Season's Greetings!

This is the last issue of Texas Weekly for 2004. We're taking two weeks off and will return in the first week of January, in time for the government and political fun to begin all over again. Thanks for your support this year: We appreciate your business and wish you a wonderful holiday season.

Out with a Bang

At slow moments during baseball games, the eyes of the fans are directed to the Jumbotron over center field, where three colored dots (or hats, or cars, or mascots) race around the track. You pick a color, you yell, a dot wins a photo finish, and the team that's behind warms up a new pitcher.

The 2006 gubernatorial race works just like that, with the Legislature in place of the baseball game. The three dots drawing attention — Gov. Rick Perry, U.S. Sen. Kay Bailey Hutchison, and Comptroller Carole Keeton Strayhorn — are ending the year with some sizzle. Though Perry alone has said he'll run for governor next year, the other two Republicans are openly coveting the job, privately checking their support while publicly leaving their plans unannounced. The three only rarely will mention their fellow dots by name, but the targets of the intramural towel snapping are clear.

Perry is ending the year with a string of loud firecrackers, announcing economic development deals, road bonds and a tentative agreement on a contract to build an alternative to the terminally clogged I-35 that stretches from the Rio Grande to the Red River.

The economic development pops include state incentives from the $300 million fund set up by lawmakers to help Perry lure jobs to the state — he announced deals for 9,000 jobs in the last week, and said he wants $600 million for similar deals in the next budget. The companies can spend the money however they please, so long as they deliver the jobs they promise in contracts with the state.

The highway deals will keep Perry in the papers with announcements of $600 million in safety improvements all over the state, and — when it's signed — with details of a $6 billion project to ease the load on the state's busiest interstate. He doesn't mention Hutchison by name when he says it, but he noted this week that the transportation problems would be easier to solve if the state got a fair return on gasoline taxes that go through Washington. Perry said things improved when Phil Gramm was in the Senate, but have slipped. Subtle.

Hutchison is beginning to talk about state issues, and in a provocative way. With many Republicans convinced she and Perry will battle over abortion rights in a primary, she said the state should get in the game with California on stem-cell research. That state's voters approved $3 billion for that research, with boosters saying the products of it would create the next Silicon Valley. Social conservatives don't like that position, but the state's biotech and medical research industries do.

Then Hutchison had a very well-publicized private meeting with a group of El Paso businessmen who wanted to tell her, among other things, that they'd rather not have a contested governor's race now that they're getting attention from Austin for their efforts on Perry's behalf.

Perry's camp has been working to get Republicans to freeze Hutchison out of a race, but according to the best account of the meeting — a report in the El Paso Times — she reacted by denouncing the role of big money in Texas politics. That, for the benefit of a group that has given $800,000 in contributions to Perry. Since federal officials can't accept such contributions, she's free to blast away without looking like a hypocrite.

Finally, Strayhorn shouldered her way in, announcing a special report calling for $1.7 billion in annual pay raises and increased benefits for public school teachers. Her pitch: That tops any economic development package "anyone else" has to offer, since businesses are looking for educated workers and not for tax breaks and a broken school system.

She'd give each teacher a $3,000 annual raise and assure them at least the national average salary each year, and would also put $58 million into a "mentoring" program that would pay experienced teachers to help newbies. That would affect 315,509 teachers, each of whom is old enough to vote in a governor's race.

No Kidding

Here's a website promoting a 2006 candidate for governor of Texas: www.kinkyfriedman.com. And as we were thinking about how that would play, we stumbled on Kinky Friedman's next column for Texas Monthly, and he pointed out the two things we were mulling: Jesse Ventura and Arnold Schwarzenegger. Like Friedman, neither was taken seriously by the political establishment. Unlike the Kinkster, Ventura and Schwarzenegger were in the movie Predator (when you have trivia like that available to you, you have to use it).

Friedman told the San Antonio Express-News he's planning to announce an independent candidacy at the Alamo, on cable TV, in early February.

