made progress but have run out of time to wrap up the issue before the Wednesday close of the special legislative session. Senators shuttled in and out of a private conference room working on a volatile mixture of taxes and fees that could put more money into public education and to buy down local property tax rates. But they figured they had to have something out of committee by Friday in order to work it through the full Senate, through the House and then to conference committee, and they weren't close to a deal. Their package never fully gelled, but it included a goulash of things considered in the House and things cooked up in the Senate. It included raising the sales tax by a half cent, to 6.75 percent, and extending that sales tax to auto repairs and car washes.

It would have expanded the corporate franchise tax to partnerships and limited liability corporations, bringing more businesses in, and lowered the rate. It would have added 50 cents to the cigarette tax; that's only half what everybody's been talking about for the last several months, but senators wanted to hold back half of the tax money that smokes will raise for later, so it can be used to fill in a deficit caused by lowering the estimates of Medicaid caseloads last year. Video Lottery Terminals were in the last version, and so were property tax appraisal caps.

But senators didn't have time to get hard estimates of what each tax would raise, or printouts showing exactly how their proposals would affect each of the state's school districts. Without a printout showing what'll happen to the school districts in a particular legislative district, you can't get a Texas legislator to vote on school finance. Several senators said they were nervous about voting for a school finance plan without a clear idea of what the House might be willing to do. They voted for a basket full of sales tax increases and expansions a year ago, and didn't want to go out on a limb with another tax bill without some assurance that the House would do the same.

And the House didn't give them much comfort with its own handling of the school finance bill. Before sending the bill to the Senate, the House voted against slot machines, against its version of a broadened business tax, and against sales taxes on auto repairs and increased sales taxes on motor vehicles. The Legislative Budget Board's legally required analysis of the House bill said it would benefit only 3 percent of Texans — those with incomes above $182,000. Senators sorted through the ashes, considered the House's general inability to reach consensus on anything right now, and decided not to risk a vote on legislation without assurances from the lower chamber.

In With No Consensus, Out with Nervous Jitters

Lt. Gov. David Dewhurst, backed by about half the Senate and faced by the Capitol press corps and an astonishing number of lobbyists, said the Senate will keep working, and he repeated a line he's used throughout the special session, saying the Senate voted unanimously a year ago for a school finance package that never got a serious hearing from the House. "If that plan were in effect today, Robin Hood would be dead, and your local property taxes would have already been reduced by 50 percent." A senator leaned over to a reporter and added: "Thank God that didn't become law."

• Rep. Fred Hill, R-Richardson, told the San Antonio Express-News that two of Perry's ideas — appraisal caps and limits on growth of local government spending — are dead for the year, but will reappear during the special session. Each would require constitutional amendments, and each has enough opposition to make it hard to assemble the necessary 100 votes in the 150-member House. That would fit with one strategy being talked about: If they use sales taxes or modifications of other existing laws to pay for property tax relief, it's possible to do this without constitutional amendments, and thus, to get it through without requiring supermajority approval.

• The confusion and anxiety at the end of the session was such that some House Republicans scurried to Austin on Monday — with no legislative agenda, a day made for playing hooky — on a rumor that the Democrats were going to try to band with renegade Republicans to challenge Craddick's hold on the speakership. That rumor didn't include a specific replacement candidate.

Talking the Talk

The dozen people talking school finance for the House will be split into two committees headed by Reps. Kent Grusendorf, R-Arlington, and Talmadge Heflin, R-Houston, the chairmen, respectively, of the House's public education and appropriations committees.

Everybody House Speaker Tom Craddick is sending into the talks was also a member of the House's special committee on school finance, which recommended legislation that fell apart on the House floor. Craddick, in announcing his appointments, defended education reforms that were included in that legislation and conceded that the biggest obstacle facing legislators is disagreement over how to pay for changes to the system.

Grusendorf will lead an "education reforms" team that also includes Reps. Dianne White Delisi, R-Temple, Helen Giddings, D-Dallas, Bob Griggs, R-North Richland Hills, Carl Isett, R-Lubbock, and Rene Oliveira, D-Brownsville. Heflin's half dozen will work on "revenue reforms". His group includes Fred Hill, R-Richardson, Jim Keffer, R-Eastland, Vilma Luna, D-Corpus Christi, Jim Pitts, R-Waxahachie, and Allan Ritter, D-Nederland. 

The Senate's "Education Excellence" panel picked by Lt. Gov. David Dewhurst will be chaired by Sen. Florence Shapiro, R-Plano. She'll be joined by Sens. Robert Duncan, R-Lubbock, Todd Staples, R-Palestine, Royce West, D-Dallas, Jane Nelson, R-Lewisville, and Frank Madla, D-San Antonio.

The Senate's "Finance Reform" working group will be headed by Sen. Steve Ogden, R-Bryan. His panelists include Ken Armbrister, D-Victoria, Kyle Janek, R-Houston, Kim Brimer, R-Fort Worth, Tommy Williams, R-The Woodlands, and Gonzalo Barrientos, D-Austin. Ogden and Shapiro, like Heflin and Grusendorf, will float between the two panels to keep things coordinated.

