Piece number one fell into place Monday, when Comptroller Carole Keeton Strayhorn announced the state's financial fortunes have improved over two years ago and the ugly budget fight that ensued then might be avoided this time around. Budgeteers, nervous about Strayhorn's steady political attacks on Gov. Rick Perry, were braced for worse news. Instead, her numbers were within a hair's breadth of their own predictions about state income.

Piece number two arrived on Tuesday, when the Texas Legislature came in for the opening of its 79th regular session, offering the media who cover the session twice every two years — on the first day and the last — enough pictures to last all the way to the end of May. We counted 25 TV cameras in the House at one point, or almost two dozen more than you'll see on a day in mid-session. They sent home video of House Speaker Tom Craddick winning a second term, of Melissa Noriega taking the oath to fill in for her husband, Rep. Rick Noriega, D-Houston, who is stationed in Afghanistan, and of Sen. Florence Shapiro, R-Plano, being elevated to the mostly honorary position of Senate President Pro Tempore, which puts her third in the government's line of succession and on center stage during "governor for a day" ceremonies later this year.

Piece number three came on Wednesday, when Lt. Gov. David Dewhurst, surrounded by senators, announced he had corralled unanimous agreement to principles for a public school package he said will include education improvements, property tax relief, fairer business taxes, and more. Now that they've eaten their spinach, the senators can line up for dessert: Dewhurst will spend the next few days working out who will get the committee assignments they requested. He got their signatures while holding those assignments back.

And as we closed this issue, piece number four — the Legislature's opening attempt at a new state budget — was set to be announced on Friday. That'll be the first real look at what legislative leaders think the spending priorities ought to be, and it'll frame the finance fight — at least the non-school part of it — for the whole session.

With all that out of the way, lawmakers ended their first week by taking a week off to allow travel time for the horde of legislators who want to watch George W. Bush's second inauguration in Washington, D.C. When they're back for the rest of the 20-week session, Perry has set out three emergency issues to be tackled: Mending the torn safety nets in Child Protective Services and Adult Protective Services, a $329 million plan outlined last week; and taking on education and school finance reforms. Lawmakers aren't allowed to act on legislation during the first 60 days of a session unless it's been declared emergency material by the governor. Also coming soon: Committee assignments in the House and the Senate, and two election challenges in the House. Enjoy the initial quiet.

Unanimous Support, in Principle

The Senate's public school finance package doesn't include the kinds of details that will ultimately make the difference between rejection and acceptance, but it's a start. Lt. Gov. David Dewhurst got all 31 senators to sign off on the proposal, which generally calls for two major state taxes that would replace the money currently raised by local school property taxes. Much of it repackages options and ideas that you've seen in other forms before. Some highlights:

• The Senate's version of a business activity tax — there are endless permutations of this in the tax world — would take a company's net pre-tax income, add back the compensation paid to their employees (with the first $30,000 for each employee deducted) and multiply that result by 1.95 percent. Sole proprietors wouldn't be subject to the tax, nor would small businesses whose compensation and net income totaled less than $150,000. It would raise about $7.2 billion over the first two years.

• The local school property tax, which is at or edging toward the constitutional limit of $1.50 per $100 in valuation in most local districts, would be replaced with a $1 state property tax that could not be raised without a popular vote. Locals would be allowed to raise 15 cents on their own for local programs. Each of those changes would require constitutional amendments, and thus, voter approval. It would cost the state about $5.6 billion to replace local property taxes with state ones each year.

• Sales taxes on consumer goods and on motor vehicles would increase, as would taxes on smokes, alcoholic beverages. This section was vague in the printed hand-outs given to reporters and lobsters (get your own copy at www.texasweekly.com/ Documents/TexasChildrenFirst.pdf), but senators have talked about taxing real estate transactions at rates of up to 1.5 percent and are looking at extending current infrastructure taxes on telephone bills that are supposed to expire, at tighter enforcement of sales taxes on used car sales, and at improving the state's delinquent tax collections. That basket of taxes would produce an estimated $7.5 billion over the first two years.

• It includes a higher standard of equity, meaning the differences in basic funding for schools in richer and poorer areas would shrink. School ratings would be linked to the success of their students on after-high school readiness tests, and students at lousy schools would have the option of transferring to better schools in the same areas. Teacher salaries would be raised — no timetable was described — to the national average. Schools would be pressed to lower dropout rates. And charter schools would have to meet tougher academic and financial standards. Without the teacher pay raise in there, Dewhurst & Co. put a $6.7 billion price tag on those and other items termed "educational improvements."

Dewhurst and the senators were careful to say the plan would not raise taxes, since it would lower some and raise some others. The net effect on taxes would be zero. But the net effect on revenue would be fairly sizable. The new taxes and other revenue tricks would bring in more money, and the plan would result in more money going into education. That's not possible if the same amount of revenue is available, but it is possible if you don't call every source a tax, and if you don't refer to hidden revenue raisers — like normal economic growth, and the growth of the values of the properties being taxes — as new taxes. There's more money, but they'll insist taxes were, on average, flat.

One more thing of note: The Senate plan doesn't include legalization of slot machines. That's still an option, but lawmakers have real doubts about the chances a conservative Texas House could muster the necessary 100 votes to allow so-called video lottery terminals in the state.

The $8 Million Man

Gov. Rick Perry says he's not "wasting any time" worrying about politics, what with the state's senior U.S. senator and its comptroller of public accounts circling his Mansion with 2006 in mind. He adds that he was a Boy Scout and still heeds the "Be Prepared" motto. Thus, last week's announcement of support from several other statewide elected officials, the announcement before that of support from conservative leaders around the state, and the announcement this week of a finance committee and a campaign bank balance of nearly $8 million.

