Unhealthy

The insurance plan for state employees will have a $140.4 million shortfall next year — and that's the least of its problems. The projected shortfall for the two years after that is $880 million, and it will take another $476 million to replenish the program's legally required contingency fund. Keeping score? That's $1.5 billion.

The Employee Retirement System and state leaders are surprisingly mellow about the red ink, saying growth in the cost of health benefits for the 303,000 members in the plan has actually stabilized at around 9 percent. But that isn't a sustainable growth rate, and ultimately, they have to figure out how to cut costs. Steady and large increases in costs threaten to erode the program, leaving policy-makers to consider cuts in benefits, to negotiate lower prices, or to find vast amounts of new money.

Sen. Robert Duncan, R-Lubbock, thinks the numbers will change but the underlying tendencies won't. "The most distressing issue is the trends that we deal with every session," he says. "It's amazing to me that our health care trends are as high as they are. It's higher than anything else in the world, other than energy.

"It's 6, 8, 9 percent every year," he says. "You can't sustain a big program like this with that sort of growth in cost trends. That's the challenge right now."

The state's top three leaders asked state agencies to cut their budgets by five percent earlier this year. To the extent that that shrinks the expected number of state employees in the insurance program, the shortfall at ERS could shrink. The immediate shortfall has the attention now, but the estimated $1.36 billion needed in the next budget cycle is a bigger problem. Then again, it's early, and ERS officials are taking care to keep budget writers in the loop so that the people in the Capitol won't be caught off-guard.

The short-term shortfall can be fixed with a series of small, mostly inexpensive changes to the current plan, like adding $5 to $20 to the cost of filling prescriptions and $50 to the co-pays charged for in-patient or emergency room visits.

"Going forward into the next session is just a whole different issue," Duncan says. "The issue seems to me to be primarily these cost-trend issues... and you know, those are negotiated prices."

Duncan says the providers — doctors, hospitals, other medical professionals — will have to control prices. "It's not easy. It's a big ol' state, and you have a lot of issues around the state when you're negotiating these contracts. It's tough, but it's a tough time for a lot of people."

They've had some success with that. ERS negotiated physician reimbursement rates during the last fiscal year, saving $2.7 billion. Hospitals will be a prime target when those negotiations start. They account for 45 percent of the plan's costs, and are rising at an annual rate of 10.5 percent. Other medical expenses — a category that includes payments to doctors — are rising 6 percent annually and account for 32 percent of costs. Drugs are 22 percent of the expenses, and are rising, like hospitals, at 10.5 percent per year. That puts the plan's current inflation rate at 9.1 percent.

ERS is required to keep $476 million in a contingency account — the equivalent of what the system pays out in health benefits in the average 60-day period. It's well on its way to empty now, cleaned out by legislators the last time they wrote the budget. The money in the bucket at that time was used to help offset increasing costs in the health care program.

The state pays for health care for full-time employees and subsidizes it for other employees and for the dependents and family members of employees. When premiums rise, that's the state's problem. But increasing costs can and have been passed along to employees in the form of higher co-pays, less generous coverage for insureds who aren't on the full-time state payroll — about 42 percent of the people who are insured.

The agency saw this coming and surveyed 45,000 people to see what sorts of cost-saving or revenue-producing changes they'd prefer. They said they'd be willing to pay a little more for primary care and prescriptions, to take on some of the insurance premiums, to higher co-pays in lieu of increases in deductibles, to base what they have to contribute on their years of service (higher seniority, lower share of the cost), and to changes that would raise fees for smokers and people who don't use disease management programs and such. The surveyors found resistance to higher prices for name-brand drugs and for hospitalization and emergency rooms, higher premiums for dependent coverage, higher out-of-pocket costs for less senior employees, and smaller hospital networks.

"State employees are a conservative bunch of people with regard to their health insurance," says Mary Jane Wardlow, a spokeswoman for ERS. They generally preferred broader, smaller changes for lots of people over narrower, more expensive ideas that would cost fewer people a lot more money.

That got incorporated into the proposed strategy for the $140.4 million shortfall expected in the year that starts on September 1, which the agency is unveiling to groups of state employees in meetings this month and which its board will consider on May 25. Out-of-pocket costs for doctor visits would rise $5 to $10. Generic drugs would cost $15 instead of $10; name-brands would cost $60 instead of $40. They'd raise the price for visiting the emergency room but add benefits at a lower price for people who instead go to less expensive urgent care centers.