Keeping score: That's two dozen people. Two thirds are Republicans. On the House side, one is from the Houston area while five are from the Dallas-Fort Worth area. Two are from west of I-35, two from south of I-10, and one from East Texas. Two represent mainly rural areas, while cities and suburbs dominate. On the Senate side, DFW has four, the Houston area has two (raise it to four if you want to include Bryan and Victoria) and East, West and South Texas are overshadowed by the people in the Dallas to San Antonio to Houston to Dallas triangle.

A Crack in The Conventional Wisdom

The poll done for Texas investor Albert Huddleston included an income tax question that wasn't available to us when we wrote last week: It turns out that, if you surround "tax on income" with the right qualifiers, 55 percent of Texans say they would favor the tax.

The poll, done by Baselice and Associates (Gov. Rick Perry's pollster) six or seven weeks ago, included the result we shared a week ago: 59 percent of the respondents oppose "establishing a statewide personal income tax which would be graduated so the people with the highest incomes will pay a higher tax rate than people with lower incomes."

But it also included a favor/oppose question on "creating a statewide education flat tax which would be an across-the-board, fixed rate tax on income dedicated to public education, and which is deductible from federal income taxes." When they put it like that, 55 percent of the respondents said they'd favor it, against 38 percent who opposed it.

A couple of questions focused on sales taxes. Only 37 percent like the idea of expanding sales taxes to services that aren't taxed, while 59 percent opposed that. Several currently untaxed service providers were mentioned as part of that question: lawyers, accountants, hairdressers, auto repairs, car washes and funeral services. Asked whether they'd like to raise the current sales tax rate, 69 percent said no, even more than were opposed to graduated personal income taxes.

The whole thing is available on a website set up by Huddleston to promote his education funding plans. It's at www.EndRobinHoodNow.com.</ P>

Future Farmers of America & Other Business

Rep. Charlie Geren, R-Fort Worth, says he's considering a run for agriculture commissioner and will make a decision after the regular legislative session next year. Even with the wait, his announcement could come six or seven months before the filing deadline. The early bird election cycle started when the current Ag commissioner, Susan Combs, said she'll be running for comptroller in 2006. She's assuming the post will be open, what with Carole Keeton Strayhorn positioning herself for a stab at higher office (governor, apparently, though she's made no declaration). And Combs said other candidates are free to covet the office she's got now. Rep. David Swinford, R-Dumas, is in for sure. He says he was planning to give up his House seat anyhow and wants to reach for statewide office. Geren, elected to the House in 2000, may be right next to him on the ballot.

• The Texas Public Employees Association is taking this moment to start pushing a pay raise for state workers, saying high turnover rates cost the state an estimated $267 million last year. They attribute that number to the State Auditor, which also says the turnover rate was 17.4 percent last year, and they blame "non-competitive salaries and benefits" for the migration. They didn't play up a retirement incentive program installed by legislators last year to encourage long-term employees to leave state government, but did note the results of exit interviews done by the auditors: 29 percent left for "retirement," while 16 percent left for "better pay/benefits." They're suggesting a $98 million patch to be applied in September, and asking for pay raises of 4.5 percent in each year of the two-year budget lawmakers will write in 2005.

• Vice President Dick Cheney is making Texas a habit. He did an early fundraiser for U.S. Rep. Randy Neugebauer, R-Lubbock (and plans another next month), who is paired with U.S. Rep. Charlie Stenholm, D-Abilene, and will headline fundraisers for three other Republicans challenging incumbent congressmen. Cheney is dragging the sack for former Houston Judge Ted Poe, who's challenging U.S. Rep. Nick Lampson, D-Beaumont, in the newly drawn CD-2; for former Tyler Judge Louis Gohmert, the Republican running against U.S. Rep. Max Sandlin, D-Marshall; and for state Rep. Arlene Wohlgemuth, R-Burleson, who is trying to knock off U.S. Rep. Chet Edwards, D-Waco.

• Gov. Rick Perry pardoned Joshua Sutton, a Houston man released from prison last year after his rape conviction was overturned because of the faulty evidence that "proved" he was the assailant. Sutton, who was innocent of the crime, served four-and-a-half years in prison.

A few days later, Perry cleared the way for the execution of convicted murderer Kelsey Patterson. The Texas Board of Pardons and Paroles voted 5-to-1 to commute the sentence because of Patterson's mental illness, asking the governor to either change it to a life sentence or to delay the execution for 120 days. Patterson, who killed two people in 1992, was 50.

Political People and Their Moves

Ann Fuelberg, a veteran of Texas government from both the inside and the outside, will be the new executive director at the Employee Retirement System of Texas, replacing Sheila Beckett, who is retiring from state government and taking a federal job overseas. Fuelberg is a consultant now. She worked for Transactive Corp. — the company set up to run the state's Lone Star cards for food stamp recipients — and before that headed the state's Department of Information Resources and worked for the comptroller of public accounts. She'll take over next month...