State finance reports and the details within have to be filed with the Texas Ethics Commission next week; federal reports are due soon at the Federal Election Commission. Perry jumped the deadline to proclaim he raised $7.1 million during 2004 — a year when he wasn't even on the ballot. The governor also uncorked the names of people who've agreed to serve on his campaign finance committee:

• Austin: Gary Farmer, Steve Hicks, Rae & Richard Hill, Richard Salwen

• Beaumont: Kent Adams

• Blanco/San Antonio: Julianna Hawn Holt & Peter Holt

• Brenham: John Barnhill, Howard Kruse

• Brownsville: Nick Serafy

• Bryan/College Station: Phil Adams

• Buffalo Gap: Lisa & Tom Perini

• Center: James Campbell, Rick Campbell

• Corpus Christi: Glenda & Jerry Kane, Colleen McHugh

• Crawford: Joe Hinton

• Dallas: Beth Anderson, Julie & Louis Beecherl, John Gill, M.D., Phillip Huffines, Aman Khan, M.D., Robert Rowling

• El Paso: Robert Brown, Paul Foster, Rick Francis, Ted Houghton, Woody Hunt

• Euless: Neal Adams

• Graham: Fred Gough

• Harlingen: Anne & Bob Shepard

• Houston: H. Scott Caven Jr., Chairman, Ned Holmes, Alfred Jackson, James Lee, Philip Leggett, M.D., William McMinn, John Nau III, Lynden Rose, Mike Rutherford, Kim & Michael Stevens, John White

• Jacksonville: Robert Lee Nichols

• Laredo: Margaret Martin

• Lubbock: Mark Griffin, Nancy Neal, Windy Sitton, Mr. & Mrs. Fred Underwood, Morris Wilkes

• Lufkin: John Parker

• McAllen: Elvia & Adrian Arriaga, Noe Fernandez

• Midland: Jose Cuevas Jr.

• Mineral Wells: Chester Upham, Robert Upham

• Missouri City: Massey Villarreal

• Odessa: Bob Barnes

• Plano: Bobby Ray

• San Antonio: Lowry Mays, Red McCombs, Allan Polunsky, Gene Powell, Weisie & John Steen, Karl Swann, M.D.

• Sugar Land: Helen & Carmelo Dichoso, M.D., James Wilson

• Texarkana: Rebecca & George McWilliams

• Tyler: Margarita & Thomas Grahm, René & Gaylord Hughey Jr., A. W. "Whit" Riter III

• Victoria: Steve Holzheauser

• Washington, D.C.: Raul Romero

• Wichita Falls/Possum Kingdom: Carol Carlson Gunn & Robert Gunn

My, What Big Bank Accounts You Have

The three people who won't say they're running against each other in the GOP primary for governor next year have a total of about $20 million in the bank.

Comptroller Carole Keeton Strayhorn won't have the details of her report until next week — it's not due until then — but says she had $5.7 million in the bank on the last day of 2004. She says she raised more money in the last six months than in any similar time period in her political career.

Gov. Rick Perry — the only candidate who has definitely said he'll be running for Guv next year — said earlier in the day he ended the year with $7.9 million in the bank.

And U.S. Sen. Kay Bailey Hutchison reported in October that she had $6.66 million cash on hand at the end of September. She's got a report coming out next week, but it's not expected to show significant change.

That's $20.2 million in the three bank accounts. The filing date for that election is 50 weeks away, and the primary election will be in March 2006 — 14 months from now.

Strayhorn also named a new campaign finance chairman: Ken Banks of Schulenburg, president of International Muffler Co., and a member of the Texas Quarter Horse Association's board.

Not Too Shabby

Legislators expect to increase taxes because of school finance, but the economic/budget outlook is much improved over this time two years ago, according to the state's Comptroller of Public Accounts.

The surplus/shortfall that matters is the one you'll see at the end of the week, when the Legislative Budget Board opens the curtains to reveal its starting budget for the session. The number the comptroller controls — how much money is available — is now in hand. But Carole Keeton Strayhorn has little say over how and how much state money is actually spent, just as the Legislature has little to say over how much revenue will flow into the treasury over the next two years. Use her numbers for income, theirs for spending; the politics are muddled, but at least the arithmetic works out.

Two years ago, Strayhorn started the session by saying lawmakers would have $54.1 billion in general revenue to spend, or about $7.4 billion less than they had appropriated in the previous budget. The comparable numbers this time: $64.7 billion in general revenue will be available to spend, or $6.4 billion more than they appropriated the last time they wrote a budget.

Another way to put it: This estimate says the state's general revenue income (federal and some other funds are left out) is up $10.6 billion over the estimate two years ago. And where started last session with $7.4 billion less than they needed to maintain spending, they're $6.4 billion ahead of the game at the moment.

If we were in an auditorium full of budgeteers and political and lobby types right now, they'd be yelling and throwing calculators and beer bottles at the stage. So let us quickly acknowledge some Ifs, Yets, and Howevers.

The $6.4 billion doesn't include what it would cost to extend current services in critical areas to new students, patients and other recipients. School enrollments, Medicaid caseloads and utilization rates, increased costs of this and that and the other thing all eat into the starting number. Which is why the LBB's budget is the thing to watch. Strayhorn says that stuff will eat up $6 billion, but the LBB's version is the one that counts.

Two years ago, for example, the LBB started with a baseline budget that called for $64.6 billion in general revenue spending and $124.6 billion in all funds spending. Combining those with the comptroller's revenue estimates, the finger-wavers in the Lege came up with their $10.5 billion budget shortfall estimate. After they whittled spending and raised revenue (but not, they would insist, by raising taxes), the thing was in balance.

Lt. Gov. David Dewhurst and House Speaker Tom Craddick had predicted starting shortfalls of $1 billion to $2 billion, having seen the LBB numbers but not the comptroller's. Their guesses were based on what they think it'll cost to stay even, to fully or partially restore cuts to the Children's Health Insurance Program, and what it'll cost to bail the state out of its self-created scandals in the child and adult protective services programs.

Strayhorn told reporters the state would begin with a surplus of $400 million, and that might turn out to be right. But it's not clear what all she added in and what she left out. Two years ago, she began by saying the shortfall was $10 billion after all those things were added in. When the Lege was finished raising money here and there and cutting programs here and there, it all balanced.

The second part of the fight will be over what to add. Here, school finance could be the mechanism for a huge sleight of hand. If lawmakers reach an agreement on a school finance plan and a tax or revenue scheme to pay for it, they'll be able to hide revenue increases there. Who'll know in the end whether new revenue measures attributed to school finance raised 100 percent of what was needed, or 104 percent? That's not a conspiracy theory: Estimates of what new taxes would produce are usually conservative, and any overflow can be used for general spending.

If, on the other hand, lawmakers get everything done during the regular session except for school finance, they can avoid tax bills and such by saying they'll do that and school finance together in a special session. They'll write specific budgets for everything else, write a "placeholder" budget for schools, and then figure out that education piece during a special session when the rest of the budget is locked up and kept away from the finance negotiators.

Either way, Strayhorn wasn't likely to get any leverage. In the first case, a tax/fee/revenue bill resulting from school finance would cover any shortfall budgeteers might produce. In the second, the education "place-holder" can be sized to make the budget balance. That takes the suspense out of her session-end budget certification, and reduces any impulses from the comptroller's office or the Pink Building to politicize the numbers.

Other Numbers

• Strayhorn said the state will have a total of $130.5 billion available for the 2006-07 budget — including federal funds, general revenue and everything else. That's up from the $114.2 billion she estimated at this point two years ago.

• The numbers tend to grow during the legislative session, largely because lawmakers fiddle with tax and revenues on one hand, and spending patterns and federal matching funds and such on the other. When the comptroller revises the estimate at the end of the legislative session, she incorporates the changes made in the Pink Building, plugs in any new economic stuff she thinks is important, and spits out a new estimate. At the end of the 2003 legislative session, Strayhorn's final revenue certification estimated $58.4 billion in general revenue would be available, up from the $54.1 billion she predicted in January; the all funds revenue projection grew to $118.1 billion from $114.2 billion.

It happens often. At the end of the 2001 session, she said general revenue sources would produce $61.6 billion and that all funds would total $109.4 billion. The corresponding January projections: $60.8 billion in general revenue, and $106.8 billion in all funds.

• Strayhorn is forecasting a 3.2 percent annual increase in the state's economic output during the 2006-07 biennium, down from the 4.1 percent rate in the current two-year period.

• Sales tax collections are expected to rise. Franchise taxes, which have been in an actual and rhetorical slump for several years, are expected to rise slightly. That's the tax in the headlights when you hear people talking about "broad-based-business-taxes" as a solution for school finance. Strayhorn and her estimators expect drops in the levies on natural gas, cigarettes, insurance, oil production and regulation, and inheritances. They're also expecting some non-tax revenue sources to go backwards, including the state lottery, and interest and investment income. Insurance taxes are dropping in spite of the number crunchers' belief that rates are still rising; it's because of a lag between premiums paid the companies and taxes the companies pay to the state.

The entire biennial revenue estimate is available on the comptroller's website if you want or need to read the fine print: www.window .state.tx.us.

Slam, Bam...

The special election to replace Elizabeth Ames Jones, R-San Antonio, in the Texas House will be held on Saturday, February 5, just three weeks from now. Jones, who would have been starting her third session, is Gov. Rick Perry's choice for a soon-to-be-open spot on the Texas Railroad Commission. Taking the oath to start the third term she recently won would have disqualified her, so she didn't do the swearing.

That opened a spot in the Legislature and Perry picked the February 5 date. It's strongly Republican territory, and four people told the San Antonio Express-News they're looking: Joe Straus III and former Rep. George Pierce on the Republican side, and Melissa Kazen and Chip Haass on the Democratic side. Straus appears to have the early edge in the money race; radio magnate Lowry Mays put his name on the letterhead, as did Peter Holt and Jim Gorman, who were the co-chairs for Jones. He's also claiming the support of Bexar County Commissioner Lyle Larson, who had been mentioned as a potential candidate earlier in the week.

It's on a fast track: The candidates have until the end of the day Tuesday, January 18, to file for the election. Early voting will run from January 25 through February 1. Chances are good that a replacement will be in the Legislature before any real lawmaking gets done this year.

New Kids on the Block

The House has 16 members who've never been through this before, including two who should be on your watch list: Yvonne Gonzalez Toureilles, D-Alice, and Hubert Vo, D-Houston. The Republicans they beat in November are contesting their elections, and could eventually unseat them.

With that asterisk in place, the freshmen class includes 11 Democrats and five Republicans. Five of the newbies replace representatives from the other party, including three Democrats who knocked off Republicans and two Republicans who knocked off Democrats. If you count Melissa Noriega, who's filling in for Rick Noriega, D-Houston, while he's at war in Afghanistan, and Tracy King, D-Batesville, who returns to the House after a rematch with the guy who knocked him out two years ago, there are 18 new faces. The sophomore class, with 30 members, remains the biggest single class in the House. Ten state reps began their House service before 1980; three of those, before 1970.

The regular elections changed absolutely nothing in the Texas Senate. Sens. Kevin Eltife, R-Tyler, and Kel Seliger, R-Amarillo, will be serving in their first regular session, but both won special elections in time to serve during last year's special session on school finance. An election contest against Sen. Mario Gallegos, D-Houston, was officially dismissed, so he took the oath again. It's a sea of familiar faces.

Craddick, with 94.7% Support

House Speaker Tom Craddick, R-Midland, easily won reelection, getting 142 votes. Elizabeth Ames Jones, R-San Antonio, didn't vote. She declined to be sworn in (she's about to be appointed to the Texas Railroad Commission, and taking office would have made her ineligible). Melissa Noriega hadn't yet been sworn in as the substitute for her husband, Rep. Rick Noriega, D-Houston. Eddie Rodriguez, D-Austin, voted "present" instead of yup or nope, and four members voted against Craddick's election to the high chair: Lon Burnam, D-Fort Worth, Jessica Farrar, D-Houston, Joe Moreno, D-Houston, and Paul Moreno, D-El Paso. And Yvonne Davis, D-Dallas, was there to be sworn in on Tuesday but was recorded as "absent" on the vote for speaker.

Non-Renewed

Texas Insurance Commissioner José Montemayor won't seek another two-year appointment when his term ends in May.

Gov. Rick Perry will name a replacement, but early indications are that he won't do that until late spring. Put Deputy Insurance Commissioner Mike Geeslin's name into the hat and save it for later.

Montemayor was the agency's number two man when Elton Bomer — previously a legislator and Texas Secretary of State, now a lobbyist — was the commissioner. He's been in the top spot for six years. During his tenure, the state tried to leash homeowners' and automobile insurance rates and to make medical malpractice insurance more available and affordable. Both efforts are still underway: home insurers were ordered to lower rates in 2003, giving back some of the increases they had put in place, and there are some early signs that more companies are offering medical malpractice insurance in Texas.

Montemayor, a CPA, retired from the U.S. Air Force in 1993 (as a major) before joining TDI. He's originally from Brownsville. In his resignation letter, Montemayor said he'll stay around until Perry names a new commissioner. He didn't say there what he plans to do next.

Political People and Their Moves

Richard Fisher, the Dallas financier who entered the public spotlight in 1994 for a kamikaze run for the U.S. Senate against Republican Kay Bailey Hutchison (he got just 38.3 percent of the votes), has been appointed to head the Federal Reserve Bank of Dallas. Fisher, who was a deputy U.S. trade representative during the second Clinton Administration, will replace Robert McTeer, who left the school to become chancellor of the Texas A&M University System...

Matthew Dowd came back to Austin right after helping get George W. Bush elected to a second term as president of these United States — really, he was back for good by Thanksgiving. Now he's settled back in, and the polling and policy wonk has opened his own public affairs shop in Austin...

Alan Pollock is the new chief in the Austin office of MGT of America, a Florida-based firm that does consulting work for government and government-related entities. He left the comptroller's office in 1996 to join that firm. Pollock will replace Jeffrey Ling, who moved to the mother ship in Florida.

Donna García Davidson is the new general counsel to the Republican Party of Texas. She's a lawyer with Potts & Reilly in Austin, a former general counsel to Gov. Rick Perry and an assistant general counsel when George W. Bush was governor. She also worked for Perry when he was a mere Agriculture Commissioner. Rene Diaz had the GOP job until Perry made him a district court judge in San Antonio a few weeks ago...

Dale Laine, who recently left Public Strategies to start his own consulting firm, signed on as president and COO of the Texas Cable & Telecommunications Association. He'll do that and keep the consulting thing, too. Laine is a reformed campaign worker whose former bosses include then-Gov. George W. Bush, U.S. Sen. Kay Bailey Hutchison and former Sen. Phil Gramm...

The Texas Association of Realtors added Craig Chick to the in-house lobby team. He was a legislative aide to Sen. Kyle Janek, R-Houston, and to Rep. Fred Bosse, D-Houston, and has also worked on several campaigns...

Will Newton takes over as Texas state director for the National Federation of Independent Business. NFIB also picked up lobster Lance Lively to help out during the legislative session. Newton had been the legislative liaison for Comptroller Carole Keeton Strayhorn; she's replaced him with Monty Wynn, a former comptroller employee who worked in the Senate last session...

Patrick Fortner is leaving the comptroller's office, where he's been part of the press shop through some thick and some thin, for the Texas Residential Construction Commission. He'll be the external communications guy there...

Political People, Appointments Division

Gov. Rick Perry had the appointments machine on full throttle as the legislative session began.

• Perry named Ernest Angelo Jr., a Midland oilman who was Republican when Republican wasn't cool, to the Texas Public Safety Commission, which oversees the Department of Public Safety. He'll replace one of his neighbors — Bobby Holt — on that three-member board.

• He named seven people to the Aging and Disability Services Council, one of several panels set up in the merger of the state's health and human services agencies to develop rules and policies for that elephantine organization. Terry Wilkinson of Midland will chair the council; she's worked on programs for the elderly there and is a former board member of the old Texas Department of Human Services. She'll be joined by Abigail Barrera of San Antonio, a doctor; Sharon Butterworth of El Paso, who was on the board of the Department of Mental Health and Mental Retardation; Jean Freeman of Galveston, who teaches public health courses at the University of Texas Medical Branch; Fran Brown of Carrollton, a former city council member and member of the former state Board on Aging who works at Lake Village Nursing Home; Thomas Oliver of Baytown, a CPA who chaired the Department of Aging's board; and David Young of Grand Prairie, an exec with Adapt of America, Inc.

• Another of those new HHS panels, the State Health Services Council, gets seven members: Rudy Arredondo, a prof at the Texas Tech Health Sciences Center in Lubbock and the former chair of the Department of Mental Health and Mental Retardation, will be presiding officer; Jim Springfield, president of Valley Baptist Health System in Harlingen and a Texas Hospital Association board member; Dr. Jaime Davidson of Dallas, president of Endocrine and Diabetes Associates of Texas; Dr. Jeffery Ross of Bellaire, director of the Medical Center for Foot Specialists and an assistant prof at Baylor College of Medicine; Beverly Barron, a former member of the Texas Commission on Alcohol and Drug Abuse who's been active in drug prevention; Dr. Lewis Foxhall of Houston, a health policy exec and professor at the University of Texas M. D. Anderson Cancer Center; and Glenda Kane of Corpus Christi, a former board member at MHMR.

• Betty Pinckard Reinbeck got a weeks-long appointment to the Texas Building and Procurement Commission — the agency that operates the state's property and real estate. When the term she's filling is complete at the end of this month, Perry intends to appoint her to a full six-year term. She's the executive director of the Tomball Economic Development Corp.

• Taylor County Commissioner Stanley Egger of Tuscola will be the newest member of the Texas Commission on Jail Standards. That's another less-than-a-month gig to be followed by six years in a full term.

• Perry reappointed John Ovard of Dallas as presiding judge of the First Administrative Judicial Region.

• The Guv appointed Barbara Sheffield of Sugar Land to the Texas Credit Union Commission. She's the CEO at the Members Choice Credit Union and a trustee of the Texas Credit Union Foundation.

• The One-Call Board — a panel that makes sure utility and pipelines get marked before crews start digging — gets three re-appointees and one new guy: Joseph Berry of Pearland, with Centerpoint Energy; Judith Devenport, who works for Merrill Lynch in Midland; and Janet Holland, who runs a hardware store in Mineral Wells, will remain on the board. John Linton of Lubbock, who works for Cox Communications (the cable wing of the company), is new on the board.

• Perry named Audrey McDonald of Georgetown to the State Committee of Examiners in the Fitting and Dispensing of Hearing Instruments, which licenses hearing aids.

• The state's Product Development and Small Business Incubator Board, part of the government's economic development apparatus, is getting nine new members: Jose Amador, director of the Texas A&M University System Agricultural Research and Extension Center at Weslaco; Michael Davis Jr. of Austin, a partner at the Haynes and Boone law firm; Richard Ewing, vice president of research at Texas A&M University in College Station and a professor there; Daniel Hanson of Dallas is the co-founder and principal of Technology Innovation Group; Neil Iscoe, director of the Office of Technology Commercialization at the University of Texas at Austin and an adjunct prof there; Dr. Mae Jemison of Houston, president and founder of BioSentient Corporation and The Jemison Group, Inc. and a former astronaut; David Margrave of San Antonio, an exec with BioNumerik Pharmaceuticals, Inc.; Paul Maxwell, vice president for research and sponsored projects at the University of Texas at El Paso; and Harvey Rosenblum director of research of the Federal Reserve Bank of Dallas.

• Sada Cumber, chairman of SozoTek of Austin, and Jane Juett, president of Kitchen Gallery in Amarillo, are the newest members of the Texas Economic Development Corporation, another piece of the government's eco devo machine.

• The Guv put three people on the Texas Small Business Industrial Development Corporation, which makes low cost loans to public entities: Nathaniel "Tan" Parker IV of Flower Mound, an exec with Computer Sciences Corporation, will chair the panel; A. Mario Castillo of San Angelo, president of the Aegis Group, Ltd., and principal of Pump Service and Supply Company; and Nancy Kudla of San Antonio, chairman and CEO of RDI Systems, Inc., and president of Core 6 Solutions, LLC.

• Perry named Randall County Justice of the Peace Jerry Bigham of Canyon to the Texas County and District Retirement System.

Quotes of the Week

George W. Bush, in The Wall Street Journal, on naming Allan Hubbard, a close chum at Harvard, as director of the National Economic Council: "He was the top of the class, which is why I'm the President and he's the adviser."

Comptroller Carole Keeton Strayhorn, after announcing good news about state income and taking a pop at her most prominent rival, asked if she wants Gov. Rick Perry's job: "Today is certainly not the time for any speculation or announcements. Or at least not any announcements."

Gov. Perry, reacting to the good revenue numbers, in the San Antonio Express-News: "I'm proud of the fact that I'm the governor of a state that over a two-year period of time went from a $10 billion budget (shortfall) to a $6 billion surplus."

Barbecue honcho Roland Dickey, talking to The Dallas Morning News after KDFW-TV killed his cooking show, citing spouse Maureen Dickey's election to the Dallas County Commissioners Court: "Gosh, this is ridiculous. I'm on the air representing Dickey's Barbecue. I have nothing to do with her political stuff. Not that I don't support her."

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Texas Weekly: Volume 21, Issue 29, 17 January 2005. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2005 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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The head of the Texas Republican Party, convinced lawmakers in her own party are trying to bury an appeal of the election that unseated a 22-year veteran legislator, is pushing voters to phone Austin to help overturn that result.Republican Chairman Tina Benkiser is sending daily emails to citizens of the GOP persuasion, asking them to contact their state representatives and offering a countdown to next week's committee hearing on Talmadge Heflin's challenge of his election defeat. The emails are written to stir the furies: Benkiser began with a message on MLK day -- government was mostly closed -- that referred to "double and triple voting, vote buying, ballot box stuffing and fraudulent election practices." Republican Talmadge Heflin of Houston was knocked out of the House -- and the chairmanship of appropriations -- by Democrat Hubert Vo. Heflin lost by less than three dozen votes out of more than 41,000 cast. He's challenging the result. (Quick recap: To challenge a legislative election, the losing candidate appeals not to a court but to the Legislature. One member -- that's Rep. Will Harnett, R-Dallas? is appointed to manage the contest and act as a judicial figure. A committee is appointed to govern the process, and that committee makes a recommendation to the full House. If the House can determine a winner, that guy gets the seat; otherwise, the House would order a new election to let voters sort it out.) The hearing in the Heflin case is set for Thursday, January 27. In December, Hartnett sent a letter to House members cautioning them against talking to the lawyers involved in challenges to elections that would be heard by the full House. Heflin's is the only such challenge left, now that Eric Opiela has joined Jack Stick in tossing his towel into the ring, and the lawyers and House members are apparently being good kids and staying out of touch with each other. Texans sent 87 Republicans to the House in November; Heflin would be the 88th if he prevails. Hartnett doesn't have the control on anyone else he's got on lawyers and House members, so he's not jumping into this fight. "I'm being guided solely by the law and the facts -- not by political parties -- as has been the precedent in previous election contests," he says. "I'm going by the book." Benkiser isn't one of the lawyers in the case and isn't directly lobbying the decision-makers. She's just asking Republicans around the state to express their desires to their public servants. Benkiser's first message after the government holiday called on Republicans to come to the meeting next week and gave the time and the place for it. Her email countdown started ten days out, with an assertion that "we have definite proof from this election of votes being cast against Republican candidates by voters long dead, votes being cast from out of district, individuals voting up to 80 times, cash payments being giving in exchange for votes, etc." Her email said the practices are a hangover from Democratic dominance in Texas, but added that "some Republican lawmakers are already urging that these incidents be swept under the rug. They are afraid of what the press will say if the elections are reversed." A spokeswoman for the GOP declined to name any of those chickens. The email urged readers to contact their state rep to push for the evidence in the Vo-Heflin race to be presented to the full House, and gave a link to help people contact their legislators. Day 9's email named Hartnett and the members of the committee that will hear the case. Day 8 included allegations that "ten people cast 800 illegal ballots in this election!" and that "they were paid to do it." That allegation was part of the challenge Opiela dropped last week. It's still under criminal investigation by local officials in Jim Wells County and by the state attorney general's office, but it's not an issue the House will be considering in the Houston race.

Two weeks ago, the smart guys were betting there'd be $1 billion to $2 billion in red ink in the state's starting budget.Instead, it's in the black, though it will probably swing from one inkwell to the other in the next few weeks. The Legislative Budget Board's blueprint calls for general revenue spending of $63.5 billion. A few days before that was uncorked, Comptroller Carole Keeton Strayhorn's forecast said the state would have $64.7 billion to spend over those same two years. The numbers are all mushy and subject to politicking and other crises, but the initial cushion of $1.2 billion was encouraging to budgeteers who started this same exercise two years ago with a $10.5 billion shortfall. The LBB also issued its first set of performance reviews. Those were created in the comptroller's office and stripped away from that agency by the Legislature and handed to the budgeteers. Their first effort would redirect and/or save $3.2 billion in general revenue; $1.3 billion of that amount is already included in their draft budget. Both those recommendations and the LBB's starting budget are available on their website: www.lbb.state.tx.us. The revenue side of the puzzle belongs to the comptroller alone, but Strayhorn ventured far enough onto the spending front to say that she thought the starting cushion amounted to $400 million. The Center for Public Policy Priorities did its version of a current services budget and guesstimated the state starts $1.5 billion short of the amount it needs to keep doing what it's doing now. That think tank's list of "improvements and restorations" totaled another $5 billion on top of that. In fact, the budgeteers have some wiggle room. School finance can't be solved without a tax bill or, if you prefer, a "revenue package," and that exercise always makes it easier to write a budget. Even lawmakers who think school finance is destined for a special session later this year say the budget won't be hard to balance. And there's an advantage to doing the budget without doing school finance at the same time. The budget would be set -- that is, taken off the bargaining table -- before the tax bill is in play. That simplifies the trading. Other spending will be locked down early, and public schools will be the only real supplicant in line for money when the tax bill is in play. If school finance gets done first, lawmakers will be tempted to swell the tax bill to feed other pet programs. A few highlights: • The "all funds" total -- which includes federal funds and state funds and everything else -- would be $134.4 billion, up $7.8 billion from the last budget. • Spending in public education (education and health and human services spending dominate the state's budget) would rise 8.3 percent under the LBB draft, from $31.0 billion to $33.6 billion. • Higher education spending would rise, but there's more to that. Spending at health-related schools and at two-year schools would rise while other areas would see cutbacks. • Public school attendance was 4.0 million in FY 2004, and is expected to hit almost 4.3 million in FY 2007. By then, the LBB expects 72 percent of those students to be passing all standardized tests, that half the school districts will be exemplary or recognized, and that 2.9 percent will drop out of school. • The LBB figures 53.5 percent of the state's college kids will be graduating within six years in FY 2007 and that enrollments by then will be 24 percent larger than they were in 2000. • The budgeteers say 61,448 college kids got Texas Grants in 2004 to help pay for school; they would cut that to 19,425 by FY 2007, the second year of the two-year budget they're writing. Funding for the B-on-Time program would be increased by $129.7 million. • Overall employment in health and human services would drop from 46,328 full-time-equivalent employees this year to 41,720 two years from now. • 36 percent of the state budget would go to health-care related appropriations, a total of about $48.6 billion. • State lawmakers are working on a workers' compensation reform in response to rapid rises in premiums; the state's own workers' compensation payments are expected to rise only 4 percent per year. • Client loads at the Department of Aging and Disability Services are rising. For instance, the number of people in Medicaid community care is expected to rise from 125,332 per month now to 149,102 in two years time. • Child protective services investigations are expected to rise from 138,587 in FY 2004 to 170,480 in FY 2007. Investigations in adult protective services would rise from 60,998 to 67,025 in those same years. • The LBB assumes the average number of days per month for foster care would go from 488,060 in FY 2004 to 578,955 in FY 2007. • Legislative budgeteers are assuming CHIP rolls will drop from 409,865 in FY 2004 to 331,132 in FY 2007, that the average number of TANF recipients in that same time frame will go from 253,907 to 215,300, and that Medicaid acute care caseloads will rise from 2.7 million to 3.1 million.

Texas Republicans are inviting everyone but their top vote getter to their biennial dinner party next month.Comptroller Carole Keeton Strayhorn, a Republican who's been making trouble for Gov. Rick Perry for the last two years, says through an aide that she wasn't invited to the party's "Fourth Biennial Banquet," and wasn't asked to either be an honoree or sign the invitation with each of the GOP's other non-judicial statewide elected officials. The Republicans are feting Perry, Lt. Gov. David Dewhurst, and House Speaker Tom Craddick at Austin's Four Seasons Hotel on February 22. "This will be an especially memorable occasion as we begin another legislative session," the invitation says. "Members of the Texas Congressional delegation, Statewide Elected Officials, State Senators and State Representatives will be joining us as we salute Gov. Perry, Lt. Gov. Dewhurst and Speaker Craddick in a special event you will not want to miss." Six officeholders signed the letter: Attorney General Greg Abbott, Agriculture Commissioner Susan Combs, Land Commissioner Jerry Patterson, and Railroad Commissioners Victor Carrillo, Michael Williams and Charles Matthews. Less than two weeks ago, Perry's campaign announced it had the support of each of those six officeholders in the governor's bid for reelection in 2006. Strayhorn's name is nowhere to be found on the invite. A spokesman, Mark Sanders, accused the Party of putting the governor's politics first and said his boss wasn't invited to sign the invitation or to attend the Party's party. He said she'd have done both. A spokeswoman for the Republican Party said hired fundraisers put the event together and didn't have an immediate comment on the slight. Strayhorn got 2,862,752 votes in the 2002 election, more than anyone else on either side of the ballot. Combs came in second in that sweepstakes, with 2,621,128, and Perry was third, with 2,617,106.

The fact that set off this round of dueling Republicans is this: Texas has left $772 million in the federal pot that could have been used on the Children's Health Insurance Program.Some of the money was forfeited by the state's relatively slow startup of CHIP. The federal money was available, but Texas didn't have it's program in place to attract the federal money. After the state got going, it spent less state money on CHIP than the federales allowed, and some of the available federal matching funds went untouched. By federal fiscal year, here's what Texas left on the table: FY98, $133.5 million; FY99, $324.4 million; FY00, $124.6 million; FY01, 85.2 million; and FY02, 104.3 million. That last number just came out, prompting U.S. Sen. Kay Bailey Hutchison to tsk-tsk about the state's failure to use the money on kids. On the Texas end, aides to Gov. Rick Perry told reporters the federal officials should change the law to give states more time to use the money. There is a federal law that allows states up to three years to draw some or all of the money, but even with that in place, Texas missed more than three-quarters of a billion bucks, according to federal and state officials.

The Texas Women's Political Caucus will roast Carole Keeton Strayhorn, who disagrees with one of that group's key tenets.Texas Comptroller Strayhorn, a Republican who opposes abortion rights, has agreed to headline a fundraising roast for the Texas Women's Political Caucus, a group that describes itself as a promoter of pro-choice women running for political office. The group's invitation says the aim of the February 7 event is to honor the comptroller "for a lifetime of dedication to public service" as a school teacher, school board member, mayor of Austin and Texas railroad commissioner. "Comptroller Strayhorn is the comptroller for all of the people of Texas," said her spokesman, Mark Sanders, when asked about the event. He said the group roasted Sen. Jeff Wentworth, a pro-choice Republican from San Antonio, at a previous event and that Lt. Gov. David Dewhurst -- a pro-life Republican -- was one of the speakers there to tease Wentworth and help the group raise money. Aides to Dewhurst say the Lite Guv did that favor for Wentworth -- not for the group. Strayhorn would outlaw abortion in all but three instances: cases involving rape, or incest, or where a pregnancy imperils the life of the mother. TWPC is an affiliate of the National Women's Political Caucus, which describes itself like this on its website (www.nwpc.org): "The National Women's Political Caucus is a multicultural, intergenerational, and multi-issue grassroots organization dedicated to increasing women's participation in the political process and creating a true women's political power base to achieve equality for all women. NWPC recruits, trains and supports pro-choice women candidates for elected and appointed offices at all levels of government regardless of party affiliation." The local version, from www.txwpc.org: "The purpose of the Texas Women's Political Caucus is to increase women's participation in the political process and to identify, recruit, train and support women for election and appointment to public office. While in pursuit of this goal, TWPC will strive to: win equality for women; ensure reproductive freedom; achieve quality dependent care and eradicate sexism, racism, anti-Semitism, ageism, ableism [sic], violence, poverty and discrimination on the basis of religion or sexual orientation... TWPC is a multi-partisan organization open to all women and men who support our issues." The comptroller is more or less openly considering a run for governor against Rick Perry in 2006, and the two have essentially the same position on abortion rights. Both are pro-life, with those three exceptions. Perry will end this week by speaking at a rally of anti-abortion groups at the Texas Capitol marking the anniversary of the U.S. Supreme Court's Roe v. Wade decision. Perry aides wouldn't comment directly on Strayhorn's role as headliner for the TWPC's fundraising event.

Spellings gets unanimous approval, PSI layoffs, and Voinis goes orangeMargaret Spellings, who started her education policy education as a staffer in the Texas House during 1984's House Bill 72 reforms, cleared the U.S. Senate confirmation process and will be the next United States Secretary of Education. She's replacing Rod Paige, the former Houston ISD superintendent who held the job during President George W. Bush's first term. Public Strategies Inc., the Austin-based communications and public affairs shop, is laying off 20 employees in Austin and Washington, D.C., as part of a cost-cutting effort. About half were "professional" employees; half were "administrative." The company's managing directors are taking salary cuts, which will be replaced by a profit-sharing plan that "could allow them to make more than they were making before," according to a spokesman. The cutback was accompanied with a rumor that two former politicians with the firm -- former state Sen. Kent Caperton and former U.S. Rep. Ken Bentsen -- would be leaving. Caperton says that ain't so: the two will remain with PSI. At the same firm, but unrelated to those layoffs comes news that Nick Voinis is leaving the world of politics and policy for the Toy Department. The veteran political spokesman and communications consultant will take over communications for the sports department at the University of Texas at Austin. Before going to PSI, Voinis worked for Kay Bailey Hutchison, Carole Keeton Strayhorn, and David Dewhurst, among others. He'll probably get tickets in the new gig, but he'll also have two bosses: Women's Athletics Director Chris Plonsky, and Men's Athletic Director DeLoss Dodds. ERCOT's new director of security, Chander Ahuja, resigned after two months on post, citing personal reasons. The council named an interim finance officer -- Roy Bowman -- who'll work under contract to help the agency through the aftermath of a harsh state audit. He's with Tatum CFO Partners of Houston. Gov. Rick Perry named Gilbert Herrera of Houston and W.A. "Buck" Prewitt III of Horseshoe Bay to the Texas Commission on Judicial Conduct. Both are businessmen and not judges, though the commission investigates complaints against judges and disciplines the ones it catches acting badly. For instance: The commission reprimanded state district Judge Luis Aguilar of El Paso for derogatory and sexual remarks about women in and around his courtroom. The targets of that talk ranged from probation officers to other judges, including one incident involving a female prosecutor in open court. Gov. Perry named Jack Ladd of Midland to head the State Securities Board. Ladd is an attorney and the director of the John Ben Shepperd Leadership Institute at UT Permian Basin. And the Guv said he'll appoint Joe Brown Jr. to San Antonio's 57th Judicial District Court. He's with a law firm now, but used to be an assistant Bexar County district attorney. He'll replace Judge Pat Boone, who's resigning from that court...

Blogs, bumper stickers, fines, the Electoral College, and a different take on ethics rulesRep. Aaron Peña, D-Edinburg, started a blog, or web log, on his political Internet site. He says there that that it's in place to keep his voters up to date. The address: www.aaronpena.org/blog.htm. Correct us if you know better, but he appears to be the first Texas state politician filing daily reports on the net. Railroad Commissioner Michael Williams has a blog set up and ready to go on his website -- it's at www.michaellwilliams.com -- but hasn't started filing regularly (note the extra "L" in the middle of that web address; if you leave it out, you'll go to the site for a completely different Michael Williams). • U.S. Rep. Gene Green, D-Houston, along with Democrats from Washington and Massachusetts, filed legislation to end the Electoral College and elect presidents on the basis of popular votes. The two major party candidates skipped those and other states during last year's elections, opting not to spend significant money or time in states that one side or the other had in the bag. Ending the state-by-state winner take all system would make each vote count, the promoters argue. And they blame the media instead of the campaigns, saying coverage of the some states as "swings" and others as "decided" makes voters apathetic. If all votes were contested, they contend turnout would rise. A squinty-eyed reporter might point out that more people voted this year than ever before. But from an economic standpoint, a change would make a difference: The presidential campaigns spent more money on TV ads in Cleveland, Ohio, last year than in all of Texas combined. • Former Texas Rep. Ann Kitchen, D-Austin, is appealing a $10,000 fine imposed by the Texas Ethics Commission for her late reporting of $103,000 worth of in-kind contributions from the Texas Democratic Party. She amended her last pre-election report in 2002 six months later, in 2003, to show the last-minute work by the Party, which was trying to save that contest. They fell short. Todd Baxter, R-Austin won (and won again in November of this year). He was also fined for late reporting of contributions from supporters and his fine was cut to $300. Kitchens is asking the ethics folks to shrink her fine to match his. They'll meet again in March. • Contrarians in the House point to a benefit of not tying leadership positions inside to investigations and grand jury actions outside: It separates penalties from accusations. The U.S. and Texas Houses have both had arguments over whether to allow an indicted leader to remain in office. The conventional wisdom is that accused criminals shouldn't be in the high chair, where the public might take offense at the Very Idea. But if an indictment alone carried a penalty -- loss of office -- it could give prosecutors too much juice. And we found a second House contrarian going in the same direction for another reason: Separating the grand jury's action and the penalty protects prosecutors, to some extent, from charges of playing politics instead of law. • The "if" people were all over the place when the House talked about lifting its salary caps for one worker per office. The idea bombed when it came up. Some lawmakers wanted the freedom to pay at least one person enough to slow the migration to the Senate, where the pay is better. But others were afraid of bidding wars between House offices, and of the effect the new pay rule might have had on the person sitting second chair in each office. • Bill Hammond, the former state representative who now heads the Texas Association of Business, noted George W. Bush's second inauguration by mailing out bumper stickers, playing off something from Bush's speech at the GOP national convention last summer. The quote: "Some folks look at me and see a certain swagger, which in Texas is called walking." Hammond's bumper sticker: "In Texas, we call it walking."

The Texas House, at the moment, includes 86 Republicans and 63 Democrats. Elizabeth Ames Jones, R-San Antonio, would have been the 87th Republican had she taken the oath of office.But she opted out; Gov. Rick Perry is poised to name her to the Texas Railroad Commission, and the special election to replace her will be held two weeks from Saturday. The district -- HD-121 -- looks like elephant habitat on paper, but the most prominent name on the ballot belongs to former Texas Supreme Court Justice Rose Spector, a Democrat. She'll face three men whose last names all start with the same letter as her's: Paul Silber, an engineer and former state representative who listed no party affiliation with the Secretary of State; Joe Straus, a Republican who lists his occupation as insurance and investments; and Glen Starnes, a Republican financial adviser. This is a fast setup: Early voting starts on Tuesday, January 25.

Democratic donors are playing both sides.The top contributors to Comptroller Carole Keeton Strayhorn include several big-time trial lawyers and others who typically give their money and time to candidates on the other side of the aisle: Walter Umphrey, John Eddie Williams, Ben Barnes, and former state Rep. Roman Martinez, D-Houston. She also got $197,428 from executives, employees and a political action committee associated with Ryan & Co., a tax consulting firm that represents clients with issues at the comptroller's office. Umphrey and Williams, two of the state's most successful trial lawyers, each gave $50,000, as did five other contributors: Dr. David Alameel, a Dallas dentist, George Ryan, the honcho at Ryan & Co., Dallas investor Harlan Crow, Kenneth Banks of Schulenburg (also the treasurer for Strayhorn's campaign), and Q PAC, a Fort Worth-based political action committee affiliated with investor Geoffrey Raynor, its sole contributor. She ended the cycle, as we noted a week ago, with $5.7 million cash on hand. Some notes from the other big spreadsheet: Gov. Rick Perry's biggest giver was a non-relative with the same last name. Houston homebuilder Bob Perry gave the governor's campaign $260,000 during the second six months of last year; he alone accounted for six of the governor's top ten contributions. Alice Walton of Mineral Wells gave $50,000, the Texas Association of Realtors gave $50,000, and Kirby Corp. Chairman Charles Lawrence gave $33,000. Perry got 39 separate contributions of $25,000 each. He ended up with $7.9 million on hand.