Something New

A week of Senate infighting closed with a unanimous vote on tax cuts, school finance and education that put Gov. Rick Perry's tax reform package close to completion. But there was something more — Lt. Gov. David Dewhurst got his ears pinned back by a group of (mostly) Republican senators who weren't willing to follow his lead on the key tax cut and education bill.

They've been grumbling for some time. They finally asserted themselves.

A week ago, a proposal to level education spending for more Texas school students split the Senate Finance Committee, prompting a walkout by a handful of Republicans who said it was unfair to districts with higher property values.

Sen. Florence Shapiro, R-Plano, led the walkout after trying to stop further changes. A surprised looking Sen. Steve Ogden, R-Bryan, wouldn't let her proceed, and she responded by leaving, followed by Sens. Kim Brimer of Fort Worth, Bob Deuell of Greenville, Kyle Janek of Houston, Jane Nelson of Lewisville, and Tommy Williams of The Woodlands. Ogden and Shapiro had stood next to Dewhurst a day earlier when the lieutenant governor told a press gaggle that stripping the legislation back to the House version wasn't an option the Senate would consider.

But Shapiro tried to do it anyway, removing everything the Senate had added the bill, including teacher pay raises, high school achievement money, uniform school start dates and a number of education measures. Ogden said he hit the brakes because he thought stripping the bill would kill it, and with it, the chance for a school finance fix in this special session.

(The walkouts included several of the Republicans who were angriest when 11 Democrats left for Albuquerque a couple of years ago to block congressional redistricting. The Republicans were careful to say they hadn't denied the committee a quorum and that work could continue in their absence. That differentiated them from the Democrats, for good and ill: They didn't stop the process, but they didn't stop the proposal they were against, either.)

Shapiro was trying to block an amendment by Sens. Robert Duncan, R-Lubbock, and Todd Staples, R-Palestine, which would have increased the percentage of students in what's called "the equalized system" to 96 percent from 90 percent. It would also have blocked richer districts from adding locally raised money to their own budgets until the poorer districts catch up with them. The poorer districts, in the meantime, would be allowed to use those local enrichment monies. That, according to Shapiro, was unfair. She told reporters she would rather kill the whole bill — including property tax relief and pay raises for teachers — than pass it with the Staples/Duncan proposal on board. And she said she had the votes, too. It turned out she did.

Janek said the bill that started the day treated all the districts fairly and that's why he opposed the changes from Duncan and Staples. Shapiro was blunter: "The purpose of this special session is to deliver property tax reduction and address the court's concerns; not create a personal piggy bank for certain members." She said the amendment created big state obligations in the "out years" — the years after the current budget is over, when more and more students are brought into the system. And she said it wasn't fair to restrict local funds in some districts while allowing them in others.

But after lunch, Shapiro's Half Dozen were back in their seats. The amendment they didn't like was added to the bill, and the committee voted to send it to the full Senate for a vote.

In the days that followed, the arguments — always behind closed doors, as is this Senate's habit — got increasingly personal. Dewhurst at one point wanted the Senate to give up its effort to lower property taxes to $1, saying it was too expensive and couldn't be done with a teacher pay raise; $1.15 was suggested as a doable number. He appeared to be on board with Duncan and Staples, and part of a group that was pushing Ogden to take HB 1 away from Shapiro and sponsor it himself.

But Shapiro had added seven senators to the six who walked out with her, and that Baker's Dozen held together while she negotiated the bill back to something she liked. (The new names included one Democrat, Ken Armbrister of Victoria, and six Republicans: John Carona of Dallas, Kevin Eltife of Tyler, Troy Fraser of Horseshoe Bay, Chris Harris of Arlington, Mike Jackson of La Porte, and Jeff Wentworth of San Antonio.

They wanted the $1 target rate left alone. They wanted to get rid of the bits in the Duncan/Staples package they thought were hard on richer districts. They wanted to shave the 96 percent equity number for fear of its future costs. And they wanted to reinstate the "high school allotment" meant to boost performance in secondary schools. And they got most of that.

As it passed, the bill still had the structural look of the Duncan/Staples package. But rich districts won't have to share any of the four cents they were raising for local "enrichment." Poor districts would get equalizing money from the state (instead of recapture) to make their local enrichment taxes more lucrative. Another two cents could be added to that local money source a year later, also without recapture from the rich districts. The 96 percent number got shaved, but not by much. And a little more than half of the high school money was put back in.

A shuttle diplomacy team led by Dallas oilman and Republican political funder Louis Beecherl and his advisor Bill Ceverha came in to keep the House and the Senate and the governor's office all on the same sheet, serving the same function Tom DeLay served on congressional redistricting a few years ago.

