Whoever Makes the Rules Gets the Gold

Republican Comptroller candidate Susan Combs is raising the stakes, saying if she's elected she will trash Comptroller Carole Keeton Strayhorn's rulemaking work on the new school finance package as soon as she takes office.

That potentially frees lobsters, consultants and taxpayers from any worries they might have about whether the rules have anything to do with who's supporting who in the Texas governor's race this year. With the dual roles of candidate and referee on the tax bill, Strayhorn gave at least the appearance of a link between favorable rulings and campaign support. We're not aware of any actual connections, but there's been much gossip about the possibility and a lot of stories that begin with "I know a guy who knows a guy who..."

Combs' public statement kills any conflict or appearance of conflict for Strayhorn, but moves it indirectly to Combs herself. She's the favorite in the race to replace Strayhorn, and the winner of the race now under way between her and Democrat Fred Head will be making the rules. Her pronouncement could fill her sails even as it deflates Strayhorn's. Politically, it's a two-fer: Combs helps herself and Gov. Rick Perry at the same time. Taxpayers and their representatives will have to wait a while to get anything done, but they won't face the uncertainty of dealing with a lame duck comptroller and hoping her successor will follow her lead.

The comptroller's office started working on the rules as the tax bills in the package passed the Legislature. The state's new business tax lets businesses choose between deductions — subtracting either cost of goods sold or employee compensation — and then pay taxes on what's left. Simple enough, until you get into the legal and accounting games over what gets included in COGS or compensation. The legislation spells it out, but there's a small industry built around favorable and unfavorable interpretations of the Legislature's tax language. With the rule making underway, the parade of supplicants has already begun. And there's no indication that the tax wonks at the comptroller's office will stop what they're doing based on the political crossfire.

Combs had said earlier that she planned to review whatever rules the agency works up between now and January. Now she's gone further, saying the work will get tossed out and that she'll start fresh if she wins the election. Former Comptroller John Sharp, a Democrat who works for a tax firm that regularly does business with the agency, says Strayhorn should probably leave the issue pending for her successor: "I think the correct thing to do is allow the next comptroller to write her own rules... when I came in, Bob Bullock left some important stuff pending, and I did, I think, when Strayhorn came in."

Companies will pay the new tax for the first time in May 2008 — almost two years from now. But the taxes paid then will be based on their business activity in their 2007 fiscal year. Some businesses have already started that fiscal year; others will start their business year sometime between now and January. From a technical standpoint — ignoring the politics for moment — the tax folks want taxpayers to know the rules of the new game as early as possible, so those taxpayers can plan accordingly.

Combs, who's now the state's ag commissioner, also says she will get rid of the judicial operations at the comptroller's office if she's elected. She told a group of tax lawyers that she'll move contested tax cases out of her office and over to the State Office of Administrative Hearings, or SOAH, to avoid any appearance of conflicts of interest.

Current Comptroller Carole Keeton Strayhorn, who's running for governor, came under fire after a state auditor's report on tax settlements and political support. State Auditor John Keel was careful not to say Strayhorn had done anything wrong, but his agency's report raised questions about the potential conflicts of a tax collector handling disposition of cases that involve political friends and enemies. And it detailed some of the overlap of politics and government at the comptroller's shop.

Combs doesn't want her name in a report like that. Tax cases start, generally, with auditors who make a guesstimate of what a taxpayer owes. The tax collectors and the taxpayers try to reach a settlement and if they can't, the cases go to the administrative courts in the comptroller's office, a semi-separate operation that is answerable to the comptroller. Taxpayers can appeal rulings from the admin courts to state courts, and many do. But most cases get settled or ruled upon without going into the regular judiciary. And cases that go to the tax courts often come back to the comptroller for final judgment.

Because there's usually some distance — sometimes a huge distance — between what the auditors initially say taxpayers owe and what they finally pay, the conflicts built into the system raise eyebrows. And because most taxpayer information is private unless the taxpayer wants to reveal it, there's no way to tell for certain from outside whether the results are honest: From outside, the conflict resolution looks the same, whether it's clean or corrupt.

