An F for Effort

Too much finance, not enough school: That was one of the problems with the special session called for the purpose of eliminating Robin Hood in favor of—what? Nobody seemed to have a workable alternative. Regardless, the Speaker and the governor bumbled along, and all signs point to the people of Texas paying dearly.

June 2004By Comments

I wish the Texas House of Representatives would install suites in the gallery. They’d make a fortune: comfortable chairs, leg room, food and drink, no DPS officers to admonish you for chortling with your neighbor at the antics on the House floor below. The business lobby would surely buy them, and members of the media could drop by to engage in speculation about which bills and amendments (and which legislators) were going to pass or fail. Come to think of it, the House could apply the revenue from the suites to public education—and the way things have been going in the special session on school finance, that’s about the only money the schools are likely to get.

So much for reverie. Instead of a suite, I find myself in a lobbyist’s cheerless office near the Capitol, watching a local public-access channel as the House debates its school finance bill. It is Tuesday, May 4, halfway through the special session. My invitation to join the lobbyist had come in a curious way: a voicemail message on my cell phone to “call James Hury.” The late James Hury was a Democratic state legislator from Galveston whose career was cut short when he was fatally injured in a freak on-the-ground collision during an air show. Although he was an effective lawmaker for his five terms in office, Hury is best remembered for trying to pass a tax bill during the 1991 session only to have the House turn on him. An amendment stripped one of his tax proposals from the bill, another amendment did the same, and the scent of blood was in the air. Before the debate was over, the House had consumed the carcass of Hury’s bill until only carrion remained to be sent to the Senate. I recognized the lobbyist’s voice on the phone message and headed for his office to see if his morbid prediction of carnage would come to pass.

The prediction turned out to be an understatement. The long-awaited moment when the House’s Republican majority would begin the process of dismantling the Robin Hood approach to school finance degenerated into a debacle. As eager as the Republicans were to get rid of Robin Hood—the system of funding public schools that places the burden on property-rich school districts like Highland Park, in Dallas—they were equally eager to vote against new money-raising measures that were necessary to replace the property taxes that had soared under Robin Hood. This was the moment when the Republicans’ anti-tax ideology came face to face with their responsibility to govern, and the pressure proved to be too great. The House went bonkers. The Republicans heaped humiliation upon Rick Perry, their own governor; they supported Democratic amendments to remove new taxes from the bill; they even embarrassed their Speaker, Tom Craddick, by defecting in sufficient numbers to defeat the leadership’s bill on the first vote (the result was later reversed). All of this was accompanied by one procedural maneuver after another—“Parliamentary inquiry, Mister Speaker”; “Point of order, Mister Speaker”—until Craddick and his top lieutenants were forced to invoke a parliamentary ploy of their own, a seldom used motion to shut off debate, rescue what was left of the bill, and pass the remaining scraps to the Senate.

I’m tempted to apologize for my too-obvious display of what the Germans call schadenfreude: reveling in the misery of others. Whenever I watch the Legislature, I wear three hats. One is that of a reporter, hoping for a good story. One is that of a citizen of Texas, hoping for good public policy. One is that of an appreciative spectator, hoping for good entertainment. The first longing is satisfied frequently, the second less so, and the third, in recent years, not at all. The battles have been too partisan, the participants too serious, to produce the kind of jousting that gave birth to the hoary jest “There are two things you should never see being made—legislation and sausage.” May 4 was a premium day for sausage-making.

