Gloomy, but Still in the Black

You remember when Speaker Tom Craddick said the state was sitting on a $15 billion budget surplus?

That was only eight months ago. And now, lawmakers, budgeteers, and various soothsayers are telling agencies and other supplicants this Legislature will be writing a tight, tight budget.

The $15 billion was never really a surplus, but the state was in good financial shape and — compared to most other states — remains so.

And part of this is the normal budget whittling that precedes a session: It's easier to say "No" when there's no money than to say "No" when the state is flush.

But the economy, Hurricane Ike, state laws on education funds, federal investigations of state mental facilities and a mess of other details are making it easy to cloud the outlook. There's more here than the usual rhetorical trick.

Comptroller Susan Combs will present her biennial revenue estimate on Monday morning — a day before legislators come back. Nobody's seen it, but the budgeteers expect it to be gloomy.

Some things, they know. Sales tax income is still up, but the rate of increase has slowed considerably. Hurricane Ike will cost up to $2 billion. State law prohibits the state's education endowment from making payments when returns fall below a certain amount over ten years. The market drop triggered that (apparently; the attorney general has been asked to read the law closely to find an out) and the state might not get $1.5 billion to $2.3 billion it expected. The State Board of Education is having a special meeting on Tuesday — before the Legislature meets — to talk about that issue and try to produce something good for budget-writers to talk about.

The state's new business tax underperformed estimates, and the economic downturn could dampen those numbers even more. And the state has a "structural deficit" in the school finance swap approved by lawmakers in 2006. They promised to spend more on local school tax cuts than they are raising with the new business tax. The difference each year — up to $5 billion — has to be made up with other funds.

They'll start with a cash balance of about $2 billion. Two years ago, the corresponding number was $8.8 billion. To a budget writer, that looks like a $6.8 billion hole to fill, since the lower balance amounts to a loss in the amount of funds available at the start.

And whenever you hear someone talk about job growth in the state, know that those numbers figure into the formulas for some federal funds — like Medicaid. The better off we are relative to other states, the lower the matching funds. For budget purposes, that's another leak in the pail.

Texas has about $6.6 billion in its rainy day fund, but that's one-time money, and in a slow economy, anything spent now might not be replaced anytime soon. Budgeteers are — at least at the outset — saying they don't want to spend that money.

Comptrollers and their revenue estimators are always pessimistic — if you make a mistake on the estimates, it's better to be low than high. Go low, and you've got more money than you expected. Go high, and you've got a sea of red numbers. This is an ideal environment for a number-cruncher who wants to make a pessimistic estimate.

Play It Backwards

Joe Straus III is poised to become the first San Antonio speaker of the Texas House in 96 years, the first Baby Boomer in the job, and only the second Republican since Reconstruction. His victory capped a weekend of intrigue that was a tense, unpredictable, textbook case of how fast things can change in politics. Played in reverse, it all looks logical, but every step along the way was fraught with intrigue and uncertainty.

• Straus has a transition team helping to organize his office as he prepares for the vote that will make him speaker of the Texas House next Tuesday. Former state Sen. and Bexar County Judge Cyndi Krier, and former Rep. Clyde Alexander — a Republican and a Democrat — head the crew. Others on the inside: Lisa Kaufman, executive director and general counsel at the Texas Civil Justice League and a former staffer in the Texas Senate and the U.S. Congress, and Denise Davis, a lawyer/lobbyist with Baker Botts and a controversial former House parliamentarian.

• After meeting on Monday afternoon with several fellow conservatives who'd been loyal to current Speaker Tom Craddick, Rep. John Smithee, R-Amarillo, drops his bid for speaker and says he and Rep. Dan Gattis, R-Georgetown, will support Straus. They're the last remaining candidates.

"The numbers became obvious," Smithee says. "We had to get some of our people back, and we went the other way... I knew the odds were very long, so it was either surrender yesterday [Sunday] or try something. I've tried to do it in a respectful and courteous and professional way, and I hope that I've done that."

It turned out that members who'd made the hard decision to leave Craddick and found themselves with a winner in Straus weren't willing to go through the wringer again. Rep. Will Hartnett, R-Dallas, tells reporters that the group of Republicans who'd agreed to support Smithee will drop their opposition to Straus.

