Record Spending, Record Restraint

A $150.1 billion state budget is on its way to the full House, which already approved another $14.2 billion spending plan for school finance. Those bills, along with a "supplement" appropriations bill to patch thin spots in the current budget, would bring state spending for the next two years to about $164.3 billion, up from $144.6 billion in the current budget.

That's an increase of 13.5 percent, largely due to the state's decision to spend more on public education so local school districts can lower local property taxes.

If you toss school finance aside for a moment, the state will spend 150.1 billion over the next two years, compared with $142.4 billion during the current two-year budget. That's an increase of 5.3 percent.

Toss out federal dollars, and this plan would spend $78.6 billion in state funds, up 15.9 percent from the $67.8 billion in general revenue spending in the current budget. Those numbers include school finance; without it, the new budget is $72.5 billion, up 10.6 percent from the current budget. Only $6.1 billion in general revenue is counted toward school finance because lawmakers created a special account for that purpose, and the money in that account isn't considered GR (it's in the Other Funds budget if you're searching for it). Isn't budgeting fun?

The House Appropriations Committee voted overwhelmingly for the budget its members have been working on: 24 Yups, two Nopes, one present but not voting and two actually absent.

The House budget panel left $4.2 billion available and unappropriated — money that could be spent if budgeteers wished. But they want to hold that money, and another $4.3 billion in the state's Rainy Day Fund, for future budgets. For one thing, some of them think the state won't have enough revenue in two years to cover the costs of the school finance plan. Money set aside now, they figure, can be used then to supplement state revenue and keep the property tax promises they've made.

Members raised some concerns about the budget. Rep. Sylvester Turner, D-Houston, said he couldn't find money he thought was earmarked for Prairie View A&M University and that the budgeteers had no assurance from the state's colleges and universities against increases in tuition and fees. Told Prairie View would be taken care of, he said he was skeptical: "If I don't see it, it's not there."

Medicaid providers — doctors and dentists and their ilk — would get increased rates under the bill, restoring cuts made in 2003 and then some. Appropriations Chairman Warren Chisum, R-Pampa, said that would offset some of the expected costs of a Medicaid lawsuit (the Frew case) that's pending in federal court. U.S. District Judge William Wayne Justice will hold a conference with lawyers for both sides next month to start figuring out what the state needs to do to remedy its care of children in those programs.

And some members said they were concerned about the  $102 million added to the budget at Gov. Rick Perry's request for homeland security. There was some confusion about whether the money would be controlled by the governor's office of emergency management or by the police and other agencies that fall under its purview during crises. Chisum said they'd fix the misunderstandings with an amendment later.

The budget includes an increase in the state's contribution to the Teacher Retirement System — to 6.7 percent of an educator's paycheck from the current 6.0 percent — but doesn't include funding for a pay raise for teachers. The pay raise is tucked in the back of the budget in the section for things lawmakers would like to mention but aren't ready to fund.

And it includes increases in provider payments to doctors and to dentists, but nursing homes say they're still getting short-sheeted. The short form: House budgeteers want to use federal Quality Assurance Funds to close the gap between what it costs to keep people in nursing homes and what government programs pay. The nursing home folks say that's a $20 gap, per day, per patient. The QAFs (you'll hear them talking about "quaffs" if you hang around too much) could replace as much as $18 of that. But not all of the money is going to nursing homes. Some of it's being used to bring up the rates for docs and dentists, at least according to the nursing home folks. They say the House leaves them $871.9 million short (including $342 million in state dollars) of what it costs to keep Medicare patients in their homes. That's enough money to provide full-time nursing home care to about 9,500 people for two years.

The bill is online at the Legislative Budget Board's website (it's a big, searchable Adobe Acrobat file). And the summary is here.

Chisum hopes to have the budget on the floor of the House next Thursday. The House will vote before then — as early as tomorrow — on a rule that would prevent anyone from adding spending to the bill without simultaneously removing at least that amount. The aim is to keep the total at or below where it is now, but some members want to tap some of the unspent $4.2 billion that's available for programs that aren't funded in the House budget.

The Maybe Budget

The House left enough money unspent to pay for everything the House put into Article 11 — the wish list at the end of the budget — with $4 billion to spare.