"I think we're going to have to make some decisions pretty quick," says Duncan. "The ideal solution is to realize some savings from the five percent cuts, to realize some savings from working with providers, and then realize some savings from benefit or plan changes."

He says the "default decision" would be to do what the agency has proposed. He and other lawmakers are still thinking. "Time is running out to make a decision. I just don't know what the answer is. ... There's not any one idea right now that is winning the day."

Defining Bill White

The news of the day — not a particularly well-kept secret even before the announcement — is that Grand Prairie Mayor Charles England, a Republican, is endorsing Democrat Bill White in the race for governor over incumbent Rick Perry.

It is Friday, April 30. England's son, Democratic state Rep. Kirk England, picks up White at the airport and fills him in on local color and news on the way to the first event. It's an Arbor Day celebration in front of a colorful crowd of public school students in a plaza next to City Hall. Next is a Rotary Club luncheon, a gathering of about 100 people — England the younger says most of them are Republicans. After that, White is shuttled back to City Hall, where he talks to an apparently voluntary gathering of city employees. He goes back to the community center where the service club lunched for the official announcement of the mayor's endorsement. Then, some down time, a reception for supporters and a few donors, back to the airport and, finally, Houston.

White, the three-term mayor of Houston, has been traveling since the primary, trying to make himself known to voters everywhere else in Texas. And he's in a footrace with Perry to do it. The governor's campaign has started the same sort of needling that unnerved U.S. Sen. Kay Bailey Hutchison in the Republican primary, calling White a liberal trial lawyer and nagging him to release tax returns for the years he was Houston's chief executive, suggesting he's trying to hide "shady business dealings." They say he was easy on immigrants, running a sanctuary city. And they contend he left Houston in precarious financial shape.

In the primary, Perry tagged his opponent with the name "Kay Bailout Hutchison" to aid his attacks on her votes in favor of federal economic recovery funds. That was just a tickler in press releases for a while, until Perry spent millions on a commercial that repeated the moniker over and over. He was able to build her reputation as a high-spending creature of Washington before she was able to become known as the remedy for the incumbent.

White's not playing. He calls the race to define who he is between his campaign and his opponent's a construct of Austin insiders and pundits.

He started a television campaign this week, with ads running initially in Houston and set to spread to other markets over the next few weeks, introducing him as a successful mayor and "man on the move." Perry responded with an ad on YouTube that pulled a smaller audience — it had been viewed only 1,180 times at last check. The idea there is to start messing with the Democrat's reputation in the punditocracy and more importantly, to prompt some hesitation from potential supporters and donors to White's campaign.

It's early and nobody's paying much attention, White argues. The snippy press releases from the incumbent are catnip for political junkies and nothing more. But he's responding in his way. While he's ignoring Perry's calls for his income tax returns and discounting the idea that he's got to be the first to describe himself, he's also working the problem.

"If you just do name-calling against everybody who disagrees with you ... after 20 years, people wise up," he says. "I want people around the state to know me as the people who work with me know me... to check the references just as you would for a job.

"What you see on the trail is that people are ready for a new governor," White says. "He's highly partisan and I'm a problem-solver."

The commercials are part of it. The biggest spending sprint in this and other campaigns will come after Labor Day. So it's early to advertise, but doing it now serves three functions: defining White in his own terms; raising his name ID for an expected round of late spring polls, both internal and external; and showing supporters that his will be a serious campaign. "We'll be competitive financially," says an aide. And the first sign of that — true or false — comes in about two months, when candidates file campaign finance reports for the first six months of the year. If the campaign is right, the money spent now on the ads will also help raise money for those reports. And they're mindful of what happened to Hutchison; Perry's campaign ads on bailouts were too heavy and too late to counter. Starting now might offset what's likely to come later.

The retail politicking and traveling around the state is the norm for this part of the election season. He's also aiming at areas that haven't been fertile for Democrats in the last decade. White has been in the Panhandle, the South Plains, West Texas — those are deep red on your political map — and is talking in places where conservatives are much more common than liberals. White won the mayor's office in Houston with support from Republicans and Independents, and hopes to win the governor's office the same way.

