Vol 15, Issue 40 Print Issue

When It Rains, It Leaks

The plan about a year ago was to dedicate the newest state office building – the one named after former legislator and parliamentarian Robert E. Johnson – before the legislative session. That completion date was moved several times, each date a little closer to the session, then to March 1, then to June 1, and finally, to late August or early September

Now there's a fierce disagreement over when the $38 million building will be ready, with some state officials saying it could be more than a year later than expected, and the contractor's folks saying basically that everything is on schedule and that nothing is really wrong.

According to some state officials, September is now only an optimist's dream. The building is not going to be ready for occupancy by then, and might not be ready at this time next year. The current worst-case guesstimates are that the building won't be available for another six to 15 months.

Another state version, this one from Tom Treadway, who heads the General Services Commission that is overseeing the construction of the building, is that no one knows the length of the delay or even if there will be one. They'll know soon, however: An outside expert brought in by GSC and the attorney general's office is looking through the contracts, blueprints and the building itself to figure out what's awry and who's responsible.

Though it looks complete, the building leaks. The state found out about it when the general contractor, Spaw Glass Contractors, sent over a letter saying the state was due a refund for some damp-proofing materials that were called for in the building design but not installed.

Call the Lawyer and Start the Inspections

GSC brought in the attorney general to help figure out the next step. The problem is that the moisture barrier – a membrane that is supposed to be between the exterior granite and the interior walls – didn't get installed. At worst, that means someone might have to peel the outside of the building, install a membrane behind the granite and the pre-cast concrete, and then re-skin it.

The contractor, not surprisingly, sees this differently. There is a weatherproofing system, but it does not include the kind of "secondary barrier" the state folks are talking about. Any leaks that have turned up are more a product of the unfinished state of the building than of its soundness. And even if such a secondary barrier is added, there's a way to do it after agencies have already moved into the building, according to the company.

After the AG was called in, the state ordered the contractor, the architect and the construction management firm to propose a solution, which is apparently the move-in-and-we'll-fix-it deal Spaw-Glass is talking about. The outside folks brought in by the AG are basically there to go over that proposed solution and figure out whether it will work. The evaluation itself could take a while.

A delay in completion of the Johnson Building would have some ripples. The state wants to renovate the Reagan Building, but can't do that until the current occupants – primarily the Legislative Budget Board and the Legislative Council – have moved into new quarters at the Johnson Building. The new building is also supposed to be home to the Senate Printing office and the State Auditor.

The auditor's office poses a particular problem. That agency is currently housed in leased space in downtown Austin, and the delay at the Johnson building is forcing SAO to exercise increasingly expensive lease options on that privately owned space. The state hasn't put a price tag on that, or on what other delays might cost, since it doesn't know how long any delays might last.

The Numbers Game

Add the weight of the comptroller's office to the tug-of-war over the Texas Lottery's instant ticket contract. The story to date: The current contractor, San Antonio-based BABN, lost the bidding to someone from out of state. A second out-of-state company came in second. BABN protested the contract award. So did the San Antonio delegation of the Legislature. Lottery officials reopened a narrow portion of the bidding and that re-bidding is now underway.

Somewhere in all that, Sen. Jeff Wentworth, R-San Antonio, asked Comptroller Carole Keeton Rylander to crank up her new "dynamic modeling" software to see what would happen if the scratch-off contract goes to someone from outside Texas. The answer, while not part of the official bidding, is interesting. Rylander concluded that the state would lose 370 jobs, $16 million in annual personal income and $9 million in investments, net of any savings the state might realize because of the lower-priced contract. Her assumption was that whoever else might win the contract would not put significant investments into the state.

That economic modeling is up and running and available on regular legislation and fiscal notes; one place where it could change the results is in the tax bills now floating through the Legislature.

An example: Sen. David Sibley, R-Waco, told the Senate Finance Committee he would expand his R&D/investment tax/job creation tax credits to more counties if the money becomes available. And some of the folks who've been pushing those credits say dynamic modeling would show that the investments actually increase the amount of taxes coming into state coffers. Maybe, maybe not. But the state now can at least investigate the argument.