But it was also a day that resurrected a question the Republicans thought they had put to rest: Can they govern? Their first term in control of all branches of state government has produced landmark tort reforms, a budget that dealt with a $9.9 billion shortfall without raising taxes, a mammoth highways initiative, and congressional redistricting. All of these successes, however, involved issues about which there was widespread agreement in their own party. School finance is different. It’s the toughest political issue there is: first, because education is the most important thing the state does; second, because it’s the most expensive thing the state does; third, because it involves devising a one-size-fits-all system that meets the needs of 1,224 unique school districts; and fourth, because it affects everybody—every parent, every taxpayer, every superintendent, every school in every legislator’s district. No other issue so mixes lofty ideals with parochial politics. And because it always requires a tax increase, lawmakers typically will not vote for a plan, and educators will not support one, unless the new system provides an increase in funding for every school district. All this would be difficult enough without the additional problem of putting an end to that elusive rascal Robin Hood, the bane of the rich school districts and the hero of the poor. The concern is not only that there is a lack of consensus in the Republican ranks—it’s that there may also be a lack of will.

As I write this, the calendar has advanced but the ball hasn’t. One week remains in the session. There is talk in the Senate of a possible deal, but the evisceration of the House bill on May 4 is still fresh in the memory. Miracles have happened before, but first the forces of coalescence must gain the upper hand over the forces of disintegration. The day after the House struck most of the revenue from its school finance bill, it resoundingly defeated a constitutional amendment authorizing a statewide property tax and legalizing video lottery terminals, a euphemism for slot machines. The resolution needed 100 votes (out of 150) to pass; it received only 26. So far, two school finance plans have been offered, one by the governor, one by the House leadership, and neither has been embraced—not by the school superintendents, not by the business leaders, not by the Legislature. Lieutenant Governor David Dewhurst would dearly love to be the one to come up with the solution—he wants to replace local school property taxes with an expanded business franchise tax—but most senators have shown little inclination to rush in where the House feared to tread. All that can be done now is to ask what can be learned from the mistakes of the session—and where do we go from here?

ONE OF THE UNWRITTEN RULES of Texas politics is that a governor should summon the Legislature to the Capitol for a special session only when he knows the outcome. Otherwise the political risks are too great. They range from losing control of the process (as happened to Mark White in 1984; the education reforms proposed by Ross Perot included competency exams for teachers, who voted White out of office two years later) to getting the blame if the session fails (as happened to Ann Richards in 1993; a year later, she too was voted out of office). But Perry’s political situation left him little choice. He faces a possible Republican primary challenge in 2006 from U.S. senator Kay Bailey Hutchison or comptroller Carole Keeton Strayhorn or, if the latest rumors sweeping the Capitol are to be believed, George W. Bush adviser Karen Hughes. No issue is hotter in the vote-rich Republican suburbs around Dallas and Houston than getting rid of Robin Hood and its high property taxes. If Perry doesn’t deliver, he will hand his opponents a gift-wrapped issue.

To his credit, Perry came up with a plan for getting rid of Robin Hood. To his discredit, the plan stunk. The governor proposed to replace local school property taxes with a statewide property tax. In theory, this isn’t a bad idea. The ease with which property-rich districts can raise money compared with property-poor districts is the problem that Robin Hood was created to solve. By putting all property into a statewide pool, you eliminate one big problem. But you create others. One is that the state constitution prohibits a statewide property tax; getting rid of the prohibition would require a two-thirds majority vote of the House and Senate, plus approval by the voters. Another is that education groups didn’t like the idea because it greatly limits the ability of local districts to raise money. They believe that local voters are more likely to care about supporting education than the Texas Legislature (and, unfortunately, history proves them right). A third objection is that Perry pandered to the voters by proposing to tax business property only, leaving residences to be taxed by school districts at a reduced rate. This is bad public policy. As long as businesses and homeowners are joined at the hip, each gets the benefit of the other’s resistance to higher taxes. To split off businesses renders it defenseless against future tax increases and thereby undercuts one of the few initiatives of the Perry administration: attracting new businesses to Texas. This is why a split tax roll has been rejected in the past and has no chance to become law. To make matters worse, all of the revenue from the statewide property tax would be used to replace local property taxes and say good riddance to Robin Hood. Not an extra cent of property tax revenue would make it into the classroom.

