A Conversation with David Dewhurst

For the ninth event in our TribLive series, I interviewed Lt. Gov. David Dewhurst about the budget shortfall, state-federal tensions, immigration, why he doesn't release his taxes, and his future plans. We've provided the conversation with the lite guv in three forms: full video, full audio and a transcript of our Q&A.

Evan Smith: Governor, it is truly a pleasure to have you here. Thanks very much for making the time. Let's talk about the news of yesterday. You, I'm sure, saw that the Legislative Budget Board revised upward its estimate of the coming shortfall for the biennium. It had been assumed it would be somewhere somewhere in the low eight figures, from $10 to $12 to $13 billion, and they're now saying $15 to $18 billion. As my colleague Ben Philpott said, quoting Roy Scheider in Jaws, “We're going to need a bigger boat,” it turns out, as we get into the session. I want to ask you, first of all, do you buy that number? Do you think the number that you're hearing about the size of the shortfall is the correct number?

Lt. Gov. David Dewhurst: First, I don't think that number came out of the Legislative Budget Board from what I understand; I was traveling yesterday, and Chairman Pitts put that number out. It depends on how you calculate it. We know that we used $6.3 billion of stimulus funds to balance the budget last year. We know that we saved, something that the Legislature normally didn't do, but from the 2007 session we ended up saving in total $9 billion dollars, but $5 billion of that went into the budget, so that's $11.3 billion. Now, normally when we have mild to moderate growth in our budget — that takes care of our expenditures the next biennium — but if you take $11.3 billion, and we normally put $5 to $6 billion of new money into the new budget, you can get to $18 [billion].

Smith: So you're not particularly concerned about this. It sounds to me like you actually do "buy" the number: You think 18 may well be the number.

Dewhurst: Well, there may be a number which you need to be $18 billion. I'm not sure that it's a shortfall, because on the other side of the ledger, the Legislature — again, and I compliment them — in the 2007 session ended up saving $9 billion dollars. That's why when we came in last year — we were only one of the six in the country in the black instead of one of 44 states in the red, and last year we saved the Rainy Day Fund. Now the Rainy Day Fund will be, oh, approximately $8.2 [billion], $8.5 [billion].

Smith: Somewhere within $8 and $9 billion.

Dewhurst: Well, on Aug. 31 of this year. But, since we're looking at the next biennium, it'll be about $10 — $10 to $10.5 billion.

Smith: You're assuming growth in economy will help get that number back up?

Dewhurst: Well, even right now ... well, of course from the Rainy Day Fund we're picking up revenues from oil and gas service taxes and things of that nature. So, historically, even over the last two years, it's been growing about about a billion dollars a year, so we're going to have about $10 to $10.5 billion. We were very careful with our stimulus dollars; when we put $6.3 billion into Medicaid, higher education and public education, we designated $4.4 billion as recurring in public education and higher education, and the $1.9 is non-recurring. So you need to take [that] off the base and add it back in. Plus, we expect to get at least one [and] probably two payments from the available school fund — approximately $1.4 billion per payment. And then, as you know, back in November I called for the Legislature to tighten their belt. On Jan. 15, the speaker and the governor and I signed a letter asking the agencies to go ahead and save 5 percent. We expect those letters to come in later on this week or in the first part of next. And so, you're going to have somewhere in the neighborhood of $17, $18 billion dollars of revenue there. Not counting, hopefully, if our economy picks up ...

Smith: You're talking about the 5-percent cuts that you and the speaker and the governor requested of state agencies? At the time, the estimate was $2 billion dollars over the biennium that 5 percent would save. When the comptroller was here earlier in the year, she thought it was actually more like a billion. Is she right, or are you guys right?

Dewhurst: The comptroller doesn't know how ... the 5-percent number per biennium is closer to $2 billion. Now, what we've been doing is going through agency by agency by agency and looking through their recommendations and making sure that we don't believe that the agency is cutting into essential programs. So we've cut back, we've provided waivers, in a number of cases, and you're going to see that when the LBB numbers come out. So I think the biennium number is somewhere between $1.2 and $1.5 billion — closer to $1.3, $1.4 billion. I think that's the number — I haven't looked at the latest total. But, again, we were very sensitive. We didn't want any of our essential programs to be reduced.

