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Who's Subsidizing Whom?

The state's biggest phone companies and their competitors are fighting over a fund that subsidizes companies that provide phone service where it would otherwise be unaffordable. AT&T;, the biggest, says the Universal Service Fund doesn't cover its costs. Competitors say the company gets at least twice what it should.

The state's biggest phone companies and their competitors are fighting over a fund that subsidizes companies that provide phone service where it would otherwise be unaffordable. AT&T, the biggest, says the Universal Service Fund doesn't cover its costs. Competitors say the company gets at least twice what it should.

And the Public Utility Commission is getting ready to referee, hoping to refresh the formulas for the USF before the Legislature comes back for a regular session in January 2009.


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AT&T says it's not paid enough for high-cost services the state requires it to provide; the companies on the other side say their customers are being taxed to help Ma Bell remain in a dominant position.

There's a pile of money at stake: About $425 million was disbursed last year to the phone companies in the biggest program within the USF, according to a recent PUC report. The fund is financed with a fee on your phone bill, and all of the phone companies have to take part. The money is supposed to subsidize high-cost customers who otherwise wouldn't get phones. An easy example: It costs a fortune, on a per-customer basis, to build and operate phone service in those long mostly uninhabited parts of West Texas. But the big phone companies agreed to do it if they could use money from high-profit areas to cover the costs. With competition coming into play, that subsidy turned into the USF; the notion was that the profitable areas would have lots of companies competing, and their customers, the state decided, should pay into a kitty to keep the phones running in unprofitable areas.

It's a state program and a tax buried in a regulated industry. Texas wants the companies to provide phone service everywhere. That's the program. And it sets the rate on a fee the companies collect — there's your tax — which is then distributed to the program providers (the phone companies) by a private company that serves the same function the state comptroller serves in most programs, collecting and distributing the funds.

The formulas were last set in 1999, based on numbers from 1997. The biggest recipient, AT&T (formerly SBC, formerly Southwestern Bell, etc.) serves the greatest number of high-cost areas. And they're paid based on what those ten-year-old financial models say they should get. But some areas that were rural ten years ago are suburban now, and profitable for the phone companies (three smaller companies also get USF money for high-cost areas they serve). And more companies are competing for various businesses, including old-fashioned land lines, wireless phones, television, and on and on and on.

A coalition of those competitors has been pressing for a change in the formulas for several years, and now hope the PUC will get something new in place by this time next year. That's a group that includes the Texas Cable and Telecommunications Association, Time Warner Telecom, and Sprint/Nextel, among others. They don't want to kill the USF, but they fear AT&T and others are getting more money than they need to serve those high-cost areas, and want to make sure the USF money going to those companies isn't being used to competitive advantage. The companies getting the money don't have to prove they spent it in high-cost areas and don't have to detail their expenses in order to get reimbursed. The opposition wants to make sure they get the money they need and no more, and that they use it for the purposes intended.

On the other side, AT&T, Verizon, Windstream, and Embarq, say they've got the disadvantage of being the "providers of last resort," and as such, have no choice but to make sure everyone in the state has access to phone service. AT&T — the 300-pound gorilla here — contends the USF reimbursements don't cover the costs of the services they provide. A spokesman says flatly that they're under-compensated for the services they're required to provide in high-cost areas. And they contend the cable companies and others want to hobble the phone company so it'll be a weaker competitor.

The PUC's been at this for a while, but the case is expected to really get going in September, and the agency could have a decision as early as next spring, according to their current timetables.

A Candidate's Check Stubs

Mikal Watts personally gave more than $500,000 to political candidates and committees over the last half-decade.

The biggest chunks went to three political action committees: The Good Government PAC, $125,000; the Texas Trial Lawyers Association PAC, $111,700; and the Save Texas Courts PAC, $75,000. That last one was set up to oppose a constitutional amendment limiting lawsuits by former Supreme Court Justice Deborah Hankinson, a Republican. The TTLA PAC is a long-running operation that gets money from lawyers all over the state for political candidates. But the Good Government PAC is closely associated with Watts, and it's the source of charges that he has supported Republican candidates as well as Democrats.

