The insurance issue blows up, the second-largest insurer plans to leave the state, more than a half million homeowners could be forced to change insurers during the next year. There's plenty for regulators and legislators to do next year, but how does that splash in the election pool?
Democrat Tony Sanchez started the fight over insurance, framing it as an ethics issue. In the Sanchez version, Gov. Rick Perry got a pile of money from the insurance industry and then has done their bidding as governor. In the Perry version, this is a consumer issue, and the Guv has cracked down on companies that have given policyholders hell. Sanchez has called for a rate rollback (to pre-crisis levels, whatever that means), and Perry has pressured companies to lower their rates and, in the case of Farmers Insurance, to refund money to Texas homeowners. At this point, it's a muddle, and the spin has reached hurricane force.
From the Perry camp, you get this: Only one of the candidates in the race makes money off sales of homeowners insurance—a subsidiary of Sanchez' bank is an insurance agency that sells policies—and it's hypocritical for him to call for reforms while he's profiting from the high premiums.
From the Sanchez camp: Insurance went out of control on Perry's watch, and consumers would be better off with a reformer than with an incumbent who counts insurers and their lobbyists among his most generous supporters.
Both camps are trying to lead this to the same result, hoping voters will go to the polls starting in three weeks with their anger or dismay over insurance linked mentally to the name of the other candidate. At this point, it's not at all clear who'll take the hit, but insurance is here to stay for the next seven weeks. Some of the high points:
• Perry said he'd make insurance reform an emergency issue when lawmakers convene in January, if he's elected. That would allow them to consider legislation right way instead of waiting until after the 60th day of the session—the starting date for votes on regular legislation.
• Sanchez responded to Farmers' announcement by repeating his call for a special session of the Legislature and noting that he had first suggested that idea more than two months earlier.
• Sanchez is calling for a new tax, or fee, or penalty that would be assessed against insurance companies that jump out of one line of insurance in Texas while trying to keep the rest of their business in the state. First, he would require companies to offer all of their lines of insurance in Texas. In other words, a company that wants to come to Texas to sell car insurance would be forced to offer any other lines they sell anywhere else in the U.S. (A couple of other states have similar laws.) Companies that pull out of one line while leaving their other lines in place would pay an "exit penalty" to the state. The money thus collected would go into a pool for the customers caught by a company's decision to pull out. All of that would require new law, and the Democrat proposes making the changes at the beginning of the next legislative session.
• Perry and other Republicans are trying to turn the insurance debate into debate on tort reform. The governor says such reforms will be a centerpiece of any insurance reforms. Republican Greg Abbott blames trial lawyers—like his Democratic opponent Kirk Watson—for the problems with insurance. Watson is busy reminding people that Abbott's law firm represents Farmers Insurance. So far, insurance hasn't become a major issue in other statewide races, but most of the campaigns have at least the outline of a reform plan ready in case it comes up.
The (Mostly) Non-political Angles
Gnarly regulatory issues and potential market problems lurk beneath the flashy politics. Farmers isn't the only insurance company that says it's losing money on Texas homeowners policies, and there's a real question of whether the other companies want to pick up the slack should Farmers follow through on its threat to get out of that business in Texas. Even if this had not become the front-burner issue in the governor's race, it will compete with budget problems for attention in the first two months of the 2003 legislative session. The Farmers' fight offers a preview of some of the issues:
• The state offered to settle if Farmers would give customers refunds totaling about $150 million and lower prices on policies. In return, the state offered to drop its attempt to collect fines against the company. The company said it loses money at the current price and would lose more at a lower price, and said it hasn't done anything improper and shouldn't be punished at all.
• On the same day that Farmers announced it wants to take its basketball and go home, state regulators told reporters they would open some of their files detailing the company practices that put the regulators and the insurer at odds. But the details remain sealed: Farmers went to court and got a judge to issue a temporary restraining order. The company says the records are proprietary and shouldn't be shown to the public or to competitors. That judge will take a longer look soon to decide whether the records should remain closed. Farmers officials say the information is part of an investigation and that it's against the law for investigators to release it to anyone. If the numbers come out, voters will be able to get some clue as to who's right and who's wrong.