Kirk England, who won office as a Republican and switched to the Democrats, says his politics didn't change when the labels did. And he thinks that might be true for some of his less political friends. "My 'love list' is 90 percent Republican," says England. What's a love list? That's his true blue supporters, he says, and puts the number at about 3,000 people. It includes a lot of the people at the lunch. "My Rotary is very conservative ... but they're looking for someone to run [against Perry]."

White's lunch talk starts with praise for local officials — he says "we ought to entrust more decisions to local people." He notes that Grand Prairie, like other cities, pays people to represent its interests in Austin, but he puts a new spin on it: "The city has to pay people to lobby just to keep people off their back." He tells them he won't get political (that's political in itself) and gets a laugh by saying, "I'm just here for a long job interview."

White talks about his experience in the wake of Hurricane Katrina — a response that won laurels for his performance, and for Perry's. And he sounds vaguely Republican when talking about two things he learned as mayor, in that and other pinches. Number one: "Treat others as we would like to be treated in the same situation." Number two: Make them self-sufficient.

His biggest applause line ends a section of his speech on high school dropout rates, a key criticism of Perry's governance in each of White's stops. He talks about his son hurting his knee in a basketball game — the quiet of the crowd until he hobbled off the court, the ambulance standing by to take him in, the surgery that followed. He says a dropout should get the same sort of attention. "It's a bigger deal than that knee," he says.

He's got a line in there about high homeowner rates, but he doesn't dwell on it. He tells the audience, without directly referring to Perry, that he wants to establish "clean politics where it's not a partisan game... not a friends and enemies list." He wants to run government "like a well-run customer service business." His talk is peppered with a couple of phrases that turn up over and over. "Do you know what I mean?" and "Isn't that right?"

Between appearances, the candidate answers reporters' questions and takes calls. Perry's campaign contends Houston was a "sanctuary city" while White was in charge (in fact, its policies were nearly identical to the state's under Perry). And he's in Grand Prairie while the topic of Arizona's new immigrant policing law is in the news. He says police don't have time to enforce federal immigration laws and says Washington should do so. "We can't send police to the border," he says. "There won't be anyone to answer 9-1-1 calls."

Back at City Hall, White talks to a small group of city employees. Noting the Charles England Public Safety Training Center and the Ruthe Jackson Center, named for the mayor and a long-time city council member: "In Houston, we need to be deceased to have a building named after us." And this: "What is it about American public life these days? [It's] the only place you'd see the chief executives thinking they could improve performance by maligning the workforce." And he talks about his challenge as a candidate, saying he won't win "if good people don't get informed and tell their friends. ... Get the word out."

The capper, though it precedes a reception ending the day, is the endorsement from Charles England, who's been mayor since 1992 and who is up for reelection this week without an opponent. He's got three more years in the bag. "We need a change in Austin," he tells a gaggle of reporters. "The house has been divided into red teams and blue teams. ... I think [White] is a very moderate politician, and that's what this state needs."

Blue Note

It might not happen this cycle, or the next, or even the one after that, but University of Houston political science professor Richard Murray says that the Texas House will be Democratic by 2020 — and will stay that way "as far out as our two-party system exists."

Murray gave multiple talks sponsored by the Texas Politics project at the University of Texas this week.

In the afternoon, he spoke to a handful of students and faculty about President Barack Obama's effect in Texas during the 2008 presidential election. Murray notes that Texas was a "big red island," breaking for McCain more strongly than any other large state. However, Obama did seem to help Democrats, somewhat, as he "drove Black turnout to the maximum." He failed to excite Hispanics, though, whose turnout levels didn't even match those for John Kerry in 2004.

Demographic shift is key to Democrats' fortunes. Obama's best precinct in Texas was in west Pearland, where a very low turnout favored Republican George W. Bush over Democrat Al Gore in 2000. In 2008, around 7,000 votes were cast, with 5,000 going for Obama. "It wasn't that people changed their mind," Murray says. "People moved in."

With the exception of Tarrant County, the big five urban counties — the others are Bexar, Dallas, Harris, and Travis — went strongly for Obama. Additionally, many traditionally Republican suburban districts are changing. "These counties ain't what they used to be in terms of demographic makeup and never will be again," Murray said.