And when they were voting and the Senate's unanimity was again in bloom, we ran into one of Dewhurst's policy folks. He said he had the sheet music for "Kumbaya."

Math of the Future

The most important program in Texas state government is now local school property tax relief. The political promise to voters — a one-third cut in those taxes — is simple to understand and it has a due date. If property owners don't get the right report on the taxes due in January 2008, then the primaries in March 2008 could be bloody.

You can make an argument that Job One next session will be to make sure there's enough money going to that relief; other state programs will be in line.

The legislation originally proposed by the governor's tax reform panel was — in the opinion of the comptroller — out of balance because it raised less money in new taxes than it proposed to spend lowering local school property taxes.

What has already passed and what is well on its way to passing raises the same amount of money, more or less, as the tax reform proposal. But it spends more, on things like teacher pay raises, money to prop up high school performance, and equity between rich and poor schools.

That almost certainly means a bigger gap between spending and revenues.

The state surplus will cover the difference for now, so the politics of the comptroller and the Legislature and the governor's race and all that can be ignored. But watch the numbers going forward. The first real examples of what the new business tax will raise should become available early next year, after the comptroller collects data from the biggest companies in the state (ranked by number of employees, property value, gross receipts, and how much they pay under the current franchise tax).

Certified, with an Asterisk

The only hurdle remaining for Gov. Rick Perry's new business tax is Perry himself.

Comptroller Carole Keeton Strayhorn says the new business tax on its way to the governor doesn't have any math problems and doesn't require the state to spend more than it's got. But she added a note to her certification: "I am certifying the appropriation in this bill as required by the Constitution because it is within available revenue, but I believe portions of the tax enacted by this bill constitute a personal income tax and are unconstitutional."

The tax bill spends hardly any money. It kills the current corporate franchise tax and replaces it with a levy on adjusted gross revenues of corporations and partnerships in the state. Businesses can choose what they deduct — either their cost of goods sold, or their (most) employee compensation. Most would pay the state one percent of what's left after that calculation; retailers and wholesalers would pay 1/2 of one percent.

Perry and former Comptroller John Sharp, who headed the gubernatorial commission that came up with the tax, say it's not an income tax for the simple reason that companies would have to pay it even in years when they don't make money. Strayhorn and some lawyers say that the tax on partners in law firms and other outfits makes it a personal income tax. Perry and Sharp are relying on legal opinions that say the tax applies to the partnerships and not to the individual partners and dodges the bullet.

The attorney general's first assistant, Barry McBee, sent a letter making that argument to Perry's office. But Strayhorn has asked AG Greg Abbott himself to issue a formal letter opinion on the subject. That request is still pending.

Session Notes

While they were in their back rooms working out their school finance differences and calling each other names (lots of them commented on the words that were heard), Texas senators took a couple of politically dangerous objects off the field of battle. They won't rescind a $500 stipend for non-teaching school employees, and they made sure their version of HB 1 won't block purchases of math textbooks designed to parallel the state's required standard tests for public school students. Teachers got their full stipend restored; it's the last $500 of their $2,000 pay raise.

• The legislation sets the start date of the school year as the last Monday in August — with no waivers for districts that want to start earlier or later (an effort to push that start until after Labor Day fizzled, but you'll probably see it again).

• The governor added tuition revenue bonds for colleges and universities, and $34 million in hurricane help for the Lamar University System and the electric industry to the Legislature's list of legal actions during what's left of the special session. The schools want money to build new buildings and such, and would use tuition revenue to cover the debt, if it's approved. Lamar needs money to fix Rita damage. And the governor wants lawmakers to consider legislation that would allow electric companies to borrow or raise rates to pay for hurricane reconstruction.

• Hey, smuggling might be profitable. One of the arguments against a big increase in taxes on cigarettes is that the cancer sticks are cheaper on the other side of the Texas border, whether you're talking about the four U.S. states that border us or the four Mexican states that touch Texas. Sen. Eddie Lucio, D-Brownsville, laid out the business plan for the bad guys: "Currently, a carton of cigarettes costs $10 in Mexico; if this bill passes, a carton will cost more than $50 in Texas. A $40-per-carton profit is a pretty strong incentive for smuggling. A smuggler could clear over $1 million a truck." He calls it an unfunded mandate on local law enforcement on the border.

• A lobbyist who demanded anonymity was caught carrying around an "amendment" to SB 6 — the Senate's catch-all bill that started as an effort to fix errors in other bills. The amendment would strip the caption of the bill and replace it with this statement of purpose: "Relating to diverting attention away from HB 3 and giving the lobby a vote to satisfy their clients."