On the website, Friedman is selling posters and hats and shirts and bumper stickers — along with the CDs and books that made him semi-famous. He apparently hasn't set up an official campaign committee yet, but he's got at least three slogans: "Why not Kinky?", "My governor is a Jewish cowboy", and "How hard could it be?".

This is funny and all, but pay attention: Just because it's gimmicky doesn't mean it should be dismissed. Remember when Victor Morales ran (the first time) against then-U.S. Sen. Phil Gramm? He didn't win, but he did raise questions about the incumbent's political power. That was Gramm's last election before retirement.

Celebs running for office can and will say and do things normal politicians won't, and sometimes, voters are receptive to it. Perry and Hutchison and Strayhorn are all Republicans, but an independent candidate in November — particularly if the Democrats don't field a strong gubernatorial candidate — could be the only alternative to a Republican who's been in the public eye for two decades or more. What seems cute and goofy now is taken seriously in political circles where recent history is full of actors and renegades and mavericks.

Dragging the Sack

Time's up for all but three state officeholders who want to raise political money. State law says they can't raise money during legislative sessions or for the 30 days before a session. The good news is that they can't hit you up for money. The bad news, of course, is that the legislative session is less than 30 days away. The fundraising lid never closes for federal candidates, and they can still chase you and your bank account during the quiet period, even if they're raising the money to run for state office.

The three exceptions are Democratic Reps. Mark Strama of Austin, Yvonne Gonzales Toureilles of Alice, and Hubert Vo of Houston. At the moment, each faces an election challenge from their GOP opponents, and the state's campaign finance law has a loophole that lets them raise money for that fight. The same goes for the three Republicans on the other side: Jack Stick of Austin, Eric Opiela of Karnes City, and Talmadge Heflin of Houston.

If the House orders a new election in one of those contests, the first step will be to declare the seat empty as a result of a November contest that didn't produce a final result. In that case, the candidates would be able to raise and spend money as if they were in a special election. Those challengers start by filing their protests, and then have to write checks to the state to defray costs and show they're serious. All three — Stick, Opiela, and Heflin — have paid up, and their contests are proceeding.

Close, but Not Too Close

Something we wrote last week gave the subject a twitch, and they wish to clarify: Wal-Mart doesn't want to sell liquor from existing stores in Texas, but would like to sell it from package stores adjacent to their current stores. It might seem like a small difference, but the state regulates who can go into a liquor store and what can be sold there and Wal-Mart and others who might be interested don't wish to subject their existing stores to those restrictions. This all follows a large IF. If the state decides to change the laws preventing that arrangement — among other things, if you have a license to sell beer and wine only, you can't get a liquor permit — the company is apparently interested in opening some liquor stores next to its existing discount stores. Texas liquor laws are up for review this year, and Wal-Mart and other grocery and so-called "big box" retailers are lobbying for some changes.

Prosecutors, Dealing

Diversified Collection Services, one of eight corporations indicted by the Travis County grand juries investigating campaign finance in the 2002 elections, got itself un-indicted by agreeing to terms set out in a document signed by reps for the company and the Travis County district attorney (see a copy by clicking here).

The company was charged with making an illegal corporate contribution to Texans for a Republican Majority (TRMPAC), a political action committee set up to help the GOP gain control of the Texas House for the first time since Reconstruction. TRMPAC accomplished its goals, winning a majority, electing a Republican Speaker of the House, and redrawing congressional maps in a way that flipped the makeup of the Texas congressional delegation from 15 Republicans and 17 Democrats to 21 Republicans and 11 Democrats. But soon after the 2002 elections, Travis County prosecutors began investigating allegations of possibly illegal coordination between campaigns and third-party groups, and of the illegal use of corporate money in funding the election efforts.

In September of this year, a grand jury issued indictments against three individuals and eight corporations, including Diversified. The company contributed $50,000 to TRMPAC in June 2002, and the indictment said it wasn't a legal contribution and alleged a third-degree felony against Diversified.