Smith: So when people proposed their 5 percent, you looked through the list and decided, "Well this is too important." You told them, "No, don't cut that."

Dewhurst: That's exactly right.

Smith: Did you then tell them to go back and cut something else where you didn't give them the forebearance to go below 5 percent?

Dewhurst: Oh, we've done that. We've allowed some agencies to go below the 5 percent. I've been saying from day one that it could be 6 percent for some agencies. We've had some agencies come in and request more than 5 percent; we've had other agencies come in that we felt that it would ... not the best interest of all Texans if we cut these programs. Of course, the other part of that — and I'm going to impute good faith to all agency directors — but, you know, sometimes you see other items on the list, "Let's close the White House" or "Let's close the Washington Monument," and we're obviously ...

Smith: … never going to do that.

Dewhurst: Right, that's right.

Smith: You mentioned the Rainy Day Fund. Whether its $8 [billion] or $9 [billion], or $10 [billion], or higher than 10 by the time this is all said and done. Should I take your invoking the Rainy Day Fund as a sign that you're open to draining all or some of the Rainy Day Fund to make good the shortfall?

Dewhurst: I'm not sure I would use the word "draining" ...
 

Smith: What word would you use, then?

Dewhurst: Well, if we don't touch the Rainy Day Fund, at the end of this next biennium it's going to be approximately $10.2 to $10.5 billion, and then the next biennium it's going to be approximately $12.5 billion. I forecast that we'll have some rain between January and June 1 of next year. It'll rain on certain days, and I think it's appropriate use of the Rainy Day Fund to draw down some of those funds. Now, thank heavens — and I wasn't the only one — but we went back and we asked the agencies to tighten the belt 5 percent, and they're doing that, and that's going to create somewhere in the neighborhood of $2.6 or $3 billion for us when you look at the 2010, '11, then '12 and '13.

Smith: You're expecting rain next year; isn't it raining now, though? Wouldn't you say the conditions out there in the world are gloomy enough that maybe you would have to ... you look at a way to decide on the Rainy Day Fund, but you don't think the signs today point to needing to "draw down," as you say, the Rainy Day Fund?

Dewhurst: I do, I do. At the end of the day, in order to be able to balance our budget in 2011, I've felt for some time that we're going to have to draw down some funds out of the Rainy Day Fund. Now, we'll be able to use the funds that we're in the process of saving right now and will be certified first, so we won't have to draw down all of the Rainy Day Fund. We'll have that reserve to use in the 2013 session.

Smith: The governor has indicated to me and to others that he would like to see as much if not all of the shortfall eliminated by cuts. Do you think that there is more cutting to be done by the state agencies? If I were the head of a state agency sitting here today, could I expect from you today that there's going to be a directive to me to cut an additional 5 or 10 percent before this is all said and done?

Dewhurst: I don't think we want to go ahead and take anything off the table. Because I'm the only traditional businessman elected out of 29 state-wide elected officials, I worry about numbers, budgets all the time. We've been calculating our revenues and our shortfalls independent of the comptroller's office but working with the comptroller's office and working with the other former revenue forecasters that are here in the city since virtually the first few months I was in office, and we could see this coming. That's why in April 2007 I showed once again what a brilliant politician I am, by, on one day in April 2007, making Democrat senator friends of mine mad and some Republican senator friends of mine mad. When some of my Democrat friends wanted to take the surplus, which we thought was going to be $7 billion and turned out to be $9 billion, and spend it on a number of different programs. Then the Republicans wanted to take that money — because, after all, the government has no money: It's your money — to go ahead and send it back in the form of tax rebates, and I said, “Oh, no.” Looking at that all the time, I could see freight numbers of construction materials coming in the state of Texas peak in September 2006 and then fall. And then we saw housing start to fall off in January, February and March of 2007, and I said, “Whoa, stop, everybody. We need to save this money until the summer of 2008, and if I'm wrong, I'll raise my hand, I'm wrong. Otherwise, we need need to save it.'”

Smith: Yeah. But again, back to this question of more cuts: you are not taking off the table the possibility of going back to the state agencies and asking for more cuts?