He's given smaller amounts to several candidates, including his favorite candidate, by a mile: Sandra Watts, a state district judge to whom he's contributed $104,751. She's also his mom.

The Good Government PAC gets most of its money from Watts and from his law firm, and shares their business address in Corpus Christi.

Since 2004, the Goo-Goo PAC (FDR and others called good government advocates "goo-goos") gave $40,000 to Lt. Gov. David Dewhurst, $15,000 to Attorney General Greg Abbott, and $5,000 each to Chief Justice Wallace Jefferson and state Rep. Phil King of Weatherford, according to campaign finance records at the Texas Ethics commission. It supported former Reps. Talmadge Heflin of Houston and Toby Goodman of Arlington in their unsuccessful reelection bids. But most of its money went to Democrats (or against Republicans): for Juan Garcia against Gene Seaman in last year's fight over a Corpus Christi statehouse seat, for Sen. Kirk Watson, D-Austin (then in a race for attorney general); for Chris Bell against Rick Perry (and Carole Keeton Strayhorn and Kinky Friedman) in last year's gubernatorial election. And they were a drag on former Rep. Jaime Capelo, D-Corpus Christi, helping knock off the incumbent in a 2004 primary. It's also a contributor to other PACs, giving $100,000 to the Austin-based HillCo PAC run by lobbyist Buddy Jones and his associates.

On the federal front, contributions amounts are limited, but Watts has been busy for the last several years, according to records with the Federal Election Commission. He's a contributor to several presidential campaigns — John Edwards, now and four years ago, to John Kerry, after he'd put Edwards on his ticket in 2004, and to Joe Biden, last year. Watts also gave to Edwards' 2002 campaign for U.S. Senate. Barrack Obama, now a presidential candidate, got a donation from Watts for his 2004 Senate race.

He's given to U.S. Sens. and Senate candidates Ron Kirk, D-Dallas; Barbara Boxer, D-California; Tom Harkin, D-Iowa; Jon Tester, D-Montana; Robert Menendez, D-New Jersey; Tom Daschle, D-North Dakota; Harry Reid, D-Nevada; Tony Knowles, D-Alaska; and Ken Salazar, D-Colorado.

Watts contributed to U.S. Reps., former Reps. and House candidates Chet Edwards, D-Waco; Ted Poe, R-Humble; Solomon Ortiz, D-Corpus Christi; Richard Raymond, D-Laredo; Henry Cuellar, D-Laredo; Ron Chapman, D-Dallas; Lloyd Doggett, D-Austin; Martin Frost, D-Dallas; and Nick Lampson, D-Stafford. Poe, a former Houston judge, was the only Republican we spotted on Watts' federal giving list.

Watts Up

Mikal Watts threw a bunch of his own money into his Senate bid, but his fundraising brought in $1.1 million from other people's bank accounts.

The San Antonio Democrat says he raised that much in the first 30 days after forming his Senate committee, and said the campaign reached the end of June with $4.9 million on hand (the rest came from the candidate himself. His campaign said $400,000 of the money came from online contributions.

The Republican incumbent, U.S. Sen. John Cornyn, hasn't released his mid-year financial report, and aides aren't saying much about what'll be in that document. But a spokesman, David Beckwith, said his boss will be in the lead: "If [Watts] wants to keep up with us, he's gonna have to write another check."

Separately, Watts has started staffing up, adding Jason Stanford of Austin to the juggernaut to do research and also some speechwriting, and Kim Devlin, who'll handle communications. Sherry Boyles, a one-time Democratic candidate for Texas Railroad Commissioner and former head of Annie's List, is handling some of Watts' fundraising.

