Making Bad News Out of a Budget Surplus

Sheesh, before you get all bothered about the grand mal disaster in the state budget, take a breath. There is no grand mal disaster in the state budget. What you've got -- as we've noted in detail over the last couple of months -- is a situation where the state has several agencies with budget messes of varying degrees of difficulty, and plenty of money to clean it all up. What you've also got is a presidential campaign and lots of people who'd like to put this in the worst light.

Sheesh, before you get all bothered about the grand mal disaster in the state budget, take a breath. There is no grand mal disaster in the state budget. What you've got -- as we've noted in detail over the last couple of months -- is a situation where the state has several agencies with budget messes of varying degrees of difficulty, and plenty of money to clean it all up. What you've also got is a presidential campaign and lots of people who'd like to put this in the worst light.

Start with the budget, since that's the foundation for the political piece. The state has a handful of agencies that have busted their budgets for reasons sometimes within their control and sometimes beyond it. The list includes a Medicaid blowout at the Texas Department of Health that comes from higher caseloads than forecast and higher drug prices than anyone imagined. Add the well-documented troubles at the Texas prison system, what with higher operating costs and now, higher pay for correctional officers. Add the budget fires at agencies for mental health and mental retardation, alcohol and drug abuse and economic development.

Budgeteers patched those problems by what they call "spending forward," or using money now that's meant for later. Later, in this case, is the end of the budget cycle, which falls after the full Legislature comes to town. They solve current problems now by spending money that was meant for use a year from now, and when they come to town in January, they pass an emergency appropriations bill that fills the hole at the end of the budget period.

The finance folks say the sped-up spending will total about $610 million by the end of the biennium. They also have a very rough estimate of about $150 million in funds that will be available unexpectedly because, believe it or not, some agencies aren't spending all that they're allowed to spend. Net it out, and the state is spending about $460 million more than budgeteers figured when they put the budget together more than a year ago. That's a tiny fraction of the $98.1 billion budget, but it's still a big number. Still, it's only half of the equation.

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Now, watch the comptroller's office. They'll release a number at the end of August telling everybody how much cash is left over at the end of the fiscal year. That'll be the difference, essentially, between the revenues brought in during the year and the expenditures that went out.

You know from the conversation so far that spending is greater than expected. Guess what? Revenues are greater than expected, too. While there is not an official number available, reliable number-crunchers say the state will end the year with over $1 billion. Some put it as high as $1.7 billion, while more conservative guesses have it in the range of $1.2 billion to $1.4 billion.

Subtract $460 million from that, and the result is a surplus of at least half a billion dollars.

Most of these budget machinations are normal, more or less. The spending numbers are, in truth, about 50 percent bigger this year than they have been in years past, even after you add back the money agencies leave unused. But the estimates of revenue were wrong, too, and to the state's advantage. There's plenty of money to cover the spending.

What's different is the presidential race. Gov. George W. Bush used a state budget surplus, in part, to push for tax cuts. He is now proposing, as a presidential candidate, using some of the federal surplus for cuts. The folks on the other side of the fight are using the Texas result -- that $610 million "shortfall" noted above -- as proof that the tax cuts were inadvisable. It's even been written up as a deficit in the state budget, without a budgeteer of either party to substantiate that claim.

Meanwhile, Hungry Eyes Survey the Surplus

While part of the political world is wringing its hands over the state's dismal fiscal status, another part is licking its chops over what to do with a large surplus that budgeteers expect to see when it comes time to write the spending plans for the next two years. Deficits are actually easier for budget writers than surpluses are. If there's no money, it's easier to turn supplicants away. When there's a surplus, legislators are forced to name their favorites.

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In that context, teachers and state employees and prison guards will all seek bigger paychecks next year and even with a large surplus on hand, lawmakers won't be able to make everyone happy. And if you're in the business of building highways or providing health care or anything else that requires some state money, those are some of the people you're competing against next year.

Corrections officers, as they prefer to be called, will try to expand on the temporary pay raise fashioned by state officials last month. They're not particularly happy about that raise as a model for a permanent fix, and they want lawmakers to bring their salaries up to the national average and want a better system in place for officers who've been on the job for a long time. Pay currently gets capped after just a few years on the job. The prisons will probably be at the front of the line.