That's where a lot of any comptroller's political clout comes from, but Combs apparently doesn't think it's worth the hickey. She told the tax lawyers she'll move the tax courts to SOAH, and that she can do so with an inter-agency contract and no legislation.

Not Necessarily Against It

The Texas Legislature finally found a school finance plan it likes, but the new business tax that pays for cuts in local property taxes didn't go down easy with the state Republican Party.

At their state convention in San Antonio, the party's delegates did, finally, swallow: 55 percent stuck with Gov. Rick Perry, who backed the new business tax as a way to finance cuts in local school property taxes. Opponents of the state's new business tax wanted the party delegates to denounce it in the GOP's new platform.

Delegates started (and ended) with a watered-down platform plank that doesn't favor the new tax, instead saying simply that lawmakers ought to take another look at it in January to make sure it's fair and effective. The final vote wasn't to support what happened in the special session; delegates merely decided not to oppose it.

The anti-tax crowd was led by Houstonians Steve and Bruce Hotze and Norman Adams. Steve Hotze gave a particularly heated speech during the pre-vote debate: "I'm gonna be honest — I'm pissed off about this." He and others argued that the Republicans had opposed the current franchise tax when it passed and that they should oppose its replacement. To do otherwise, he said, would be "taking something that was unfair, and making it fair by giving it to everybody." Adams and the Hotzes were among the loudest critics of the tax-swap package when it was under legislative consideration, saying the new business tax is too big and that it isn't fair to have a tax that businesses might still pay in money-losing years.

Perry supporters spiked that idea in a temporary platform committee (the vote was 28-3) and in the permanent platform committee (the vote was 25-6). The opponents couldn't muster even signatures needed to file a minority report. But the mood on the convention floor was with the anti-tax folks. At one point, state Sen. Tommy Williams, R-The Woodlands, was lightly booed when he stood up to defend the governor and the Legislature's work.

After some speeches on the floor, delegates were asked to stand to indicate whether they were for or against the amendment. It was too close to call, so they did a roll call vote to see what the 4,000+ delegated wanted to do. The opposition got 45.1 percent of the vote; 54.9 percent voted to leave the platform with the watered-down language.

Perry took it as a win. "The Texas Legislature had a vigorous debate and passed historic property tax relief and meaningful school finance reforms with bipartisan support," he said in a prepared statement. "The Republican Party has now had a vigorous debate and formally endorsed legislative action."

That's not exactly right: Republicans didn't endorse the tax bill anywhere in their platform. In addition to the "review it in January" language, the Party had a resolution honoring the governor, noting his support for parental consent legislation, the Defense of Marriage Act and the constitutional amendment banning same-sex marriage, for efforts to protect the border, and for his efforts to get the current congressional redistricting plans in place. It makes no mention of school finance, property tax cuts, or the new business tax.

The Immigration Plank and the GOP Platform

The GOP platform includes a three-page section on immigration reform that calls for a fence on the Texas-Mexico border, a search-and-expel operation by the federal government to find undocumented immigrants and move them out of the country, and use of the National Guard to supplement Border Patrol efforts. They're against amnesty, but favor assimilating legal immigrants who demonstrate English proficiency and who study American history and civics.

The plank gives up the politically correct "undocumented immigrants" for the phrase it replaced, "illegal aliens." The description of the deportation program in the document goes like this: "deploy the Immigration and Customs Enforcement Agency (I.C.E.) within the U.S. to locate and secure all illegal aliens who have previously entered our country and expedite their return to their source country."

And before they get into three pages of details, they close their preamble with, "Should the federal government fail to uphold its constitutionally mandated obligation to protect the border of Texas, we call upon the Governor and Legislature of Texas to secure our border."

Elsewhere in that section, they call for Homeland Security officials to "establish and maintain the presence of armed guards and armed pilots on all commercial aircraft." They favor stiffer fines and criminal penalties for employers who knowingly hire illegal workers. They would suspend automatic citizenship to U.S.-born children whose parents are in the country illegally. They'd outlaw day work centers, where laborers queue up for those who need temporary employees.