Instead, Perry proposed directing new money into education through taxing sin: gambling, cigarettes, and unbelievably, a $5 cover charge for patrons of gentlemen’s clubs. The idea that the future of Texas—which, let us not forget, is what education is all about—would rest upon the ample bosoms of lap dancers was so ludicrous that the Austin Chronicle, the city’s alternative weekly, took notice of it under the headline “Tits for Tots.”

One thing you can always count on from Perry: His internal compass will invariably point to the political path of least resistance. The significance of his plan was not what he proposed but what he did not propose, which was to put new money into education through broad-based taxes. This can only mean that he believed to do so was too fraught with political risk, that the Republican primary electorate will not look kindly on a candidate who proposed new or increased broad-based taxes, even to support public education. This is very bad news for Texas.

The governor’s plan was DOA. Dewhurst and Craddick didn’t want Perry to call the Legislature into session. They preferred to try to find some consensus first rather than flail around publicly in search of a solution. But Perry felt that the only way to get a consensus was to call the lawmakers into session. He handed the ball to the Legislature, and it fell into the hands of a special House committee, 29 members strong, that has been working on school finance for almost a year. But it wasn’t ready. Chairman Kent Grusendorf, a former member of the State Board of Education who has waited for this moment through many years of Democratic dominance of the House, had lots of ideas about improving education but few specific ideas about how to pay for them. The committee had done no serious work on taxes, nor had it reached a decision on the most basic decision of all: whether to go for a little fix that would ease some of the pain of Robin Hood or a big fix that would overhaul the state’s tax structure and the formulas for funding education as well.

One reason, perhaps, is that it would have been futile to do so. Since Craddick became Speaker, in January 2003, all of the big decisions have been made by him. Early in the session, he made his choice: The big fix it would be. This was consistent with a view he had expressed to me during the debate over Governor George W. Bush’s tax reform plan in 1997: “We should either go all the way or do nothing,” he said, disdaining Bush’s little fix. For a couple of days there was cautious optimism in the Capitol, but when Craddick came out with his tax plan—cutting property taxes by approximately one third, achieved by expanding the sales tax to include professional services, such as legal fees, and sin taxes for education—the wheels began to come off. Many Republicans couldn’t vote for a bill that taxed other Republicans, as most professionals are. Democrats couldn’t vote for a bill that still relied on sin taxes. In the regular session, Craddick had been able to bend reluctant Republicans to his will on issues they resisted, like tuition deregulation, but this time he couldn’t do it. The legislators took one look at Craddick’s plan, with its long list of new taxes and new taxpayers, and lost their resolve. The committee had to postpone voting on it. Finally, Craddick capitulated on taxing professional services, and the optimism died.

Now there was a new plan: Jim Keffer, a Republican from Eastland, proposed getting rid of the ailing corporate franchise tax, which many companies now avoid by reorganizing themselves into partnerships, and substituting a flat tax based on employees. This solves a big problem, which is getting every business (except those with five or fewer employees) to pay some state tax. “I felt, as chairman of the Economic Development Committee, I had to weigh in,” he told me. “We can’t fight business. We saw in California that business will leave the state if taxes get too high.” But every plan creates winners and losers, and the losers made their voices heard. Keffer’s plan was good for heavy industries such as oil refineries, which pay very high property taxes, but it was anathema to labor-intensive businesses such as airlines and big retailers. The failure of Grusendorf’s committee to work on taxes loomed large, because just as lawmakers would have to vote on the bill, they were hearing from lobbyists about the problems with the tax proposals for the first time.

When the committee met on May 1 to vote on whether to send the bill to the full House, it was clear that the Speaker’s plan, which now included enlarging Keffer’s employee tax to include a payroll tax, was in big trouble. Republicans and Democrats alike condemned the gambling provision, which purported to raise an optimistic $1.5 billion for education, a figure that few believed. One Republican committee member after another promised to vote for the bill to get it out of committee but vowed to vote against slot machines on the floor. Democrats objected to funding public education with gambling, which they see as an unstable source of revenue, and cigarette taxes, which are even more unreliable because cigarette consumption is declining. This was not partisan wrangling; it was pervasive skepticism.