Teachers Want More Money, Drawing Friends and Foes

Teacher groups are likewise focused on compensation. For instance, the Texas Classroom Teachers Association will be after higher pay, increased benefits and state-funded insurance for teachers. Other teacher organizations plan similar pleas, though some admit that it would be incredibly expensive -- in the $5 billion-plus range -- to do all of what they're asking from the state.

Even with the $3,000 annual raises given to Texas teachers by the Legislature a year ago, their pay remains below the national average. Catching up might not completely satisfy the educators anyway: The newest annual study from the American Federation of Teachers indicates that teachers, on average, don't earn nearly as much as similarly trained professionals in other fields. In the 1998-99 school year, Texas teachers made about $6,000 less than the national average, according to AFT. That was the year before the big pay raise narrowed the gap, but other states also increased pay and some gap remains. That year, Texas teachers made about $3,000 more than the average worker in the private sector in Texas. But when you compare teachers to other workers with similar training, they fall behind. That'll be one of the arguments behind their quest for higher pay.

For the counterpoint, take a look at a new study from the Texas Public Policy Foundation, a conservative group based in San Antonio that says educators' requests for state-funded health benefits are "unwarranted." That study argues for merit-based pay and says teachers make more than most other workers because they get paid for a 185-day work year instead of a 235-day work year. The study, available on-line at www.tppf.org, contends that moving Texas teachers to state-paid health insurance would amount to an across-the-board pay raise which isn't based on merit.

Sidebar: Numbers from the Bureau of Labor Statistics show that nationally, state employees make 3.8 percent more than their private sector counterparts, but that in Texas, pay for private sector jobs outstrips state jobs by more than 10 percent. Numbers like that buttress arguments from state employee groups who say the state can't attract and retain talented workers if the grass is greener outside of state government.

The costs of the various proposals put off most politicos, but they're attracted to the pay issues for the same reason that the costs are high: There are lots and lots of guards, teachers and state workers. The Republican candidate for state Senate in the 3rd district, Rep. Todd Staples of Palestine, has already claimed credit for the temporary prison pay raise. Now he's first out of the chute with a local-option teacher health insurance proposal that would have the state paying 35 percent of the premium while the local districts and school employees themselves would pay the rest. He said the $950 million proposal could be funded without a tax increase and that he had preliminary praise for it from Sen. Bill Ratliff, R-Mount Pleasant, the chairman of the Senate Finance Committee.

Check Them Later and See If They Bloom

Laredo businessman Tony Sanchez Jr. says, through an aide, that it would "not be appropriate" to answer questions right now about a possible bid for governor. He is thinking about it, and has not made up his mind, according to the aide and to people who know him. He also didn't want anything made public, we're told, until after the elections in November, but some of his suitors gabbed. Until then, his story in politics is that he wants his buddy George W. Bush elected president.

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After that, he's a 100 percent Democrat, as he has been in most of his other appearances on the political scene. Sanchez, named a University of Texas Regent by Bush, owns a chunk of International Bank of Commerce and an eponymous oil company, and has earned a personal fortune that would make him a self-financing candidate if that's what he wants to be. He's told others in politics that he would be willing to spend upwards of $15 million of his own money if he decided to run for office. That would be nearly enough all by itself; you can still run a big-league gubernatorial campaign in Texas for $20 million to $25 million, even with inflation in television and polling and consulting fees.

Sanchez and his wife contributed $101,000 to Bush's gubernatorial campaigns over the years, according to Texans for Public Justice, a private research organization that has been tracking Bush's fundraising efforts. Sanchez gave $3,000 to his presidential campaign accounts (there's a $1,000 max on the candidate account, but Sanchez also gave to Bush's legal and accounting fund, which is counted separately), according to FECInfo, a company that tracks federal political giving and spending. Sanchez is also one of Bush's "pioneers" -- people who raised at least $100,000 for the governor's presidential run.

Sanchez is the second Democrat to express interest in the job. Marty Akins of Marble Falls, a successful trial lawyer, former UT quarterback, and former Republican, has been making the rounds for months and is widely expected to throw his hat into the governor's race as a Democrat. He hasn't declared yet, but bought a full-page ad in the program for the Texas Democratic Party convention and has set up a web site under the moniker "Friends of Marty Akins".