• Straus says he's won the support of more than 100 of the House's 150 members.

• Straus holds a press conference in the Capitol Rotunda to announce he's got 93 signatures from members and expects to be elected speaker of the House at the beginning of the session on January 13. "It's time to turn the page and to move to a more positive tone in the House, and that's what I'm dedicated to," he says in front of a bank of cameras and a throng of reporters, staffers, lobbyists and other gawkers that fills the floor, the balcony on the second floor, and a good part of the third-floor balcony. He praises Craddick's service to the state, takes care to say, "this is not a fully completed project," and says he hopes to meet with Smithee to talk about the situation.

Straus also answers reporter questions about his family's gambling interests, saying he'll beware of conflicts: "I'll stay away from it, I'll recuse myself and not allow that to be a distraction."

• Although Straus claims the support of well over half the House, a group of Craddick Republicans — 57, by Smithee's count — agrees over dinner to support Smithee to replace Craddick. They don't release the vote list, but say they considered five candidates before voting to support Smithee, including Reps. Warren Chisum, Dan Gattis, John Otto, and Vicki Truitt. It comes down to Smithee and Gattis and the group votes unanimously.

Craddick tells the group he got out of the race when he realized he couldn't win. And he realized he couldn't win, he told them, when he lost the support of a handful of Democrats who had supported him in the past. His press office issued a brief statement when it was over: "Tonight, Tom Craddick released his pledges for speaker."

Afterwards, Smithee repeats his argument that members who have committed their support to Straus should reconsider now that Craddick is out of the race and Smithee has taken his place as Straus' competition. He and others in the Craddick group say they are concerned that most of Straus' initial support comes from Democrats. Their fear is that he'll be beholden to Democrats rather than to Republicans.

• On Sunday evening, Straus announces he's got the votes to become speaker and releases a list of the 15 Republicans and 70 Democrats who support him. He says he'll hold a press conference the next day. "The needs of special interests and partisanship will take a back seat to doing what is right for our State at this critical time," he says in a press release. "It is time for a new tone and an atmosphere of trust in the Texas House of Representatives. Having received the commitment of a strong majority of my colleagues, it is my goal to restore civility, fairness and transparency to the House of Representatives and its public-policy making process."

• Smithee says the House should have more than two days to decide between him and Straus and makes a play to Straus supporters to reconsider, now that Craddick is out of the race. He claims Gattis' support. "I don't know if it's too late to try to make the case or not," he says.

• Craddick folds late Sunday afternoon, saying he can't get the votes he needs to win a fourth term as speaker. He frees his pledges, knowing Straus has locked up more than half of the members and that his tenure is over. Any other candidate will have to scoop up all of Craddick's voters and persuade some of Straus' to switch.

• Smithee, who's been in Colorado for the holidays, sends papers to the Texas Ethics Commission allowing him to campaign for speaker, joining candidates Craddick, Gattis, and Straus. Straus has been moving rapidly during the last 48 hours to lock up the 76+ votes needed to win in the 150-member House. Gattis has been in the contest for a while, with three other members pledged to him. And Craddick has been trying to get a majority of the votes since the November 4 elections, without success. Craddick has called a meeting with supporters at a downtown Austin steakhouse tonight (a meeting that was on the books before the weekend began). Smithee's play will only work if Straus is short of the 76-vote mark and if Craddick drops out and frees his supporters to go with someone else. If they chose Smithee over Straus and Gattis, that'd be that.

At this point, the arithmetic and the timing appear to favor Straus. Smithee and Gattis are now contending for two groups: Uncommitted Craddick opponents, and people who've been with Craddick to this point but who could become available if they think they're not with a winner. They're after people who don't think Craddick can or should get there and who don't want Straus for whatever reason. The question, with Craddick and Straus working so hard, is whether there are enough votes available to make Gattis or Smithee a viable candidate.

Meanwhile: Conservatives outside the House continue their attacks on Straus, who comes from a San Antonio clan with deep Republican roots, for his family's gambling interests (they own a share of the Retama Park horse track near San Antonio), and for his views and votes on abortion. He sends members an email, saying in part: "As you know I believe in the sanctity of life. I am consistent with existing restrictions on abortion including parental notification/parental consent. I believe exceptions should exist for rape, incest and harm to the life of the Mother."

