Has Governor Bush Monkeyed Around With Business?

According to Regulatory Research Associates, which evaluates the regulatory climates of forty-eight states from the perspective of investors, Texas is one of six states rated as below average. Only two are regarded as worse.
by Paul Burka

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A Texas governor affects business in three ways: through his philosophy and policy priorities, through his appointees to regulatory agencies, and through his involvement in legislation. Bush's philosophy and priorities are unmistakably pro-business, but what business wants has changed since the days of low taxes and union busting. His top priority, improving the public schools, has now become a major concern of business as well, especially large employers such as the high-tech and telecommunications industries. "The educated child is more likely to become an employee," Bush told me. In an earlier conversation last summer he argued that the number one problem facing the state was convincing young Texans, particularly minorities, that a good job will await them if they stay in school and master basic skills. "The high-tech industry is going to create 140,000 jobs in Texas over the next few years," he said then. "We've got to convince these kids that they have a future. It's a marketing problem." The governor's campaign to eliminate the social promotion of students who cannot read at grade level is strongly backed by the Texas Association of Business and Chambers of Commerce. "We are the consumers of the public school system," says its president, Bill Hammond.

Bush's philosophy regarding business, which will carry over to his presidential campaign, is to increase its opportunities and reduce its burdens. The former involves supporting what he describes as "free and fair trade," a nifty linkage of two principles that are inherently contradictory: the carrot of open markets and the stick of retaliatory action. He has always been a big fan of NAFTA, the North American Free Trade Agreement, and is quick to summon up statistics in its support, such as the $36 billion in commerce that flows from Texas to Mexico. He has devoted considerable political attention to the border, appointing former Cameron County judge Tony Garza as his first Secretary of State (Garza has since won election to the Railroad Commission) and this year naming the first UT System regent from El Paso. Bush believes that Republicans must make inroads into the traditionally Democratic border counties if the GOP is to remain the state's dominant party; in the 1998 governor's race he lavished attention on El Paso County and was rewarded with 50.01 percent of the vote there. But what the border really wants is the kind of attention that can be measured in dollars, particularly for new highways to ease the logjam of NAFTA traffic. The Bush-appointed Transportation Commission has drawn criticism from the border for not providing enough help.

A reduction of the burdens on business was the impetus for the tort reform package of 1995, which he campaigned for and pushed through the Legislature. It was his foremost legislative achievement for business, with curbs on punitive-damages awards and forum shopping for judges favorable to plaintiffs. (Without the governor's active support, additional tort reform bills, most of them far more controversial than the original, languished during the 1997 session. This year Bush has advocated limiting liability for Y2K glitches, a proposal questioned by high-tech companies that don't think they have problems and see no reason to let competitors that might be at risk off the hook.) A burden Bush wants to eliminate for small businesses is the franchise tax. His current plan to exempt the first $100,000 in gross receipts would save 231,000 taxpayers from the expensive and time-consuming process of filling out forms that, in the end, yield the state just $100 million in revenue. The exemption is expected to become law.

Legislation gets the headlines, but the day-to-day operation of the state agencies headed by gubernatorial appointees is far more critical to many industries. A staggering number of agencies have an impact on the business community. Texas regulates barbers, funeral homes, pest-control companies, doctors, gaming, and a host of other concerns. The public hears about it only if something goes wrong. Something apparently has gone wrong with the Funeral Services Commission, whose former executive director has sued the commission along with Houston-based Service Corporation International (SCI) and its chairman, Robert Waltrip, saying she was fired by Bush-appointed commissioners after Waltrip complained to the governor's office about an investigation of SCI. ("She asked to leave, and we granted it," commission chairman Dick McNeil insists. "We didn't fire her.") Other agencies act as facilitators for companies that want to do business in the state—for example, the Texas Film Commission and the Department of Economic Development. (The latter, a big player during the bust, has declined in importance in the Bush years and now is little more than a clearinghouse of information.) By far the most important agencies for big business, however, are the Texas Natural Resource Conservation Commission, whose province is the environment; the Department of Insurance; and the Public Utility Commission, which regulates electric utilities and local-service telephone companies.

The three-member commission that oversees TNRCC (called Ten-Rack for short) is friendlier to business than it was during the early Richards years, when it was known in the business world as Trainwreck. Then, as now, many of the battles were over the speed with which TNRCC approved industrial activities that might affect air and water quality. During the Richards years, business complained that the permit process dragged on and on in contested hearings; in the Bush years it's the environmentalists who grumble that the process is too streamlined. Bush appointee Barry McBee, who chaired TNRCC until he left to become Lieutenant Governor Rick Perry's chief of staff, steered the agency according to a recent law that allows industry to police itself. "I don't believe in 'command and control' environmental regulation," Bush told me. I asked him if he thought that the voluntary system of compliance was working. "I didn't say 'voluntary,'" Bush said. "I said 'not command and control.' We set high standards and expect people to meet them. If they don't and they get caught, they know they'll get hit with a stiff penalty." Except for the decision on the Sierra Blanca nuclear-waste site, TNRCC has operated outside the limelight, a sure indication that its decisions have not been too controversial.

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