A sidebar here: Prosecutors said at the time that some corporations got indicted and some didn't because of differences in evidence. Corporate money can't be used directly to elect a particular candidate, but it's not clear to anyone who wasn't included in the conversations that any of the corporations involved knew whether their money would be used for legal or illegal purposes. Proof that a corporation knew its contribution was out of bounds would be one example of a difference in evidence between an indicted corporate contributor and an unindicted one, but the prosecutors haven't said just what kind of evidence persuaded the grand jury to indict those eight companies.

Diversified Collection Services admitted no wrongdoing. It agreed to set up internal policies to prevent it from making illegal corporate contributions here or in other states that disallow or limit such donations. It agreed to disclose in its annual reports all political contributions made by the company, showing shareholders what it's up to. It agreed to let Travis County District Attorney Ronnie Earle approve the plan and object if he thinks it's too soft.

The company agreed to do community service and civic involvement chores in lieu of reimbursing the county for the costs of the investigation. And — this is the headline — it agreed to help in prosecutions of other defendants who were involved in the corporate contribution that resulted in the company's indictment in September.

The prosecutors said in their part of the agreement that the company only made one such contribution. They said the evidence indicates the company's contribution was made "on the basis of false and misleading information provided by the fundraiser that solicited the contribution." They noted that the manager responsible no longer works for Diversified. And the company agreed to do a series of education programs "related to the role of corporations in American democracy." The document was signed by Jon Shaver, the company's vice chairman, by their attorney, and by Earle.

Three political consultants — John Colyandro, Warren RoBold and Jim Ellis — were indicted along with the eight corporations in September. Each of the three has worked with U.S. House Majority Leader Tom DeLay, R-Sugar Land, who founded TRMPAC. DeLay has said he's not a target of the investigation, but prosecutors have neither confirmed that nor denied it, saying they're after anybody who broke the law. No deals with those three men or with the other seven corporations named in indictments have been announced.

The grand jury that issued that set of indictments went home, only to be replaced by two grand juries that are still meeting, looking at TRMPAC and other PACs, trade groups, and individuals involved in the 2002 elections. Prosecutors have said they don't think any more indictments will be issued this year, but they are not finished and expect the investigation to continue into 2005.

A Road You Can See From the Moon

They still have to cut a deal, but the first phase of the I-35 Trans-Texas Corridor will be developed by a team that includes Madrid-based Cintra Concesiones and San Antonio-based Zachry Construction Corp. That project includes about 400 miles of road, is supposed to start next year, and the timeline runs from next year through 2055. The corridor could eventually include lanes for cars, for trucks, train tracks, pipelines and other infrastructure in a right of way one-quarter of a mile wide.

• One school finance funding plan making the rounds would put a one percent gross receipts tax on most businesses to raise the money needed to lower local property taxes and put more state dollars into public education. That was among the candidates two years ago, too, along with payroll taxes, video lottery and all the rest. But a business tax opens some other possibilities. Lt. Gov. David Dewhurst hasn't said what specific plan he likes, but has said a broad-based business tax could also be used for other public policy ideas; businesses could be encouraged to pay for employee health care, for instance, by allowing deductions from a state tax for doing so.

• Pollster Jeff Montgomery — who choked up some Republicans with a horserace survey on a Perry-Hutchison governor's race a week ago — is back with more. He asked voters to pick a favorite in a U.S. Senate race between David Dewhurst and Carole Keeton Strayhorn, and says Dewhurst would start with a skinny lead, 42%-37%. The pollsters asked telephone respondents whether they were Republican or Democrat, and these are the numbers they got back from self-identified GOP primary voters. They also asked how Dewhurst would do against former U.S. Commerce Secretary Don Evans of Midland in a Senate race. Dewhurst got 52% to Evans' 18%.

Notice there aren't any Democrats in that head-to-head polling. Now look at the environment for donkeys. The firm asked Texas voters which party they agree with on 16 issues, and Republicans led on 10 issues, tied on three and came in behind the Democrats on only three. Winners for the GOP: promoting a business environment, economic development, "sharing your values", transportation, higher education, spending taxpayer money, "being on your side", improving public education, "caring about people like you", and determining a fair way to pay for public schools. Ties, more or less: helping farmers, helping cities, and helping rural communities. Winners for the Democrats: making health care affordable, making it accessible, and "helping those in need."