Democrats Try to Keep Hispanics in the Fold

Put former Comptroller John Sharp in the middle of the Sanchez recruiting effort. He's been talking to Sanchez for months about running for governor, after spending time trying unsuccessfully to talk Henry Cisneros, the former San Antonio mayor and Clinton cabinet member, into running. Sharp has been saying since he lost the last lieutenant governor's race that Democrats need Hispanic candidates on their ticket if they are to turn their fortunes around. He recently upgraded that, telling groups at the Democratic state confab that Hispanics need to be at the top of the ticket, not just on it.

Sen. Judith Zaffirini, D-Laredo, has known Sanchez all of her life and says his phone started ringing off the wall when people learned he might be a candidate. She's not sure what he'll do, but says he'd have a lot of support if he went ahead and ran. She says numbers that were run to show Sanchez what was possible are promising, and says they show that a Democratic Hispanic candidate could win a race for Texas governor. Sharp and others who pored over the last election results are convinced that marginal races that went to Republicans would have gone differently had the Democrats put identifiable Hispanics on the ballot and drawn more Hispanic voters to the polls.

Hispanics in Texas have traditionally voted for Democrats, and the state's demographic trends clearly show Latinos make up an increasingly large share of the population of the state. Remember what happened in the U.S. Senate race in the Democratic primary last March: Gene Kelly won after party elders said loudly and publicly that people shouldn't vote for him. That plea worked in many of the state's major counties, but Kelly won the race in part by racking up big majorities in South Texas.

Republicans would like to hold onto what Bush started in his 1998 reelection bid, when he won 39 percent of the Hispanic vote in Texas. Those numbers didn't hold as voters went down the ballot, but Bush set a mark. Democrats have to get those voters back if they're going to take back any of the statewide offices in Texas. That realization is behind the push to bring Hispanic candidates on board.

Buy Texas for Less Than a Trillion Bucks

The value of taxable property in Texas rose 5.85 percent last year, to $793 billion, according to the comptroller's office. Those are the property tax numbers that get plugged into the state's school finance formulas and then get used to set tax rates in districts around the state.

The biggest dollar increases were in the places with the most valuable property in the first place, in and around Dallas, Houston, San Antonio and Austin. Among the 20 most-valuable districts in the state, the big percentage gains were in the suburbs, in districts like Lewisville and Plano outside of Dallas, Round Rock, outside of Austin, and Fort Bend and Cypress-Fairbanks, outside of Houston. Property values in each of those districts by more than 10 percent. The biggest dollar increases were in Houston, Dallas, Austin and Plano.

The biggest decreases, both in dollar and percentage terms, tended to be in West Texas. Iraan-Sheffield, a school district in Pecos County, lost 40 percent of its property value in 1999, or about $573 million, according to the new numbers. Andrews, another oil patch district, lost 29 percent, or $431 million. And Seminole, in Gaines County, saw values dive 31.7 percent, or $680 million.

Horse Race Politics -- Horse Race Everything Else, Too

Gov. George W. Bush leads Vice President Al Gore by about 8.6 percent in the popular vote, and by 310 to 88 in the Electoral College vote, according to a poll by Virginia-based Rasmussen Research. The interesting thing about that poll, other than the numbers themselves, is that it's updated constantly and it's available free on the Internet. The "Portrait of America" is a survey of 2,250 people. It's updated weekly, and has a margin of error of 2 percent. They get their Electoral College numbers by looking at poll numbers from each state and then extrapolating how the Electoral College votes would go. In their reckoning, Gore has solid support in two spots -- Massachusetts and the District of Columbia -- which together have 15 electoral votes. Bush has solid support -- meaning he's at least 10 points ahead in the polls -- in 22 states with 168 electoral votes. Add in the leaners for each candidate and you get the numbers above, with 140 electoral votes considered by the pollsters to be toss-ups. The pollsters also track business, sports and lifestyle issues, coming up with results that show 59 percent of Americans don't think school should start until after Labor Day, and that 57 percent of people with credit cards have made online purchases and that they favor baseball's designated hitter by a 48 to 40 margin.