More from the gaming front: The House passed a bill by Rep. Ron Wilson, D-Houston, that would free the lottery from legislative constraints on how much of the money wagered can be paid out as prizes. That's based on an odd-but-provable theory that increasing the amount paid out leads to an increase in betting, which leads to more money going into the state treasury. Accordingly, the fiscal note on that bill says it would increase state revenues by more than $80 million a biennium when it's fully up and running. The sledding will be tougher on the Senate side, but watch for a trade between what the lottery spends on advertising and the payouts. If the Senate agrees to allow higher payouts, they're likely to lower the advertising budget in return.

A Delicate Coalition Around Parental Notification

It won't get out of committee in the same week that testimony is heard, but you can bank on a parental notification bill making it to the floor of the House for the first time in memory. The current version has an easy majority in the House, including virtually all of the Republicans and over a dozen Democrats. But change a word here or there and the coalition could easily fall to pieces. The biggest policy question affecting that is over what sort of bypass provision will be allowed in.

Rep. Dianne Delisi, R-Temple, says she's got 88 signatures in support of the bill, but it is a fragile bit of legislation and a skittish group of lawmakers. The bill requires minors to notify their parents or a judge before they can proceed with an abortion. Some House members want to add other alternatives to the judicial bypass provision, allowing young ladies to tell other adult family members or counselors or others instead of their parents before they seek abortions. Any additions in that direction might cost votes. Other members would like to get rid of bypasses altogether, and amendments in that direction might cost votes on the other side.

The other variable is whether changes in either direction would bring on any new support to replace, wholly or in part, the votes that get lost from the change.

But Rep. Steve Wolens, D-Dallas, will hear the bill this week in his State Affairs Committee, and said last week he expects the issue to find its way to the floor of the full House.

You've Got Spam... uh, Mail

Somebody came up with "spamming" to describe mass emails. Generally speaking, it's considered horribly bad manners to spam someone. And it usually falls to Internet Service Providers, or ISPs, to enforce anti-spamming etiquette. But that apparently only applies when the ISPs are not involved in a tax fight. Gov. George W. Bush has proposed a sales tax exemption for Internet access charges, a lollipop that would cost the state about $20 million annually.

Most Texas ISPs currently charge sales taxes; some of the strongest resistance to such taxes has come from companies based elsewhere that do business here.

Some of those ISPs are sending their customers a form letter of sorts that claims the Internet will one day account for $3.2 trillion, or more than a third of 1998's Gross Domestic Product. They're encouraging customers to lobby for Bush's proposal and against another bill that would add a new fee to what Texans pay for Internet access. The form letter gives out the email addresses of the members of the House committees considering the bills. It also suggests members support Bush in "removing all taxes from the Internet," which the governor hasn't proposed.

We haven't talked to anyone who says the Internet tax is dead, but there is some sentiment to use it to push some other tax breaks. The argument is that the Internet is more often used by more affluent Texans, since those are the people who can afford computers, and that any tax cut that benefits those folks should be balanced against something that benefits poorer Texans. That back-and-forth, and the fact that the Internet tax hasn't been finally approved by the Legislature, is apparently what prompted some ISPs to start trying to gin up support for the tax break.

Utility Corner

The Office of Public Utility Counsel, the state agency that represents residential and small business customers in utility cases, says consumers might save more money without restructuring. The argument is essentially that rates are going down right now, and they're actually dropping faster in a regulated environment than they would be in the deregulated environments proposed by the Legislature. It's an interesting analysis, and it might turn out to be true, but there are a couple of holes to poke in it while we're visiting. First, the OPUC analysis (which was done at the request of Rep. Kevin Bailey, D-Houston, and not on OPUC's initiative) assumes that the rate experience of the past three years will continue into the future. Take it out there, and the rate at the end of four years is up to a half-cent lower per kilowatt-hour without deregulation than with it. One other proviso is that the OPUC analysis assumes the various rates would drop steadily, instead of in the regular jerks and shimmies that normally accompany changes in rates under regulation. Still, the OPUC numbers have the attention of some of the House committee members who'll vote on the issue.

