Magical Accounting

It's 1983. Oil prices are in the toilet. The Texas economy is suddenly and unexpectedly reeling. Lawmakers, who happen to be in session, have a choice between big cuts or new taxes or something creative. Comptroller Bob Bullock and his top propeller-heads find a creative out — a way to balance the budget without big cuts or tax hikes.

They changed the due dates of the taxes already in place, borrowing from the future by speeding the arrival of money that wouldn't have been available under normal circumstances until the next budget period.

In another budget crunch just a few years later, they did the opposite, slowing payments due in the current budget a day — into the next budget. Lawmakers decided to pay state employees on the first day of the month instead of the last day of the month. That moved the last payment of the budget period into the next budget period, lowering what was needed immediately and making it easier to match costs with lower revenue.

No taxes. No cuts. Just some accounting and collection tricks. When lawmakers — now in the early stages of exploration into a budget shortfall that, on the low side, will total $11 billion — return early next year to construct a balanced budget, they'll look to timing maneuvers to cover the first $2 billion or more. It's a time-tested solution.

"I would rather see reductions made," says Talmadge Heflin, a former House Appropriations Committee chairman who now works for the Texas Public Policy Foundation. "But if they have no other choice than raising additional revenue..."

The state's accounting tricks really came into their own in 1991. That's right: Another budget crunch, one so bad that lawmakers approved a new tax bill, some "efficiencies" in existing programs, the state lottery, and hundreds of millions of dollars in "smoke and mirrors" budgeting that moved costs out of the troubled period and into a future budget. They delayed the state's payment to local school districts by a day, "saving" an astonishing amount of money. They held money in the general fund that was destined for state highways a little longer than usual and delayed other payments that would ordinarily come due in the last days of a biennial budget.

A few years later, lawmakers "repaid" the money they'd borrowed from themselves. A simple way to think of it: Over two years, the state makes 24 monthly payments from the Foundation School Program for public education. If they're writing a tight budget, lawmakers can — and have — delay that 24th payment into the next budget. They only make 23 monthly payments in the current period, and the budget can be balanced, in part, with that extra money. Things get better, the economy improves, and lawmakers write a budget "correcting" their earlier sleight of arithmetic by putting 25 payments — one more than ordinary — into a budget. And when things get tight again, they've got their trick ready to go again.

It's ready now. State budgeteers expect the gap between revenue and current service spending to be somewhere in the $11 billion to $20 billion range, a classic money trap that leads to conversations about taxes, spending cuts, expanded (and taxable) gambling, using the Rainy Day Fund and new federal stimulus programs.

And cheating, too. The budget writers could erase $2 billion or more of tough political decisions over cuts or taxes with accounting tricks. And when you get down to it, it's a victimless crime. "Obviously, it's easier (than the alternatives) — it's invisible to the public," Heflin says.

Delaying the school payment by a day would chop $1.4 billion from the total. That's instead of trying to cut that much from a program or to raise that much with a new tax. It's politically easy, and so it'll be at the top of the list when it's time to balance spending and revenue. Delaying payments to the employee and teacher retirement systems, Medicaid payments, and transfers of gasoline taxes into the state highway fund — all will be on the table.

The danger is a slow economic recovery. The timing games are one-time solutions, based on the idea that you can delay the fiscal worries until things get better, hopefully within two years. If it takes longer, you're in trouble. "It's a gamble," says Dale Craymer, president of the Texas Taxpayers and Research Association. "It works great if revenues recover and you grow out of the problem."

Moving up the tax due dates probably wouldn't work again. When that was done, sales taxes were due at the end of the month. Taxpayers knew that so long as their checks were postmarked in time that the money didn't have to be in the state's hands on time, and they could make money on the float. Moving the due date back ten days meant that most checks landed in the state coffers before the end of the month, and that's why it helped duck a tax bill three decades ago. With electronic filing, that sort of trick doesn't work anymore. Likewise, some of the spending tricks aren't there. The state never returned to paying its employees on the last day of the month, so that one-time delay is no help now.

Billy Hamilton, now a consultant, worked for Bullock in 1983 when the comptroller cooked up those changes in tax deadlines and got these games started. And he was there when another comptroller, John Sharp, expanded the use of delayed payments in 1991. "We used to say that 'on the last day of the state,' you know, when Texas goes out of business or whatever, someone will have to write a check before they turn out the lights."