Dewhurst: No, I'm not. I'm optimistic that we have planned carefully and prudently, and that this session in 2011 is going to be a lot easier than in 2003.

Smith: How do you say that?

Dewhurst: Well in 2003 we hadn't built up a reserve, Evan. We came in — I came in the last six months of my campaign ... what's that fellow's name ... anyway —

Smith: That would be John Sharp?

Dewhurst: Yes, thank you for reminding me.

Smith: He's going to love that, by the way.

Dewhurst: We thought that the shortfall was going to be $5 billion, and literally three or four weeks before we in, the shortfall went to $10 billion, so we didn't have a reserve. Going through that experience of balancing the budget, trying to wring out all the non-tax revenue that I possibly could so we could as easy with our cuts, maintain our essential services, going on hands and knees to the State Board of Education trying to get a couple hundred million dollars more out of the available school fund — that and other things which we were able to cobble together — was more fun than I ever want to have again. That's why, since that experience, I have been very focused on our budget and making sure we've got enough revenues.

Smith: The speaker yesterday essentially called for a session with no new taxes. Would you join him in that? Would you commit to not supporting any tax increase of any sort as a way to get through the session?

Dewhurst: I don't think, Evan, that we need. ... Since the first day I came in as lieutenant governor, I wanted to lower the taxes here in Texas and grow our revenue so that we're able to do the things that we want to do in public education and higher education, etc., and we've been able to do that, and we've given the largest tax cut in the state of Texas when we cut local school propert taxes from $1.50 to $1. The state absorbed, and we're still working our way through, the $7.1 billion of liability, so we're paying that $7.1 billion — all the people of Texas are. And then, as you remember, last year we cut the business tax for 40,000 small businesses, which would save them $187 million. So we're trying to keep taxes low. You can't raise taxes during a recession. Plus — I don't know if most people realize this — I was talking to the IRS three days ago, but not on a personal ...

Smith: Not on a personal matter?

Dewhurst: Not on a personal matter, no.

Smith: Just checking.

Dewhurst: And their numbers are showing that we've got about 1,300 new people coming in the state of Texas every day, almost 500,000 people a year. Now just look at that: 500,000 people a year, 2 million people during a four-year cycle, and while those people come in here ... I'm in McAllen the other day and I've got a group of business people, and I'm saying “Tell me about your job base,” and they said, “Governor, it's great! We're going up 10 percent, [from] 280,000 to 310,000. It's super.” “So your unemployment numbers are coming down.” “No.” Everybody's got a cousin who lives or a relative who lives in California, Michigan, New York — they're all coming to Texas. Just go out there in the parking lot. We've got a real challenge: That's why, thank goodness, we put more money in the Texas Workforce Commission. We've got new job programs — I'm proud of this program called Texas Back to Work — we've got pre-apprenticeship programs, apprenticeship programs. We're doing everything we can to create more jobs.

Smith: So that is: Yes, you're committing to not supporting any tax increase of any kind during this time?

Dewhurst: Yes, that's right.

Smith: You will commit to no new taxes during this time.

Dewhurst: I do not want to see taxes raised and I don't believe that they're going to be necessary. I believe we have enough tools in our toolbox to be able to balance our budget.

Smith: Let me ask you about a statement you made in an op-ed you published somewhat famously last October. Quote: “It's simply political fiction that stimulus dollars were necessary to balance our budget.”

Dewhurst: That's a true statement.

Smith: My memory is that in fact it took an enormous number of stimulus dollars to balance not only the last budget but, in retrospect, the budget before that. Can you really say that it was not the case that stimulus dollars balanced the budget and that without stimulus dollars we would have been totally upside down?

