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All About the Money

No matter what you thought you heard during the election season, in the session starting on Tuesday, everything will be a sideshow to the main act: The state budget.

No matter what you thought you heard during the election season, in the session starting on Tuesday, everything will be a sideshow to the main act: The state budget.

Gov. Rick Perry has staked his reputation on it, saying the state shouldn't need more than the $114 billion in the current budget to run for a couple more years. He's got his number-crunchers writing a budget that will fit within current revenues, and he hopes to present it in a united front with Lt. Gov.-elect David Dewhurst and presumptive House Speaker Tom Craddick, R-Midland. He and the legislative leaders say they'll keep their promise of "no new taxes," but they are talking about bringing in some new "non-tax revenue" to help balance the books. Perry has told some reporters he's open to some user fees and things like higher fees for hunting licenses (don't include Dewhurst there—he blasted his election opponent for threatening higher hunting fees), and to "closing the loopholes" in the state's business franchise taxes, but said he's against higher tobacco taxes and expansion of legalized gambling. Republican officeholders aim to keep the tax pledge now, and then, once they've shown they're good to their word, to turn their attention to school finance as the school year ends.

Meanwhile, the outgoing leaders of the Legislature—Lt. Gov. Bill Ratliff and House Speaker Pete Laney, have had the Legislative Budget Board working for months on a current services budget. The LBB's budget will assume the state is continuing its current programs and will add in money for expected increases in the numbers of public school students and welfare recipients and such. Ratliff says the governor and "a contingent from the House" asked him to put out a current revenue budget, but he says they couldn't or wouldn't answer two questions: The current revenue numbers haven't been released by the comptroller yet, and the incoming budgeteers weren't willing to say what they would cut from the current budget to make it fit within that unknown but presumably smaller revenue number. The LBB will be under his direction until the second week of the session, and he says they will present a current services budget by the time his successor is sworn in.

What's-Her-Name Grabs the Reins

Comptroller Carole Keeton Rylander—who got married and will heretofore be known as Carole Keeton Strayhorn—is the keeper of the only state finance numbers that really count, and she jumped in to say the gap between the costs of current services and the amount of money that'll come in over the next two years will be "significantly" larger than the $5.1 billion she predicted months ago.

That's the big budget mess everyone's been talking about for the last year. But it's not the only mess. The current state budget, written two years ago, underestimated the costs of some programs. Lawmakers need an "emergency" appropriations bill to cover those higher-than expected expenses. That's not unusual, but it will require them to find some money to cover the changes, and that is money that would otherwise be available to help balance the next two-year spending blueprint.

The next mess is a rare one: The state's revenues might fall short of the comptroller's target. She told lawmakers a certain amount of money would be available for this budget, but growth in state tax income has slowed to a crawl and the state might see red ink in the current budget. The shortfall reduces funds available for the next budget; a deficit adds to the costs the state has to cover to keep its budget balanced. That's what Strayhorn was hinting at when she said the last Legislature's "party" left this Legislature with a hangover. That last budget, passed by a Democratic House, a Republican Senate and signed by a Republican governor, relied on a surplus from earlier years for part of its funding.


As we hit deadline, Comptroller Carole Keeton Strayhorn was planning two announcements that will shape the budget conversations for the next 20 weeks. One: Recommend ways to cut state spending and to make more money available for the next budget without raising taxes. Two: Release the estimate of what the state will bring in over the next two years.

First, she planned to unveil her new "e-Texas" report—essentially a large legislative package that includes about $3.7 billion in savings, revenue enhancements, spending delays and other financial moves that are designed to make the budget $3.7 billion easier to balance.

Of that total, $1.7 billion involves general revenue—the part of the budget made up of state money (as opposed to money from the federal government and other sources).

The biggest single whack at the impending budget shortfall would come from delaying a change in the state's Medicaid program. Texans who get those services have to reapply every six months, but lawmakers voted to change that to once a year. That hasn't taken effect yet, and the change would cost the state about $282 million over the next biennium. Strayhorn will recommend leaving the program as is for three more years, thus cutting that expense out of the list of costs to cover.

Other big-ticket items include changes to prescription drug programs in Medicaid and in the Employee Retirement System that the comptroller says would save $165 million. And a change in compensation for public hospitals that serve indigent patients would save the state (and cost the hospitals) $192 million over the next two years.