What Happens in Arizona...

It's no surprise that Arizona's new immigration enforcement law is unpopular with Texas Democrats. But it's hard to find a high-ranking Republican in the state who'll endorse it, either.

Some lawmakers are all for it. Republican Reps. Leo Berman of Tyler and Debbie Riddle of Tomball say they'll file identical legislation when Texas lawmakers convene in January. Similar proposals have been filed — and left for dead — in previous sessions.

The ripple effects from the Arizona immigration bill have spread throughout the Southwest and could climax in Texas this weekend. Marches in protest to the bill and to champion for comprehensive immigration reform are scheduled in many of the state's major cities.

We asked some statewide officeholders and their challengers about the Arizona law to see where things stand now, at the beginning of the general election cycle that will precede the next session of the Legislature.

Gov. Rick Perry and his Democratic challenger, Bill White, both say the federal government isn't doing its job. White's flatly against the Arizona bill. Perry says he's got problems with it, too. Both spoke through staff or in press releases.

Perry started off his statement by saying the feds have failed to do their job on the border, but he added, "I have concerns with portions of the law passed in Arizona and believe it would not be the right direction for Texas."

He said law enforcement officers have enough to do without having immigration enforcement to worry about. "Our focus must continue to be on the criminal elements involved with conducting criminal acts against Texans and their property," Perry said in a press release.

He says he's asked the federal government for 1,000 National Guard troops to help police with border enforcement, and also for drone aircraft that can be used to monitor the border (Homeland Security officials say that air surveillance is coming soon).

Aides to White said he's against Texas having a law like the one recently signed into law in Arizona. And his reasoning is, in part, similar to Perry's, that "we can't have police officers taken off of answering 911 calls in order to stop cars on the street or ask for people's papers in a restaurant," said spokeswoman Katy Bacon. "... And how would police work to enforce this Arizona law, say, in a restaurant without racial profiling? Ask everyone to produce their passports and birth certificates?"

Linda Chavez-Thompson, the Democratic nominee for lieutenant governor, didn't have anything good to say about the new law in the West. "We learned from what happened in Arizona last week that the promise of the American Dream is not a guarantee. We have to defend it. The law they passed in Arizona is not only anti-immigrant; it's anti-American," she said. "This law doesn't distinguish between criminal and undocumented. It doesn't distinguish between undocumented and citizen. And it ignores our history — because the founders of this country were not afraid of immigrants, they were immigrants. And their dream wasn't to raise the power of the state, but to safeguard the rights of the individual."

Chavez-Thompson said the Arizona statute will cost that state's economy, and that police are against it. "I'll fight to ensure that Texas rejects the advice of those who don't understand economics, who refuse to listen to law enforcement, and have little respect for the rights of citizens to be free of police harassment," she said.

In his official statement on the question, Lt. Gov. David Dewhurst never said whether he agrees or disagrees with the Arizona law. "I understand the frustration of the people of Arizona with the federal government's failure to secure our borders and stop illegal immigration, drug trafficking and dangerous transnational gangs coming across from Mexico. Texans are frustrated too... While Texas is doing its part, I think the federal government should do theirs by dramatically increasing the number of border patrol agents to secure our borders once and for all."

The state's attorney general will have to enforce whatever the Legislature and the governor decide to do

Attorney General Greg Abbott hit all the talking points, spanking the feds, noting legal concerns with the new law, and saying the state will protect you. "The Federal Government's primary job is to protect our borders and the safety of our citizens — and they aren't getting the job done," Abbott said in a press release. "Even President Obama acknowledged that Arizona acted out of frustration because of the federal government's failures. There are legitimate concerns with the Arizona law and while those are sorted out, Texas will continue demanding that the federal government stop dithering while Texans' safety is at stake. In the meantime, Texas is redoubling its efforts to provide resources — including personnel and technology — to protect Texans and secure our border."

His Democratic opponent, Barbara Ann Radnofsky, strongly opposes Arizona's approach. "The Arizona law should be declared unconstitutional," she said. "Any similarly worded Texas law should also be declared unconstitutional. The government should not be in the business of violating individual U.S. citizen's rights, regardless of the citizen's appearance. The sitting Texas Attorney General, consistent with his belief that he has the power to sue the federal government for fair treatment of Texas should now insist that Texas receive its fair share of federal funding and assistance for enforcement and security. Texas taxpayers should not bear the burden for enforcement and border security, including our vital ports."