Follow the Green

Railroad Commissioner Michael Williams hasn't filed his mid-year reports yet, but aides say he raised $322,000 in ten days, an amount they think is a record for a Railroad Commissioner. Williams, like other state officeholders, was barred from raising money while the Legislature was in session and while Gov. Rick Perry was in the 20-day window for approving and vetoing bills after the session ended.  Williams is also set to announce endorsements from "four-fifths" of the members of the State Republican Executive Committee (he's the state GOP's former general counsel) and from 100 of his party's county chairmen. Here's a weird bit of trivia: He might draw opposition in next year's election from Dale Henry, who ran as a Republican against Victor Carrillo and as a Democrat against Elizabeth Ames Jones in the last two election cycles. That would apparently make Henry the only guy to run against every sitting member of a Texas Railroad Commission.

Dan Grant, a Democrat challenging U.S. Rep. Mike McCaul, R-Austin in CD-10, says he raised $72,700 in the last month. No report yet (it's not due) from the incumbent. Grant worked as a civilian setting up new government operations in both Afghanistan and Iraq and consulted for the John Kerry presidential campaign; he poses himself as a "foreign policy expert."

• Another early announcement: Joe Jaworski, a Galveston Democrat challenging state Sen. Mike Jackson, R-La Porte, in SD-11, says he'll report more than $250,000 in his campaign accounts at mid-year. That total includes $214,495 he says he raised during the last six months (non-officeholders aren't barred from raising money during legislative sessions, as incumbents are).

• Texans for Public Justice reports, based on info at the Texas Ethics Commission, that House Speaker Tom Craddick had nearly $4.2 million in the bank at the beginning of the year and was sitting on nearly that much during last year's election cycle. But he didn't spend much, contributing less than $200,000 to the political action committees that were defending his supporters in their reelection bids last year, TPJ says in their report.

Not for Profit, For Profit

A California company has pulled together a database that tries to do for charities what campaign finance databases do for politics, and there's some interesting overlap.

NOZA pulls together public information from charities around the U.S. and makes it searchable, so you can find out, for instance, who in Texas gave money to a particular charity and about how much they gave. It's not completely hard data: The numbers depend on what the charities reveal about themselves and their donors. But if someone gives, and the organization lists them as a donor — often done, and often with dollar ranges — they end up in the database.

Craig Harris, a former nonprofit exec, set the website up to help other nonprofits get information that could help them raise money. If you give to one outfit and end up in the database, other similar outfits will know you're out there and can hit you up for contributions to their causes.

That opens a potential tie to politics and political giving, an avenue the company's now pursuing. If someone gives to a particular charities or charities and hasn't been active politically, it's possible to make an educated guess about their politics and their finances.

It's not a new idea — back in the day, Karl Rove, for instance, had direct mail businesses in politics and in fine arts, and found some useful overlaps there. And corporate America has been using cross-indexing like this for years. But it hasn't been this easy to access.

About a third of the database doesn't have dollar values attached, usually because the charities listed their donors without numbers. But that's potentially useful, too, since it links names to causes and to other gifts that might have bucks enumerated.

Harris says he's still aimed mainly at the nonprofit business, but says political campaigns and candidates are starting to poke into the data. So, he says, are reporters, who want to know more about contributors and about the candidates themselves, and who they give to. Check it out: www.nozasearch.com.

• While we're at it, there's a new website that's basically in existence to collect dirt on presidential candidates. You click on a candidate to find out what's going on with them, and you can click on another link to add to the muck. Sheesh: www.oppodepot.com.

Candidate Scanner

Rep. Rick Noriega, D-Houston, was all set to announce his bid for U.S. Senate, but will delay that event until Monday out of respect for Lady Bird Johnson (and, he didn't say, for the simple fact that all of the political press will be busy this weekend with that funeral). He'll jump into the Democratic primary against San Antonio lawyer Mikal Watts next week. The winner of that primary — next March — will likely face the incumbent, U.S. Sen. John Cornyn, a San Antonio Republican.