Money isn't the comptroller's only interest. One of her proposals would merge the Public Utility Commission with the Texas Railroad Commission and let three elected officials oversee regulation of telephone, electric and gas utilities in Texas. Similar proposals in previous years drew fire from both the utilities and the oil patch, but Strayhorn—once a railroad commissioner herself—thinks its time for a combination. A merger would be more symbolic than profitable—the savings would be well into the millions of dollars, but wouldn't be significant in the overall budget picture.

She's also aiming to apply one of her favorite speech lines to an agency that has been politically protected for years. Strayhorn's line is that state government shouldn't be doing anything that's available in the Yellow Pages, since businesses supposedly have those things covered. But Texas has for years maintained its own agency—the Aircraft Pooling Board—to manage the state planes used to fly elected and non-elected officials around the state on their official business. One of the pooling board's protectors has been House Speaker Pete Laney, D-Hale Center (the late Lt. Gov. Bob Bullock was another). But Laney won't be Speaker this year, and Strayhorn wants the agency privatized.

... and Sticks

On Monday, after a weekend of news about her proposed cost savings and other proposals, Strayhorn will unveil the state's biennial revenue estimate. The budgeteers call it the BRE: It's the official guess at how much money will come into the state treasury over the next two years from taxes, fees, federal funds and everything else. The significance is that, no matter what you believe about the economy or about the cost of this proposal or that one, the comptroller's estimate is the only official number and will become the legal limit on what the Legislature can budget.

All indications are that it will be well below the amount needed to fund current services, and will be the first formal indication of whether Strayhorn thinks the current budget will end in red ink. The BRE isn't the last word on state revenue. If the past is any indication, the comptroller will adjust the number as the session goes on—a process that combines economics, finance, and political horse-trading—and she'll issue a final, official estimate near the end of the legislative session. That last number is the one the state will be stuck with for the next two years.

New Bosses, New Rules

Here's a rule for living: Lock up the big dogs before you get the raw meat out of the refrigerator. And here comes a political field test for that rule: Lt. Gov.-elect David Dewhurst is planning to announce his committee appointments next week, before he's sworn into office. That might or might not come before the Senate votes on the rules that give him the power to make those very appointments. We don't expect any noise in particular, but it's an unusual way to do things. More common: Get the power, and then announce the winners and losers.

On the House side, the rumors are at least more consistent. Committee assignments will probably be announced at the end of the month. That's a little early by historical standards, but Speaker-presumptive Tom Craddick apparently wants the committee transitions to start quickly.

The names of those committees are circulating, as are some of the rules that will govern who gets a say in their memberships. Current House rules designate some of the seats on major committees as seniority positions. If a legislator asks for a particular committee assignment and is the most senior member to request it, she or he gets on automatically. Under Craddick, currently the longest-serving member of the Texas Legislature, that would change in two significant ways: The budget-writing appropriations committee would no longer have any seniority seats, and the number of seniority seats on other committees would shrink as the size of those committees shrinks.

The current House has 36 standing committees and two special committees. Special committees aren't named in the rules—more on that further on. Craddick's rule-revisers added four new committees, remade a couple of existing ones, and shrunk the membership of 11 more. The additions track what we wrote a month ago: The overburdened State Affairs and Ways & Means committees are both being split, and committees on Government Reform and Border & International Affairs are being created. A new Regulated Industries panel will handle legislation affecting utilities and science and technology, matters now handled by State Affairs. And a new Local Government Ways & Means panel will take property and other local tax legislation, leaving state tax matters to Ways & Means.

More Committees, But Fewer Seniority Assignments

Most committees—27, by our count—will have a member who is designated chairman of budget and oversight. Those CBOs will also hold seats on Appropriations and are supposed to coordinate what the standing committees and the spending committee are doing. Eleven committees that now have nine members each would have seven under the new rules. That's to make the numbers work with the newly created committees, but the smaller panels cut into the number of available seniority seats. Appropriations would grow by two, to 29. The two split committees would shrink to nine seats each, and their newly created offspring would each have seven seats.