• Farmers sent letters to customers, but won't stop renewing policies until after the elections. As a matter of politics, that will keep some customers from boiling over before they vote on November 5. The state gave Farmers a November 11 deadline to fly right or go to court. Farmers insures about 700,000 homeowners in Texas, or about 20 percent of the market. If the company were to leave the state, an average of about 58,000 policies would expire each month. Company officials say they lose $2.50 in Texas for every dollar they collect in premiums. They contend 40 percent of their losses nationally are on Texas policies, and say dropping Texas from the mix would actually free them to sell more insurance in other parts of the country where it's profitable and where there is strong demand.
• A question if Farmers pulls out: Do other insurers, which have said they're losing money on homeowners policies, want to bring in more money-losing customers? The downside, obviously, is that they would lose money for now. The upside is that they could increase their market share now, taking what might be short-term losses, and be in position to make that much more money later.
No Pay to Play in Elections
Secretary of State Gwyn Shea put an official stamp on something one of her lawyers did earlier, saying it's a really, really bad idea to let a political candidate cover the costs of opening extra locations for early voting. In August, an attorney in Shea's office wrote a letter to Dimmit County Commissioner Larry Speer saying it sounded like a bad idea, but that the law was unclear. Shea, in a follow-up letter in the form of a formal opinion, says it's not legal. The trick is in how it's paid for. Speer told state officials that the county had been asked to open some extra polling places in certain locations. When they said they couldn't afford it, the campaign that did the asking offered to cover the costs. Those conditions are apparently what make the thing illegal, as opposed to merely odoriferous. In any case, it's too late to do anything even if everyone thought it was a swell idea. Early voting starts in three weeks, and Texas elections are overseen by the U.S. Department of Justice. That agency would have to approve any new voting locations, and they need 75 days to process requests. Time's up. One more item: Most accounts of the original request say the inquiry in Dimmit County came from the Tony Sanchez campaign for governor. They say they never offered to pay for any polling places.
The Blue Plate Special
The political split personality of the restaurant business is more complicated than we first thought. The Texas Restaurant Association's political action committee endorsed Republican David Dewhurst in the race for lieutenant governor, breaking a string of trade group endorsements for Democrat John Sharp. Sharp responded within days, announcing a group of Texas restaurant owners and operators who are on his side even though their association went the other way.
As it turns out, some of the restaurant folks, including the organization's president-elect, have a foot in each political camp. Tom Kenney says he voted for Dewhurst when the 12 members of the PAC board chose which candidate would be the trade group's best friend. But when the group of restaurant folks for Sharp was being assembled a few days later, he joined up with the Democrat he had voted against. And he wrote an email to a Sharp campaign aide undermining the group's endorsement of Dewhurst. "Just wanted to again make the point to John about the strong support he has from the leadership of the Texas Restaurant Association," Kenney wrote. I think John now understands that the 12 members of the TRA PAC are not always speaking in one voice for the association. The TRA PAC distributes money to pro-business candidates but they are not always expressing a majority—or staff—point of view. And the PAC is not always right."
Kenney went on to write that "many members" of the trade group would be helping Sharp get his voters to the polls, and closed by saying the candidate who lost the PAC endorsement "can count on the enthusiastic support of the leadership of the TRA and we look forward to helping him solve the complex problems facing Texas in the next few years."
Kenney said later he entered the PAC board's meeting leaning toward Sharp, but then voted for Dewhurst as the group talked. Later, he said, he decided to join the splinter group supporting the Democrat. "I'm comfortable with both guys," he concluded.
• Side Issue Number One: Sharp's aides say the restaurant people assembled themselves and came to the campaign—not the other way around. Last week, we reported it the other way, and as is often true in politics, there are credible sources for either version.
