Ready? Set...

That act following the Easter Bunny by a day is none other than your Texas Legislature, coming to Austin to work on a problem that has left them bewitched, bothered, and bewildered for years: School finance.

They'll be watching a 45-day egg timer, trying to make the school finance system legal by a June 1 deadline imposed by the Texas Supreme Court.

And they have the luxury of two options for increasing state funding and lowering local funding for schools: a burgeoning budget surplus and a new business tax cooked up for Gov. Rick Perry that has managed to remain alive in public without attracting the ire of most businesses. It looks like most won't attack it, and a few of them will even promote it.

But it's hard to raise taxes when there's money in the till — nobody in state office today has had the experience of passing a tax bill except when the state was in some sort of fiscal mess. And the surplus — estimated for the moment at $4.3 billion — might be bigger than that.

The story starts on Monday, with this lineup:

• Perry will issue the call — the official agenda — for the legislative session. He has said he'll try to confine it to school finance, shutting out distractions like education reforms, appraisal caps, and such. That ordinarily happens sooner, but by holding it back, Perry prevented lawmakers from pre-filing legislation on pet projects, and also gave other state leaders less time to look at the exact wording of the call so they could figure out loopholes.

• Comptroller Carole Keeton Strayhorn will issue a new estimate of how much money the state has available for spending. The number now is $4.3 billion, and while some state leaders contend the money is earmarked for various projects and contingencies, it's officially uncommitted. And Strayhorn is widely expected to say there's even more money available; most estimates start at $2 billion, though some think there's much more than that. She wasn't sprinkling any numbers into the conversation, but told a gaggle of reporters that the economy and state tax revenues are doing very, very, very well. We'll find out Monday whether that was foreshadowing or just a head fake.

• Lawmakers will show up, call the roll and wait for presentations of the tax bill by former Comptroller John Sharp, appointed by Perry to head the Texas Tax Reform Commission that cooked up the tax bill. Other members of that commission will be around to help present the plan.

The surplus is probably the best clue to what'll happen during the legislative session. The Perry-Sharp plan would spend $1.4 billion of that, but would leave the rest in state accounts to be spent elsewhere. They've cautioned against spending more of it. House Speaker Tom Craddick, Lt. Gov. David Dewhurst and others, like the wonks at the Center for Public Policy Priorities, have been warning lawmakers that the current surplus isn't really a surplus at all, what with the state's needs in everything from education to health and human services to you-name-it. They've made some progress on that front.

Some conservative lawmakers, encouraged by the Texas Public Policy Foundation, would rather attack this without a tax bill. Rep. Bill Keffer, R-Dallas, put it into words recently, saying the surplus is really a tax over-charge that ought to be refunded in the form of property tax cuts. If Strayhorn increases the amount of money available, Sharp and Perry will look like a couple of diet counselors at a fast-food convention. Even if lawmakers think a tax bill would be a better long-term solution, a big surplus will look like the irresistible #1 Combo Plate at their favorite Mexican restaurant. They'll be tempted to put that diet on hold until the regular session in January.

The Other Campaign

We've written about plans for a media campaign to promote the governor's tax bill, but the size of the thing is news: Gov. Rick Perry is gearing up a television, radio and direct mail campaign with a proposed budget of $6 million. The campaign, funded at least in part with corporate money, won't be directly linked to Perry's reelection campaign. But his top political aides are running it, and the news prompted a wave of criticism from political opponents and campaign finance reformers.

Perry and former Comptroller John Sharp — along with a handful of political operatives — made their opening pitch to a group of lobbyists for trade groups this week, describing the project and setting the stage for a big fundraising campaign. Lawmakers will convene next week to consider the tax bill pushed by the governor.

They've got a storefront — a 501(c)(6) organization called Texans for Taxpayer Relief — and aides to the governor say it'll be able to take corporate contributions as well as money from individuals, political action committees and foundations. They've already got a website up: www.taxpayerrelief.com.

It's an election year, and Perry's on the ballot, and his face will be on at least some of the commercials, but the organization won't be directly involved in his campaign effort. That's the opening for corporate money. And the corporate money is the opening for critics.

Two of Perry's gubernatorial opponents, Chris Bell and Carole Keeton Strayhorn, said he ought to drop the idea. Bell initially said the plan was unethical even if it was legal, and later, aides raised questions about whether the new organization's ties to Perry — and it's possible lobbying activities — open it up to state disclosure laws. Strayhorn said Perry was violating the spirit of the law and ought to back out of the plan. She said she's never raised corporate money for campaigning, but ducked questions about a Republican Party effort in 2002 on behalf of her and other statewide officials that did involve corporate money.