While we're on presidential polling, that Vanishing Voter project we've been following says voters in Texas and Tennessee, the two states that have local boys in the presidential race, aren't really that engaged in the contest. The project, headquartered at Harvard University, has been polling people every week since late last year on the presidential race. They measured average voter interest over that entire period in each state, then ranked the states. Tennessee ranked tenth, followed by Texas in the number 11 slot. New Hampshire, which got more than its share of attention early in the race, led the pack, followed by Sen. John McCain's state of Arizona.

Highway Bonds, Volunteer Strikes, and Info from Outer Space

Legislators on the House side didn't like GARVEE bonds last session, but Comptroller Carole Keeton Rylander isn't giving up on the idea. The bonds would be paid from future highway proceeds; contractors fear that means less road work in the future. Rylander's new pitch: Highway costs are rising so quickly that using the dollars now will build more roads than using the dollars on schedule... Sen. Troy Fraser, R-Horseshoe Bay, gets tapped to recruit and coordinate 5,000 volunteers who will get voters to the polls for Gov. Bush in November... And the Texas Legislative Service has a new techie trick: Beaming information on legislation to Palm Pilots carried in lobbyists' purses and pockets.

Protection Racket, Other Political Briefs

Texas-bashing is a natural offshoot of the presidential campaign, mostly because our own governor is running and can be blamed if anything's wrong here, and partly because a good number of folks who don't live here like to dislike the state. But have no fear -- there's a self-appointed group of Texans calling itself the "Proud of Texas Committee" that says it will try to protect the state from bad facts during the next four months. Who's in it? Michael Levy, publisher of Texas Monthly, Dr. David Smith, president of the Texas Tech Health Science Center and the former head of the Texas Department of Health, former state Rep. Mark Stiles, who's now in business in Dallas, Austin attorney Will Davis, who is on the State Board of Education, and Dan Pearson, a lobbyist who formerly headed the Texas Natural Resource Conservation Commission. They say they'll monitor media reports and attempt to correct things they think aren't right. For starters, they fired off a letter to Democratic presidential candidate Al Gore, taking him to task for things he's said about problems with the way the state handles education, health care and criminal justice.

• One of the few things that has never appeared on Mark McKinnon's post-collegiate resume is newspaper reporter. In fact, McKinnon is a political consultant who's working for Gov. George W. Bush as his chief adman. That's why this next item is an item. There is a magazine for media goons called the American Journalism Review. The magazine exists, is says, "to reveal as completely as possible the noble, fascinating, exciting, and often controversial world of American journalism." One of their current subscriber pitches is "Who questions the questioners? We do!" Behind that slogan is a photo of a reporter holding a tape recording and intently listening to Bush, the GOP's presumptive presidential nominee. Who's the reporter in the picture? Mark McKinnon.

• We made mention last week of a fund-raising pitch from the Texas Home School Coalition's political action committee that encouraged supporters to switch to a long-distance company that would give 10 percent of each money bill to the PAC. When we first talked to them, they said those contributions would be reported as coming from Lifeline, the telephone company. After we went to press, they corrected themselves: The money will be reported as contributions from the people who agreed to the phone deal. Since most of those will be under the $50 limit, that could -- depending on how the PAC wants to do it -- mean that few of the contributors are identified in the PAC's reports to the Texas Ethics Commission.

Online Crime Fighters, Tax Breaks, and Vacation Notes

Attorney General John Cornyn will soon announce an "Internet Bureau" that will coordinate his office's new cybercrime and similar programs. The basic idea, and this is a trend in law enforcement right now, is to develop some expertise in electronic communications so that the lawyers will be ready to deal with cases that involve crimes committed through the use of computers and communications equipment. The U.S. Attorney's office in Dallas is on a similar track, and Cornyn says the new bureau will coordinate his office's efforts with the federal operation.

• Comptroller Carole Keeton Rylander wants to expand the list of items that can be purchased tax-free during back-to-school shopping every summer, and she wants to allow people two weeks to shop instead of three days. The sales tax holiday, passed by the Texas Legislature last year, lets people buy certain items priced under $100 without paying sales taxes. It lasts for just three days, but sales ballooned during that time last year, costing the state $32 million in foregone sales taxes. Rylander is advocating a list that includes backpacks and sewing supplies, and a sales period that would last for two weeks every August. She can't do that without the Legislature, so she'll probably be asking them for help next year. In the meantime, she has made one change to the program: She's allowing people to put things on layaway, pay later, but take the tax break anyhow.