In his evening lecture, Murray said statewide Democratic dominance is still a decade away, but demographic trends are all in that party's favor. Whites who define themselves as conservative and very conservative are growing scarcer, and soon Hispanics, who typically lean Democratic, will constitute a plurality in the state.

He noted that over 70 percent of Texans live in Democratic-leaning districts. Still, they have a ways to go before they are competitive enough to warrant attention from the national party. "We're probably not looking much at being in play in 2012 or 2016," Murray said.

Next session's redistricting process will be an important factor in how quickly that happens. Because of demographic changes, Murray said, it would be in Democrats' interest to let a computer make the districts, because the numbers are in their favor. "Democrats really needed to gerrymander in 1991, but in 2010 they don't need to gerrymander." Luckily for the Republicans who, as of right now, control the Legislature, the redistricting process is still run by politicians.

Historically, he said, capturing the governorship, which has less of a correlation to whether a state is considered "red" or "blue," goes a long way to building up a minority party. If Democratic gubernatorial nominee Bill White is going to do it — and Murray says, "it's not going to be easy" — he will need to capture a large majority of the independent vote.

Murray said the former Houston mayor's "health, wealth, diligence" will help him campaign in a mega-state like Texas. That is, White's physical vigor, personal funding, combined with his famous attention to detail will help him muster the grassroots support he needs to win against his opponent's formidable political machine. White may also be able to capitalize on the fractures born during the Republican primary between U.S. Sen. Kay Bailey Hutchison, picking up donations from disaffected Hutchison supporters who've already run the risk of angering Perry. That said, Murray rates the Democratic candidate as an "underdog," because "too many good things have to happen on his side for this to all work."

Ultimately, the hegemony the GOP has enjoyed in Texas, combined with the state's demographic changes, could be the party's undoing, according to Murray, who noted that the dominant party holds responsibility for the scandals —and the lack of progress — that happen with its leaders in office. "After a while, you wear your welcome out," he said, "It just doesn't seem to me that you can maintain a static political system in state as dynamic as Texas."

Red Planet

The contest for control of the Republican Party of Texas has attracted three candidates, including current chair Cathie Adams. But this much is clear: Nobody's conservative bonafides are at issue.

The race for state GOP chair is conducted largely out of the public eye — through phone calls and at meetings of party elders — and involves wooing some 14,000 delegates across Texas. With redistricting on the horizon and a governor's race in November, the Republican faithful will gather in June in Dallas at their state convention to select who will lead the party out of debt and confront the growing specter of left-trending demographics. At stake is the party's future base of support with donors and the electorate alike: the chair's chief responsibility is to develop the tools that will get its candidates in office. That means a successful chair must strike a delicate balance — in the party line, if not personal ideology — that appeases the GOP's conservative base without alienating its more moderate elements.

Adams, who previously served as the president of the Texas chapter of Phyllis Schlafly's Eagle Forum, has presided over the party since October. Her predecessor, Tina Benkiser, left the position she'd held since 2003 to join Gov. Rick Perry's campaign, prompting a special meeting of the State Republican Executive Committee to choose her replacement. Adams' short tenure illustrates the difficulty a chair can face in shifting from the role of an ideologue — like Adams' position at the archly conservative Eagle Forum — to that of the party's chief harmonizer. Shortly after she took over, Adams attracted criticism within the party for breaking the post's tradition of neutrality with an awkwardly timed endorsement of Justice Eva Guzman in her Republican primary against Rose Vela. At the time, Adams said she had given the nod to Guzman before she became chair although news of her support didn't come out until after she was elected.

Now Adams is running for the job, and she has two opponents: Tom Mechler, a former Gray County Republican party chairman and current vice-chair of the Texas Board of Criminal Justice, and Steve Munisteri, a retired Houston lawyer and businessman.

The candidates agree there's not much ideological distance between them on fundamental issues like abortion, gay marriage, and market regulation. Fiscal responsibility, something near and dear to the GOP's heart, pops up as a topic of conversation because the state party is currently saddled with about $550,000 in debt left over from the Benkiser era, a condition unbecoming a party promoting fiscal restraint. Since Adams took the reins, the party is about $75,000 less in the red, according to the 2009 year-end report from the Federal Election Commission. "I am very pleased that we have a ship that was taking on water when I came on to the job on October 24 and today we have a ship that is in shape," she says. Mechler and Munisteri both emphasize their financial wherewithal in interviews — the former is an entrepreneur and Wharton Business School graduate, and the latter is a longtime small-business owner.