The biggest problem for the bill, it was becoming clear, was not taxes. It was that the bill—and the rationale for it—had no constituency. This school finance bill was all about finance and only a little about schools. Its main purpose was to get rid of Robin Hood, and it didn’t even do that; the richest of the rich districts would still be affected. Lawmakers who did not represent districts victimized by Robin Hood may have been sympathetic, but they had no incentive to vote for the bill, especially since the vast majority of property tax relief would go to residents of rich districts that have shouldered the burden of Robin Hood.

One way to build a constituency for a school finance bill is through rhetoric—to talk about how you’re providing more money to schools to make Texas a better place in the future. You may recall that the state’s previous Republican governor used just this sort of rhetoric as the centerpiece of his successful campaign for president of the United States. The current crop of Republicans did provide more money for education, but they were grudging about it rather than proud; it was something they had to do, not something they wanted to do. (One senior Republican called it “the big bribe” to get school organizations to support the bill.) Every school district was guaranteed at least a 2 percent increase in state money, and the funding formula will include an adjustment for inflation. Another provision called for updating an index that is supposed to ensure that districts in high-cost-of-living metropolitan areas, where salaries average $10,000 more than in rural Texas, get the extra funding they need but haven’t received in more than a decade, since the index is still based on 1989 numbers. (Skeptics noted, however, that the 2 percent increase will not kick in for two years, and that future Legislatures can ignore inflation adjustments, as past Legislatures have done.)

So where was the uplifting rhetoric? Certainly not from Perry, whose program was all about property tax relief and placing limits on the ability of all local governments (not just school boards) to raise money. And certainly not from Grusendorf, the House sponsor of the bill, who at times expresses open hostility toward the education community. A little over a year ago I served as the moderator of a panel whose members included Grusendorf and a Republican state senator. The audience was strongly pro-education, and the senator gave a pep talk about how everybody in the room was there because they believed that education came first. I remember only one thing about Grusendorf’s remarks: He spoke of driving past the headquarters of a large teachers organization before the election and seeing all the “Tony Sanchez for Governor” signs. He spent many years in a Democratic House where his ideas, such as vouchers, weren’t welcome, and sometimes his accumulated resentments boil over. Recently, in a brief conversation with me in the hall outside his office, he referred to education—the budget area—as a “black hole” that swallows money; in keeping with the theme, he has been known to call education lobbyists “Galileo.” As his committee prepared to vote on the bill, he noted from the chairman’s seat that the education community did not support it and threatened to remove the inflation adjustment from the bill.

The vote was anticlimactic—Grusendorf easily had enough votes to pass the bill out of committee—but the discussion beforehand was revealing. Rene Oliveira, a Brownsville Democrat, exposed the fatal weakness of the bill in a mild-mannered but devastating attack: The committee’s bill, after almost a year of work, sets as its goal a 55 percent passing rate on the new TAKS test (which replaces the TAAS and is designed to be more difficult). The funding for Texas schools will be based on the cost per pupil, determined in a study by a team of university researchers, of reaching the 55 percent level, which, under the state’s rating system for schools, is regarded as “acceptable.” Oliveira asked rhetorically why it made sense to peg the funding to a 55 percent passing rate, thereby leaving the remaining 45 percent of the students to fail. That seems like a fair question to me. Later, during House floor debate, Grusendorf explained that a 55 percent passing rate on the more difficult TAKS is equivalent to at least a 90 percent passing rate on TAAS, but I don’t understand how that justifies hitching our wagon to a 45 percent failure rate. Failing is still failing. The real answer to Oliveira’s question, of course, is that to pay for the next level of achievement, at which a school is rated as “recognized,” would cost an additional $2 billion, and Republicans haven’t shown themselves willing to pay for the lower level of achievement, much less the higher.