Perry, asked how he planned to pay for the promotional effort, told reporters to "Ask Kathy" — referring to his press secretary, Kathy Walt. She said the proponents of the tax bill plan to use the same kind of money the opponents are using: "The tobacco companies are using corporate money to attack the tax bill."

But they're not on the ballot this year. Walt and others said Perry and Sharp — who headed Perry's Texas Tax Reform Commission — have already been filmed for some commercials, though the final spots haven't been put together.

Perry's political team is working on the tax campaign. Dave Carney, his general consultant, presented the idea at a meeting of lobbyists. He cited surveys done by Mike Baselice, the governor's pollster. David Weeks is working on the commercials; he's done Perry's work (among others) for years. Ray Sullivan, Perry's former press secretary, is in the mix, handling news pests. And Jennifer Lustina has signed on to raise money for the project.

Sullivan compared TTR to other groups that use corporate money for legislative advocacy, but couldn't point to another such effort in Texas or elsewhere that's closely tied to a public official. Although Perry has been filmed, Sullivan said the final form of the commercials isn't set and it might not include him. No corporations have yet contributed, though AT&T has pledged $100,000 to promote the Perry-Sharp tax bill.

Lawyers for the group say they don't have to disclose the amounts or sources of their contributions, their expenditures or the balances they keep, Sullivan said. Asked whether they'd voluntarily disclose those things, he said no decision's been made.

Second Cull: The Runoffs

Management had a rough night, with five candidates backed by the governor and/or the speaker defeated in primary runoffs.

Barbara Ann Radnofsky knocked off Gene Kelly, who gave the new Democrat a scare in the first round of the primaries. She got just under 60 percent and will face U.S. Sen. Kay Bailey Hutchison in the fall.

Maria Luisa Alvarado won the Democrats' nomination for lieutenant governor, handily beating former state Rep. Ben Z. Grant in the runoff. Alvarado got 58 percent. Grant, along with Bob Gammage and Fred Head, ran on a reform message. The three were members of the Dirty 30 — a group that bedeviled House Speaker Gus Mutscher in the early 70s and ran him out of office. Gammage lost in the primary. Head will face Republican Susan Combs in the race for comptroller in November.

John Zerwas beat David Melanson in the HD-28 GOP runoff, getting 53 percent. Rep. Glenn Hegar, R-Katy, the incumbent, won a primary for state Senate and then got lucky when the Democratic nominee in that race dropped out.

George Antuña beat Steve Salyer in the HD-118 race in San Antonio, the seat now held by Rep. Carlos Uresti (who won a state Senate primary against Frank Madla). Republicans are trying to flip that Democratic seat to their column, and many think their chances are better with a Hispanic candidate. Antuña got 81 percent of the votes Tuesday night.

Rep. Terry Keel, R-Austin, passed on another term to run for the Texas Court of Criminal Appeals. He came up short, losing to Charles Holcomb, who got almost 54 percent of the vote. Holcomb has to retire partway through his next term — that court has an age limit, and he's approaching it.

In the race to replace Keel, Bill Welch beat Alex Castano on the GOP side, getting 55 percent of the votes. He'll face Valinda Bolton, who easily beat Jason Earle — son of the Travis County district attorney — in the Democratic primary. Ronnie Earle's son got 33 percent.

Former Rep. Ken Mercer, R-San Antonio, defeated incumbent Dan Montgomery for a seat on the State Board of Education.

Rep. Scott Campbell, R-San Angelo, lost his reelection bid, pulling fewer than 40 percent of the votes in a runoff against Drew Darby, also of San Angelo. House Speaker Tom Craddick was backing Campbell, endorsing him and appearing in the district on his behalf. Campbell was one of four Craddick candidates defeated in the runoffs.

And incumbent Al Edwards, D-Houston, lost his seat in a runoff against Borris Miles. Edwards came within a hair of winning outright in the March primary, but Miles rallied in the runoff and got almost 54 percent. Edwards is one of a group of Democrats who have backed Craddick; some of his fellow Democrats were involved in the effort to knock him off.

Rep. Richard Raymond, D-Laredo, held off former Webb County Judge Mercurio Martinez in HD-42, winning the Democratic primary with almost 58 percent.