Most of the grumbling we've heard centers on the smaller number of seniority seats, particularly on appropriations, and on a rule change that would remove the salary cap for committee staff. It wouldn't change the overall committee budgets, but chairmen would be allowed to pay more to more valued aides as long as they didn't exceed their overall budgets. One change that raised eyebrows could put Bubba and the opera in the same hearing room: Cultural affairs would be added to the State Recreational Resources Committee, putting hunting, fishing, the State Commission on the Arts, among other things, under the same panel's purview. The Public Safety panel would be renamed Law Enforcement, and emergency preparedness and related issues would be moved to the renamed Defense and State-Federal Relations panel. Anything resembling homeland security would land there.

It's up to a speaker to put "select" committees together when needed. The House had panels on state taxes, constitutional revision and teacher health insurance in recent memory, and another few are coming. One would look at the health care costs rippled through the state budget and try to find some savings or reforms there. Another—which would be named later in the legislative session—would focus on school finance, an issue that the state's top three leaders want to take on as soon as they're out of the current budget dilemma.

Lobster Trap

Lobbyist Kim Ross, long a target of the fellow in the Pink Building's middle offices, is leaving the Texas Medical Association, where he's been lobbying since 1986. TMA battled with Gov. Rick Perry (and with former Attorney General John Cornyn) last session, then endorsed Perry's opponent, Tony Sanchez, in the governor's race. They also endorsed Cornyn in his successful bid for U.S. Senate, but that didn't quell the furies in Austin. Perry sympathizers have been working on the doctors for months in an effort to run Ross out, and he and TMA's board finally decided he should leave. He's the most prominent of four people leaving their lobby shop, not all of them because of the battle with the governor. Troy Alexander is going to work for Speaker-presumptive Tom Craddick. Connie Baron had already announced her retirement, and Alfred Gilchrest will run a grassroots communications operation inside TMA. Ross plans to quit lobbying, saying he'll advise a handful of clients on public policy and legislative issues, but won't be working the halls of the Pink Building.

It's unrelated, but Perry has said medical malpractice—a top issue for the docs—an emergency issue for the Legislature. But TMA will enter a tough session without an in-house lobster and with the general perception that they don't stand up well under pressure. The trade group is talking to outside lobbyists who could help them through the session on contract.

Department of Second Chances

The same groups that assembled to oppose Priscilla Owen's appointment to the 5th U.S. Circuit Court of Appeals last year is reassembling, but her chances at Senate consent appear to have improved. One of the Texas Supreme Court justice's former colleagues, John Cornyn, is in the U.S. Senate now and was granted a request to serve on the Senate Judiciary Committee. That's where Owen's nomination will go. When he renominated Owen for the position, President George W. Bush also renominated former state Rep. Rob Junell. He was up for a federal judgeship in Midland, but the nomination expired when the Senate's term ended. He's up again, and doesn't appear to be a controversial pick. Junell, a Democrat who headed the Texas House Appropriations Committee, campaigned for Bush during the presidential campaign. Watch for more federal court appointments in Texas. U.S. District Judge James Nowlin, who's based in Austin, has let the folks in Washington, D.C., know that he'll step down later this year.

Flotsam & Jetsam

The residency challenge to Rep. Jim Dunnam, D-Waco, is over, after a judge in Leon County dismissed it. His opponent, Jeffrey Hibbs, challenged his residency; Dunnam asked the court to spank Hibbs for filing a frivolous lawsuit. They cooled down, and the court agreed to dismiss the case with prejudice after Dunnam agreed to let go of the frivolous lawsuit charge. That's that.

• Go ahead and fill that last chair in the Texas House. Republican Larry Phillips beat Democrat Donnie Jarvis by almost a 2-to-1 margin to succeed Rep. Ron Clark, R-Sherman. Clark got a federal judgeship and is headed for Beaumont. Phillips won the special election to succeed him.

• U.S. Rep. Larry Combest, R-Lubbock, officially let Gov. Rick Perry know that he'll resign at the end of May. That sets up a special election for May 3 to replace him. At last check, 10 candidates from Lubbock to Midland had expressed interest in that race.