AND SO THE COMMITTEE sent the bill to the House. Craddick had three days to try to round up his votes for the bill before it was scheduled to be debated on the floor. He could count on only one Democrat, Ron Wilson, of Houston, who had paid the price for his alliance with Craddick by losing his seat in the March Democratic primary. But on Monday, the day before the vote, Perry sent word that he would veto any bill that contained a payroll tax and then confirmed it with a press release. Craddick had no choice but to remove the payroll tax from the bill—and the slot machine proposal as well, because it had no chance of passing. By the time floor debate began the next day, the bill was just a shell of its former self.

The day would be one of the most incredible scenes anyone at the Capitol could remember. As debate began, more than two hundred amendments to the bill sat on the Speaker’s desk. The first was offered by Jim Keffer, the champion of the payroll tax that the governor had scotched. “Until four o’clock yesterday, I thought we had a plan,” he told the House. “Before you is the governor’s plan. He called us here without so much as a consensus and then undermined our process and criticized the committee’s plan.” So Keffer proposed to amend the bill by substituting the governor’s plan. “If you’re for it, vote yes,” he said. “If you don’t like it, vote no. Mr. Speaker, show me voting no”—against his own amendment. The House erupted with shouts of “Vote! Vote!” accompanied by whistles emulating the sound of falling bombs, a sure sign that the governor’s plan was going down. A couple of Republican lawmakers rushed to the governor’s defense (“This is wrong.” “This is childish.” “Is it your purpose to be wasting your time on foolishness?”), but at this point it didn’t matter who was a Republican or who was a Democrat; the battle was joined between those two ancient foes, the Legislature and the executive, and the House’s blood was up. The vote was zero for the governor’s plan, 126 against, and 16 present but not voting: a shutout. Has a governor ever been rebuked so resoundingly? This was one of those moments in the House when the members run loose like a pack of dogs, out of control, and no bill is safe.

Oliveira soon followed with an amendment to kill a proposed increase in the tax on automobiles and a new tax on automobile repairs. Back in the regular session, Democrats couldn’t get any Republican support for their amendments, but this was different. The House was mad at the governor, mad at Grusendorf, mad at the lobby, mad at the world. An attempt to table Oliveira’s amendment failed, 32 votes for and 111 against. The course for the rest of the day was clear: Amendments would be offered to remove every tax from the bill, and they were destined to pass.

But Craddick is not one to allow destiny to get in his way. He sent Talmadge Heflin, the formidable chairman of the Appropriations Committee, to the microphone with a parliamentary ploy to move the previous question. If the motion carried, it would cut off all further amendments, end all debate, and force an immediate vote on the bill. This was, as Democrats pointed out, a terrible breach of the democratic process, an affront to the republican form of government. Someone in the back of the hall shouted, “Sieg!” Craddick has been criticized often, including by me, for his iron-fisted control of the House, for forcing Republican members to vote against their will, for using parliamentary maneuvers that deny his opponents the opportunity to debate, but you have to give the guy this: He is fearless. He does what he has to do, and he doesn’t care how bad it looks. And what he had to do at that point was to get Heflin to move the previous question. If he didn’t, the dogs would have stripped the bill to the bone. His Republican members were put in the untenable position of having to choose between voting against tax cuts to save the bill or voting for tax cuts and effectively killing the bill and the session. The Democrats objected to the motion, of course, and some heated rhetoric ensued, but the wisest among them knew that Craddick had no choice.

The vote to move the previous question went largely according to party lines. But the surprises weren’t over. The next vote was to pass what was left of the bill—and the nays had it, 77–69, with 19 Republicans voting no. Once again Craddick did the unthinkable. He left the House standing at ease, officially in session, while the Republican caucus went off to a closed meeting. When the Republicans returned, more than an hour later, Craddick had turned barely enough votes to pass the bill, 73–70, and send it to the Senate, where, at this writing, it is expected to expire. Please, no flowers. No one is mourning.