 (That section starts with an explanation of what follows: "... The descriptions and sums represented in this Article do not represent items of appropriation, but reflect the intent of the Legislature that funding of these programs and strategies be given consideration at such time as additional resources become available..."

That 94-page list (take a deep breath) includes money — in some cases, additional money — for the crime victims assistance fund, for the governor's Texas Enterprise Fund, for putting some of the State Archives' records on the Internet, for mental health community hospitals, a rider that would prevent budget money from being used for a mandatory HPV vaccine, for a statewide teacher pay raise, adult literacy programs, construction of state prisons with room for 1,000, a new state crime lab and "border radio infrastructure" for state police, adding an hour to each state trooper's shift to increase force size without hiring anyone, ethanol and biodiesel fuel programs, the Texas State Railroad, a series of local park grants and new funding for Parks & Wildlife, desalination projects, public transportation, a health insurance risk pool, pay raises for agency heads and other "exempt" state employees, a pay raise for all other state employees, a raise for state prison workers in both the adult prison system and the Texas Youth Commission, and contingency riders for a number of bills that haven't passed. The idea on that last one is to set aside money now for bills that are winding their way through the Legislature and that might actually become law after work on the budget is done.

That listing of "items for future consideration" includes some things that could get added to the state budget during the conference committee negotiations between the House and Senate and some things that'll never take effect. And many in that long line of people talking to budgeteers are trying to claw their way out of Article 11 and into the part of the budget where actual money is available. If the whole list were moved into the budget, it would cost $2.7 billion in 2008 and $1.8 billion in 2009. All of which, as we've noted, is available if lawmakers decide to spend all of the money they've got on hand.

How It Feels to Win the Lottery

Take a walk around that table where House budgeteers left $4.2 billion sitting. It's a peculiar thing in a state capitol to see a pile of available, unencumbered money after the budget is drafted.

The loose money, along with the money expected to be on hand in the state's Rainy Day Fund at the end of the fiscal year, totals about $8.5 billion. It's got a kind of magnetic field around it that warps some of the normal rules about state spending.

• It's enough to give each citizen of Texas — from newborns to nonagenarians — a check for more than $3,600.

• It's enough to pay for everything on the "wish list" that's stashed in the back of the budget approved by House Appropriations this week (See The Maybe Budget).

• About half of the money could be spent with the existing spending cap. Put it another way: If you don't count school finance, lawmakers could spend another $4 billion or so without growing the budget faster than the economy.

• That half is enough to lower school property taxes by about 40 cents for one year.

• It would cover the tab for the prison system and the Department of Public Safety — and everything else in that section of the budget — for more than a year.

• It's enough to run the Legislature and all of the state's judiciary for five years.

• It would cover the state's health and human service spending for about five months.

And it presents a political problem for state budgeteers. They have enough money on hand to pay for any number of things they and others want to do. But they don't want to spend everything they've got.

Part of that is fear of school finance. Lawmakers don't really know what the state's new business tax will bring in, and they won't know for certain, once and for all, until spring of next year. But they've promised to spend enough to lower school property taxes to $1, and they want to have some money socked away in case the business tax comes up short. It wouldn't be a complete surprise: Then-Comptroller Carole Keeton Strayhorn told lawmakers when they were working on it that the school finance package was out of balance to the tune of about $25 billion over five years.

Part of it is fear of U.S. District Judge William Wayne Justice. He's in charge of a case brought against the state for not doing its job under federal health and welfare programs for children. The state has lost the case and now it's waiting for the outcome of a conference between the judge and the various lawyers to find out what the remedies are and what they'll cost. Most estimates put that at $500 million annually or less, but some pessimists think the numbers will be much higher.

And part of it is resistance to increases in state spending. Conservatives still run the Legislature and still want to hold the line on increases in the state budget. And they point out that the mound of money available now is about the same size as the deficit they faced in 2003. Budget cuts made then, they say, were more painful than holding the line will be this year.

The stack of greenbacks is tough on another group, too. Gambling promoters generally count on stress to win permission for their games. Tight budget times work well for them. But even times of plenty can work, if legislators are looking for money for large pet projects. But when lawmakers won't even spend the money they've got, it's hard to sell casinos or slot machines as moneymakers for the state. One proposal would use gaming money to send kids to college. Another would fund health care for kids or even for larger groups that include adults. At this point, that's a tough sell.