• Side Issue Number Two: The Democrat has been making noise about how many more endorsements he has than the Republican. By Sharp's count, his campaign has the support of 153 official interest groups (or, if you prefer, trade associations) to 3 for Dewhurst. But there's another version of that one, too. Sharp is counting the endorsements of each member of CLEAT (the Combined Law Enforcement Association of Texas) as a separate group, adding 101 to his count. Two can play: Dewhurst has been endorsed by the Texas Federation of Republican Women, or TFRW. If you do what Sharp's done and count local chapters, Dewhurst adds 175 groups to his list, and by his count, brings his total to 197. One caveat: Sharp isn't counting Democratic groups, just the so-called "non-partisans," and we'll leave that argument to the campaigns. This isn't the end of it: Sharp's campaign website has a new "endorsement derby" section that counts newspaper endorsements. Only one has jumped in so far: The Amarillo Globe-News endorsed the Democrat. Stay tuned.
After the Land Rush
The Texas Democratic Party is finally free of a stinker of a land deal that landed in the party's lap during the 1984 presidential contest between Ronald Reagan and Walter Mondale. The party acquired, by way of donation, a piece of land that ended up saddling the Democrats with a debt. Now, 18 years after the fact, the party finally has paid off the debts that resulted (they still owed $650,000 as of four years ago) and can finally stop answering pesky questions from reporters and supporters. By the way, the last three chairs of the state Democratic Party promised to kill the debt. They each carved on it, but Molly Beth Malcolm finished it off. The GOP snipped at them in the form of a congratulatory note, suggesting the Democrats should thank trial lawyers for bailing them out.
Republican David Dewhurst ran his first television ads of this election cycle before John Sharp was even an official candidate for lieutenant governor (and before the Republican incumbent, Lt. Gov. Bill Ratliff, had exited the race). He's had commercials on and off the air for more than a year. And he's had a negative commercial on the air for several weeks.
Sharp hasn't answered any of it, and Dewhurst's campaign says the polling shows their guy with a lead because of it. The Democrats' folks say it ain't so, but they're finally joining the air war.
Sharp's first commercial features former baseball great Nolan Ryan, a Republican who now runs a bank and a ranch and owns part of a minor league ball club in Round Rock. It's basically an endorsement ad, with Ryan saying he supports Sharp because of the Democrat's efforts to cut welfare fraud, to cut state spending, and to "save us from an income tax." In the ad, Ryan says Sharp's performance reviews as state comptroller saved the state "hundreds of millions of dollars." For Sharp, who has claimed for years that the savings amounted to $8.5 billion, that's a downgrade, but it's one that might not be noticeable to voters.
Sharp sent out an email teaser for his commercial to lobsters and scribes, hyping the arrival of the TV spot a day before it went on the air. The teaser starts with a mock version of the familiar green movie-rating screen and then goes through a promo for the coming ad campaign. It uses a well-known sound effect at the beginning, which turns out to be copyrighted. It's the THX "Audience is Listening" sound effect, and at first blush, that company called the promo an infringement of its rights. The spot was only on for a day, and the THX people in California say the Sharp gang pulled it off the website "very cordially" when the movie folks called to complain. The Sharp folks say they pulled the promo because the commercial started running and it was no longer needed.
By the time you read this, Sharp will have started new ads—still positive, the campaign says—that tout Sharp's ideas and record and continue to use Ryan as a pitchman. Dewhurst, meanwhile, started a new commercial attacking the Democrat's plan to use lottery money to send Texas kids to college. It continues a theme used earlier in the Republican's radio spots, calling Sharp's plan a "bad idea" that would take money away from public education and saying it would lead to higher property taxes. Sharp said when he introduced the plan that he wouldn't propose the tuition assistance until the state economy and budget have righted themselves.
Both campaigns are also taking their fight to radio, both running ads that more or less track what they're doing on television: Sharp is running biographical and endorsement ads, while Dewhurst is warning voters away from the Democrat.
In Search of Those Pesky and Evasive Trial Lawyers
Texans for Lawsuit Reform commissioned their public relations firm to dig through the reports at the Texas Ethics Commission to find out how some of the state's prominent trial lawyers make their contributions. The result? A study (available online at www.ttlwatch.org) that says the big money from the plaintiff's bar is laundered so that candidates who get the money aren't tainted by the relationship with those lawyers. The TLR study says that's legal but calls it "an egregious misuse of our system" and promises to open it up during what's left of the election cycle for everyone to see. The report says a small number of lawyers contributed $7.3 million to Texas state office-seekers between January 2000 and July 2002. Now that they've got the hang of how the money flows, they say they'll update the report with each campaign finance reporting period (there are, for most candidates, two more reports before the elections).