Rep. Suzanna Gratia Hupp of Lampasas could be replaced by a candidate backed by the Texas Parent PAC. Jimmie Don Aycock beat Dale Hopkins in the GOP primary for Hupp's spot, winning almost 58 percent.

Susan King edged by Kevin Christian in the GOP primary to replace Rep. Bob Hunter, R-Abilene. She got 103 more votes than he got. Gov. Rick Perry did phone messages for Christian, urging Republicans to vote, but that fell short. Christian is a former chief of staff to Hunter (though Hunter stayed out of the race); King is one of several candidates this year who started with a stint on a school board.

Another of that PAC's candidates missed, when Tan Parker squeaked by Anne Lakusta by 48 votes out of 6,356 cast. Parker had endorsements from Mary Denny, who's giving up the House seat, and former U.S. Rep. Dick Armey.

In Houston, Jim Murphy beat Michael Scofield in the GOP race to replace Rep. Joe Nixon in the House. Murphy was endorsed by Nixon; Scofield, a former aide to Gov. Perry, was endorsed by radio host Dan Patrick, who just beat Nixon and two others in an expensive and noisy Senate primary.

Thompson Challenges Craddick

Rep. Senfronia Thompson, D-Houston, is running for Speaker of the House and said she has filed the legal papers and will begin collecting pledges from House members right away. But she's running next January — not in the special session that starts next week.

Thompson attacked House Speaker Tom Craddick's administration, saying bipartisanship in the House has disappeared, that members of both parties "have been punished for voting their districts and their consciences," and accused the Midland Republican and his supporters of defeating members who voted against publicly funded vouchers for private schools.

"I can no longer stand by quietly and watch such damage be done to this institution without complaining loudly and vigorously," she said in a press release. In an interview, she said she's working on changes to House rules that would put more control in the hands of members, and said legislators have gotten stuck between the people they represent and their leaders. She wasn't specific about what she'd change, but managed a swipe at Craddick: "I won't be sending a lobbyist to represent me in a conference committee."

A spokeswoman for Craddick, Alexis DeLee, said he has already collected enough pledges of support to win reelection to the House's top office. "She's entitled to her opinion... but we already have the votes to win," DeLee said. She said Craddick has collected pledges from "more than 110" members of the House for reelection at the beginning of the regular session in 2007.

Craddick's term runs through the end of the year — the House starts its business every two years by electing a speaker. But the House also has the power to pull down a speaker, moving to "vacate the chair" and then electing someone else to preside over the chamber. No speaker has been openly challenged since Gus Mutscher in the early 1970s. He went out on the wave of the Sharpstown bank stock scandal, which resulted in the election of a huge number of new members in 1973. One of them was Senfronia Thompson.

And House Democrats Want New Rules

Three top House Democrats want new rules put in place before lawmakers get going on school finance to make it easier for outsiders to see what's going on in there.

Reps. Garnet Coleman, Jim Dunnam, and Pete Gallego want amendments made available on the Internet while they're being debated on the floor, want the House to follow state open meetings laws — the Legislature is exempted from many of those statutes, want conference committees that reconcile House and Senate differences to meet in public, and want record votes taken on bills to be available instantly to the public.

They want to reinstate a rule that required members serving after losing an election to give up chairmanships. That would immediately affect Rep. Kent Grusendorf, R-Arlington, who lost his primary but remains chairman of the House Public Education Committee. The Democrats want both parties to have the same number of seats on the House General Investigating & Ethics Committee, an idea that would move Party Caucuses into positions of actual power in the House for the first time.

And they'd prevent the House from adopting special rules on legislation — limiting floor amendments, for instance — unless 2/3rds of the members agree.

Political Notes

Add Sen. Mike Jackson, R-La Porte, to the list of people interested in the GOP position on the ballot in CD-22, where U.S. Rep. Tom DeLay, R-Sugar Land, plans to retire next month.

DeLay's spot on the ballot will be filled after four precinct chairs — one from each county in the district — pick someone. That person will face former U.S. Rep. Nick Lampson, a Democrat, in November. As for the rest of this year, Gov. Rick Perry has said he doesn't intend to call a special election to put a temp in DeLay's job.

• Democrat Chris Bell says he'd end tuition deregulation and lower tuition rates if elected; those rates jumped significantly when lawmakers left them in the hands of universities. The schools complained for years that lawmakers were capping their tuition and short-sheeting them on other funding, and when they were set free, they began raising costs to compensate. Bell says that was a bad idea that keeps some Texans out of college due to high prices.