Rulemaking

The bills from the state's new business tax won't come due for two years — in May 2008. But, assuming Gov. Rick Perry signs HB 3 into law, some companies will pay that tax based on the business they do next month.

And the state tax collector's rulemaking process will start up right away, a development that makes practical sense. But it also puts the political people on high alert.

Every business paying the new tax will be paying at the same time, but not all businesses work on calendar years, and a few are already in their fiscal versions of 2007, the first tax year of the new legislation.

That's at least part of the rationale for setting the wonks at the comptroller's office loose on the tax bill right away, even though they're working for a comptroller — Carole Keeton Strayhorn — who won't be in that office after the first of the year.

Taxpayers with an interest in the rules could get stuck between the outgoing comptroller, who's running for governor, and the incoming comptroller — either Texas Agriculture Commissioner Susan Combs, the Republican, or former state Rep. Fred Head, the Democrat in that race. They want to be involved in the process — definitions and interpretations are everything in tax law — but they have enough trouble without choosing sides, or appearing to. They'll play, on eggshells.

A spokesman for Strayhorn, Mark Sanders, says she'll have the rulemaking process up and running in a couple of weeks. Comptroller staffers are already talking about how to set up the new tax, how to collect it, how to explain it. But first, they have to write the rules that'll put the law into operation.

Republican political types, already off the Strayhorn brand since she declared as an independent against Perry, are urging Combs to say she'll review or rewrite all the rules if and when she's elected. But the bill doesn't even have the governor's signature yet, and she's staying out of it for now.

A Throng of Non-Voters

Comptroller Carole Keeton Strayhorn took petitions with 223,000 signatures to state election officials, saying she has far more than the 45,540 needed to get on the ballot as an independent.

And the number of signers aligned with Kinky Friedman is... 169,574. Friedman delivered his boxes to the Secretary of State a few hours before the deadline, completing the first phase of what we've been calling the Middle Finger Primary.

Our unofficial Spin of the Week award goes to Robert Black, a spokesman for Gov. Rick Perry's reelection campaign. His press release reacting to Strayhorn's numbers said she only managed to attract 1.9 percent of the voters eligible to sign her petitions.

The reason so many voters were eligible to sign petitions is because so few showed up at the primaries thrown by the two major parties. But so you'll have the numbers on hand to settle bar bets, Perry got 552,545 votes in his primary, and Democrat Chris Bell got 324,869 in his primary.

Friedman didn't turn in signatures until high noon on the day they were due. His operation didn't include any conventional media — television, radio, and newspaper advertising, or apparently, direct mail. But he had three Internet spots, a lot of free media (that's what political ops call news stories on campaigns), and he did a lot of traveling around to generate interest.

The campaign also had some serious infrastructure. They were already organized in 60-some-odd counties in December, before they were allowed to collect votes. Assuming all the signatures are valid, they got 3.7 signatures for every one they needed. Strayhorn got 4.8 for every one she needed. More importantly, the two candidates together brought in 392,574 — well over the number of votes Bell got in a major party primary.

Secretary of State Roger Williams now has the job of verifying that one or both of those candidates got enough legitimate names to win a place on the ballot. Williams is a Perry appointee, which raises the levels of paranoia in the independent camps. That led to federal court, but the courts stuck with Williams. The state can check names on petitions from independent candidates one-by-one if it wants to, according to U.S. District Judge Lee Yeakel. Strayhorn sued to force Williams to use sampling to check the petitions she turned in. It's faster, and it gets her back into the campaign and fundraising game more quickly (it's hard to raise money from people who are waiting to see whether you're really going to have your name on the ballot).

Williams said he wanted to look at each name on the petitions turned in by Strayhorn and Kinky Friedman, to be sure either or each has the needed 45,540 registered and otherwise uncommitted voters. The law gives him the option, and so did the judge.

Strayhorn claimed a partial victory. In court papers, Williams trimmed his estimate of how long it will take to make sure the names are valid to "several weeks."

Friedman did that one better; his filing with Williams included a CD with the data on his petitions already entered. All the SOS has to do is run that against its database (after making sure it matches the petitions).

• Strayhorn brought in another 5,800 signatures in a second batch on deadline day, but Williams wouldn't accept them. Under state law, the petitions have to come in with the application, and she brought in the application on Tuesday with the first 223,000 signatures. That'll get counted, but the late stuff won't. She'd have been able to include the 5,800 had she held all of her stuff until the deadline. It cost her to release them earlier, but there was an ulterior motive: She swamped the news that Democrat Chris Bell had outrun her for the AFL-CIO endorsement.