After everyone is elected, TLR wants reforms, including a prohibition on PAC-to-PAC contributions that disguise the original sources of campaign contributions, laws requiring immediate public reports of large contributions to candidates, a labeling requirement that would make it easier to tell who PACs represent, and legislation that would treat contributions from law firms the same way contributions from corporations are handled.
Flotsam & Jetsam
• Former Texas Secretary of State Henry Cuellar—whose campaign has been all but given up by some of the national Democrats who said they would back him—is running a quarter-million-dollar television and radio campaign boosting his credentials and questioning those of U.S. Rep. Henry Bonilla, R-San Antonio. The initial Cuellar ads were biographical, but now the campaign is mixing in spots questioning Bonilla's votes on some issues. The Democratic Congressional Campaign Committee was initially high on the race but lost interest as the campaign hit some obstacles—notably the tepid reaction of Sen. Judith Zaffirini, D-Laredo. As we reported earlier, she hasn't endorsed Bonilla, but she introduced him at a fundraiser and has said publicly that Cuellar can't win. That hasn't inspired confidence in Washington. But Cuellar's TV surprised the Republicans, who thought he had too little money to put up a fight.
• It's celebrity endorsement time, and the celebrities have begun moving down the ballot to grace the candidates they haven't already helped. To wit: Vice President Dick Cheney was in Dallas to help raise money for Jeb Hensarling, a Republican making his first run for Congress. To the south, House Speaker Dennis Hastert was in Waco, along with U.S. Rep. Pete Sessions, R-Dallas, to help raise cash for Ramsey Farley, who's making a second run at U.S. Rep. Chet Edwards, D-Waco. It's not only for candidates, either. Texas First Lady Anita Perry is the headliner for a public awareness campaign and candlelight vigil for the Texas Council on Family Violence on October 6. That's the kickoff date for a "Break the Silence" campaign against domestic violence.
• A group of campaign finance reformers pulled together a report that says 71,831 political ads ran on Texas television stations between the first of the year and mid-September, at a cost of $40 million. That's before most campaigns really went on the air. The measurements come from an outfit called the Campaign Media Analysis Group, which was hired by the reformers to see what was happening with political spots around the country. Nationally, 624,137 political ads ran during that period at a cost of $375 million. The Washington-based Alliance for Better Campaigns, which paid for that information, says the number of ads run is pretty accurate and the amount spent is an estimate. It's probably a low one, at that. The numbers in the governor's race alone probably exceeded $40 million by mid-month; the campaign finance reports detailing that will be out in about a week. That group, which is working with some Texas-based groups on campaign finance reform, is urging Congress to force television broadcasters (not cable companies) to give free airtime to political campaigns in return for their use of the public airwaves. In the meantime, they expect spending on television ads during this election cycle to reach $1 billion nationwide.
• The Texas Lottery is shrinking its smallest Lotto Texas awards to $3 million, because lagging sales won't support the $4 million minimum that had been in place. That's the amount of the prize if someone wins it right away. The jackpot grows from that smaller number each time there isn't a winner. Lottery officials say they've been plagued by the odds: Players get more interested when there is no winner and the jackpot rolls over, but that hasn't happened as many times during the last year as the statisticians had forecast. Thus, the lower prize amounts.
• The first buyer got into the Woodlawn Mansion, looked at what needed to be fixed, considered the prospect of historic preservationists hovering over the property while repairs are done, and pulled out. Now, the state of Texas is trying again to sell the former home of two former governors. It's a fixer-upper on 3.84 acres in a fancy section of Austin. Minimum bid is $2.65 million. Bids are due right after Election Day, on November 7.