• Department of Pomp and Circumstance: The inauguration of Perry and Lt. Gov.-elect David Dewhurst will be held on January 21, starting with a parade up Congress Avenue to the Capitol. That'll be followed by the usual swearing (not the interesting kind) and speeches. Sometimes, there are several balls around town after an inauguration, but Perry and Dewhurst got the biggest room in town—the Austin Convention Center—and consolidated all the partying in one place. Entertainment will be of the country variety, featuring Robert Earl Keen (a Texas Aggie) and Clay Walker of Houston. Steve Wariner, also of the country music persuasion, will play the first dance at the ball for the governor and First Lady Anita Perry.

Government in Transition

Attorney General Greg Abbott is filling out his shop, naming Don Willett, an assistant U.S. attorney general, as his own general counsel. Ted Cruz, now the policy director for the Federal Trade Commission, will be Solicitor General in Abbott's administration.

Abbott is also keeping several people from John Cornyn's administration. They include Jeff Boyd, deputy AG for civil litigation; Cynthia Bryant, deputy AG for child support; Don Clemmer, special assistant AG for criminal justice; Edna Butts, special assistant AG for health care and border issues; and Elizabeth Rogers, attorney ombudsman and ethics advisor to the AG. Nancy Fuller is the new chief of the legal opinions committee at the AG's office.

• Fit the following recruits for flak jackets: Bob Richter retired from the San Antonio Express-News, where he worked for 25 years, to take a job standing between his former colleagues in the press and Speaker-presumptive Tom Craddick, R-Midland. He took that job when it was offered, on Christmas Eve, and the paper is now looking for a replacement to help cover the legislative session. Fort Worth television reporter Angela Hale is moving to Austin to handle press for Attorney General Greg Abbott. David Beckwith is back in Austin for the legislative session to handle press for Lt. Gov.-elect David Dewhurst. Beckwith most recently spoke for John Cornyn's U.S. Senate campaign. He's previously spoken for U.S. Sen. Kay Bailey Hutchison and for then Vice President Dan Quayle.

• Dewhurst named Spencer Reid as his general counsel. Reid has been at the General Land Office since 1979. Doug Davis, who worked on the Senate Administration Committee, and Karen Barratt, who worked in enforcement at the Texas Department of Insurance, will be policy advisors. And Amy Brownlee and Bruce Scott, former Senate aides who've been working in the lobby, will return to the Pink Building as legislative advisors to Dewhurst. John Sneed, also from the GLO, is coming over as a liaison between Dewhurst and state agencies.

Barratt and a previously announced hire—Karina Cassari—give the incoming Lite Guv some insurance expertise, since both were at TDI when the Farmers Insurance mess was hottest.

Another new hire—attorney Frank Battle, who worked for House Speaker Pete Laney, adds a well-respected school finance expert on the East End of the Capitol. Finally, Dewhurst is building a budget staff, bringing in John Opperman, a seasoned state budgeteer who is now at Texas Tech, and Blaine Brunson, who most recently was staff director of the Senate Finance Committee. They're still working out Opperman's deal, but at press time, the university system and Dewhurst were planning to share his services and split his salary. Opperman, a former Senate Finance staffer, worked on budgets for Gov. Rick Perry before taking the Tech job.

• Denise Davis, who was general counsel for Lt. Gov. Bill Ratliff, is moving to the other end of the building, where she will be assistant parliamentarian for the House. Edward Johnson, who has worked for Laney for the last four years, landed a job at the Texas Building and Procurement Commission. He'll be director of legislative affairs there... Stacey Nicchio will stay on at the Speaker's office when Tom Craddick takes over. And Trish Conrad is leaving the Speaker's office for a job with the Texas Retired Teachers Association.

• Land Commissioner Jerry Patterson named top staffers. They'll include Larry Laine, who'd been at the comptroller's office, as chief clerk, a constitutional position. Lubbock attorney William Warnick will be the General Land Office's general counsel. And Mark Loeffler will be the public information guy; he worked for Patterson's campaign and as an aide in his Senate office before that.

• If you stick your head into the Chambers County district office for Rep. Craig Eiland, D-Galveston, you'll find former Rep. Zeb Zbranek, who's not coming back as a lawmaker. Eiland says Zbranek will take all the complaints... Rep.-elect Linda Harper-Brown, R-Irving, hired Erin Sanders and Miranda Safer for her House staff. Sanders most recently worked on Greg Abbott's campaign for attorney general and for Rep. Ron Clark, R-Sherman, before that; Safer used to be a project manager for pollster Frank Luntz.