Dewhurst: Absolutely. You're absolutely wrong on that statement. Absolutely wrong. We came in and we saved $9 billion because I was concerned about the account. Now, obviously when the comptroller — and it was the right thing to do — cut our revenue estimate, part of that $9 billion went away. Our first budget that we submitted last January was $4 billion over what turned out to be our revenues. We balanced our budget every time. We would have balanced our budget. Our budget would have looked differently. That's an absolutely true statement, and I think a lot of people who just don't understand our budget process have questioned that. But we would have balanced our budget; it wouldn't have looked the same; we wouldn't have been able to do as much, but we still would have had a balanced budget. We still would have passed our public education reforms in which we created the baseline for the first time in the history of the state of Texas so that we could measure what's happening in a classroom in school; we still would have ended teaching to the TAKS test; we still would have passed the bill that Senator Zaffirini was key on, which created a whole new structure, $500 million, so that we can incentivize our emerging technology universities to become tier-one universities; we still would have passed our measures on the border and on our health care — I think revolutionary bills, which we passed.

Smith: But the difference would have been that you would have had to go find the money that you got from the federal government that you got presumably in the form of cuts.

Dewhurst: No, we wouldn't have had the spending level that we did. We would have had to trim the budget. We still would have been able to put some money into public education, some money into higher education, but we wouldn't have been able to put as much money into public education and higher education and into Medicaid as we were able to do with the stimulus dollars. That's a true statement. At the same time, we were able to create a better budget by having some access to the federal funds

Smith: Let me ask you about one aspect of the federal stimulus. You know last week your colleague, Sen. Eltife, described the decision by the governor not to take the insurance funds, part of the stimulus, as, quote, “insane.” Is your colleague Sen. Eltife correct, or is the governor correct?

Dewhurst: I don't ... I think that Sen. Eltife, as a dear friend of mine, may have been a little over-dramatic with that statement. Obviously the governor's not insane on. ... The governor's decision ...

Smith: I think he said that the decision was insane. He didn't call the governor insane.

Dewhurst: That's what I said. The governor's decision was not insane, to do. ... You know, when you look at the numbers. ... If you look at the numbers, there's a very small difference on the net present value calculation on whether or not you use your own funds, because we're drawing down interest free through the end of this year, or whether you take those stimulus funds. So I can make an argument either way.

Smith: But you support the governor's decision in the end to not take the money? If it were you, if you were Gov. Dewhurst as opposed to Lt. Gov. Dewhurst, would you have taken the money?

Dewhurst: I probably would have taken the money, because there was a difference of about $30 million on net present value, but there were some strings. I didn't because that was not my decision. I did not look at a number of these elements in the details, but the governor felt that there were some strings attached which would hurt Texas. I respect that. If I came to that same conclusion, I wouldn't have made the same decision because it was very, very close.

Smith: The governor spent much of the last year talking about the tension between the federal government and the states. Do you share his antipathy to the government as far as its role it might play in Texas?

Dewhurst: Well, I think you're mischaracterizing that once again. I think the federal government plays an indispensable, critical role, obviously, in the responsibilities which it has: foreign affairs, protecting the borders of the United States — which, incidentally, I think they've done a very poor job in doing. But I think the word "antipathy," which you used ... I am very frustrated. In my seven years as lieutenant governor, I've never seen, on any level in seven years, an administration doing as much that has a direct effect on our budget here in Texas. It's no secret that I had been in favor reforming health care, but reforming health care — that's what we passed out of the Senate last [session], and I appreciate the help of the senators, Senate Bill 6, 7, 8, and 10, which did a total reform. I'm convinced, based on studies done at Dartmouth, [that if you] reform health care and you align the benefits between doctors and hospitals and patients, and you pay doctors more for good outcomes and best practices, incentivizing to focus on wellness and prevention, then you can keep people healthier [and] out of hospitals. Dartmouth has done three empirical studies which say that we can save up to a third of the money. I'm convinced that if we use our heads to reform healthcare, that we can cover the 47 million with the money that we're currently spending. America spends two and a half times more per capita on health care than the average of the other developed countries. But that's not what this bill does. This bill creates a tax bill for all of us here in the state of Texas between 2014 and 2023 of $27.1 billion.

Smith: You know that number is in dispute. The CBO says it's quite significantly less than that.

Dewhurst: I understand that, but they haven't come back and been able to challenge any of the numbers coming out of the Texas Health and Human Services Commission. The analyses have been published, and if someone will come back and point out where they're wrong, but in state government right now, we have to rely on what the Health and Human Services ...