This issue marks the equivalent of the last day of school for the ink-stained wretches at Texas Weekly. We're outta here -- to cooler climes, with any luck -- for the last two weeks of July. Our next issue will appear in the first week of August.

Political People and Their Moves

The number one numbers whiz in the governor's office, Albert Hawkins, is taking leave to move from the Pink Building to the office tower eight blocks away that houses the Guv's presidential campaign. He says he'll do some analysis, assisting Bush on the road and the like. He says this will probably be his only chance to do such a thing, then corrects himself to add "until his reelection campaign." His deputy, Wayne Roberts, stays behind as the governor's chief state budgeteer... Cassie Carlson Reed, who has worked all over state government for the last 25 years, is the new executive director at the Texas Workforce Commission. Reed, who had been a division director for TWC, has worked as a legislative and congressional aide and in several other state agencies. She's been at TWC since 1998... Yet another official in the University of Texas System is leaving. Dr. M. David Low, who heads the UT Health Science Center in Houston, is resigning his post after 11 years and will return to teaching at the school. He cited health reasons in a resignation statement... Wendy Taylor cuts out after three-and-a-half years working for Sen. Buster Brown, R-Lake Jackson. She'll be the new spokesperson for the Texas chapter of the National Federation of Independent Business... Shaun Davis signs on as political director for Democratic SD-3 candidate David Fisher. He worked for former U.S. Rep. Charlie Wilson for 10 years and most recently worked for Temple-Inland... Judicial spankings: Visiting District Judge H. Lon Harper was reprimanded by the State Commission on Judicial Conduct for trying to repair a couple of handguns, at the bench, while presiding over a death penalty case in Houston and for letting the bailiffs read magazines in court during the proceedings.

Appointments: Gov. Bush named Gordon Adams of Salado to the 169th Judicial District Court, which is in Bell County. Adams, a former city councilman and school trustee, will replace the late Judge Oliver Kelly... Bush appointed Marjorie Craft of DeSoto as a regent to the University of North Texas. She's a business consultant with degrees from UNT and from Texas Woman's University... The Guv picked Mac Cannedy Jr. of Wichita Falls and David Stephens of Plano as regents at Midwestern State University in Wichita Falls. Cannedy's an accountant; Stephens is a Jaguar automobile dealer... Deaths: Charles Alan Wright, a well-known legal scholar with particular expertise in federal courts and a professor at the University of Texas at Austin. He was 72.

Quotes of the Week

Gov. George W. Bush updating Republican supporters on the status of the presidential race: "The good news is, I'm leading some of the polls. The bad news is, the election isn't tomorrow."

Former Democratic presidential nominee Michael Dukakis, who lost to Bush's father in 1988 after being 15 points ahead in the polls in July of that year, in an interview with The Dallas Morning News: "The first thing you ought to learn from 1988 is that the horse race numbers are meaningless. Those numbers were never real, and they never are."

Sen. Judith Zaffirini, D-Laredo, who is famous for callingearly morning meetings, making a pledge in the event that Bush is elected president and senators pick her to be presiding officer of the Senate: "I would commit not to call sessions at 7 o'clock in the morning."

Marc-David Seidel, a professor at UT Austin, on what consumers might do with all of the choices of local and long-distance phone companies: "Confusion creates apathy. If they make it confusing enough, people will say 'Forget it,' and not bother with switching."

Harry Potter author, owner and gazillionaire J.K. Rowling on being consistent as she writes the next three books in what is supposed to be a seven-volume run: "I don't think it would be faithful to the tone of the books to have somebody brought in from Texas or wherever it might be."

Lt. Gov. Rick Perry, after a highway patrol videotape showed him getting testy with a state trooper who pulled his Suburban to the side of the road for speeding: "At the end of the process, she looked up to [the driver] and said, 'Now, what was that guy's name again?'"


Texas Weekly: Volume 17, Issue 5, 17 July 2000. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2000 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 (800) 611-4980 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.


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