• Independent Carole Keeton Strayhorn wants to move the state's standardized tests — the TAKS test given to public school children — from the spring to the fall. She says that would make the test more diagnostic and says teachers could then use the rest of the year responding to the results and helping kids where they need it.

• Gubernatorial appointees and their families contributed $3.8 million to Gov. Rick Perry over the last five years, according to the latest report from Texans for Public Justice. TPJ says one-third of Perry's appointees gave to his political campaign — two-thirds didn't, which is different sort of news — and they gave an average of $3,769. Their whole report is online at www.tpj.org.

• John Courage, the Democrat challenging U.S. Rep. Lamar Smith, R-San Antonio, gets a fundraising visit next week from U.S. Sen. Russ Feingold, D-Wisconsin. They're doing a "listening session" with students at the University of Texas, and then an Austin fundraiser that evening.

Flotsam & Jetsam

Bill Ceverha got a clean bill of ethical health from former Judge Mike McCormick, who was hired by the Employee Retirement System to ferret through charges of ethical lapses by Ceverha, a board member. McCormick's report says Ceverha was eligible (not a lobbyist) when he was appointed to that board, that he hasn't violated standards of conduct or done anything that should disqualify him from the board, and he recommended no action be taken. The board took the report and called it done.

House Democrats accused Ceverha of taking the post while he was still a lobbyist, and they said he shouldn't have accepted a $100,000 gift from Houston homebuilder Bob Perry while on the board. That gift, in two checks, was reported to the Texas Ethics Commission, but with no dollar amounts attached. After ethics commissioners looked at it and required nothing further, Ceverha and Perry owned up to the amount of the gift in The Dallas Morning News. You can read a back-and-forth on the ethics commission's decision in the Soapbox section of our website. And ERS posted a copy of McCormick's report, at www.ers.state.tx.us/abouters/CeverhaReport_20060412.pdf.

• The Texas Legislature is only a week behind Congress for the number of days in session for the last two years, according to the Texas Municipal League. That's if the special session starting next week isn't extended. Since the beginning of 2005, Congress has met 238 days and the Texas Legislature, once this session is under its belt, will have met for 231 days. During the 2003-04 biennium, TML says the part-time Texas Lege met for 255 days, compared with 248 days for the full-time Congress.

• State lawmakers have tried to lower the cap on appraisal increases to limit increases in local taxes. Local governments have fought it as an infringement of local control. Right now, the limit is 10 percent and an effort to lower it failed in the House last year (though it'll surely come back). The city council in Austin offered a new twist: They want the state to give them the authority to lower the cap themselves, preserving local control and leaving to local voters the question of what ought to be done.

• The Children's Health Insurance Program is starting a $3 million campaign to sign kids up. Enrollment has been dropping steadily, from 322,898 in December of 292,681 this month, a decline of 9.3 percent in five months. Enrollment has dropped by more than 200,000 since lawmakers cut it back in 2003. Now the state will do radio, print, bus-bench and Spanish-language TV ads to promote the program.

• Put librarians back in the 65 percent soup. They weren't included in the state's initial idea of direct instructional costs, but Education Commissioner Shirley Neeley has moved them into that category. She's polishing the rules ordered by Gov. Rick Perry, who wants at least 65 percent of public education money going to instruction. Neeley will phase in the rules over three years time.

• Rep. Craig Eiland, D-Galveston, wants to add full funding for the Teacher Retirement System to the agenda for the special session. TRS needs about $300 million to balance assets against expected debts, and he says it'll be easier to fix now than when the problem gets really big. He'd have the state increase its contribution to 7.31 percent of educator salaries, up from 6 percent and he says the Employee Retirement System could use a similar, though smaller fix: an infusion of $60 million in state money.

George, and Other Political People and Their Moves

George Phenix, the publisher of Texas Weekly and the last of the three founders still involved with this enterprise, is retiring. In 1984, Phenix, Sam Kinch Jr., and John Rogers launched the newsletter to try to fill a gap between what was happening in politics and government and what was getting reported in the big papers and TV stations. Also, they wanted to make money. Rogers died, Kinch retired, and now Phenix is hanging it up. He wants to work on some writing projects and see if he can make Thursdays — a regular deadline every week for more than two decades — feel like any other day of the week. We wouldn't be here without him, and we wouldn't have had nearly this much fun on the trip.

Recovering: Sen. Mario Gallegos, D-Houston, checked out of the clinic where he went for a month to get sober. He publicly admitted his alcoholism a little more than a month ago and sought treatment. He says his doctor has given him a clean bill of health, and that he has no plan to get out of politics: "Don't stick a fork in me yet."