You can download the immigration section of the platform — or a draft copy of the entire platform — from our website (The state GOP will post a typographically cleaned-up version of the platform on their website at some point, but we snagged a copy of what delegates approved that hasn't been checked for small mistakes).

Immigration: www.texasweekly.com/documents/rpt-immigration.pdf

The whole schmear: www.texasweekly.com/documents/rpt-platform.pdf

• Perry's Homeland Security Director, Steve McCraw, appeared twice at the GOP convention. Once was for delegates, with press barred from the room. The other was for the press, immediately following the talk with Republicans. Perry aides said McCraw gave the same presentation to both groups. What was different? Convention organizers and aides to Perry didn't want reporters writing about the questions the delegates asked at the presentation. McCraw, on the other hand, could measure his words.

Other Convention Notes

Republicans elected Robin Armstrong their first new vice chairman in nine years, and their first African-American statewide officer since reconstruction.

Armstrong had been a member of the State Republican Executive Committee. He's from Dickinson, in Sen. Mike Jackson's district, and will replace David Barton, who's been in the state party's number two spot for nine years. Armstrong is a doctor. He's married to a doctor. And he's on the board of the Texas Medical Association's political action committee.

Armstrong beat Bobby Eberle, who operates a Republican-oriented news service called GOPUSA (which you might remember at the employer of Jeff Gannon, a GOPUSA reporter who slipped a background check and posed under that false name covering the White House). Eberle peppered delegates with emails leading up to the convention. Some watchers had him as the favorite — if only because of that highly visible campaign — but Armstrong took the election in caucus elections without a fight on the floor that would have marked a closer contest.

• House Speaker Tom Craddick told the delegates he wants lawmakers to take another crack at appraisal caps, possibly by forming a group to look broadly at appraisal issues — caps included — that could be considered by the Legislature. Gov. Rick Perry endorsed the idea, and you'll probably see some sort of panel and then a report sometime before the Lege meets next year.

• Lt. Gov. David Dewhurst'sspeech was interrupted when power problems at the convention center sent the house speaker system into a burst of white noise. He sat on the edge of the stage chatting with delegates until they worked out the trouble. Craddick said he didn't do it. Land Commissioner Jerry Patterson said he didn't do it.

• When Democrats were in power, Texas Republicans were all about term limits. And some still are. A provision limiting the terms of national committee members from Texas and the state party chairman and vice chairman was struck from the platform. But there was a minority report, too, from a group that wanted to keep the limits in the rules.

• Republicans support a popular vote for statehood in Puerto Rico, an idea that wasn't in the old platform. But they continue to oppose statehood for the District of Columbia.

• Rep. Bill Keffer, R-Dallas, says he won't be doing a daily radio program when Dan Patrick and company come to Dallas, but says he's talked with them and wants to help. Patrick, the Houston radio host who won the GOP nomination to replace Sen. Jon Lindsay, R-Houston, bought a Dallas radio station and plans to replicate what he's got in Houston: a conservative political talk station that serves as the hub of that part of the political community.

• Spotted, but not widespread: "McCain-Perry 2008" buttons.

It's the Little Things

Gov. Rick Perry is now referring to Democrat Chris Bell of Houston as his "principal opponent." Speaking to the Texas GOP convention delegates, Perry didn't mention Bell by name, but wasn't talking about a female opponent like Carole Keeton Strayhorn: "My principal opponent has been specific about only one aspect of his school finance plan: That despite a record $8.2 billion surplus, he believes we must raise taxes. I appreciate his Walter Mondale-like honesty... I just think he is wrong."

Bell has said he'd raise money for education, and specifically that teachers ought to get a $$6,000-a-year pay raise to bring them up to the national average. He's also been critical of what he calls the state's over-reliance on standardized testing. The school finance legislation passed last month ties incentive pay for teachers to the performance of students on those standard tests.

Red Meat

Some excerpts from Rick Perry's speech to the Texas GOP convention delegates.