The Senate version of telephone legislation is only a deal in one meaning of the term, and that is this: The sides have agreed to stop fussing over their differences in the Senate bill. They'll take what they get there and march over to the House to fight some more. AT&T's folks, who originally said their preference was for the Legislature to do nothing, say now that they can support the Senate bill all the way through. Southwestern Bell's folks still want to see different numbers on price reductions and different words on what constitutes a price-regulated service and what doesn't.

The House isn't in on this set of talks and there are already rumblings from Bell about cutting a better deal in the lower chamber. However it goes, the chances of something passing are increasing; both sides have more or less agreed that legislation is preferable to the inevitable litigation that would follow if this was sorted out by regulators instead of lawmakers.

The Senate version would cut access charges paid by long-distance companies for the right to use local lines from about 12 cents per minute to just under 6 cents per minute. The House package that Bell apparently likes best would cut those charges to 7.5 cents per minute. The pennies add up: The rough estimate from regulators is that a one-cent drop in access charges costs the local phone companies about $100 million a year.

The Man Who Would Be...

This makes us feel a whole lot better about the checks we had to write: Gov. George W. Bush and his wife Laura made $18.4 million last year and wrote a $3.7 million check to the IRS to settle up their taxes. That's about half the $7.6 million the governor raised for his exploratory presidential bid. He spent $854,520, leaving a serious pile of money at the bank.

A little over half the money came from Texans. Two-thirds came from people who gave the federally allowed maximum $1,000 contribution. And as those numbers were being compiled, Bush was telling the Dallas Morning News that he would like to see the contribution limits raised, a position that didn't go over well with groups that have been pushing for national campaign finance reform. He contends – as he has with state contributions, which are unlimited – that there's nothing wrong with bigger contributions so long as they're disclosed. And it's true that he posted the contributions he's gathered on the Internet as soon as he announced them.

The governor continues to collect support from other states, and like the fund-raising gambit, seems to be building a little suspense and frustrating the opposition. In Iowa, for instance, other campaigns are ginning up news stories along the lines of "Where's Bush?" but the governor picked up the endorsements of that state's GOP congressmen.

While that was burbling, Bush turned his attention to his own state, walking the Texas House as hearings on the heart of his legislative package get underway. House Ways & Means Chairman Rene Oliveira, D-Brownsville, has been openly questioning the prospects for a property tax cut this year, though he's solidly behind some of the sales tax cuts Bush has proposed. The rest of the money stuff, at least on the House side, is in the hands of the House Public Education Committee, chaired by Rep. Paul Sadler, D-Henderson. His standard line for the last week has been that the session is only just beginning. Other members of the committee expect to meet every day for a while.

Or, If You'd Prefer, a Refund

That $800 million surplus in the state's workers compensation insurance fund won't go to school finance or property tax relief or other gubernatorial programs after all. House members who've been working on that have decided to try to refund $198 million to the companies that paid the premiums in the first place. A plan worked out by state Reps. Kim Brimer, R-Arlington, Craig Eiland, D-Galveston, and Bill Siebert, R-San Antonio, would also require the fund to do what the private insurers have to do: Pay a maintenance tax, and join the guaranty pool that insures the worst risks.

Siebert, prompted by Gov. Bush, originally filed legislation that would have scooped up $400 million of the surplus and applied it to general state spending. (The other half of the surplus would have stayed in the fund). The rationale was that the fund was started with bonds guaranteed by the state and that the state was thus entitled to some or the entire surplus.

That idea got batted down pretty quickly both in the Legislature and in parts of the business community, partly because there's no pressing need for more money in the face of a big state surplus and partly because there were some legitimate questions over whether the state had any right to the loot. When the smoke cleared, the only real news was that the workers comp fund was running a huge surplus that might be available to the people it insures. That's why there's now an effort to refund some of the money to the companies that originally paid the premiums.