Agriculture Commissioner Todd Staples didn't respond to requests for comment. But his opponent, Democrat Hank Gilbert, said the Arizona law would be expensive for people in agriculture.

"If you want to talk about driving up food costs, slashing tax revenues, and damaging our economy, then Leo Berman's bill is exactly what you want," Gilbert said. "I cannot imagine someone proposing something so irresponsible or damaging to Texas agriculture."

According to Gilbert, some of Texas' agriculture labor costs are currently as high as $26.50 per acre, which he said would undoubtedly increase after wages rose in response to the bill.

"The fact of the matter is this: undocumented immigrants make up a significant segment of the agricultural labor force in Texas. These men and women help Texas grow food not just for our state, but also for the rest of the nation. If you take away their ability to move freely within our society and survive without being under constant threat of police action, they will go somewhere else for jobs," Gilbert said.

"I personally do not want to live in a state where Hispanic Americans are constantly stopped and asked for their 'papers.' It is reminiscent of living in Nazi Germany or the Soviet Union where identity papers were required at all times. Texas doesn't need that," he said.

Mother-in-Law Plan

Debra Lehrmann may have violated campaign finance laws during her bid to become the Republican nominee for the Texas Supreme Court, according to a complaint filed with the Texas Ethics Commission.

Texans for Public Justice says $20,100 the Fort Worth district court judge received from her mother-in-law, Norma J. Talley, appears to flout the Judicial Campaign Fairness Act's $5,000 cap on individual campaign contributions and "may have shaped the outcome of the race for the Place 3 open seat." The law excludes immediate family members — defined as children, parents, siblings, grandchildren and grandparents — as well as bank loans from the limits imposed by the act.

When she advanced to the Republican runoff with former state Rep. Rick Green, R-Dripping Springs, Lehrmann raised nearly $280,000 to defeat him. She is competing in the general election with Democrat Jim Sharp, who sits on Houston's 1st Court of Appeals.

Lehrmann said she had just gotten word of the complaint. "Of course, we certainly did not intend to violate any ethical rules," she said, "And if something inadvertently happened, we will correct it immediately." If the ethics commission finds her in violation, Lehrmann could face a fine of up to three times the amount the contribution exceeds the $5,000 cap — or up to $45,300.

The Week in the Rearview Mirror

The new anti-immigration law signed into law by Arizona Gov. Jan Brewer continues to generate a firestorm of comments, polls, protests and debates. While some question the constitutionality of the new legislation, others think that the federal government's inaction on the question of immigration has left the states with very few options. Texas lawmakers have spoken out for and against the Arizona law, and are some are speaking up about their plans to introduce similar measures when the Legislature convenes in January. Rep. Debbie Riddle, R-Tomball, told the Houston Chronicle that she introduced a similar bill in the last legislative session and plans to do so again in the upcoming session next year. Protests marches organized by various civil rights groups have been planned in Dallas, San Antonio and Austin. Other groups are promoting an economic boycott of Arizona, posing potential damage to the state's recovering tourism industry.

• Border violence continues to plague the El Paso-Juarez area. The El Paso Times reports that four men were gunned down outside a supermarket in Juarez on Tuesday, and five more were killed in an attack at a Juarez home. This follows news that seven police officers were attacked on Friday after stopping to help a man who flagged them down. A bystander was also killed in that attack. Although five men were arrested in the slayings of the police officers, they claim to have taken orders from the two who remain at large. The raging drug cartel war shows no signs of slowing as the total number killed since 2008 now tops 5000.

• The Texas Court of Criminal Appeals cleared the way for the prosecution to proceed in the money-laundering cases against two former Tom DeLay associates. John Colyandro and Jim Ellis have been fighting the case since 2002 on the grounds that the statute being invoked applied only to cash. The charge leveled against them involved the transfer of $190,000 to the Republican National Committee and then back to the state organization in the form of a check. The court today ruled that the same rules apply, whether the funds are cash or check.