What does emerge as a flashpoint is the RPT's effectiveness in organizing voter support across the state. Mechler criticizes its past ability to cooperate with other influential Republican electoral powerhouses, such as GOPAC and the Associated Republicans of Texas. He believes the party should be "a place where the different groups within the Republican team come together and build off each others' strengths." Historically, he says, the struggle has been that many individuals, many groups have not been comfortable working with state party leadership.

"A strong chairman is not intimidated by strong forces within the party," Mechler says. "I have been building those bridges and building those relationships for the past 18 months. If I become chairman, we will immediately shift into cooperation." Part of that, he says, will be to move the party into "a grassroots, bottom-up organization" that depends on the effectiveness of GOP county chairmen and volunteers.

Munisteri, who said he started his political career in 1972 as a block walker for Hank Grover and John Tower, also said he was running because he was concerned with the state party's infrastructure and its finances. "There are no field men in the field, there are no field offices, and there is no statewide organization that can turn out say, statewide block walk. There's not even an organizational director that I know of on the staff," he says, "The model we should look at is how effective the Democrats are," citing their efforts to increase voter turnout during early voting periods.

The RPT, in contrast, uses a method Munisteri calls "antiquated" — a 72-hour voter turnout program, where Republicans identify their votes and mount telephone campaigns to get them to the polls 72-hours prior to their close. According to Munisteri, the 72-hour program "is basically the same technology and same technique I saw in 1980 when I worked as state chair for Young Texans for Reagan."

Party messaging, arguably the most important responsibility of a chairman, also concerns Munisteri, who brought up the rising number of Democrats in the state. "The question is, how do you get people who are not Republicans to vote for you?" he asked, recommending seeking common ground on issues with more moderate voters outside the party. "What you don't do is go find the two issues that are not compatible with them and get into a fight with them about it."

Adams says she doesn't believe devotion to the GOP is endangered in Texas. She cites high voter turnout in the March Republican primary as evidence: "It's very, very clear with the huge numbers that came out … that Republicans are united, shown not only in the support for our governor but also in opposition to the Obama administration's liberal agenda."

Membership has its Privileges

It may not be of any solace now to state Reps. Tara Rios Ybarra, D-South Padre Island or Betty Brown, R-Terrell, but according to National Institute on Money in State Politics, incumbents' staying power nationwide has steadily improved in recent years, as has their ability to raise money.

According to the institute's report, The Role of Money and Incumbency in 2007-2008 State Elections, incumbents who raised more money than their opponents were re-elected 96 percent of the time, and in 12 states not one incumbent with the fundraising advantage lost a seat. Incumbents that didn't raise more money were still re-elected 94 percent of the time.

In its report, Competitiveness in 2007-2008 State Legislative Races: No Contest? Only 22 percent of races were "monetarily competitive." That report also highlights the effects of corporate donations on campaigns, noting that in states where candidates received the most direct contributions from businesses and special interests, those races were the ten "least competitive."

Transparency Now

U.S. Sen. John Cornyn's efforts to amend the federal Freedom of Information Act (FOIA) and make public information public more quickly is out of the Senate, which passed the Faster FOIA Act. The bill, co-sponsored by U.S. Sen. Patrick Leahy, D-Vermont, would establish a committee that would identify ways to decrease FOIA backlogs.

Southern Comfort

Democratic lieutenant governor nominee Linda Chavez-Thompson told a group of Austin Democrats this week that they won't be seeing her commercials, probably. She's going to concentrate on San Antonio and points South, and says she's hoping to get people in that zone to vote who don't normally vote and without whom she probably can't win. She's challenging Republican Lt. Gov. David Dewhurst.

Political People and Their Moves

Michael Grimes and Trent Townsend are starting up a new political and lobbying firm under the name Imperium Public Affairs. Grimes was previously with Fort Worth-based Capital Alliance; Townsend with Sen. Kirk Watson, D-Austin.

