This is the last issue of Texas Weekly for 2004. We're taking two weeks off and will return in the first week of January, in time for the government and political fun to begin all over again. Thanks for your support this year: We appreciate your business and wish you a wonderful holiday season.

Out with a Bang

At slow moments during baseball games, the eyes of the fans are directed to the Jumbotron over center field, where three colored dots (or hats, or cars, or mascots) race around the track. You pick a color, you yell, a dot wins a photo finish, and the team that's behind warms up a new pitcher.

The 2006 gubernatorial race works just like that, with the Legislature in place of the baseball game. The three dots drawing attention — Gov. Rick Perry, U.S. Sen. Kay Bailey Hutchison, and Comptroller Carole Keeton Strayhorn — are ending the year with some sizzle. Though Perry alone has said he'll run for governor next year, the other two Republicans are openly coveting the job, privately checking their support while publicly leaving their plans unannounced. The three only rarely will mention their fellow dots by name, but the targets of the intramural towel snapping are clear.

Perry is ending the year with a string of loud firecrackers, announcing economic development deals, road bonds and a tentative agreement on a contract to build an alternative to the terminally clogged I-35 that stretches from the Rio Grande to the Red River.

The economic development pops include state incentives from the $300 million fund set up by lawmakers to help Perry lure jobs to the state — he announced deals for 9,000 jobs in the last week, and said he wants $600 million for similar deals in the next budget. The companies can spend the money however they please, so long as they deliver the jobs they promise in contracts with the state.

The highway deals will keep Perry in the papers with announcements of $600 million in safety improvements all over the state, and — when it's signed — with details of a $6 billion project to ease the load on the state's busiest interstate. He doesn't mention Hutchison by name when he says it, but he noted this week that the transportation problems would be easier to solve if the state got a fair return on gasoline taxes that go through Washington. Perry said things improved when Phil Gramm was in the Senate, but have slipped. Subtle.

Hutchison is beginning to talk about state issues, and in a provocative way. With many Republicans convinced she and Perry will battle over abortion rights in a primary, she said the state should get in the game with California on stem-cell research. That state's voters approved $3 billion for that research, with boosters saying the products of it would create the next Silicon Valley. Social conservatives don't like that position, but the state's biotech and medical research industries do.

Then Hutchison had a very well-publicized private meeting with a group of El Paso businessmen who wanted to tell her, among other things, that they'd rather not have a contested governor's race now that they're getting attention from Austin for their efforts on Perry's behalf.

Perry's camp has been working to get Republicans to freeze Hutchison out of a race, but according to the best account of the meeting — a report in the El Paso Times — she reacted by denouncing the role of big money in Texas politics. That, for the benefit of a group that has given $800,000 in contributions to Perry. Since federal officials can't accept such contributions, she's free to blast away without looking like a hypocrite.

Finally, Strayhorn shouldered her way in, announcing a special report calling for $1.7 billion in annual pay raises and increased benefits for public school teachers. Her pitch: That tops any economic development package "anyone else" has to offer, since businesses are looking for educated workers and not for tax breaks and a broken school system.

She'd give each teacher a $3,000 annual raise and assure them at least the national average salary each year, and would also put $58 million into a "mentoring" program that would pay experienced teachers to help newbies. That would affect 315,509 teachers, each of whom is old enough to vote in a governor's race.

No Kidding

Here's a website promoting a 2006 candidate for governor of Texas: www.kinkyfriedman.com. And as we were thinking about how that would play, we stumbled on Kinky Friedman's next column for Texas Monthly, and he pointed out the two things we were mulling: Jesse Ventura and Arnold Schwarzenegger. Like Friedman, neither was taken seriously by the political establishment. Unlike the Kinkster, Ventura and Schwarzenegger were in the movie Predator (when you have trivia like that available to you, you have to use it).

Friedman told the San Antonio Express-News he's planning to announce an independent candidacy at the Alamo, on cable TV, in early February.

On the website, Friedman is selling posters and hats and shirts and bumper stickers — along with the CDs and books that made him semi-famous. He apparently hasn't set up an official campaign committee yet, but he's got at least three slogans: "Why not Kinky?", "My governor is a Jewish cowboy", and "How hard could it be?".

This is funny and all, but pay attention: Just because it's gimmicky doesn't mean it should be dismissed. Remember when Victor Morales ran (the first time) against then-U.S. Sen. Phil Gramm? He didn't win, but he did raise questions about the incumbent's political power. That was Gramm's last election before retirement.

Celebs running for office can and will say and do things normal politicians won't, and sometimes, voters are receptive to it. Perry and Hutchison and Strayhorn are all Republicans, but an independent candidate in November — particularly if the Democrats don't field a strong gubernatorial candidate — could be the only alternative to a Republican who's been in the public eye for two decades or more. What seems cute and goofy now is taken seriously in political circles where recent history is full of actors and renegades and mavericks.

Dragging the Sack

Time's up for all but three state officeholders who want to raise political money. State law says they can't raise money during legislative sessions or for the 30 days before a session. The good news is that they can't hit you up for money. The bad news, of course, is that the legislative session is less than 30 days away. The fundraising lid never closes for federal candidates, and they can still chase you and your bank account during the quiet period, even if they're raising the money to run for state office.

The three exceptions are Democratic Reps. Mark Strama of Austin, Yvonne Gonzales Toureilles of Alice, and Hubert Vo of Houston. At the moment, each faces an election challenge from their GOP opponents, and the state's campaign finance law has a loophole that lets them raise money for that fight. The same goes for the three Republicans on the other side: Jack Stick of Austin, Eric Opiela of Karnes City, and Talmadge Heflin of Houston.

If the House orders a new election in one of those contests, the first step will be to declare the seat empty as a result of a November contest that didn't produce a final result. In that case, the candidates would be able to raise and spend money as if they were in a special election. Those challengers start by filing their protests, and then have to write checks to the state to defray costs and show they're serious. All three — Stick, Opiela, and Heflin — have paid up, and their contests are proceeding.

Close, but Not Too Close

Something we wrote last week gave the subject a twitch, and they wish to clarify: Wal-Mart doesn't want to sell liquor from existing stores in Texas, but would like to sell it from package stores adjacent to their current stores. It might seem like a small difference, but the state regulates who can go into a liquor store and what can be sold there and Wal-Mart and others who might be interested don't wish to subject their existing stores to those restrictions. This all follows a large IF. If the state decides to change the laws preventing that arrangement — among other things, if you have a license to sell beer and wine only, you can't get a liquor permit — the company is apparently interested in opening some liquor stores next to its existing discount stores. Texas liquor laws are up for review this year, and Wal-Mart and other grocery and so-called "big box" retailers are lobbying for some changes.

Prosecutors, Dealing

Diversified Collection Services, one of eight corporations indicted by the Travis County grand juries investigating campaign finance in the 2002 elections, got itself un-indicted by agreeing to terms set out in a document signed by reps for the company and the Travis County district attorney (see a copy by clicking here).

The company was charged with making an illegal corporate contribution to Texans for a Republican Majority (TRMPAC), a political action committee set up to help the GOP gain control of the Texas House for the first time since Reconstruction. TRMPAC accomplished its goals, winning a majority, electing a Republican Speaker of the House, and redrawing congressional maps in a way that flipped the makeup of the Texas congressional delegation from 15 Republicans and 17 Democrats to 21 Republicans and 11 Democrats. But soon after the 2002 elections, Travis County prosecutors began investigating allegations of possibly illegal coordination between campaigns and third-party groups, and of the illegal use of corporate money in funding the election efforts.

In September of this year, a grand jury issued indictments against three individuals and eight corporations, including Diversified. The company contributed $50,000 to TRMPAC in June 2002, and the indictment said it wasn't a legal contribution and alleged a third-degree felony against Diversified.

A sidebar here: Prosecutors said at the time that some corporations got indicted and some didn't because of differences in evidence. Corporate money can't be used directly to elect a particular candidate, but it's not clear to anyone who wasn't included in the conversations that any of the corporations involved knew whether their money would be used for legal or illegal purposes. Proof that a corporation knew its contribution was out of bounds would be one example of a difference in evidence between an indicted corporate contributor and an unindicted one, but the prosecutors haven't said just what kind of evidence persuaded the grand jury to indict those eight companies.

Diversified Collection Services admitted no wrongdoing. It agreed to set up internal policies to prevent it from making illegal corporate contributions here or in other states that disallow or limit such donations. It agreed to disclose in its annual reports all political contributions made by the company, showing shareholders what it's up to. It agreed to let Travis County District Attorney Ronnie Earle approve the plan and object if he thinks it's too soft.

The company agreed to do community service and civic involvement chores in lieu of reimbursing the county for the costs of the investigation. And — this is the headline — it agreed to help in prosecutions of other defendants who were involved in the corporate contribution that resulted in the company's indictment in September.

The prosecutors said in their part of the agreement that the company only made one such contribution. They said the evidence indicates the company's contribution was made "on the basis of false and misleading information provided by the fundraiser that solicited the contribution." They noted that the manager responsible no longer works for Diversified. And the company agreed to do a series of education programs "related to the role of corporations in American democracy." The document was signed by Jon Shaver, the company's vice chairman, by their attorney, and by Earle.

Three political consultants — John Colyandro, Warren RoBold and Jim Ellis — were indicted along with the eight corporations in September. Each of the three has worked with U.S. House Majority Leader Tom DeLay, R-Sugar Land, who founded TRMPAC. DeLay has said he's not a target of the investigation, but prosecutors have neither confirmed that nor denied it, saying they're after anybody who broke the law. No deals with those three men or with the other seven corporations named in indictments have been announced.

The grand jury that issued that set of indictments went home, only to be replaced by two grand juries that are still meeting, looking at TRMPAC and other PACs, trade groups, and individuals involved in the 2002 elections. Prosecutors have said they don't think any more indictments will be issued this year, but they are not finished and expect the investigation to continue into 2005.

A Road You Can See From the Moon

They still have to cut a deal, but the first phase of the I-35 Trans-Texas Corridor will be developed by a team that includes Madrid-based Cintra Concesiones and San Antonio-based Zachry Construction Corp. That project includes about 400 miles of road, is supposed to start next year, and the timeline runs from next year through 2055. The corridor could eventually include lanes for cars, for trucks, train tracks, pipelines and other infrastructure in a right of way one-quarter of a mile wide.

• One school finance funding plan making the rounds would put a one percent gross receipts tax on most businesses to raise the money needed to lower local property taxes and put more state dollars into public education. That was among the candidates two years ago, too, along with payroll taxes, video lottery and all the rest. But a business tax opens some other possibilities. Lt. Gov. David Dewhurst hasn't said what specific plan he likes, but has said a broad-based business tax could also be used for other public policy ideas; businesses could be encouraged to pay for employee health care, for instance, by allowing deductions from a state tax for doing so.

• Pollster Jeff Montgomery — who choked up some Republicans with a horserace survey on a Perry-Hutchison governor's race a week ago — is back with more. He asked voters to pick a favorite in a U.S. Senate race between David Dewhurst and Carole Keeton Strayhorn, and says Dewhurst would start with a skinny lead, 42%-37%. The pollsters asked telephone respondents whether they were Republican or Democrat, and these are the numbers they got back from self-identified GOP primary voters. They also asked how Dewhurst would do against former U.S. Commerce Secretary Don Evans of Midland in a Senate race. Dewhurst got 52% to Evans' 18%.

Notice there aren't any Democrats in that head-to-head polling. Now look at the environment for donkeys. The firm asked Texas voters which party they agree with on 16 issues, and Republicans led on 10 issues, tied on three and came in behind the Democrats on only three. Winners for the GOP: promoting a business environment, economic development, "sharing your values", transportation, higher education, spending taxpayer money, "being on your side", improving public education, "caring about people like you", and determining a fair way to pay for public schools. Ties, more or less: helping farmers, helping cities, and helping rural communities. Winners for the Democrats: making health care affordable, making it accessible, and "helping those in need."

• The Texas Supreme Court quietly unveiled a cool tool for judicial watchers who don't live in Austin or just don't get out. Audio links to the court's oral arguments are being posted on the Internet. To tune into your favorite case, go to www.supreme.courts.state.tx.us/oralarguments/audio.asp. They're working through a backlog of older cases, but hope to post arguments from new cases online by the end of the day on which those arguments are made. And at some point in the future, the court hopes to "stream" the arguments live over the Internet. Oyez, oyez, oyez.

• Attorney General Greg Abbott is backing legislative efforts to require more disclosure from private investment funds that have state money invested in them. The private funds don't like to share investment information they say would lay open trade secrets; the legislation would allow them to keep their secrets, but not if they're handling public money.

• Freed but not yet free: Rep. Timoteo Garza, D-Eagle Pass, his mother, Martha Garza, and his father, Isidro Garza Jr., three of the six people indicted as a result of a federal investigation of the Kickapoo Indian tribe and the Lucky Eagle Casino owned by the tribe. Federal prosecutors allege they and others used nearly $1 million from the casino for personal and other reasons, including funneling money into their political campaigns. Timo Garza lost his reelection campaign to Democrat Tracy King — the man he beat two years ago. Isidro Garza, who was tribal manager, lost a 2000 race for Congress to U.S. Rep. Henry Bonilla, R-San Antonio. The three, freed on bond, still face trial...

Political People and Their Moves

Becky Klein, the former Texas Public Utility Commissioner who ran an unsuccessful race for Congress against Democrat Lloyd Doggett of Austin this year, is the new managing principal in the Austin office of Loeffler Tuggey and Pauerstein Rosenthal. The San Antonio-based firm also has offices in Washington, D.C., where Dale Klein — that'd be her spouse — is working for the Defense Department. Politics can make one cynical: Klein, who was Becky Armendariz before she was married, went by Klein at the PUC, then reemphasized her maiden name — as Becky Armendariz Klein — while running in a heavily Hispanic district. Now, in her bio on the law firm's website, she's back to Becky A. Klein...

Gwyn Shea is joining the Schlueter Group, the lobby outfit started by former Rep. Stan Schlueter. They were colleagues in the Texas House, and Shea has also been a constable, a Texas Secretary of State, and a gubernatorial appointee to several positions. She'll start before the session does...

Charles Saunders, formerly a lawyer and chief of staff to state Rep. Peggy Hamric, R-Houston, is joining CITGO in Houston, where he'll be on the lobby team. His replacement in Austin: Meredyth Fowler...

Wendy Lary, nee Wyman, is newly married, moving to Houston, and leaving the governor's policy office (she worked on environment and natural resources issues) to run the government affairs shop at the Greater Houston Partnership...

Ken Whalen is moving up at the Texas Daily Newspaper Association, which named him executive vice president, replacing Phil Berkebile, who's retiring. In spite of the title, the EVP is the guy who runs the joint. Whalen joined TDNA in 2000 and has been lobbying for the group. Berkebile has been at the helm since 1985...

Tim Conger is joining Fleishman-Hillard, a national PR firm, to run their Austin office. He's been running his own firm, Strategic Approach, and before that was at the American Heart Association...

Kathryne Reed is retiring as general counsel at the Texas Department of Agriculture, after working at the agency for 29 years. The new lawyer at TDA is Ellen Witt, who until now was practicing health and corporate law in the Austin office of Vinson & Elkins...

The state's Office of Rural Community Affairs — ORCA — named Charlie Stone as its new executive director. He's been at the agency since 2002 and has also been Refugio County Judge, a legislative assistant, a state highway patrolman and a helicopter pilot in Vietnam...

The state's 34 Republican presidential electors met one afternoon in Austin and cast all of their votes for President George W. Bush. It would have been big news had they done anything else.

More Political People, More Moves

The next president of Texas A&M-Corpus Christi will be Flavius Killebrew, now the provost and vice president of academic affairs at West Texas A&M in Canyon. He's a zoologist by training, but has been working in administration jobs since 1988. He's the sole finalist for the president's post being vacated by Robert Furgason, who'll now head the new Harte Research Institute for Gulf of Mexico Studies...

Robin Hadley, a veteran of the Pink Building who most recently was chief of staff to former state Sen. Teel Bivins, has started a new company that will track the comings and goings of people in and around state government. The Capitol Crowd will be a constantly updated database of officeholders, staffers, lobbyists, and media that'll give subscribers up-to-date information on where people are and how to reach them...

The Republican Party of Texas adds Kevin Lindley as political coordinator. He won't be the political director — a position left open when Jeff Fisher became executive director. Lindley ran Railroad Commissioner Victor Carrillo's successful campaign...

Gov. Rick Perry says Lubbock County Sheriff David Gutierrez will be the new presiding officer at the Texas Commission on Jail Standards. That outfit regulates facilities and prisoner treatment at county jails around the state...

We seem to write this every few months, but here we go: Wendy Bengal is leaving the governor's press office to move to the desert. Bengal's husband is a military pilot; his last gig sent the two to Tucson and this time they're moving to El Paso. Bengal came back to the Pink Building between tours to work for First Lady Anita Perry...

The state's Department of Information Resources grabbed a 24-year veteran of the FBI as their new IT Security Director. Bill Perez' main assignment: "to protect the state's information technology infrastructure from cyber attack"...

Deaths: H.R. "Bum" Bright, an oilman, banker, investor, political financier, and one-time owner of the Dallas Cowboys, after a long illness. Among other things, Bright was a big Aggie, chairing the board of regents at Texas A&M in the early 1980s. He was 84.

Quotes of the Week

U.S. Defense Secretary Donald Rumsfeld, fielding hostile questions from American troops in Iraq: "Now settle down, settle down. Hell, I'm an old man and it's early in the morning."

Vince Sollitto, a spokesman for Gov. Arnold Schwarzenegger, quoted in the Fort Worth Star-Telegram after Gov. Rick Perry dealt $20 million to California-based Countrywide Financial to expand in Texas instead of at home: "Many states are clearly seeking to steal jobs from other states and utilize any means possible, including giving away millions of dollars, to do this. What California is focused on is not tax breaks for specific companies, but improving the business climate for all."

Angelo Mozilo, Countrywide's CEO, quoted in the Austin American-Statesman: "We are in all 50 states, and let me tell you that Texas is by far and away the best state to do business in. I love Texas."

Jeff Moseley, who heads economic development for Perry, quoted in the McAllen Monitor on scarce job-training money: "There are some people who think if you train a village of auto-assembly workers, then you get an auto-assembly plant. That is not the reality of the business market."

U.S. Sen. Kay Bailey Hutchison, telling the Associated Press Texas needs a stem-cell research policy to keep up with California's $3 billion research investment: "I think if we are going to stay in the forefront of scientific discoveries, we are going to have to find an ethical way to keep the state-of-the-art experiments on stem cells and how they can displace unhealthy cells in people's bodies."

El Paso businessman Ted Houghton, in an El Paso Times report about a rocky meeting between Hutchison and donors who've given heavily to Gov. Rick Perry and like the status quo: "We have made an investment in the leadership of the state, and we're playing at the highest levels of the state."

Former El Paso Mayor Jonathon Rogers, in that same report: "As far as I know, right now she's a senator. If she decides to run for governor, it will be a different story. I will certainly be on her side."

Writer and musician Kinky Friedman, quoted in the San Antonio Express-News on two possible opponents in the 2006 gubernatorial contest, Gov. Rick Perry and U.S. Sen. Kay Bailey Hutchison: "Paper or plastic -- that's the choice we've got. Kay Bailey would be a ribbon-cutter just like Rick."

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Texas Weekly: Volume 21, Issue 27, 20 December 2004. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2004 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 (800) 611-4980 or email biz@ texasweekly.com. For news, email ramsey@ texasweekly.com, or call (512) 288-6598.

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Rep. Jack Stick drops his election challengeHe says the voting was fouled up but that an election contest would be politically divisive and would leave the voters in HD-50 without effective representation for much of the legislative session that starts next week. The Austin Republican says he'll spend his time working over the elections process in Travis County to make sure future elections are kosher, and says more generally that he probably will run for office again sometime in the future. That means Mark Strama, D-Austin, will take a seat in the Lege next week. Strama says he'll file papers asking Stick -- who raised the challenge in the first place -- to pay his legal fees. Strama didn't say how much he spent on attorneys. And he vented a bit about Stick's allegations of tainted voting and vote counting, saying he thought the election was clean and that he won it fair and square. Stick says voter turnout was up in this election (over 2000), but that straight-ticket voting in Travis County rose by greater numbers than overall voting. And straight-ticket voting by Democrats, by his reckoning, outgrew similar voting by Republicans. But Strama pointed out that there were more straight-ticket Republicans than Democrats in the House district (though there were more Democrats than Republicans in the countywide totals). Worse for Stick, Rep. Will Hartnett, R-Irving, who was assigned to ferret out the facts and present them to a committee for consideration, was sending ominous signals to the Stick camp. In a mid-December email to the candidates and their lawyers, Hartnett told Stick he needed more info: "Unfortunately, other than the allegation of 72 duplicate votes, the amended petition, despite the passage of 43 days following the election, appears to be founded entirely on speculation. I think I can say with confidence that neither I nor the Select Committee will consider any speculation in reaching a decision on this matter. Please be prepared to discuss the amended petition's allegations in detail during our conference tomorrow, and how Mr. Stick intends to meet his burden of proof by clear and convincing evidence within a short timeframe." In an email a day later, he told the parties he wouldn't need to interview two witnesses unless Stick's case improved: "Unless Mr. Stick files a solid petition and discloses a solid list of alleged illegal or excluded voters quickly, however, there will be no need for the ladies to provide me any information." And two weeks later, he denied Stick's request for more time. Stick subpoenaed county officials for records, but didn't deliver the subpoenas in any official way, then wanted a continuance based on the lack of any answers to those unserved subpoenas. Stick said he is withdrawing, in part, because the information he'd need to contest the election didn't appear to be forthcoming and that, in essence, he didn't want to drag it out.

Hearings on the remaining House election challenges are set for the third week of the session.Two more Republicans who lost their elections are challenging the Democrats who won them, and Hartnett plans to hold hearings on January 25-27 before writing his reports and recommendations to a House committee that will then take the contests to the full House. He had scheduled three days of hearings, but that was when the Stick/Strama duel was on, and we haven't seen a new schedule if there is one. The House can throw out a challenge or try to figure out -- from the election results, voter rolls, and other evidence -- who won. If it can determine the winner, it has to seat that candidate. If it can't, it has to order a new election in that district, throwing the candidates back to the voters for another bite. The headliner here is former Appropriations Chairman Talmadge Heflin, R-Houston, who lost his reelection bid to Democrat Hubert Vo. Heflin's lawyer says Vo's totals include votes from people who shouldn't have been allowed to vote; however it turns out, Heflin is out of the center chair on the budget-writing committee and probably out of the House leadership, at least for now. Committee chairs and other leadership positions will likely be doled out before the election contests are decided, and House Speaker Tom Craddick would have to decide if he wanted to rearrange the chairs again in the event of a Heflin win in the election contest. The facts of the case aren't yet clear, but the politics are: Heflin's challenge gives House Democrats a solid talking point in the Legislature's ongoing War on Bipartisanship. The second jump-ball involves two newcomers: Republican Eric Opiela, R-Karnes City, wants the House to have another look at his loss to Yvonne Gonzalez-Toureilles, D-Alice. She beat incumbent Rep. Gabi Canales, D-Alice, in a primary runoff and then won the general election in November. He says the vote totals are suspect and is pressing forward. To prevail, a contestant has to show that enough of his voters were barred or that enough of his opponent's were illegitimate to overcome the margin of defeat. If the number of tainted votes is greater than the margin -- and they can prove it -- the House has to either overturn the result or order a new election. That's happened only once in recent history. The documents filed in the three cases are available online at the Texas Legislative Council's website (www.tlc.state.tx.us). When you're there, you'll see "Election Contest Documents" as one of the selections on the right side of the agency's home page.