Smith: Just so we're clear on this, it's not a margin of error difference: The state says it's $27 billion; the CBO says it's $1.4 billion. This is not just a little bit of money that's separating the two. Someone is wildly wrong.

Dewhurst: No, you're missing the point. With all due respect, you're missing the point. The CBO has to score what's in front of them, and the health care bill is a myth. The Congress is not going to cut Medicaid reimbursals by 21 percent; they're just not going to do it. They haven't done that on permanent. ... They've rolled it back every year for the last, I don't know, four, five, six-seven-eight years. They're not going to cut $500 billion out of Medicaid [and] Medicare Advantage for seniors, and I very seriously doubt in the year 2018 that a Democrat Congress, if it's still a Democrat Congress, is going to put a surcharge on premium healthcare plans, which, volume-wise, union members have more than industry does. I believe that's a true statement. And so it's just not going to happen. So they're scoring a bill which is not reality.

Smith: The premises behind the bill you take as ...

Dewhurst: Yes, sir.

Smith: On your website there is a banner, one of the issue areas, which says, "Fight government-run healthcare." You totally support the notion of fighting government-run health care as it's presented in this bill, correct?

Dewhurst: Well obviously, as presented in this bill, because this bill does not create reform; it adds $570 billion in taxes over the next decade, and it doesn't really improve the health outcomes. That's what I think we should all be focused on: healthier Texans. We don't pay doctors to ... well, we pay for office visits, but we're not paying [or] incentivizing to focus on wellness and prevention. We've got huge challenges with diabetes and obesity.

Smith: Do you consider Medicare to be government-run health care?

Dewhurst: Of course.

Smith: Okay, so if you want to fight government-run healthcare, why not fight the Medicare system?

Dewhurst: The Medicare ... that is not going to change. That's impossible, that's been in place ...

Smith: So it's not all government-run healthcare, it's just this government-run health care, what's being proposed now. You're comfortable with the Medicare system.

Dewhurst: I'm not saying that I'm comfortable with the Medicare system. What I'm saying is that this piece of legislation makes Medicare and Medicaid ... the state is contributing quite a bit of money on Medicare, and all us taxpayers [are] contributing quite a bit of money — it makes it substantially worse.

Smith: You're going to turn 65 later this year ...

Dewhurst: Thank you very much for pointing that out.

Smith: You will eligible for Medicare as a result of turning 65. Will you turn your check back into the government if you don't support government-run health care?

Dewhurst: I have no idea, haven't even ... you know, I'm probably in denial that I'm turning 65. But I really appreciate that, you pointing that out.

Smith: Well let's move on to something less controversial: immigration. You alluded to earlier the fact that you believe, and this is the governor's position as well, that the federal government has not done enough along the border. In view of that, would you support the Arizona immigration law? If they basically took it from Arizona and walked it over two states, would you support it? Would you propose passing it in the Senate?

Dewhurst: The Arizona bill ... we all understand. We all understand the frustrations the people in Arizona. We all understand everyone's frustration with the federal government not doing anything virtually. Republican presidents and Democrat presidents, sitting on their hands for various and different reasons. But it's interesting: The New York Times/CBS poll last Tuesday or Wednesday showed an overwhelming number of Americans understood and supported what Arizona did. I'm after a long-term solution, and the long-term solution is we've got to secure our borders. Now, a lot of people just say that, but here's ... we've got a 1,900-mile border with Mexico, a 4,000-mile border between Canada and the United States. How many cops do we have? I mean that ...

Smith: Broadly defined ...

Dewhurst: Broadly defined, how many law enforcement, how many Border Patrol do we have on our border? Right at 20,000. Now, how many police do we have in New York City? 35, 36,000. What's wrong with this picture, you know?

Smith: Maybe Mayor Bloomberg should be president.