• The Tony Sanchez campaign fired one Ian Davis, a campaign worker who was packing a pistol and who came to the attention of the public when he allegedly pulled the gun during an argument with a truck driver. That made the papers. The campaign fired him and that was that. But there is another Ian Davis on the other end of the state, who also works for the Sanchez campaign. He's an organizer in Waco. If you see him, relax: we are reliably informed that he's not packing.
Political People and Their Moves
Linda Cloud, the executive director of the Texas Lottery Commission for almost five years, resigned in the midst of a scrap with a newspaper and a review by the Texas Sunset Advisory Commission. Cloud told the Fort Worth Star-Telegram earlier this year that she didn't know about problems between lottery commissioner Walter Criner and a lottery employee. But when asked under oath by the Sunset panel, she admitted that she had known about an incident and had told the governor's office about it. She said in her resignation letter that her testimony and the articles about it compromised her reputation... Political dustup of undetermined size to follow: Dr. Mark McClellan, a physician and economist, is President George W. Bush's pick to head the U.S. Food and Drug Administration, a controversial post that's been empty for months. McClellan, currently a member of the president's council of economic advisors, hasn't run a big organization, but he's got political genes: His mom is Texas Comptroller Carole Keeton Rylander. His brother is White House spokesman Scott McClellan... We're late to this one, but Scott Bates, a Texas political consultant who pulled up stakes to consult politicians in Kosovo for a year, is back and working in the Washington office of U.S. Rep. Jim Turner, D-Crockett... Kristy Ozmun left her own public relations firm to join Austin-based Public Strategies and now she's going back to restart her own firm. She won't be lobbying, but will be working on public policy issues... ABC News personality John Stossel is headlining a $100-per-plate dinner for Citizens Against Lawsuit Abuse in Austin on October 1, but the organizers of the event say it's not a fundraiser. They're in it for the exposure, they say, and won't make a dime off the deal. Stossel, they say, is their speaker only and isn't endorsing their tort reform efforts.
Quotes of the Week
Outgoing Railroad Commissioner Tony Garza, after his fellow commissioners voted down three rule changes he proposed: "Texans expect and deserve action from its leaders when lives are at stake. Sadly, this commission has failed the test." Fellow Republican Michael Williams, noting Garza's pending appointment as U.S. Ambassador to Mexico in his reply, quoted by the San Antonio Express-News: "If Commissioner Garza felt they were so important, rather than pack up and move to Mexico City, he would stay here and complete this task."
U.S. Rep. Dick Armey, R-Flower Mound, when a voter asked him about the division in the Jewish community between conservatives and liberals, as quoted by the Bradenton (Florida) Herald: "I always see two Jewish communities in America: one of deep intellect and one of shallow, superficial intellect." He told reporters in Washington later that liberals are less intellectual than conservatives: "They don't think deeply. They don't comprehend."
U.S. Rep. Ron Paul, R-Surfside, giving the Houston Chronicle his two cents on Iraq and similar adventures: "The downside is we get all the bills, risk the lives of our people without cause and make ourselves the target for every event that goes badly. We get blamed for the unintended, unforeseen consequences and become the target of terrorists that evolve from the radicalized fringes."
Sociologist Ken Sanchagrin of Mars Hill College, quoted in The New York Times on a study of gains and losses in various religious denominations: "I was astounded to see that by and large the growing churches are those that we ordinarily call conservative. And when I looked at those that were declining, most were moderate or liberal churches. And the more liberal the denomination, by most people's definition, the more they were losing."
Texas Supreme Court candidate Steven Wayne Smith, who successfully challenged admissions standards at the University of Texas Law School, quoted on affirmative action in the Houston Chronicle: "You create this artificial system where minorities are being admitted to schools where their credentials aren't in the mainstream. And so from that school to the next tier, UT, and then on down, you're always having minorities compete with people who are better prepared to be there."
President George W. Bush, congratulating the University of Texas baseball team for winning this year's College World Series and tangling their slogan in the process: "We're proud of all the Texans that work here in Washington, D.C., proud to be able to 'hook the horns.'"
Texas Weekly: Volume 19, Issue 14, 30 September 2002. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2002 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.