• Straus works the phones and meets with members on Saturday, while Democrats caucus and collect votes (they reach the upper 50s on Saturday and add a dozen more on Sunday). Craddick and Straus both talk to so-called Craddick Ds — Democrats who've supported Craddick. Six of ten join Straus, followed later by three more.

• Late Friday night, conservatives like David Barton of Wall Builders and Cathie Adams of the Texas Eagle Forum launch email campaigns against Straus, attacking his family's gaming interest and his votes on abortion, parental rights, casino gambling, and homosexuals as foster parents. They express concern about his short tenure in the House and about the fact that most of his supporters are Democrats.

• Eleven Republicans who've agreed to oppose Craddick and to pool their votes behind one candidate meet (ten in person, one by teleconference) at Byron Cook's Austin residence and after three ballots, pick Straus. Burt Solomons of Carrollton got five votes on that third ballot to Straus' six, participants said. The winner, 49, was in third grade when Craddick was first elected to the House in 1968. Straus was elected in 2005. Straus files as a speaker candidate from the meeting at Cook's house. He's been considering a candidacy for weeks, but didn't decide, he told reporters, until he got to the meeting.

Gattis is still in the race, and Smithee is openly thinking about it. Craddick issues a statement: "There are great challenges facing the state, and there are clear differences in experience and philosophy between Mr. Straus and myself. I am confident that I will be re-elected speaker."

• Rep. Brian McCall, R-Plano, files for speaker on Friday afternoon, before the meeting of the 11 ABC (Anybody But Craddick) Republicans. That Gang of 11 includes Cook, Rob Eissler, Charlie Geren, Delwin Jones, Jim Keffer, Edmund Kuempel, McCall, Tommy Merritt, Jim Pitts, Solomons, and Straus.

Before that tumultuous weekend, Smithee says he will decide over the New Year's break whether to run for speaker. He wants to talk to Craddick first. And the week's events begin on Monday, December 29, when House Democrats release five pages of signatures from 64 of the 74 Democrats who'll be in the House this year. They've pledged not to vote for another Craddick term. Craddick aides question the signatures, suggesting some of the signers have also promised to vote for the incumbent. They don't name names, and nobody on the list protests that their name is being used without permission. The ten Democrats who didn't sign became targets for Craddick and for the ABCs hoping to unseat him. And the game is on.

Totalizator

We're keeping this vote sheet handy on the theory that you and we will be referring to it in the future. That's what happened last time, right? A little history: Straus presented 85 names in claiming victory (the list grew later); Craddick, after the 2002 election that put Republicans in the House majority, had 102 on his list. Though both are Republicans, Straus had 70 Democrats and 15 Republicans on his first list; Craddick had 87 Republicans and 15 Democrats on his, six years ago.

Straus' first 85 votes:

Democrats (70): Alma Allen, Roberto Alonzo, Carol Alvarado, Rafael Anchia, Valinda Bolton, Lon Burnam, Joaquin Castro, Norma Chavez, Ellen Cohen, Garnet Coleman, Yvonne Davis, Joe Deshotel, Dawnna Dukes, Jim Dunnam, Craig Eiland, Kirk England, Joe Farias, David Farabee, Jessica Farrar, Kino Flores, Stephen Frost, Pete Gallego, Helen Giddings, Veronica Gonzalez, Yvonne Gonzalez Toureilles, Roland Gutierrez, Joe Heflin, Ana Hernandez, Abel Herrero, Scott Hochberg, Terri Hodge, Mark Homer, Chuck Hopson, Donna Howard, Carol Kent, Tracy King, David Leibowitz, Eddie Lucio, Diana Maldonado, Barbara Mallory Caraway, Marisa Marquez, Armando Martinez, Trey Martinez Fischer, Ruth Jones McClendon, Jim McReynolds, Jose Menendez, Robert Miklos, Joe Moody, Elliott Naishtat, Rene Oliveira, Dora Olivo, Solomon Ortiz, Aaron Pena, Joe Pickett, Paula Pierson, Chente Quintanilla, Richard Raymond, Tara Rios Ybarra, Allan Ritter, Eddie Rodriguez, Patrick Rose, Mark Strama, Kristi Thibaut, Senfronia Thompson, Chris Turner, Allen Vaught, Marc Veasey, Mike Villarreal, Hubert Vo, Armando Walle.