Dewhurst: Well, he's trying to argue that New York City is safer than it was a few years ago. My point is that we have invested in Texans taxpayer money general revenue, about $230 million over the last two sessions. We put in total 150, plus or minus additional state law enforcement along the border. We've got five new helicopters. We've put money in for search operations, and long story short, here's the point: Every time we do an operation between local sheriff's departments, local police departments, the state and our federal partners, and we go after a discrete portion of the border, 20 miles, 30 miles, we shut it down. Nothing moves. Rabbits don't move; snakes don't move — nothing moves. At the end of the day, [even with] all of the technology in world, you need people. And just using that one example, you've got almost twice as many cops in New York City as you do on our entire border. That's nuts. That's nuts. So literally, literally, if congressmen get off their hands and ... and back of the envelope, double the number of Border Patrol, that'd cost about a billion — 2, with cars and equipment — but even if that number were $2 billion, that's a fraction what third-party analysts say illegal immigration costs just the state of Texas, not to mention the other three border states, not to mention the other 46 states.

Smith: Governor, with all due respect, you didn't answer my question. Would you support the Arizona law in Texas or wouldn't you?

Dewhurst: I answered your question ... yes I did, because what I said was we don't need it, I'm going for long-term solutions.

Smith: So the answer is no? So we can tell people that the Lieutenant Governor of Texas does not support the Arizona law?

Dewhurst: I don't think we need that in Texas. We need to go for long-term solutions.

Smith: Okay. Let me ask you two more things before we open up the floor for questions. You know that Mark Miner, the governor's press spokesman for his campaign, has been attacking Mayor Bill White, the Democratic nominee, for not releasing his tax returns. What Democrats say in response to that is that, Gov. Dewhurst, you haven't released your tax returns, so why is okay for the governor to attack Mayor White when you haven't released your own tax returns? I'd like to give you an opportunity to — I know you've heard this — I'd like to give you an opportunity to respond.

Dewhurst: Actually I haven't heard that, but it's not surprising. I've had a blind trust, and to release this, it would unwind the blind trust. I don't see my tax returns.

Smith: Do you believe that your situation and Mayor White's situation are different with regard to what transparency the people of Texas are owed, if they're asking to elect you to an office where you may make decisions where you may somehow impact your own personal situation?

Dewhurst: If I don't know what the assets are that I have, which was my intent from day one — I don't know the assets — but that's not the situation. You're not talking about apples and oranges in your question. If Mayor White had a blind trust, I would be supportive of him not releasing that information. I release the front page each year, which is the summaries of revenues, taxes, my charitable deductions, etc. But since I don't know what assets the blind trust has. Those are not released.

Smith: Okay. Let me ask one last question before we open it up to questions, and that is about your future plans. There were people who thought based on what Sen. Hutchinson said that today I would be sitting across from Senate candidate Dewhurst, or possibly even Sen. Dewhurst. Instead we know that she's not resigning, that she's seeing through her term. You said all along, “I'm not going to make a decision about my future until there's actually something to make a decision about.” Obviously she's said now that's she's going to serve out her term and then be done, and there will be an open Senate seat which people have said that you might be interested in. Will you commit to the people of Texas as you seek re-election for lieutenant governor, that you will serve as lieutenant governor all four years, and therefore take the Senate race in 2012 off the table?

Dewhurst: Nice try.

Smith: It was a nice try.

Dewhurst: Nice try. First of all, I said this past fall, right after Labor Day, that I was going run for re-election. I'm running for re-election. I have no intention of running for the Senate. Although — and you've heard people say this before — never say never. I don't know what the situation will be like in 2012. I'm focused on running for re-election and I'm focused on this next session, and I think we're in total ... one of the things you and I are in total agreement on. And there are ...

Smith: There are several.

Dewhurst: ... there are several, is that this 2011 session is going to be very challenging, and it's not my first rodeo: I've gone through it before, so has the governor. We're going to balance that budget, we're not going to cut into the muscle, we're not going to cut into any essential services. It's going to take a lot of work. You haven't mentioned redistricting: I'm going to be naming our select committee on redistricting. I want hearings held around the state of Texas. It's going to be challenging; our population is obviously dramatically growing. Virtually every senator's district is being affected, in some cases by migration out of the district, and in a lot of cases quite a few people coming in, so we have a challenging map. I'm optimistic that we're going to be able to reach an agreement on a map in the Senate, so we've got a lot of challenges in front of us.

Smith: Well, governor, you're a good sport. Thank you very much for being here. I appreciate it. Gov. Dewhurst, thank you.