The largess also gives lawmakers an opportunity, if they want to take it, to calm private insurers who have complained about the fund's price advantages. That's why the new deal includes the maintenance tax and the guaranty pool.

One note: The surplus is more a child of the economy than of the workers compensation business. Last year, for instance, the fund lost $11 million on underwriting, which means that claims outstripped premiums by that amount. But while they were losing money on insurance, the investments they made while they were holding the money did very well. Last year, in spite of the losses on underwriting, Eiland says the fund had overall income of almost $122 million.

The Austin Tea Party

A little partisan action went awry last week because it involved a piece of legislation that lawmakers on both sides of the aisle were interested in signing. Rep. Arlene Wohlgemuth, R-Burleson, is sponsoring a constitutional amendment that would require two-thirds of the Legislature to vote on any new taxes, tax rate increases and expansions of the tax base. Right now, such votes require a majority in the House and the Senate, but not a super-majority.

The plan, laid out in a memo to Wohlgemuth written by Republican consultant Todd Smith, was for Republicans to sign on in support of the amendment, then have a press conference on income tax day to make a partisan issue of their support and the lack of Democratic support. That press conference was to be accompanied by editorial pieces written by the sponsors and co-sponsors. The memo, which referred to all of this as an "Austin Tea Party," said the sponsor should get as many Republicans as possible to sign on, while "there should be no effort to solicit Democrats as co-authors."

Wohlgemuth was collecting signatures on the floor of the House when the Democrats somehow got wind of it. A couple, including Reps. Tom Ramsay, D-Mount Vernon, and Clyde Alexander, D-Athens, asked if they could sign on. After a bit of a dance, Wohlgemuth let Ramsay sign it and offered to let Alexander do the same. (He decided he wanted to read it first.)

Oddments and Random Legislative Notes

Just a few days after Border legislators made their pitch to the Texas Department of Transportation, that agency says it will increase discretionary funding for NAFTA projects to $50 million from $8 million. Lt. Gov. Rick Perry and TxDOT Commissioner David Laney, along with Sen. Eddie Lucio, D-Brownsville, announced that deal. That's a little short of what the Border delegation asked for; they told TxDOT that NAFTA has created $980 million in highway needs in and around El Paso, Pharr and Laredo alone. In addition to the funding, the new deal is supposed to speed up some projects, including highway expansions between Laredo, Victoria, Corpus Christi and Brownsville.

• Things to watch: The HMOs and the doctors are facing off over legislation that lets doctors band together to bargain with managed care companies. The doctors say they need to band together to get enough clout to cut good deals. Their opponents say the plan amounts to creation of a doctors' union. Some doctors say the HMOs are working together on their own deal, which would allow payors – under the guise of fraud investigation – to compare notes on what particular doctors are doing and charging. The collective bargaining legislation, which we're told has passed in only one other state, is one of the few pieces of legislation that's actually moving easily in both houses.

• The number we've been using for possible tax cuts is $500 million, the rough amount that was more or less set aside for the House Ways & Means Committee. It could be a lot more than that. The $97 billion state budget that sailed through the House last week left almost $780 on the table. That money could be used for anything from tax cuts to Rainy Day funds. The Senate version of the budget could be out as early as this week. One issue that could cause a bump: The Senate included its tax cuts and teacher raises in the budget document itself. The House put in line items to cover what other committees do with the money. It probably won't be a big problem, but it could delay House and Senate conferees when they start sorting out the differences in the two budgets.

• The medical school at UT-San Antonio got whacked in the Senate Finance Committee's budget, but might be able to stage a comeback. Sen. Mario Gallegos, D-Houston, managed to wrestle $50 million in tobacco funds away from the school's cancer research efforts and put it in the purse of M.D. Anderson's cancer center. That was possible in part because nobody on the finance committee is from San Antonio. It was also sort of a good-bye kiss to former Attorney General Dan Morales, who some members suspected was taking care of his hometown when he suggested that money go to San Antonio in the first place. Sen. Judith Zaffirini, D-Laredo, (whose district includes part of San Antonio) gave Gallegos a brass hog for his feed at the trough.