THAT’S WHERE WE ARE NOW, a week later, except that the House voted the next day to kill a constitutional amendment authorizing a state property tax and legalizing slot machines. Only, 26 of the 150 members voted for the resolution, 74 short of the number needed for passage. Meanwhile, Dewhurst had six days left to win support for his plan: a business tax to fund education, other taxes for property tax relief. Unlike the original Perry and Craddick plans, it will have the support of education advocates—but will it have the support of a taxaphobic Legislature?

In taking stock of what round one of the school finance fight has taught us (and there will surely be a round two), the place to start is with Rick Perry. If his first priority was to get rid of Robin Hood so that he would be insulated from attack on the issue by a 2006 opponent, the House bill was a bigger fix than his own plan. He didn’t have to torpedo it. But he did. The reason he gave, that the tax could cost Texas jobs, is exactly the argument against his own proposal of taxing business property separately from residences.

Let’s follow this trail. Perhaps the reason to kill the payroll tax is that it represented the big fix. It looked like a tax increase, even though the revenue it would have raised went to property tax relief. Perry doesn’t want to be identified with any kind of tax increase. Why not? Remember that one of the participants on Perry’s midwinter trip to the Bahamas to discuss school finance (and scuba dive), paid for with campaign funds, was Grover Norquist, the Republican anti-tax activist. Perry’s plan was chock-full of anti-tax provisions and anti-spending provisions. It imposed ceilings on increases in property values and on increases in the tax rates of cities, counties, school boards, and any other governmental entity that levies property taxes. It set aside one third of future state surpluses to be used for property tax reductions. Entreaties that Texas was following the course of California, whose infamous Proposition 13 is said to have hamstrung local governments, fell on deaf ears in the governor’s office. Is it possible that Perry has set his sights beyond Texas, that he is positioning himself to be championed by Norquist as the man who slew the government beast by putting it out of the taxing business, with an eye on the national GOP ticket in 2008 or 2012?

The other person in the spotlight is the Speaker. Craddick’s autocratic style of running the House—deciding on the policy he wants and expecting his Republican members to ratify it, with wiggle room if he senses he has pushed too hard—didn’t work this time. He had to back off expanding the sales tax and legalizing slot machines. He was barely able to reverse the initial vote against the House bill. Is it possible that GOP members are growing some backbone? Don’t bet on it. You’ll seldom go wrong by banking on the spinelessness of the average House member. Still, it would be nice if Craddick actually tried to build a real bipartisan consensus on school finance. But it’s hard to build a consensus when you don’t believe in compromise.

And what of the Democrats? Thus far I have addressed only the actions of Republicans, because they are in charge. Irrelevant in statewide elections, reduced to ineffective minority status in the House, clinging to influence in the Senate only because of that body’s tradition of requiring a two-thirds majority to pass legislation, the D’s have been relegated to the role of critic in the school finance debate. Yet they do have some leverage. Both Perry and Craddick propose a statewide property tax, something that is prohibited in the state constitution. So are slot machines. Republicans are short in both houses of the two-thirds majority needed for a constitutional amendment. It is not hard to envision a scenario in which Democrats provide their votes in return for more money in education. But the nature of minority factions is to retreat into ideology, to let the perfect be the enemy of the good. Here’s an example: If Republicans were to offer to put more money into education but to do so through sales taxes, Democrats would likely object that sales taxes are regressive and kill the deal, instead of taking the view that how the money is spent is far more important than how it is raised. So great is the antipathy toward Craddick among House Democrats that they would rather see the Republicans fail than the schools succeed.

A governor who hates government. A Speaker who hates compromise. A minority party that hates the opposition. An education committee chairman who hates education advocates. Can this get any more entertaining? Unfortunately, it can.

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