Republicans (15): Dan Branch, Byron Cook, Rob Eissler, Gary Elkins, Charlie Geren, Delwin Jones, Jim Keffer, Edmund Kuempel, Brian McCall, Tommy Merritt, Doug Miller, Jim Pitts, Burt Solomons, Todd Smith, Joe Straus.

Time on Task

Look at the seniority list of serious candidates and the non-candidates who picked Straus at a Friday night meeting in Byron Cook's living room. Ranked by their tenure in the 150-member House: Tom Craddick, 1; Delwin Jones, 3; Edmund Kuempel, 4; John Smithee, 6; Brian McCall, 17; Jim Pitts, 26; Burt Solomons, 33; Jim Keffer, 44; Tommy Merritt, 47; Charlie Geren, 67; Byron Cook, 77; Rob Eissler, 78; Dan Gattis, 80; Joe Straus, 109.

Signs at the End of the Road

The Texas Eagle Forum's Cathie Adams was one of Joe Straus' fiercest critics over the frenzied last weekend of the speaker's race. How do you know the race is over? Her last email.

"Friends, Rep. John Smithee withdrew from the Speaker's race late today. Rep. Joe Straus is expected to be the next Speaker of the Texas House. I look forward to working with the new Speaker and each of YOU in the upcoming legislative session. Thank you for all your help, Cathie Adams"

A couple of days later, she sent out emails alerting her list to a story about gambling interests' role in getting Straus elected.

A Year From Now

Put U.S. Rep. Michael McCaul, R-Austin, on your list of potential candidates for Texas attorney general in 2010. It's not open at the moment, but if it opens up, he'll be among the interested parties. And, we're told, he'll file papers this quarter allowing him to raise state campaign money for that gig.

AG Greg Abbott is looking at possibilities ranging from lieutenant governor to U.S. Senate. The implication there is that Abbott would run for whichever is open if and when Kay Bailey Hutchison resigns from the Senate. If Lt. Gov. David Dewhurst runs for reelection, Abbott would go for the federal deal. If Dewhurst runs for the federal deal, Abbott would run for the state gig. The filing deadline for both races is in the first days of January 2010 — about 12 months from now.

McCaul starts with an empty federal campaign purse, but he's personally wealthy and will be getting an early start raising money for the state race.

Abbott had $8 million in his state campaign account at mid-year. None of that is transferable to a federal account, since the state doesn't limit contributions and the feds do (to $2,300 per person). He'd have an initial advantage in a state race, but would start at scratch in a federal race.

The AG's office is on next year's ballot. Hutchison's Senate seat is up in 2012 — unless she resigns early.

• Semi-related: Former U.S. Senate candidate Barbara Ann Radnofsky of Houston says she'll shut down her political committees for now. She has talked about running for AG in 2010 (she's a Democrat), and might yet do so. But she's going dormant for now.

A Year from Now, Part B

U.S. Sen. Kay Bailey Hutchison started the New Year with a series of fundraising letters dissing Gov. Rick Perry and asking for support for her exploratory committee for governor.

She's thinking about running in 2010 and Perry says he'll be seeking reelection. That sets up a noisy primary a year from March.

"Ten years of one man in the Governor’s office has left challenges unanswered, too little trust and consensus, and too much infighting," she writes in the fundraising letter. "This tone comes from the top and we can do something about it."

She hit some themes you'll probably hear if there's a race, noting that the state budget has doubled over ten years, that "our state government ignores private property rights and property owners in a quest to cover our state with massive Toll Roads," and raising questions about scandals in the Texas Youth Commission and state mental facilities. She attributes the health of the state budget to high oil prices (that's only partly right) and says those won't continue.