Political People and Their Moves

Rep. Clyde Alexander, D-Athens, won't leave Austin when he leaves the Legislature. Alexander will lobby for clients of the Kemp Smith law firm...

Former state Rep. Bill Carter, R-Fort Worth, will also be in Austin during the legislative session. Carter is going to lobby for Good Company. They also added Sherry Boyles, a former Democratic Party executive director who lost a race for the Texas Railroad Commission, and Matt Watson, who worked for Sen. David Bernsen, D-Beaumont, and who will concentrate on water issues...

Wade Anderson, a tax wizard who left the comptroller's office several years ago to work in the private sector, is back. Anderson is nationally known and has done a fair amount of work on sales taxes on interstate catalog, direct mail and Internet purchases, among other things...

David Holmes, a Senate aide who most recently worked on the Tony Sanchez campaign, is joining former Railroad Commissioner and state Rep. Lena Guerrero's lobby practice...

House Speaker Pete Laney appointed Ralph Wayne to a spot on the Texas Ethics Commission... Lobbyist Ron Kessler left the Locke Liddell & Sapp law firm to start RonKesslerGroup LLC—he'll lobby, do executive coaching and economic development work...

Sen. Todd Staples promoted Shannon Wickliffe to chief of staff after Wil Galloway decided to join the Austin law firm of Booth, Ahrens and Werkenthin. Staples also hired Shannon Smith, who worked on Greg Abbott's AG campaign, to handle media...

Jennifer Waisath, who worked for Tony Garza for almost seven years, joins Public Strategies Inc. in Austin; she'll be in the international division. Garza is now the U.S. Ambassador to Mexico...

Mary Herrick is leaving the Texas Department of Economic Development to join the lobby team at Stewart Title Guaranty Co...

Gov. Rick Perry appointed Patrick Keel to the 345th Judicial District Court in Austin. Keel, a lawyer at Baker Botts in Austin, is the brother of Rep. Terry Keel, R-Austin, and will replace Democrat F. Scott McCown, who resigned from the court to join the Center for Public Policy Priorities, an advocacy group...

Perry also appointed Sherry Radack as chief justice of the 1st Court of Appeals in Houston and named George Hanks Jr. as a justice there. Radack was already on the court; Hanks was judge of the 157th District Court.

Quotes of the Week

Gov. Rick Perry, commenting at the swearing-in of the newly married comptroller, Carole Keeton Strayhorn, whose last name was Rylander just three days before: "Carole, I did think you would probably issue your revenue estimate first and then change your name."

Strayhorn, on the state's budget: "The Texas Legislature had a party in 2001 and spent every dime available. I now believe the shortfall will be significantly larger than earlier projections."

Lt. Gov. Bill Ratliff, who helped put that "party" together: "I think Carole would tell you she is a prone to a little hyperbole—I think the things we funded are the things Texans said they wanted."

Lt. Gov.-elect David Dewhurst, talking to reporters about closing that shortfall: "To do that, we are going to have to provide a lot of our services more efficiently, and in some cases look for non-tax revenue in order to balance our budget and keep taxes as low as possible."

Rep. Talmadge Heflin, R-Houston, the ranking Republican on the Appropriations Committee: "We will be talking about a lot of things we weren't willing to talk about in the past, like asking school districts to be more effective with the money they get, maybe serving more students with the same amount of money. People don't want to hear that, but that's an appropriate thing to talk about."

Sen. Florence Shapiro, R-Plano, quoted in a San Antonio Express-News story on the budget: "We are not going to throw your mother out of a nursing home, for heaven's sakes. But we are going to find a way to treat her in a more efficient and effective way that's better for her as well."

Former Attorney Dan Morales, quoted in an Austin American-Statesman story on accusations that his brother Michael Morales tried to sell supposedly damaging information about gubernatorial candidate Tony Sanchez to Republican Rick Perry and to Sanchez's own campaign: "At times, family members do things that make you want to wring their necks. But even in those circumstances they're still family members, and you still love them and support them and wish the best for them."

Texas Weekly: Volume 19, Issue 27, 13 January 2003. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2003 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@ For news, email ramsey@, or call (512) 288-6598.

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