• Among the many issues Rick Perry and Bill White disagree on is how to calculate the dropout rate in Texas. They're not alone: the TEA itself uses three different rates and each one paints a substantially different picture. Perry uses the TEA dropout rate of 10.5 percent, while White quotes the attrition rate of 28.6 percent, a measurement of how many students beginning 9th grade did not graduate on time. Those numbers are clouded by the U.S. Department of Education, which reported that Texas had a graduation rate of 72.5 percent last year, making the graduation rate well below the national average of 73.4 percent. We did our own rundown of what the numbers all mean last year.

• More groups are speaking out on the social studies curriculum being proposed by the State Board of Education. African-American and Hispanic state legislators held a hearing to consider the "whitewashing" of history, as the standards were widely perceived to remove references to minorities. The head of the SBOE, Gail Lowe, turned down a request to address the group about the revised standards. The outcry also led to a student rally at the University of Texas on Sunday where student protesters carried signs saying "Save our History"; also the name of the coalition they have formed. They were joined by Austin Democratic Reps. Mark Strama and Donna Howard. Strama's offered a strongly worded caution to the state that Texas would have trouble continuing to recruit businesses if the educational system is perceived to be driven by ideology.

• When does an oversight panel need oversight? The nine-member Texas Forensic Science Commission, charged with investigating complaints of forensic misconduct, faded from the spotlight following the replacement of its chairman in October, just two days before members were to take up the controversial case of Cameron Todd Willingham. At their quarterly meeting in Irving on Friday, they didn't have much to report on their review of the case and instead spent their time discussing the backlogs in forensic laboratories. The only action on the case was the appointment of Fort Worth attorney Lance Evans to a formerly three-person subcommittee. The new subcommittee will not be subject to the Open Meetings Act, and its hearings will not be required to be accessible to the public.

• This week saw several former and current public officials sentenced for their parts in bribery, theft and general financial shenanigans cases. Former state District Judge Carl Prohl struck a deal for probation, a fine and community service, along with the forfeiture of his law license to avoid jail time for felony theft. In the same judicial district, former District Attorney Roy Sutton of Junction pleaded guilty to two counts of misapplication of fiduciary property leading to his plea deal of two years deferred adjudication and a fine. Meanwhile, in a Dallas courtroom, former Rep. Terri Hodge, a Democrat, was sentenced to a year in prison for falsifying tax returns, which came to light in a Dallas corruption scandal involving city officials and affordable-housing developers Brian and Cheryl Potashnik.

• Talk of a United/Continental Airlines merger led U.S. Rep. Sheila Jackson Lee, D-Houston, to hold a press conference at home on Tuesday. She voiced her opposition to the merger, particularly the piece that would have Continental's corporate headquarters moving to Chicago. Afraid of job losses in Houston, she and several other state and local leaders are working on an incentive package to convince the merged company that staying in Texas is the best business decision for them.

• When Kay Bailey Hutchison was running for Governor, she was accused of being a Washington spendthrift. Now that she is back to being a Senator and advocating for continuation of space shuttle operations, what will conservatives reaction be? As reported in the Houston Chronicle, Hutchison painted a dire picture of astronauts being stuck at the space station with no way to retrieve them once the space shuttle is retired. Congressional Democrats along with Hutchison and U.S. Rep. Pete Olson, R-Sugar Land, have been actively trying to combat the planned changes to NASA and its funding by the Obama Administration.

• The state's parks have been on a long decline due to protracted funding cuts. But with the passage of $44 million in general obligation bonds, there is finally a little money in the park's budget to do long-needed repairs. The Fort Worth Star Telegram reports that $25 million will be spent to dry-berth the Battleship Texas, accounting for the biggest portion of the funds. The money will also go to several state parks to do necessary repairs and upgrades, replacing aging water and mechanical systems. Texas currently ranks 50th in per-capita spending on its parks, and without the bond money, some parks would have been forced to close.

Political People and Their Moves

House Speaker Joe Straus is the headliner at a fundraiser next week for Patrick Rose, D-Dripping Springs. That wouldn't be unusual except that Straus is a Republican speaker, and Rose has a Republican challenger in November. Straus has said he won't campaign against incumbents from either party, and he's backed other Democrats who didn't have Republican opposition. This is apparently the first he's backed over his own party's challenger.

Gov. Rick Perry's top fundraisers, Leslie Sullivan and Krystle Alvarado, left the campaign, apparently over a disagreement about how much they should be paid. Sullivan's husband, Ray, is the governor's chief of staff.