• The Texas Supreme Court quietly unveiled a cool tool for judicial watchers who don't live in Austin or just don't get out. Audio links to the court's oral arguments are being posted on the Internet. To tune into your favorite case, go to www.supreme.courts.state.tx.us/oralarguments/audio.asp. They're working through a backlog of older cases, but hope to post arguments from new cases online by the end of the day on which those arguments are made. And at some point in the future, the court hopes to "stream" the arguments live over the Internet. Oyez, oyez, oyez.

• Attorney General Greg Abbott is backing legislative efforts to require more disclosure from private investment funds that have state money invested in them. The private funds don't like to share investment information they say would lay open trade secrets; the legislation would allow them to keep their secrets, but not if they're handling public money.

• Freed but not yet free: Rep. Timoteo Garza, D-Eagle Pass, his mother, Martha Garza, and his father, Isidro Garza Jr., three of the six people indicted as a result of a federal investigation of the Kickapoo Indian tribe and the Lucky Eagle Casino owned by the tribe. Federal prosecutors allege they and others used nearly $1 million from the casino for personal and other reasons, including funneling money into their political campaigns. Timo Garza lost his reelection campaign to Democrat Tracy King — the man he beat two years ago. Isidro Garza, who was tribal manager, lost a 2000 race for Congress to U.S. Rep. Henry Bonilla, R-San Antonio. The three, freed on bond, still face trial...

Political People and Their Moves

Becky Klein, the former Texas Public Utility Commissioner who ran an unsuccessful race for Congress against Democrat Lloyd Doggett of Austin this year, is the new managing principal in the Austin office of Loeffler Tuggey and Pauerstein Rosenthal. The San Antonio-based firm also has offices in Washington, D.C., where Dale Klein — that'd be her spouse — is working for the Defense Department. Politics can make one cynical: Klein, who was Becky Armendariz before she was married, went by Klein at the PUC, then reemphasized her maiden name — as Becky Armendariz Klein — while running in a heavily Hispanic district. Now, in her bio on the law firm's website, she's back to Becky A. Klein...

Gwyn Shea is joining the Schlueter Group, the lobby outfit started by former Rep. Stan Schlueter. They were colleagues in the Texas House, and Shea has also been a constable, a Texas Secretary of State, and a gubernatorial appointee to several positions. She'll start before the session does...

Charles Saunders, formerly a lawyer and chief of staff to state Rep. Peggy Hamric, R-Houston, is joining CITGO in Houston, where he'll be on the lobby team. His replacement in Austin: Meredyth Fowler...

Wendy Lary, nee Wyman, is newly married, moving to Houston, and leaving the governor's policy office (she worked on environment and natural resources issues) to run the government affairs shop at the Greater Houston Partnership...

Ken Whalen is moving up at the Texas Daily Newspaper Association, which named him executive vice president, replacing Phil Berkebile, who's retiring. In spite of the title, the EVP is the guy who runs the joint. Whalen joined TDNA in 2000 and has been lobbying for the group. Berkebile has been at the helm since 1985...

Tim Conger is joining Fleishman-Hillard, a national PR firm, to run their Austin office. He's been running his own firm, Strategic Approach, and before that was at the American Heart Association...

Kathryne Reed is retiring as general counsel at the Texas Department of Agriculture, after working at the agency for 29 years. The new lawyer at TDA is Ellen Witt, who until now was practicing health and corporate law in the Austin office of Vinson & Elkins...

The state's Office of Rural Community Affairs — ORCA — named Charlie Stone as its new executive director. He's been at the agency since 2002 and has also been Refugio County Judge, a legislative assistant, a state highway patrolman and a helicopter pilot in Vietnam...

The state's 34 Republican presidential electors met one afternoon in Austin and cast all of their votes for President George W. Bush. It would have been big news had they done anything else.