Racing for the Border

It wasn't too many years ago that a new license for horse racing in Texas was big news — just like a $1 million lotto jackpot. But the Texas Racing Commission granted three new licenses this week with Zero Hoopla, allowing a track in McAllen and two more in Laredo.

Two of the tracks — in McAllen and in Laredo — would be built by partnerships headed by the LaMantia family, which has beer distributorships up and down the Texas-Mexico border.

The third license, conditioned on the sale of a dog track, is also for a Laredo track; it's owned by Maxxam, Inc. — the Charles Hurwitz-run corporation that owns and runs the Sam Houston Race Park near Houston. State law bars companies from owning more than two tracks if their share of either is more than 5 percent, so the company has to sell its Valley Race Park in Harlingen before it can get a license for another track.

The commission granted two licenses in Laredo, apparently in the hope that they'll slug it out and the competition will produce at least one viable operation. State hearing examiners had recommended conditional approval of the Maxxam track, and denial of a license to the LaMantia operation, saying the area wouldn't support two operations. But three years after starting the process for granting a track in Laredo, the state's racing commissioners decided to grant licenses for two.

Maxxam's track would be operated by some of the same people who run the company's Sam Houston track. The two LaMantia groups would bring in the Retama Park management team to run their tracks. Retama is a horse track north of San Antonio.

A license doesn't necessarily mean a track will get built. Two of the original licenses granted by the racing regulators — one in Austin and one in Lubbock — have never been built. The Lubbock license is now owned by a group that wants to build a track in Amarillo. The Austin license belongs to a group that wants to put a track in Fort Worth or thereabouts. The last track built in the state — Lone Star Park in Grand Prairie — opened more than ten years ago.

Flotsam & Jetsam

One of the Pink Building's current rumors has Comptroller Susan Combs telling lawmakers she's planning to lower her official estimate of what the new business tax will bring in. Don't bet on it. Combs has said in the past that she plans to stick with the numbers. Around 4,000 taxpaying companies are supposed to have filed dummy returns telling how much they'd be paying if the tax was already in effect. But fewer than three out of four did so, and there's no penalty, as Combs has pointed out, for lying. That cuts the usefulness of the fake returns for revenue-estimating purposes, and besides, there's no reason for the comptroller to jump in. The move would create two sets of fans, however, which could lead you back to the sources. Group one — budgeteers — would have a better case for holding back money that's available but not spent in their current plans. Group two — rivals of Lt. Gov. David Dewhurst — could increase his anxiety about having to face a future tax bill when he's planning a widely expected run for governor when Rick Perry's done.

• While we're on the subject of the comptroller, a letter from Combs to Rep. Warren Chisum, R-Pampa, gives some leverage to smokeless tobacco companies that want to change the way the state taxes their product. One set of companies wants the tax based on the weight of the stuff. It's currently based on price. But you can manipulate the price by deciding where in the chain of commerce the stuff should be taxed. It was the subject of a lawsuit several years ago, and according to Combs' letter, the state has had to give back refunds to the companies ever since. She estimates refunds this year will total $5.9 million unless the law is changed. It's gone as high as $31.6 million in 2001 and $19.1 million in 2003. She doesn't say so, but the implication is that a weight-based tax would free the state from those refund disputes.

• Here's a weird little tidbit for parliamentary junkies: Most of the bills approved by the House these days have immediate effect. That's because a rule forcing a record vote on final passage of bills has members routinely punching their green lights on third reading. And if more than two-thirds do it — an everyday occurrence under this rule — the bills have immediate effect when they become law. Most of the time, it's not a big deal, but when it is, it is.

• Two of this week's shots at the executive branch are worth noting. The House voted for a constitutional amendment that would bring lawmakers back for veto-busting sessions after regular sessions. That'd give them a chance to override vetoes made after the Lege leaves town every two years. That's on the way to the Senate. Second, the House voted to put a special prosecutor in charge of the Texas Youth Commission investigation. After they did that, a point of order brought down the legislation. But the sentiment was clear, and the bill might be revived.