The 500 Club

It's hard to get on the ballot as an independent candidate for governor, but non-party candidates for other offices have fewer obstacles; it only takes 500 signatures to get on the ballot for a spot in Congress, for instance. So there are more of them, and with less hoopla.

The non-gubernatorial list, from the Secretary of State's office, includes U.S. Senate candidates Robert Belt and Arthur Willis Loux; CD-3 candidate Bob Hise (the incumbent is Republican Sam Johnson of Plano); and HD-17 candidate Harold Pearson (the incumbent is Democrat Robby Cook of Eagle Lake). The best-known name on the list is in CD-22, where former U.S. Rep. Steve Stockman will be on the ballot with former U.S. Rep. Nick Lampson, a Democrat, and a Republican to be named later in the race to replace Tom DeLay, R-Sugar Land, whose resignation will be official on June 9.

Labor Sticks with the Democrat

Democrat Chris Bell won labor's endorsement at the annual COPE convention of the Texas AFL-CIO. He had to fight to win it. Comptroller Carole Keeton Strayhorn courted the group for weeks and already has won support from some teacher and public employee groups. That wasn't enough. To get the endorsement, a candidate has to win support from two-thirds of the delegates.

Kinky Friedman also spoke to the labor reps; Gov. Rick Perry declined their request to speak at the convention. Bell's speech included some boilerplate, but its core was his first real attack on Strayhorn, who was, after all, his only real rival for labor's endorsement. He attacked her for a long list of recommendations she's made to privatize government services and said she backed several of Perry's proposals "as long as it suited her political plans."

• Land Commissioner Jerry Patterson, who's running for reelection, is the first statewide Republican to win the endorsement of the Texas AFL-CIO. All the rest of labor's endorsements went to Democrats. Patterson was the only Republican, apparently, to seriously seek the endorsement, though the labor folks say they invited everyone.

• Ready to think about November? Those elections are only six months away, and Texas Secretary of State Roger Williams has posted a side-by-side list of Republican and Democratic candidates in the November elections, with blanks for Libertarians, independents, and others to be named later. It's on that agency's website.

Political People and Their Moves

Tracye McDaniel's old boss lured her to the Greater Houston Partnership; she's leaving the economic development and tourism department in the governor's office to rejoin Jeff Moseley in Houston. Moseley was head of the state's economic development before he moved east. McDaniel will be GHP's chief operations officer starting next month.

Gov. Rick Perry appointed Welcome Wilson Sr., chairman and CEO of GSL Industrial Holdings and a real estate developer, and Jim Wise, managing member of Haddington Energy Partners III, as trustees of the University of Houston System. Both men are alums.

The Guv named Govind Nadkarni of Corpus as presiding officer of the Texas Board of Professional Engineers. He's vice president at Maverick Engineering and founder of Govind and Associates.

Perry appointed James Ratliff, a Garland appraiser, to the Texas Appraiser Licensing and Certification Board, and reappointed three others to that panel. The returning members are William "Rusty" Faulk, a Brownsville attorney, Larry Kokel, a Walburg appraiser, and Shirley Ward, an appraiser from Alpine.

Bells will be ringing: Democratic consultants Jeff Hewitt and Eleanor D'Ambrosio are getting hitched Saturday. He's still a consultant; she's now chief of staff to Rep. Donna Howard, D-Austin.

Deaths: Former state representative, movie star, and Aggie football sensation John Kimbrough of Haskell. He was 87.

Quotes of the Week

Sen. John Whitmire, D-Houston, after a fitful day with the Senate Finance Committee: "We're trying to get Iraq to go to this system."

Democratic gubernatorial candidate Chris Bell, speaking at an AFL-CIO convention: "Carole Strayhorn speaking to a labor convention is like Godzilla running for the mayor of Tokyo."

Lt. Gov. David Dewhurst, quoted in the Houston Chronicle when the session still had a week to go: "One of the problems we have is that we've got too much time remaining. When we get closer to a deadline, people work faster."

Roger Williams in the Midland Reporter-Telegram on whether he'll seek statewide office: "I love public service. I'm not going to close any doors if they're open."

Kinky Friedman, asked why Carole Keeton Strayhorn got more signatures than he did, quoted by the Associated Press: "Of course she got more signatures than we. She had all her ex-husbands sign."

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Texas Weekly: Volume 22, Issue 44, 15 May 2006. Ross Ramsey, Editor. Copyright 2006 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 (512) 302-5703 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.