She includes pitches from well-known Texans from around the state (different folks are signed on for different regions) and some of them have been Perry supporters up to now. Among the notables: Actor Chuck Norris, former pitcher Nolan Ryan, Houston beer distributor John Nau III, Austin lawyer Pete Winstead, Dallas investor Louis Beecherl Jr., former Temple-Inland CEO Kenneth Jastrow II, U.S. Rep. Kay Granger of Fort Worth, former U.S. Reps. Dick Armey of Flower Mound and Henry Bonilla of San Antonio, former Dallas Cowboy Roger Staubach, former Lubbock Mayor Windy Sitton, Amarillo investor Wales Madden Jr., Joci Straus of San Antonio (mother of speaker-apparent Joe Straus), and a group from Houston that includes Drayton McLane, Edd Hendee, Ned Holmes and former U.S. Education Secretary Rod Paige.

• A semi-related bit on this one: As promised, Democrat John Sharp filed papers on New Year's Day making him a candidate for the U.S. Senate seat now held by Hutchison. That enables the former legislator, railroad commissioner, and state comptroller to start raising and spending money for that effort.

Political People and Their Moves

Former Rep. Dianne Delisi and Heather Vasek, who's been at the Texas Association for Health Care, are joining Delisi Communications, the lobby/PR/strategy firm run by Ted Delisi and Texas Highway Commissioner Deirdre Delisi.

John Howard Jr. leaves Vinson & Elkins to hang a shingle; his Clarendon Strategies will focus on environmental and energy policy.

Damon Withrow, formerly of the Public Utility Commission, is Xcel Energy's new regional government affairs guy. He's replacing Eric Woomer, who left Xcel to join Reliant. Michael Jewell left Direct Energy for Reliant. He and Woomer and Elizabeth Brock will do that firm's Texas lobbying.

Bob Cash is the new director of the Texas Fair Trade Coalition. He's been chief of staff to Rep. Kevin Bailey, who lost his reelection bid last year. Cash was previously with the Texas AFL-CIO.

Harrison Keller — the education policy wonk for House Speaker Tom Craddick — is going back to the University of Texas, where he worked before jumping to state government.

Press Corp Moves: Karen Brooks is ditching print, leaving the Dallas Morning News for Austin's KXAN-TV, where she'll be "digital executive producer," overseeing content on their website and helping with other political coverage... John Moritz, the former Fort Worth Star-Telegram writer whose articles have graced Texas Weekly for the last few months, joins Quorum Report, where he'll write about energy and utilities and such... And the Houston Chronicle moves Matt Stiles from Houston to Austin for the session. He'll cover the local delegation and work on what newspapers call "projects" — stories that require more than a few hours of digging.

Speaker Craddick appointed Don Wood of Odessa to the board of the Employee Retirement System of Texas.

Deaths:J.L. Huffines, a Dallas car dealer, political player and former Texas A&M Regent. He was 85.

Quotes of the Week

Rep. Pat Haggerty, R-El Paso, defeated in the GOP primary last year by House Speaker Tom Craddick's candidate, talking to the San Antonio Express-News about Craddick losing the speakership: "The rich irony is that he and I go out together. Isn't that sweet?"

Appropriations Chairman Warren Chisum, R-Pampa, who supported Craddick to the end: "I'm probably a lame duck budget guy."

Rep. Leo Berman, R-Tyler, telling reporters during the speaker race why he thought John Smithee could attract members who had already promised their votes to Joe Straus: "These are the same people who signed pledge cards for Speaker Craddick. If they violated their pledge card once, they'll violate it again. There's no honor among them."

Amadeo Saenz, executive director of the Texas Department of Transportation, on the fate of the Trans-Texas Corridor, quoted in The Dallas Morning News: "The concept has been diminished. We must recognize the inevitable: The TTC is not the choice of Texans."

Gov. Rick Perry, telling reporters why he went to Iraq to visit Texas troops: "I think it's important for me to see them, to tell them they're doing a great job. I'm the commander-in-chief of the Texas state forces."

Colin McEnroe, a former Connecticut capitol correspondent, quoted in Governing about the shrinking press corps in statehouses: "It's like some French Foreign Legion outpost up there. Everyone around you is dead and you've got six bullets left and 20 people running at you."

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Texas Weekly: Volume 26, Issue 1, 12 January 2009. Ross Ramsey, Editor. Copyright 2009 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.