• Credit political scientist Larry Sabato of the University of Virginia and his contributors for cranking up numbers on the next round of redistricting. If you use the current Census estimates for the U.S. population in 2010, Texas would probably be in line for three more congressional districts, bringing the total to 35.  Push it 30 years out, and they guesstimate a Texas addition of eight seats, making 40 in all.

• Land Commissioner Jerry Patterson says he and Railroad Commissioner Victor Carrillo are forming the "Keep Your Powder Dry" caucus for Republicans who haven't picked or endorsed a presidential candidate yet. They want to hang back and wait for a shakeout.

• Comptroller Combs, who's been called the "cafeteria lady" for her past efforts to get school kids eating healthy food, is unveiling a study on how obesity affects Texas employers. And her successor at the Texas Department of Agriculture, Todd Staples, is pushing plants. His program? "Fruits & Veggies — More Matters."

Political People and Their Moves

Former gubernatorial candidate, congressman and Houston city council member Chris Bell joined Patton Boggs; he'll work in Texas for that Washington, D.C.-based lobby firm.

Former U.S. Rep. Henry Bonilla, R-San Antonio, is President George W. Bush's pick to be the U.S. representative to the Organization of American States. He lost his reelection bid in November. The new gig will require Senate confirmation.

Two more execs left the scandal-wracked Texas Youth Commission. Neil Nichols, the agency's general counsel and briefly, its executive director, and Linda Reyes, the deputy executive director, both quit. Neither's been directly blamed for any of the trouble at the agency, but they were in management when inmates were sexually abused by prison administrators and weren't disciplined. And like the board and others in top management, they're out.

She hasn't said whether or how to get the Texas Tomorrow Fund restarted, but Comptroller Susan Combs is reorganizing the management of that part of her agency. The manager and the accounting manager of that program — Zulay Sanchez and Pent Rector — were fired, and the comptroller has posted one job opening that combines their duties, for a manager who'll make up to $97,000 running the prepaid college tuition program and the related 529 college savings plan. Agency officials wouldn't give a public reason for the firings.

George S. Christian is the new president of the Texas Civil Justice League, succeeding Ralph Wayne, who'll be the tort reform group's chairman. Christian's been the group's general counsel for 20 years.

Laura Stromberg, a former reporter and most recently the spokesperson for Kinky Friedman's gubernatorial campaign, joins NFIB Texas as communications director.

Deaths: Banker and former El Paso Mayor Jonathan Rogers, a political and business player in that city for years, and the force behind a City Hall ban on neckties between Memorial Day and Labor Day every year. He was 78.

Department of Corrections: Rep. Frank Corte, R-San Antonio, is a full Colonel in the U.S. Marine Corps Reserve. We had him at a lesser rank last week because we figured the press release from his office would have the right rank. We missed a correction sent later, and for that we are sorry, sorry, sorry.

Quotes of the Week

Sen. Steve Ogden, R-Bryan, telling the Austin American-Statesman why he's now trying to trim the sails on a toll road and highway-building program he originally sponsored: "What's going on? We had an election, that's what. All we're doing is reflecting what we heard on the campaign trail."

Texas Supreme Court Justice Nathan Hecht, who successfully fought a state judicial sanction, on why the state should pay his legal fees even though he raised the funds from political contributors, quoted by the Associated Press: "So, I can raise the money and be a sleazebag, or I don't raise the money and lose and I'm a sleazebag. So maybe that's not quite a fair system, even for judges."

Micah Sifry, editor of TechPresident, quoted by the Los Angeles Times on "unsigned" Internet ads for and against Hillary Clinton and Barack Obama: "The striking fact today is the knowledge and skill to make a video like this has moved out of campaign headquarters. It is the beginning of something new in politics."

Rep. David Swinford, R-Dumas, telling House members they should drop the idea of automatic special sessions to override gubernatorial vetoes: "I know a lot of people would like to spit in the governor's eye, and this is a good way, and I hope you enjoy doing that… [however,] this is a serious issue we're talking about, this is not fun and games."

Rep. Pat Haggerty, D-El Paso: "We've got a lot of silly rules in this state. That's why we [legislators] come back here every two years — to make more silly rules and undo some of the silly rules we've already got. That's our job."

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Texas Weekly: Volume 23, Issue 38, 26 March 2007. Ross Ramsey, Editor. Copyright 2007 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.