There's still no permanent head at the Texas Legislative Council, but Lt. Gov. David Dewhurst and Speaker Straus have posted the job, an indication they're ready to work it out. The agency drafts bills for lawmakers in both houses and is the home of redistricting. Frontrunners: Frank Battle, who works for Dewhurst now, and Jeff Archer, who's at TLC now.

Trey Powers is leaving Comptroller Susan Combs — he worked for her at the department of agriculture before following her to her current spot — to start a lobby business. He was in legislative affairs at both agencies.

Straus appointed Rep. Warren Chisum, R-Pampa, to the executive committee of the Energy Council.

First Assistant Chief David Brown was selected to be the new Chief of Police for the Dallas Police Department, starting next week. Brown has worked for the Dallas Police Department for 26 years. Assistant Chief Charles Cato, who has been with the department since 1998, will become First Assistant Chief.

Nancy Pearson, a licensed social worker living in Burton, has been appointed to the Texas State Board of Social Worker Examiners by the governor. She is a branch support manager for Hospice Brazos Valley and a former service coordinator and case manager for Texana Mental Health and Mental Retardation Services Center.

Perry has reappointed Beau Egert, a special assistant to the chairman at Mosbacher Energy Company, and Joanie Haley, an executive director of the Robert and Janice McNair Foundation, to the OneStar Foundation, which connects nonprofits with expertise and resources.

Quotes of the Week

U.S. Sen. John Cornyn, R-Texas, on Florida Gov. Charlie Crist's decision to run as an independent, to the Huffington Post: "Once you leave the Party, you can't come back. And if he has other aspirations, it's hard to see how that works out."

Rep. Norma Chávez, D- El Paso, at a legislative hearing on the State Board of Education, quoted in the El Paso Times: "Clearly, the whitewashing of the civil-rights movement and advancement of Latinos, African-Americans and women has made the Texas State Board of Education the laughingstock of the nation."

Vice President Joe Biden, quoted in the Dallas Morning News blaming the country's fiscal problems on George W. Bush in a talk to Texas Democrats: "I do know about you Texans. I know enough about you that when I got here, it was all Democrats."

Rep. Leo Berman, R-Tyler, to a crowd in Tyler, as reported by the Tyler Morning Telegraph: ""Barack Obama is God's punishment on us today, but ... we are going to make Obama a one-term president."

U.S. Rep. Ron Paul, R-Lake Jackson, explaining his views on President Obama's economic policy in an op-ed piece to the Houston Chronicle: "But a closer, honest examination of his policies and actions in office reveals that, much like the previous administration, he is very much a corporatist. This in many ways can be more insidious and worse than being an outright socialist."

Rep. Garnett Coleman, R-Houston, on the prospect of Continental's move to Chicago after a merger with United, to The Texas Tribune: "I hope they take into consideration that bigger isn't always better, and dance with the one that brung ya. I wouldn't overly worry, but I think that every employee, and every leader in the community would say we want Continental to stay, it shouldn't be lost to Chicago…No disrespect to Chicago but I would say that Houston is the future, not Chicago."

Texas GOP spokesman Bryan Preston, on the Mexican American Legislative Caucus' SBOE hearing, as reported by the Houston Chronicle: "If MALC wants to get in touch with their inner children, play dress up and have a pretend committee hearing, I'm sure they can rent a community center somewhere and have themselves a ball. But holding a blatantly political pep rally on the Texas taxpayer's dime may be a little more serious. It may be an unethical and illegal use of state resources."

Houston Mayor Annise Parker on running the city in lean times to Time: "I feel like a mom planning a family budget. We're going to make sure we still have plenty of healthy vegetables, but we might have to cut back on dessert for a while."

Gov. Rick Perry to the Associated Press on killing a coyote while jogging: "Don't attack my dog or you might get shot ... if you're a coyote."

Denver-based WildEarth Guardians spokesperson Wendy Keefover-Ring in a news release: "With all due respect to his manhood, 90-pound women in tennis shoes effectively scare 30-pound coyotes away with a sharp shout."

Contributors: Julian Aguilar, Reeve Hamilton, Ceryta Holm, and Morgan Smith

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Texas Weekly: Volume 27, Issue 17, 3 May 2010. Ross Ramsey, Editor. Copyright 2010 by The Texas Tribune. 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) 716-8600 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 716-8611.