Political People and Their Moves

Mark Harkrider, a lobbyist, political operative and aide to former Attorney General Dan Morales (among others), is mulling a run for Congress from his hometown of Dallas. If he pulls the trigger, that would be a race against U.S. Rep. Pete Sessions, R-Dallas... Democrat Richard Raymond, a former House member who ran unsuccessfully for land commissioner, is working on contract for the Texas Department of Health... Former House member Carolyn Galloway is now a House staffer, working part-time ($500 a month) for Rep. Jerry Madden, R-Richardson. Some representatives had thought she was lobbying, but she's a state employee... Gtech, the state's lottery operator, adds lobbyists Mario Martinez and John Hall to the lineup. The two weren't hired specifically because of legislation that changes the lottery payouts back to the way they used to be, but the two were signed about 24 hours before the House vote on that issue... Political op Mark Sanders is trying to go straight, leaving the campaign world for a job with Strategic Partnerships Inc., the Austin firm started by former Railroad Commissioner Mary Scott Nabers. Sanders had most recently been working for Land Commissioner David Dewhurst. With Sanders' departure, Dewhurst has hired Richard McBride, a former staffer of U.S. Sen. Phil Gramm who has been consulting in the private sector for the last couple of years... U.S. Sen. Kay Bailey Hutchison took issue with our recent item on U.S. Attorney Paul Coggins of Dallas, which said she blocked consideration of him as a federal judge. Her staff contends that Coggins was never seriously considered for the job and that the senator never intervened either for him or against... This doesn't happen often: A Republican couple – Brad and Lynette Ghormley – jumped over to the Democratic Party. Mr. Ghormley lost the Republican primary for state representative last year to Rep. Betty Brown, R-Terrell. Mrs. Ghormley was a Republican Party precinct chair in Kaufman County... Jim Wright of Wheeler (don't dive for a map – it's in the Panhandle, over by Oklahoma) is the newest gubernatorial appointee to the Texas Funeral Commission, which might be a short-term gig. The House's state budget wiped out the agency's funding.

Quotes of the Week

Gov. George W. Bush, on raising $7.5 million in one month for his exploratory presidential bid: "There is some support out there and it looks like it's fairly significant."

Presidential hopeful and irrepressible quote machine Pat Buchanan, speaking to a group in Midland: "We're bombing Saddam Hussein with American fighter bombers while he's selling us 500,000 barrels of oil a day at $8 or $9 a barrel and he's bombing West Texas."

Brazos County District Attorney Bill Turner, testifying against a bill that would end the use of the death penalty in cases involving mentally retarded murderers: "It says if you can't spell murder, if you don't know where the state of Louisiana is, then you get a break on a capital murder case. Murder is not an intelligence exercise. Just because you are intellectually challenged doesn't mean you can't know the difference between right and wrong."

Frank Sturzl of the Texas Municipal League, bemoaning the effect on cities of legislative cuts in sales taxes: "Texas cities will have to find $30 million somewhere else. The problem I that you have to assume there is an excess of municipal funds just sitting around to offset this lost revenue."

Arthur Robins, a director of the American Lung Association, on that group's increasing difficulties in raising money, and the failure of one particular ailment to capture donors' attention: "We don't have the big scary disease any more. Asthma isn't the disease that will make it for us."

Natalie Wagener of Hurst, on the Senate's vote to outlaw eight-liners except at racetracks and other places where gambling is allowed: "They're busy-bodies. If people want to gamble, let them gamble. I don't really think that they have a need to meddle."

Thomas Judd, an art student who agreed to let a San Francisco restaurant tattoo him with its logo – featuring a character called "Jimmy the Corn Man" – in exchange for a lifetime of free lunches: "Some people do it for the love of the art. I'm doing it for the beer and the taco."


Texas Weekly: Volume 15, Issue 40, 19 April 1999. Copyright 1999 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited.