Maybe a little sympathy is in order here. Gov. George W. Bush is running for president, and naturally enough, would like to have things running smoothly back on the home front, where the government is dominated by his own party and where the executive branch is populated mostly by his own appointees. But even with all the watchdogs, things have been bumpy on the finance front.

The trouble list grew by two in the last week, with the release of a paint-peeling auditor's report on the Smart Jobs fund at the Texas Department of Economic Development, and the appearance of an early (and perhaps faulty) indication that the state's Medicaid Managed Care operation could be short by $116 million if current trends persist. Add those Morning Glories to the flowers already in bloom -- significant budget shortfalls at the Texas Commission on Alcohol and Drug Abuse and the Texas Department of Mental Health and Mental Retardation, a skirmish over compensation rates for nursing homes that get government reimbursement -- and you have quite a busy little garden.

Financial spits and spurts are a normal part of government. Something is always running a little short of expectations or a little long. One problem here is that the ranks of experienced budget people in Texas government is a little on the thin side, especially at the agency level. Another problem is that the state budget is written to tighter tolerances now, leaving less leeway for bad forecasts.

A third problem is that numbers from the health and human services part of government are notoriously fuzzy, no matter how good their budget offices are. It's harder to price things in those disciplines, and harder to count the things once they are priced.

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Take, for instance, this new Medicaid problem from the Texas Department of Health. The program could end the year with a budget shortfall of $116 million if first quarter trends continue. Those numbers indicate a shortfall ahead because people are leaving the welfare rolls more slowly than predicted, utilization levels for certain clients are up, and the costs of prescription drugs are rising more quickly than expected. Budgeteers say similar projections two years ago didn't pan out, and say the program actually ended with a small surplus. That's true, but the earlier problem didn't include rising drug prices, which account for about half of the wattage in this latest warning.

TCADA and MHMR, on the other hand, fumbled. The two agencies had similar, but not identical troubles, each ending the fiscal year with much less cash than they had estimated. Lawmakers had written the new budgets for the two agencies based in part on those estimates of unspent money left from the previous year. MHMR is a large enough agency to absorb most or all of its shortfall without seriously cutting service levels. They got an infusion of $6.4 million last year and moved some money around and should be fine. But TCADA sent letters to the private sector providers who depend on the agency for financing, telling them that their budgets for the next year are being rejiggered and will probably drop. Without help, that means a cut in services. Budgeteers are trying to find enough money to at least maintain last year's service levels, but nothing was complete at our deadline. Even if there is an infusion of cash, the agency won't be able to grow this year as planned.

We've noted previously that the nursing homes and legislative fiscal types are working out a deal that will increase the reimbursement rates for the homes even more than the Legislature had already agreed to. The budgeteers in the Capitol are also working on ideas to reduce future finance problems, perhaps by running budget officers and agency board members and others through fiscal training to teach them how to spot these things early enough to prevent real trouble.

Smart Jobs, Dumb Finance

The auditor's report on the Texas Department of Economic Development begins with the words "Gross fiscal mismanagement" and goes downhill from there. The auditor said TDED wasn't watching contractors or the fund closely enough and detailed financial sins including an employee's personal use of airline vouchers given to the agency and a $540,000 payment to a contractor who never produced a product. The agency is reeling from that and is days away from the beginning of its first Sunset hearings. The Legislature will decide next year whether TDED should remain in business.

The audit report says TDED short-sheeted the unemployment compensation fund by $63 million. The auditor says the law caps the balance of the Smart Jobs fund and says TDED has let the program remain above that cap amount for more than two years. When it came up in a preliminary audit report last year, the agency transferred $29.6 million to the Unemployment Compensation fund, which is where the overage is supposed to go. The auditor says another $63 million should be transferred. The agency says that's too much. One side is counting the total balance in the account; the other is counting that part of the balance that is unencumbered. It's an accounting fight, but legislators are predisposed against the agency right now. The issue will sit until Attorney General John Cornyn registers his opinion on which balance is right. If the $63 million got transferred right now, it would leave $108 million in the Smart Jobs fund.

The auditor also lit a fire by saying an under-funded Unemployment Compensation fund would force a tax increase on Texas businesses. That's not likely, but it's not impossible, either. For the first four months of the current fiscal year, the unemployment fund's balance was under the minimum balance set by statute. When it goes below that line, it can trigger the tax.

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Another Hole in the Pocket, Coming Soon

This doesn't exactly qualify as a goof, but it sure puts the whammy on the state budget: The federal government is lowering its reimbursement rate on Medicaid by 0.79 percent starting in fiscal 2001. That looks like a small number until you multiply it times a number that has a bunch of commas. The bottom line is that the state will be about $86 million short in the federal funds department and will have to come up with the cash to keep services on the current track.

On the horizon: It looks like the state will need about $15 million for more prison beds because fewer paroles are being handed out than expected.

None of this adds up to a budget crisis, apparently, but its safe to say that Appropriations Chairman Rob Junell and Senate Finance Chairman Bill Ratliff find the rush of bad news frustrating. The budget-writers didn't seem too upset about the Medicaid caseload projections (that's the $116 million in the previous section) partly because the numbers are very preliminary. Partly, though, they were aware that it was at least an attempt to give them an early warning. They're tired of finding out about problems after the problems are fully out of control.

Odd footnote: The outgoing director of the Texas Commission on Alcohol and Drug Abuse gave an employee an $8,000 merit bonus before leaving last year. The agency now has a budget deficit, detailed earlier. Who got the raise? The agency's internal auditor.

Quick Hits on Campaign Finance

There's a new report out called "The Governor's Gusher" on contributors to George W. Bush's two gubernatorial campaigns. . The report was put together by Texans for Public Justice, and concludes, essentially, that the contributors gave because they want favors. It profiles 100 contributors that the group labels "profiteers." The site also has a searchable database of the folks who gave Bush $41 million to run for office in 1994 and 1998.

Tax That Fellow Behind the Tree

Just when you thought Land Commissioner David Dewhurst was finished talking about his use tax liability with the state of Texas, he writes an opinion piece for the San Antonio paper reviving the story and pushing his proposal that the state should change the tax.

A quick refresher, in case you were on Mars or have a life outside of politics: Dewhurst raised a ruckus a couple of weeks ago after the state's tax collector, Comptroller Carole Keeton Rylander, sent him a letter saying that it appeared he had purchased some items outside of Texas and might owe a tax on some or all of them. He responded to her with a letter -- not made public by either side -- detailing what he and his wife purchased outside the state over the last seven years. In his public response, he suggested Rylander was selectively enforcing the use tax law, applying it only to wealthier taxpayers and maybe only to wealthy taxpayers who serve at the top of the General Land Office in the State of Texas and who might be in a position to run against Rylander in future GOP primaries.

The San Antonio Express-News weighed in with an editorial that got Dewhurst's goat. That helped this saga grow its second set of legs: Dewhurst wrote back, which might have made him feel better, might have set the record straight, and might have extended the life of the story for another few days. He picked at Rylander, quoting an unnamed spokesman for the comptroller who said she alone decides who gets pegged to pay the use tax. And he fired directly at her with a section saying, basically, that she should tax everyone or no one.

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Her response is a repeat of what she has said before: The tax isn't selectively enforced, nobody was singled out, and the comptroller sends an automatic letter to people reported by the U.S. Customs Service for bringing things into the state. There are a couple of unexplored alleys and byways here. Rylander's aides say Customs collects information on anyone bringing more than $400 worth of goods into the U.S. Her office sends use tax letters only to those who brought in more than $95,000 in goods in a given year. Do the math: At an absolute minimum, that means Dewhurst owes almost $6,000.

He says he'll pay what he owes as soon as he gets a bill in response to his detailed letter to the tax folks. He's also calling for an exemption on the use tax that would have the effect of letting small spenders off the hook while continuing to collect the tax from businesses and from big spenders like himself. Sen. Tom Haywood, R-Wichita Falls, jumped in to say he plans to file legislation that eliminates the use tax on individuals altogether. He went out of his way in a press release to say he's not taking sides. "Their conflict just identified another tax to target," he wrote. The use tax directly brought in about $2 billion last year, but if indirect collections and so on are included, the comptroller says it would cost the state about $9 billion every two years to completely repeal it.

Other States, Other Use Taxes

Dewhurst owns or recently owned homes in New Mexico and Colorado. Here's a hypothetical case: If he bought three chairs in, say, Grenada, declared them at Customs and then put one chair in a house in each state, he could have tax liabilities in each state. Dewhurst himself raised this possibility in a conversation by saying that not everything he purchased overseas was actually used in Texas.

Back to reality: Colorado has a sales and use tax, but a spokesman for the land commissioner says Dewhurst has never been asked to pay a use tax there, doesn't think he owes it and has never paid it.

New Mexico's tax is an odd duck. The state has a use tax (by a different name) and if you buy something outside of New Mexico that would be taxed if you bought it in state, you owe the tax. The Legislature in the Land of Enchantment passed a law a few years ago that prevents the state's tax collectors from enforcing collection of the use tax.

Here's the short form: A New Mexico resident might owe the tax, but the state is barred from coming around and demanding it (some businesses have to pay and are audited, but that's another can of wax). A spokesman for Dewhurst says the land commissioner has never been asked to pay such a tax in New Mexico and has never paid it.

Lots of Republicans and Very Few Democrats

Texas Republicans have never turned out 1.1 million voters in a primary, but they'll turn out 1.3 million in March, predicts GOP consultant and pollster Bryan Eppstein.

And Democrats, who regularly turned out more than 1 million voters for each of their primaries until 1996, will only attract about 600,000 to the polls this year, he says.

Eppstein got the numbers right last year, coming up with a prediction darned close to the actual general election turnout of 3.7 million. That was at a time when everyone else, at least on the Republican side, was betting the George W. Bush tsunami would pull as many as five million Texans to the polls. His take this time is that Bush, as a presidential candidate, will pull a lot of Texans to the booth, and that the Democrats are in a kind of limbo dance ("How low can you go?" he jokes.) because they don't have a slate of statewide candidates on the ballot.

Total primary turnouts won't be all that different from 1996, also a presidential year, if Eppstein's prediction holds. He's pulling 1.9 million total votes off of his Ouija Board for the March turnouts; 1.94 million showed up in the same spots four years ago. (Don't get your hopes up about voter interest, though. The 1992 presidential primaries drew 2.27 million Texans to the polls, and four years before that, 2.78 million voted. That's when there were fewer people in the state.)

The real exclamation point in the Eppstein prediction is his contention that more than twice as many people will vote in the GOP primary as will vote in the Democratic primary. That's a particularly bold weather forecast if history is the only guide, since the GOP primary has been bigger than the Democratic primary only once in recent years. That was in 1996, when elephants outnumbered donkeys by 98,547 in the Texas primaries.

Political Briefs

Rep. Domingo Garcia, D-Dallas, wants make two things perfectly clear. He says, first, that he was not involved in any effort to recruit Hispanics to run against incumbent Anglo Democrats in Dallas County. None. He adds that if he had been involved in such an effort, it would have resulted in opponents for everyone he recruited against.

His second point is that he didn't send a new fundraising letter after he was asked by two of the co-signers on the first letter to stop using their names. U.S. Rep. Martin Frost, D-Dallas, and Houston businessman Paul Hobby wrote to Garcia in December to ask him to stop using their names in his campaign materials. Garcia says it is true that another batch of letters was mailed after those requests, but he says it was essentially the same letter. In his view, their requests applied to new materials -- not to new mailings of old materials. In any case, he's through with the fundraising effort that depended on those letters, and presumably through using their names.

• Oh, that. Former Dallas Cowboy Thomas "Hollywood" Henderson, a recovered drug addict who now runs drug rehabilitation programs and does community work, won't run for the Austin City Council after all. He said he had been advised differently, but he's ineligible to run because of a sexual assault conviction in California in 1983 (he served just over two years) unless he can get a pardon. That's unlikely before the March deadline, so he's no longer in the race.

• Follow-up: Sen. Judith Zaffirini, D-Laredo, encored her recent training programs done for the City of Laredo by doing a seminar for Webb County officials. Her firm made $10,000 for a day spent telling county officials and workers how to do a better job communicating. That amount didn't require a bid, but did require a vote from county commissioners.

• Former comptroller and Lite Gov candidate John Sharp has signed on as the director of public relations for a new company called The company was started by the conditioning coaches from several major leagues (football, baseball, basketball and hockey). Sharp will keep his current post at Ryan & Company, a tax consulting firm.

Texas Senate Opens its Box of Crayons

Redistricting isn't quite afoot, but some of the runners are now known. As was rumored last summer, Lt. Gov. Rick Perry named Sens. Troy Fraser, R-Horseshoe Bay, and Mario Gallegos, D-Houston, to co-chair the Senate Committee on Redistricting. The other nine senators on the panel are Gonzalo Barrientos, D-Austin; Robert Duncan, R-Lubbock; Mike Jackson, R-La Porte; Eddie Lucio, D-Brownsville; Frank Madla, D-San Antonio; Jane Nelson, R-Flower Mound; Steve Ogden, R-Bryan; Florence Shapiro, R-Plano; and Royce West, D-Dallas.

If this were a poll, you'd want the cross-tabs, so here goes. The 11-member committee will have six Republicans and five Democrats. It will have nine men and two women. It will have six Anglos, one African-American and four Hispanics. Dallas got a member. So did Houston. So did San Antonio and Austin. Six members have significant rural areas in their districts. Four represent suburban areas. They plan to take the show on the road for the next year, holding hearings to establish community concerns and interests, and they'll draw lines during the next legislative session.

Before you draw districts, you count bodies, and that's as infused with politics as reapportionment. The U.S. House's Democratic Caucus is trying to get Gov. George W. Bush to take a position on actual counts versus using counting-and-estimating to get a census this year. Most Democrats and some minority groups want to use estimating, which some say will give a more accurate picture of how many people there are in the U.S. and exactly where they are. Others, including many Republicans, say the U.S. Constitution requires an actual headcount.

Finally, the U.S. Supreme Court took at stab at the Voting Rights Act and said basically that redistricting plans that don't erode the rights of minority groups. That undercuts the idea that a new redistricting plan should advance the positions of various groups beyond the current plan. That'll change the reading given by the courts to whatever the Legislature does next year.

Random Bits, Oddments, and Miscellany

Here's an addendum to last week's item on school finance. The state paid 45.6 percent of the cost of public schools in fiscal 1999, according to the latest numbers from the Legislative Budget Board. Two years earlier, the LBB had estimated the state's share would climb to 48.7 percent in 1999, but local school districts raised taxes faster than the state's number-crunchers had predicted. The Legislature went back and did more work in last year's session and the newest estimate is that the state's share of the costs of education will rise to 48.6 percent in the current fiscal year and 48.7 percent in fiscal 2001. As with the earlier set of numbers, it all depends on what those local school boards do.

• Get on the Internet and try Also try and It might sell contracts for the Texas Tomorrow Fund and it might not, but you've gotta give them points for trying. The links jump to the state's prepaid college tuition page and show you how to enroll (they don't let you enroll online, however). While that's testing the Internet, it's also testing the memories of drivers: The program has those addresses posted on billboards in eight Texas cities.

• This one has its share of "Ifs", but it's bound to be a good deal for somebody. The kids who graduate from New Caney and Splendora High Schools starting this year will get $1,000 college scholarships. There's a catch: They have to use the money for tuition and fees at a college or junior college inside the North Harris Montgomery Community College District. The money's from the East Montgomery County Improvement District.

• This has nothing in particular to do with anything, but it's interesting just the same. The Texas Department of Health says the most common boy's name given in the state in 1998 was Jose. That's for kids of all colors. The most popular girl's name overall was Emily, which apparently made it on combined scores, since it wasn't the favorite name in any group. The most popular girl's name for Hispanic babies? Jennifer. African-American babies? Jasmine. Anglo? Hannah. Texans gave birth to 342,199 kids in 1998, and the statistics says they'll live, on average, for 76.5 years, or until 2074.

Political People and Their Moves

Texas Education Commissioner Jim Nelson hired Arturo Almendarez as his deputy commissioner of programs and instruction and promoted Paul Ballard to run the $20 billion Permanent School Fund. Almendarez had been superintendent of the Calallen ISD. Ballard had been the number two at PSF... Mary Bacon quit the state prison board after the State Commission on Judicial Conduct -- at her request -- said it would be a conflict to serve there and to also work as a visiting judge. That leaves two vacancies on the nine-member board... Lois Moore, the former Harris County Hospital District president, will head the Harris County Psychiatric Center and the Mental Health Institute. Both institutions are part of the UT-Houston Health Science Center... Lobbyist Karen Johnson, who's resume includes a stint at the head of the State Bar of Texas and the presidency of Entergy Texas, is the new president of the United Way of Texas... Anne Friedenberg Swanson has moved to the comptroller's office to work in communications for Carole Keeton Rylander. She had been at the Bush campaign working as Laura Bush's press secretary, and before that, at the governor's state office... Lee Alcorn has been reinstated as the head of the Dallas branch of the NAACP. He was suspended in July after starting another group that some thought was competitive with the NAACP. The new arrangement is up for review by the group's national board next month... Jay Kimbrough is leaving the Texas Commission on Private Security to become executive director of the Texas Commission on Alcohol and Drug Abuse. He takes over TCADA as the agency tries to dig out of a deficit without cutting services too deeply... Sen. David Bernsen, D-Beaumont, promoted Kathy Golson to legislative director and hired Jennifer Chapman as general counsel. Chapman had been with Rep. Patricia Gray, D-Galveston... The Texas Chiropractic Association put Charles Hester in the executive director's chair... Lt. Gov. Rick Perry appointed Thomas Wilkins of Plano to the Telecommunications Infrastructure Board. Wilkins runs an eponymous tech company... After seven years in the State Auditor's Office, Mark Garcia hired on as the Senate's internal auditor... Convictions: Dallas City Councilman and longtime activist Al Lipscomb, on 65 counts of bribery and conspiracy stemming from payments he accepted from a Dallas cab company owner and votes he made while taking them. He'll appeal... Deaths: Bob Squier, a nationally known Democratic political adman, and a documentary-maker who did time in public television in Austin, of colon cancer. He was 65.

Quotes of the Week

Tony Raymond, who started FECinfo, a private firm that tracks campaign spending, on a new (and voluntary) U.S. Senate system that will track lobby spending: "In reality, the lobbyists are the key people in Washington when it comes to money and politics. They decide who the money is going to go to. These are the guys who need a little bit more exposure."

Bush finance chairman and friend Donald Evans on how much "soft" money could be raised by that campaign's contributors during this election cycle: "People are talking about big numbers. I have heard $225 million, $250 million. Those numbers don't make any sense to me. But it's possible."

Texas Transportation Commission Chairman David Laney, on a report that says Texas gets about 84 cents in federal funding for every dollar Texans put into the federal highway fund, or about six cents less than the law requires: "Everybody was so upbeat and optimistic about the rate of return once (the law) was implemented and all of a sudden we look back and we have slipped into a ditch."

California Secretary of State Bill Jones, commenting on the risks of Internet voting, after a technology panel there recommended against an immediate jump to electronic democracy: "I'm not in a business that can spend some money and repair my image. I only get one chance."

Iowa State University political scientist Steffen Schmidt, on the overemphasis on that state's caucuses and the rest of the country's relative indifference: "In 2000, a bunch of stupid white guys talking about really complicated issues is not entertainment, and people will not tolerate it."

Terlingua resident Mindy Hamlett, on local efforts to attract newcomers: "Most people down here don't want to live around a bunch of people. If we wanted that, we would have moved to Las Vegas."

Texas Weekly: Volume 16, Issue 29, 31 January 2000. Copyright 2000 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited.

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