"We have redrawn their gerrymandered districts, kicked the personal injury trial lawyers out of our doctor's offices, overcome a deficit by cutting spending, invested more in jobs, challenged the status quo in education, defended our border, defended traditional marriage, defended unborn children and delivered the largest tax cut in history. If you were a liberal, you'd be mad, too."

"Ronald Reagan put every future election in perspective when he asked the question, 'Are you better off than you were four years ago?' That is the central question of this election. With jobs at an all-time high, a top-ranked business climate, college enrollment and student test scores climbing, frivolous lawsuits dropping, teacher pay on the way up, property taxes on the way down, andschool finance solved by this Republican majority, the answer is clear: Texans are better off today because Republicans have led for the last four years."

"One business activity, however, we refused to exempt: employers will not be able to deduct payroll expenditures for illegal workers."

"Some critics now say we cut property taxes too much because government will have less money to spend. But to me, the best time to stop wasteful spending is before government gets your money."

"Let me put this in clear terms: The debate on immigration reform is meaningless until the federal government secures our southern border."

"I have weathered my share of criticism from elitists, liberals and opportunists. But more importantly, I have always fought for what I believe in and delivered on my promises. And the results are adding up: the largest school property tax cut in state history, sweeping lawsuit reforms, a renewed focus on classroom excellence, and the passage of new laws that protect life."

Let the Games Begin

U.S. Rep. Tom DeLay, R-Sugar Land, is now officially a civilian, at least for purposes of reelection. Texas Republican Party Chair Tina Benkiser says she got the letter from DeLay saying he's moved to Virginia. That makes him ineligible to run for reelection to Congress (and also puts him in a state where he'll be paying a 5.75% personal income tax). DeLay is officially leaving Congress on Friday, June 9; Benkiser declared him ineligible to run a few days earlier but doesn't have the power to declare him ineligible to serve.

Gov. Rick Perry has said he won't call an early special election to replace DeLay for most of the rest of his current term. Instead, voters will elect a lame duck in November who'll serve until January. As for the full term, GOP officials will pick someone to replace DeLay on the ballot. Benkiser told the party chairs in each of the four counties in the district to call meetings and elect someone who'll serve on a district committee. Those four people will meet and vote to replace DeLay on the ballot (if they lock up and can't do it, the full State Republican Executive Committee will meet and do the job for them).

Contenders for the post include Houston attorney Tom Campbell, state Rep. Charlie Howard of Sugar Land, state Sen. Mike Jackson of La Porte, Houston City Council member Shelley Sekula-Gibbs, state Rep. Robert Talton of Pasadena, and Sugar Land Mayor David Wallace.

Man Bites Dog, or Republican Switches Parties

State District Judge Julie Kocurek, the only Republican with a black robe at Travis County's courthouse, is giving up the second title: She's still a judge, but she's now a Democrat.

It's become a commonplace for Democrats to switch to the GOP in Texas — that's been a trend at least since it happened to the Dallas County Courthouse in the early- to mid-1980s. But going the other way is relatively unusual.

Kocurek is a George W. Bush appointee who won her first election in 2000 and then won reelection — unopposed — in 2004. She's not up for reelection this year (so she's not forfeiting a spot on the ballot). Kocurek said she'd done some soul-searching and decided "there is no doubt that my beliefs are more in alignment with the principles of the Democratic Party." Voters turned out another Republican — Patrick Keel, a Rick Perry appointee — in 2004. Kocurek was the last Republican left on the district court bench in the state capital.

Political People and Their Moves

The head of the Texas Department of State Health Services — Dr. Eduardo Sanchez — is leaving that post in October. Sanchez took over the old Texas Department of Health from Reyn Archer, a controversial George W. Bush appointee, and stayed on for five years that were marked by a reorganization of all of the state's health and human services agencies. In an email to the agency's employees, he said he'll stick around until October 6, and he said he wants to spend more time with his family and hasn't lined up his next gig.