A Pete Laney line from a recent roast of Rep. Edmund Kuempel, R-Seguin, who famously had a heart attack at the Capitol last session: "He's the only guy I know who tried to take an elevator to heaven." Kuempel, who remains alive, is one of the promoters of a CPR class at the Capitol this week. The Texas Society of Anesthesiologists is billing that event as their "first" Capitol CPR training.

Gov. Rick Perry appointed:

• Lloyd Potter, a University of Texas at San Antonio professor, as State Demographer.

• Fred W. Heldenfels IV of Austin as chair of the Texas Higher Education Coordinating Board. Elaine Mendoza was named vice chair.

• 10 student regents to their respective university systems. They are: Cresencio Davila at Texas A&M University of San Antonio, David Reyna at Midwestern State University, Sydni Mitchell at Stephen F. Austin State University, Bianca Brock at Texas Southern University, Christopher Covo at Texas State University, Jeffrey Harris at Angelo State University, Sarah Adams at Texas Woman's University, Andrew Cobos at the University of Houston Law Center and the University of Houston Bauer College of Business, Jonathan Gallegos at the University of North Texas, and Kyle Kalkwarf at the University of Texas Health Science Center. Also, Eric Rohne at Texas A&M University at Corpus Christi was appointed to serve on the Texas Higher Education Coordinating Board

• Seven people to Texas Medical Board District Review boards. They are: Larry Buehler of Angleton, Kathy Flanagan of Houston, Royce Hill of Carthage, Jayarim B. Naidu of Odessa, Nancy Seliger of Amarillo, Leah Raye Mabry of San Antonio, and Russell Parker of Austin.

• Joyce King of Plano, an author and frequent contributor to CNN, BET, and USA Today, to the Cancer Prevention and Research Institute of Texas Oversight Committee.

• Kimberly Shambley to the Texas Real Estate Research Advisory Committee.

• Will "Bill" Hubbard chair of the Grayson County Regional Mobility Authority. His term ends February 1, 2012.

Quotes of the Week

Gov. Rick Perry, addressing the BP oil spill in the Gulf of Mexico at a chamber of commerce event in Washington, D.C., as reported by The Dallas Morning News: "From time to time, there are going to be things that occur that are acts of God that cannot be prevented."

Democratic consultant Phillip Martin, in reply: "Leave it to Rick Perry to call an oil company God."

Konni Burton of the Northeast Tarrant Tea Party steering committee on its members, in to the Fort Worth Star-Telegram: "Who better to run than average citizens who are fed up with a government that doesn't listen to the people?"

Rep. Leo Berman, R-Tyler, after the governor came out against aspects of Arizona's tough new immigration law, in a statement regarding Perry's pledge to Berman to crack down on illegal immigration: "I have been asked if Governor Rick Perry lied to me. He did not."

Political consultant Matthew Dowd, in the Christian Science Monitor: "In real estate, it's location, location, location. In politics, it's conditions, conditions, conditions."

State Rep. Debbie Riddle, R-Tomball, on why an Arizona-styled immigration bill would struggle in the Texas Legislature, as told to Houston radio host Geoff Bergon on KPFT's Partisan Gridlock: "When you have people that are used to entitlements, then they like the entitlements and they want the entitlements to keep coming."

U.S. Rep. Sheila Jackson Lee, D-Houston, on the floor of the U.S. House of Representatives after mistakenly voting in favor of a cost-of-living increase for members of Congress, as reported by the Houston Chronicle: "Congresswoman Jackson Lee opposes a cost of living adjustment for members of Congress as opposed to the vote that was cast opposing (the measure)."

University of Arizona political science professor John A. Garcia on San Antonio Mayor Julián Castro, in the New York Times Sunday Magazine: "Of course, he's still young, and he might be too good to be true, but if I were betting on the next national Hispanic political leader, I'd bet on Julián."

University of Texas history professor and Pulitzer prize-winning author David Oshinsky, on the state's use of the death penalty: "I do not see the death penalty fading away in my lifetime. I think it will always be there, and my only hope is that it is used sparingly in very clear cut cases involving only the most atrocious kinds of crimes."

Contributors: Julian Aguilar, Reeve Hamilton, Ceryta Holm, Morgan Smith

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Texas Weekly: Volume 27, Issue 18, 10 May 2010. Ross Ramsey, Editor. Copyright 2010 by The Texas Tribune. 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) 716-8600 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 716-8611.