Barry McBee will take the in-house lobbying job at the University of Texas System, replacing former Rep. Ashley Smith, who left that gig for a private sector job in Houston. McBee, a former chief of staff to Gov. Rick Perry who is currently the first assistant to Attorney General Greg Abbott, will take the post in June. The government folk don't call these lobby jobs — they prefer to call it legislative relations. McBee will be the vice chancellor in charge of it. He worked for Gov. Perry, Lt. Gov. Perry, Agriculture Commissioner Perry, and also did a stint at the top of what's now the Texas Commission on Environmental Quality.

Ray Martinez III is resigning from his spot on the U.S. Election Assistance Commission at the end of next month. Martinez, a Democrat, was appointed to the bipartisan commission by President George W. Bush on the recommendation of then-U.S. Sen. Tom Daschle, D-South Dakota. He'll return to Austin and said in his resignation letter he was leaving for family reasons.

Pat Wood, the former chairman of the Federal Energy Regulatory Commission, and the Texas Public Utility Commission, is joining the advisory board of Airtricity, a wind energy developer with four projects in the state.

Lisa Barsumian, who left Texas for New Mexico a couple of years ago, is reversing course; she'll join Austin-based Strategic Partnerships as a "senior consultant." She was a lobbyist for two decades before the New Mexico stint.

Chris Hughes moves from Exelon Generation Co. to Brown McCarroll. He'll work on environmental, utilities and telecom issues for that law firm.

Chris Lippincott has left the Texas Association Against Sexual Assault to join the federal lobbying, er, liaison staff at the Texas Department of Transportation

Another of the former ERCOT staffers accused of directing agency money to their own companies pleaded guilty. Christopher Douglas is the fourth defendant to plead guilty; he agreed to pay $500,000 stolen from the agency and faces jail time.

Deaths: James Douglass "Jim" Shear, one of the state's real experts on school finance, after a long bout with throat and neck cancer. He worked for the late Bob Bullock for years before signing on with a law firm that specializes in school funding issues. He was 53.

Quotes of the Week

Activist, college prof, and former political candidate José Angel Gutiérrez, quoted in The Dallas Morning News on a march on immigration that drew 500,000: "This is the first real social movement, bottom-up, grass-roots movement of the 21st century. Mexicans and other Latino immigrants are outing themselves and saying, 'You're not inviting me to the table, so I'm taking to the streets.'"

Fort Bend County Republican Terese Raia, telling the Houston Chronicle why she and others showed up to disrupt a rally for Democrat Nick Lampson: "We decided we wanted to cause a little a rumpus this morning and show our support for Tom DeLay."

Republican Tom Campbell, who finished second in the primary to U.S. Rep. Tom DeLay, telling Texas Lawyer how he found out DeLay was quitting: "The home phone went off first. We ignored it, but then my cell phone rang, my wife's phone and then the kids' phone, so we figured we had better answer."

Former Rep. Fred Head, the Democratic nominee for comptroller, at a press conference introducing the slate of Democrats running for top state offices: "We've got a lot of underdogs here today."

Gov. Rick Perry, asked whether he'll go past the legislature to win support for his tax plan: "I've never run a campaign that I wasn't fully prepared to use every source of advertising available, be it television, radio, newsprint or just good old-fashioned shoe leather."

John Sharp, quoted in the El Paso Times on reports that a shift from local property taxes to a new state business tax — a tax designed by a committee he chaired — will throw school finance out of balance: "That ain't our fault. That's in the school finance formula. It doesn't make it any worse than what current law is."

Scott McCown of the Center for Public Policy Priorities, quoted in the San Antonio Express-News: "If I've got money to change an election, it's going to be a lot easier on me to change your mind. If I'm only trying to change your mind on the basis of your intellect and patriotism, it's much harder."

Sen. Troy Fraser, R-Marble Falls, quoted in the San Antonio Express-News on the impact of money from phone companies on telecommunications legislation that passed in 2005: "All their money had zero impact. And here's the reason: Nothing moves through my committee unless I agree with it."

Former Gov. Ann Richards, saying she expects a full recovery from cancer, on the reaction she's met: "If I had known people would be so nice to me, I might have done this sooner."

Texas Weekly: Volume 22, Issue 41, 17 April 2006. Ross Ramsey, Editor. Copyright 2006 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited. One-year online subscription: $250. For information about your subscription, call 512-302-5703 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.