More Political People, More Moves

The next president of Texas A&M-Corpus Christi will be Flavius Killebrew, now the provost and vice president of academic affairs at West Texas A&M in Canyon. He's a zoologist by training, but has been working in administration jobs since 1988. He's the sole finalist for the president's post being vacated by Robert Furgason, who'll now head the new Harte Research Institute for Gulf of Mexico Studies...

Robin Hadley, a veteran of the Pink Building who most recently was chief of staff to former state Sen. Teel Bivins, has started a new company that will track the comings and goings of people in and around state government. The Capitol Crowd will be a constantly updated database of officeholders, staffers, lobbyists, and media that'll give subscribers up-to-date information on where people are and how to reach them...

The Republican Party of Texas adds Kevin Lindley as political coordinator. He won't be the political director — a position left open when Jeff Fisher became executive director. Lindley ran Railroad Commissioner Victor Carrillo's successful campaign...

Gov. Rick Perry says Lubbock County Sheriff David Gutierrez will be the new presiding officer at the Texas Commission on Jail Standards. That outfit regulates facilities and prisoner treatment at county jails around the state...

We seem to write this every few months, but here we go: Wendy Bengal is leaving the governor's press office to move to the desert. Bengal's husband is a military pilot; his last gig sent the two to Tucson and this time they're moving to El Paso. Bengal came back to the Pink Building between tours to work for First Lady Anita Perry...

The state's Department of Information Resources grabbed a 24-year veteran of the FBI as their new IT Security Director. Bill Perez' main assignment: "to protect the state's information technology infrastructure from cyber attack"...

Deaths: H.R. "Bum" Bright, an oilman, banker, investor, political financier, and one-time owner of the Dallas Cowboys, after a long illness. Among other things, Bright was a big Aggie, chairing the board of regents at Texas A&M in the early 1980s. He was 84.

Quotes of the Week

U.S. Defense Secretary Donald Rumsfeld, fielding hostile questions from American troops in Iraq: "Now settle down, settle down. Hell, I'm an old man and it's early in the morning."

Vince Sollitto, a spokesman for Gov. Arnold Schwarzenegger, quoted in the Fort Worth Star-Telegram after Gov. Rick Perry dealt $20 million to California-based Countrywide Financial to expand in Texas instead of at home: "Many states are clearly seeking to steal jobs from other states and utilize any means possible, including giving away millions of dollars, to do this. What California is focused on is not tax breaks for specific companies, but improving the business climate for all."

Angelo Mozilo, Countrywide's CEO, quoted in the Austin American-Statesman: "We are in all 50 states, and let me tell you that Texas is by far and away the best state to do business in. I love Texas."

Jeff Moseley, who heads economic development for Perry, quoted in the McAllen Monitor on scarce job-training money: "There are some people who think if you train a village of auto-assembly workers, then you get an auto-assembly plant. That is not the reality of the business market."

U.S. Sen. Kay Bailey Hutchison, telling the Associated Press Texas needs a stem-cell research policy to keep up with California's $3 billion research investment: "I think if we are going to stay in the forefront of scientific discoveries, we are going to have to find an ethical way to keep the state-of-the-art experiments on stem cells and how they can displace unhealthy cells in people's bodies."

El Paso businessman Ted Houghton, in an El Paso Times report about a rocky meeting between Hutchison and donors who've given heavily to Gov. Rick Perry and like the status quo: "We have made an investment in the leadership of the state, and we're playing at the highest levels of the state."

Former El Paso Mayor Jonathon Rogers, in that same report: "As far as I know, right now she's a senator. If she decides to run for governor, it will be a different story. I will certainly be on her side."

Writer and musician Kinky Friedman, quoted in the San Antonio Express-News on two possible opponents in the 2006 gubernatorial contest, Gov. Rick Perry and U.S. Sen. Kay Bailey Hutchison: "Paper or plastic -- that's the choice we've got. Kay Bailey would be a ribbon-cutter just like Rick."

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Texas Weekly: Volume 21, Issue 27, 20 December 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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