Debra Coffey, a Fort Worth Republican, got the drop on everyone in HD-97, filing papers designating a treasurer and saying she'll be a candidate in the race to succeed Rep. Anna Mowery, R-Fort Worth, who's decided not to seek another term. Her husband is Tarrant County Criminal Court Judge Daryl Coffey. And the two have a funny distinction on their resumes: They were named Kentucky Tree Farmers of the Year in 2003 for their 2,100-acre tree farm there. Former Rep. Bob Leonard Jr. is looking hard at a return to the Texas House. If he jumps, and if he's successful, he'd be succeeding his successor. A Leonard confederate tells us that Mowery — then a Republican activist — was one of the people who got Leonard to run in the first place, back in 1978. He served ten years and decided to bow out; Mowery has been in that spot since 1988. That district is full of tire-kickers and the ballots are far from settled. City Councilman Chuck Silcox has also been mentioned as a candidate.

• The other state rep (only two so far) widely expected not to run — Buddy West, R-Odessa — is now making noises about coming back. He ended the session telling members that this might have been his last rodeo. But he told the Odessa American that his health has improved and he might just give it another go. Meanwhile, Randy Rives, an Ector County ISD board member, is looking (and raising money for a run). Democrat John Wilkins, a former head football coach at Permian High School, is looking. Another possible candidate, if West doesn't run, is Shirley West. That's the incumbent's wife.

• Take Jesse Ancira off the list of candidates who'll challenge Rep. Mike Krusee, R-Round Rock, in HD-52. Ancira, a former deputy state comptroller and former FBI agent, says he'll keep the door open for future contests, but won't play this time out. He hasn't decided who he'll support and says he's heard of five or six Democrats who are considering the race.

Flotsam & Jetsam

You'd think legislators would want to hog credit for state employee pay raises. You'd be wrong. They put a small increase in pay in the budget, but made it contingent on the comptroller saying the money was there to pay for the thing. Everybody knew the money was there; the state has more than $7 billion in uncommitted money in the treasury. Anyhow, Comptroller Susan Combs officially says the money is there for a raise when the budget starts in September. State employees will get a two percent hike then and another two percent hike a year later. Law enforcement officers will get bigger increases. The total tab for that is $402.4 million during the next budget cycle. On a micro level, someone making $40,000 a year now will be making $41,616 two years hence.

Quico Canseco, a Republican challenging U.S. Rep. Ciro Rodriguez, D-San Antonio, in CD-23, picked up endorsements from car dealer Red McCombs and from Ken Mercer, the former House member who's now on the State Board of Education.

Department of Corrections: We got our trucks mixed up last week, putting former Texas Senate candidate Victor Morales in a red one instead of a white one. Shoot, and we even rode in it a couple of times. The red truck that got stuck in our head belonged to Fred Thompson, who drove it around when he was running for U.S. Senate from Tennessee.

Lady Bird Johnson, 1912-2007

Claudia Alta Taylor — known to the world as Lady Bird Johnson — had a particular talent for remaining kind and gracious while in close proximity to her famously coarse and rough-edged husband, President Lyndon Baines Johnson. She was a successful businesswoman while he was alive, parlaying an inheritance into a successful broadcasting company (radio, TV, and cable). She offered a soft counterpoint to LBJ's White House as First Lady. And when he was gone, she had another career as she pursued her love for conservation and wildflowers and outdoor beauty. She's to blame when you see flowers instead of billboards when you're zipping down a Texas highway. Johnson struggled with health issues in her final years and died with family and friends at her side. She was 94.

John Hill, 1923-2007

John Hill Jr. came agonizingly close to the Governor's Mansion in one of his two bids for that job (and residence), but instead became the first Democrat to lose a Texas gubernatorial election since Reconstruction. In the Democratic primary that preceded that election, he became the last candidate (so far) to beat an incumbent governor in his own primary when he took Dolph Briscoe out of the race. Republican Bill Clements won that 1978 race by around 17,000 votes. Hill, who had already been Texas' Secretary of State and its attorney general, recovered a few years later and won election as the chief justice of the Texas Supreme Court. He left the court three years later and became a vocal advocate for judicial selection reform; he just didn't think it proper for judges to run for election financed by the people who practice law before them. He served as a Texas Lottery Commissioner under then-Gov. George W. Bush and ended his career as he started it — in a law office. Hill, born in 1923, died after complications related to a heart procedure. He was  83.