Two state legislators — Sen. Kip Averitt, R-McGregor, and Rep. John Otto, R-Dayton — are negotiating deals to go to work for Ryan & Co., the Dallas-based tax-consulting firm that also employs former state Comptroller John Sharp. Both Averitt and Otto are CPAs, and both were in the thick of things when the Legislature was rewriting the state's business tax laws in special session this spring.

Tim Reeves, a Dallas political consultant who's made a specialty of local option wet-dry elections, has sold that business to the Fort Worth-based Eppstein Group and will become that company's main guy in Dallas. Reeves is a Democrat who ran campaigns for former state Sen. David Cain and former Comptroller John Sharp, among others, and the Eppstein Group is a Republican firm. Reeves will stay out of "partisan political races," focusing on public affairs, lobbying, and the kinds of local elections he's been doing.

Gov. Rick Perry named Dr. Margaret Carter McNeese to the Texas Medical Board. She's an associate dean and pediatrics prof at the University of Texas Health Science Center in Houston.

Anna Arredondo Chapman of Del Rio is Perry's latest pick for the Texas Physician Assistant Board. She's the acting city secretary for Del Rio.

Douglas Jeffrey III of Vernon will be the district attorney for the 46th district, which includes Foard, Hardeman and Wilbarger counties. He's been in private practice and is already on the ballot for a full term.

Cara Wood, Assistant Montgomery County Attorney, will take over the 284th Judicial District Court there until the next election; she beat state Rep. Ruben Hope in the Republican primary runoff for that spot in April.

Perry chose Jerry Hennigan of Arlington to wear the robes in the 324th Judicial District Court. He's an associated judge there and also won a GOP primary runoff in April, so he'll be on the November ballot.

The governor picked Thomas Weir Labatt III of San Antonio for the Texas Water Development Board. He's president of Labatt Management Co., and "agent-in-charge" of an Edwards County Ranch.

Perry named Grace Kunde, a Seguin attorney, and retired banker Tilmon Lee Walker of New Braunfels to the Guadalupe-Blanco River Authority Board of Directors.

House Speaker Tom Craddick appointed Dr. Joseph Bailes of The Woodlands to the Texas Cancer Council.

Former Public Utility Commissioner Karl Rabago leaves the Houston Advanced Research Center for the AES Corp. in Arlington, Virginia. He'll work on global regulatory affairs there.

Press corps moves: James Bernsen is leaving the press box for the field, moving from the Lone Star Report to spokesman for U.S. Sen. Kay Bailey Hutchison's reelection campaign.

Deaths: Federal District Judge William Steger of Tyler, who once ran for governor of Texas (in 1960) and who headed the Texas GOP from 1969-1970. He was 85.

Quotes of the Week

GOP consultant Royal Masset, telling the Fort Worth Star-Telegram that Republicans are flirting with trouble on immigration: "I am for very strong controls along the border, and I am not for amnesty, But I am definitely not for all of this hateful rhetoric we are hearing on this issue — that we are going to felonize them, that we should deport them. It's talk like this that is going to lose us the Hispanic vote just like we lost the black vote in the last generation."

Republican delegate James Turner of Castroville, telling the Austin American-Statesman that Texas should stop educating the children of illegal immigrants: "I'd put them on a bus and send them back to Mexico or Honduras or wherever."

Rep. Trey Martinez Fischer, D-San Antonio, criticizing the state GOP's platform on border security and immigration, quoted by the Associated Press: "Don't forget to tip the immigrant who's going to clean your room and serve your meal."

U.S. Sen. Kay Bailey Hutchison, telling Republican conventioneers that Texas doesn't always get its fair share of federal help: "Every time I turn around, somebody is dumping on Texas."

The Tonight Show's Jay Leno, on Rick Perry's proposal to put cameras along the border so that people could monitor activity on the Internet and alert officials if they see illegal crossings: "I thought of a great idea for this to pay for itself. Most people are looking at porn anyway, right? They make illegals cross naked and charge $2 bucks a minute."

Texas Weekly: Volume 23, Issue 1, 12 June 2006. Ross Ramsey, Editor. Copyright 2006 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited. One-year online subscription: $250. For information about your subscription, call (512) 302-5703 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.