President George W. Bush nominated Texas Supreme Court Justice Michael Schneider for a federal judgeship in East Texas. That goes to the Senate for consent. Schneider, who's from Harris County, would take the post left open by the death last year of federal Judge John Hannah Jr...

Mark Moreno moved from UT M.D. Anderson, where he'd been in government affairs, to UT Medical Branch in Galveston. He'll work mostly on Austin stuff, with some forays into Washington, D.C., as director of governmental relations. Moreno worked in the Pink Building before going to M.D. Anderson almost nine years ago...

Department of Corrections: We made Larry Soward the executive director at the Texas Commission on Environmental Quality in some editions last week; he's a commissioner there. Sorry, sorry, sorry.

Political People: Appointments Division

Gov. Rick Perry named seven people to the Texas Human Rights Commission: Mary Banks of Houston, national director of employee relations for Bank One, as chair; C. Robert Keeney Jr., a Houston attorney; Thomas Anderson of Richmond, human resources director for Fort Bend County; Nila Wipf of Harlingen, who heads a property firm; Patricia Asip, a Plano consultant; Jose de Santiago Sr. of Houston, a former commissioner who runs a steel and concrete company; and Anwar Khalifa, a Tyler homebuilder...

The Guv picked Marisa Rummell of Spring and John Draper of Cypress as directors of the San Jacinto River Authority. She owns a company that makes parts for petrochemical companies; Draper is a homebuilder...

Perry put three new people on the Texas Animal Health Commission: Ralph Simmons of Center, who runs the "live production facilities" in Nacogdoches and Lufkin for Pilgrim's Pride Corp., the chicken company; Coleman Locke of Wharton, who's in the cattle business with J.D. Hudgins Ranch; and Rita Baca Benton of El Paso, an insurance agent...

Gov. Perry named Cliff Mountain of Austin to the Texas Online Authority and tapped current member, Harris County District Clerk Charles Bacarisse of Houston, to chair it...

The Private Sector Prison Industries Oversight Authority is getting two new members: Lillian Barajas of El Paso, a psychotherapist with Catholic Counseling Services; and S. Roxanne Carter, executive director of The Bridge Children’s Advocacy Center in Amarillo. Perry designated Dr. Kathy Flanagan, a Houston psychiatrist already on the board, to chair it...

Bill Ledbetter Jr. of North Richland Hills will join the Texas Workers' Compensation Commission. Former state Rep. Richard Smith resigned; Ledbetter, the human resources director for Justin Brands, will serve through February...

The Texas Commission on Law Enforcement Officer Standards and Education gets four new board members: Midland County Constable Charles Hall; Houston Police Officer Romulo Chavez; retired teacher Betty Murphy of Fredericksburg; and Tyler Police Chief Gary Swindle...

Perry named Laurens Fish III of Austin to the Texas Funeral Service Commission; he's the managing general partner of Fish Funeral Services...

Quotes of the Week

Lt. Gov. David Dewhurst, throwing in the towel 25 days into the special session: "Folks, I'd like to tell you we could get a bill out. But we can't do it."

House Speaker Tom Craddick, after Dewhurst's announcement: "Believe me, I understand the Senate's problem in reaching a consensus. The House has nearly five times as many members."

Sen. Ken Armbrister, D-Victoria, on why things didn't pan out: "Both David Dewhurst and [Tom] Craddick said before we were ever called into special session, 'Let us develop consensus in both bodies, and then we will come and solve this problem. Only one person has the power to call a special session, and it was called without a consensus in either body."

Sen. Florence Shapiro, R-Plano, quoted in the Austin American-Statesman: "It's hard to get 181 people moving without a gun at their head. With a court ruling it might be the impetus that's necessary to get everyone to the table. I hope not. I hope we can do this before January."

Democratic consultant Kelly Fero, quoted in the Dallas Morning News: "Rick Perry searching for consensus was like O.J. Simpson searching for the real killer."

Rep. Toby Goodman, R-Arlington, quoted in the Fort Worth Star-Telegram on House Speaker Tom Craddick and the large number of new representatives: "A lot of them voted lockstep, almost like lemmings, during the last regular session, and now he's lost control of them. He's empowered a bunch of freshmen. He's put them in positions... and now he's dealing with a renegade freshman class."

Sen. Kip Averitt, R-Waco, on a proposal to lower the cap on annual property appraisal increases for homeowners: "Homes of similar values would be taxed at different rates. Is that a problem?"

Harris County Tax Assessor-Collector Paul Bettencourt, urging lawmakers to lower the cap rather than leaving it to local officials: "It's top-down guidelines that actually make a difference."

Analyst John Morton, on a key trend in the newspaper business nationally, quoted in The New York Times: "Their readers are dying off faster than they're being replaced."

Texas Weekly: Volume 20, Issue 47, 24 May 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.