Political People and Their Moves

Texan John Weaver still has a favorite in the GOP race for president, but not a job. Weaver — who's been on the John McCain bandwagon as long as anyone, most recently as the presidential candidate's chief strategist — resigned from the campaign, along with Terry Nelson, McCain's campaign manager. Both men said nice things on the way out the door. Weaver's a longtime political op from Texas who worked for former U.S. Rep. Tom Loeffler of San Antonio and former U.S. Sen. Phil Gramm of College Station, among others. In recent years, he's done work for some Democrats, too, as well as the Democratic Congressional Campaign Committee and the American Trial Lawyers Association.

President George W. Bush nominated Diane Rath of San Antonio to be assistant secretary of health and human services, proposing to move her to Washington, D.C., from the spot on the board of the Texas Workforce Commission that he gave her when he was governor. Bush named her to the Texas post in 1996 and made her the chairman two years later. Gov. Rick Perry reappointed her to the spot in 2001.

Rick Dunham, who ditched Texas state politics to cover national politics two decades ago, will be the new Washington bureau chief of the Houston Chronicle. Dunham is currently with Business Week's Washington bureau and served as president of the National Press Club. Before that, he worked for the late Dallas Times Herald (where he mentored our editor). We're biased: Good hire.

Maverick County Judge Jose Aranda Jr. of Eagle Pass joins the Stat Community Development Review Committee as a Gov. Rick Perry appointee. That panel reviews federal block grants for cities and counties.

Chris Cronn is taking a leave from the governor's legislative operation to work for Texans to Cure Cancer, the temporary outfit that'll try to persuade voters to approve $3 billion in bonds to support ten years of intensive cancer research in Texas. He hopes to return after the elections in November.

Mark Epstein joins the Austin offices of MGT of America, a public sector management and policy consulting firm. He was at Maximus Inc. until now and is a "revenue enhancement" and program management expert.

Bruce Anthony Toler was shot in the leg and then charged with aggravated robbery with a deadly weapon after allegedly trying to steal copper wire from the unfinished home of state Rep. Borris Miles, D-Houston. Miles told police he interrupted Toler and other man, dodged a knife thrown by Toler and shot him in the leg. The other thief ran away.

Quotes of the Week

Vision America head Rick Scarborough, at a Christian political rally in East Texas, quoted by the Lufkin Daily News: "Even if we don't have a president we can vote for without holding our nose, we can impact county, city (and) school board... raising up God-fearing leaders at the local level."

West Texas pecan grower Tony Rancich, quoted in The Dallas Morning News on efforts to build fences on the Texas-Mexico border: "My grandfather had a vision for the border, and it wasn't a place guarded by fences where everyone is armed to the teeth, shooting it up. This isn't the Wild, Wild West. This is home."

Bryan resident Cindy Seaton, quoted in the Bryan-College Station Eagle on her opposition to a proposed Hooters restaurant: "I'm mostly worried about the college girls. They're the ones that are going to be working there and putting their bodies on the line. It's going to set a precedent for them that they can use their bodies here to get through college. That's just not the way that our society needs to work, and I just don't agree with that."

Dan Moldea, who's in league with Hustler owner Larry Flynt and is also working on a book with Deborah Jeane Palfrey, the so-called "D.C. Madam," telling the Washington Post he outed U.S. Rep. David Vitter, R-Louisiana, for hypocrisy and not for hiring the escort service: "If someone hasn't been shooting off his mouth, we'll throw him back in the river."

Wendy Vitter, the congressman's wife, joking in a 2000 interview with Newhouse News Service that she'd be less forgiving about dalliances than the spouses of former U.S. Rep. Bob Livingston and former President Bill Clinton: "I'm a lot more like Lorena Bobbitt than Hillary. If he does something like that, I'm walking away with one thing, and it's not alimony, trust me."


Texas Weekly: Volume 24, Issue 6, 16 July 2007. Ross Ramsey, Editor. Copyright 2007 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.

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