The news slowed down while we were on a year-end break, but it didn't stop. To wit:Sears, Roebuck and Co. became the second corporation to agree to help Travis County prosecutors' inquiry of campaign finance in the 2002 Texas House races. In return, the indictment against the company is being dropped. Meanwhile, political consultant John Colyandro filed documents asking for a dismissal of the indictments against him, saying the laws involved apply only to candidates, political committees and officeholders and that he is none of those things. The inquiries began shortly after the 2002 elections. Prosecutors are investigating allegations of illegal coordination between campaigns and third party organizations and political action committees, and illegal use of corporate funds in those same elections. Sears, for instance, had been charged with making an illegal contribution to Texas for a Republican Majority PAC, one of several groups trying to win the first GOP majority in the Texas House since Reconstruction. Prosecutors have indicated that this will be the last year any of this could bring indictments: Most of the allegations have three-year statutes of limitations. Two grand juries were working on that investigation during the last quarter of 2004. Their terms ended, and two new grand juries are being impaneled now. At least one will be working on this issue for the next three months. • Bob Richter, a veteran journalist who left newspapering to be House Speaker Tom Craddick's spokesman two years ago, got a pink slip over the holidays and is interviewing for a job set aside for him somewhere in the state's vast health and human services domain. Richter was a victim of his own words, and of harsh media coverage of his boss, a prominent figure in the 2002 elections that are being investigated by grand juries and prosecutors in Travis County. We're admirers: Richter is honest, forthcoming, and has the sharp tongue of a former editorial writer. That last attribute can be a liability when used in the vicinity of politicians. His assistant, Kate Huddleston, was moved to another job in the Speaker's office. Neither saw it coming, apparently, but their replacements were interviewed and hired before the involuntary relocations took place, and the HHS people were drawn into the hunt for a new job for Richter early in December, well before he knew his fate. In their places, Craddick hired Heather Tindell and Alexis DeLee. Tindell worked in a couple of hotspots: ERCOT (the Electric Reliability Council of Texas) and before that, at the Texas Department of Housing and Community Affairs. DeLee was most recently the spokeswoman for the Texas GOP, and before that worked in public relations with lobbyist Bill Miller; she was the spokesperson for a West Texas group seeking water rights that tussled with Land Commissioner Jerry Patterson and that included several Midland business people... • Sonny's Last Shot, a play by Austin writer Lawrence Wright, began a five-week showing down the street from the state Capitol through February 6. It's a spoof on the Texas Legislature, in case you need one. • Ron Kirk said he won't run for chairman of the national Democratic Party. The former Dallas Mayor, Texas Secretary of State and U.S. Senate candidate endorsed former U.S. Rep. Martin Frost, D-Dallas, who is actively seeking that job. • The next election cycle started, with an invitation to a fundraiser at the home of Texas political guru Ben Barnes for one Eliot Spitzer, the New York attorney general who wants to be governor there. The hosts include several regular Democratic contributors -- Ken Bailey, Joe Jamail, Harold Nix, Audre and Bernard Rapoport, Wayne Reaud, and Jack Martin. Of the group, Martin might be closest to that situation; the founder of Austin-based Public Strategies has been spending much of his time in New York City, working for clients there. Call this a hunch: If Texas Democrats don't mount serious candidates for state office in the face of Republican strength for the next couple of cycles, rich Texas Democrats could become prime financiers for out-of-state candidates.

Melissa Noriega of Houston will represent HD-145 during the regular session, filling in for her husband, Rep. Rick Noriega, a major in the Army National Guard who's serving in Afghanistan, training soldiers for that country's army.She'll serve until he gets back or until his term ends, whichever comes first, and will have full voting rights as his proxy in the House. There was some discussion about that among the House's rule-makers, and some question about the legality of her votes and of her pay for time in office (Major Noriega, by law, gets his daily legislative pay while he's on the front). The question is apparently resolved, at least where the votes are concerned. Rep. Joe Nixon, R-Houston, one of those who raised the issue, says he wanted her to get full legislative rights but first wanted to make sure it was legal. The other question -- whether both Noriegas will get paid for the same gig -- remains unanswered. The proxy issue was settled with a constitutional amendment voters approved last year, and though some members raised questions about whether Mrs. Noriega would have full privileges as a proxy, they've decided last year's amendment made it constitutional, as it was supposed to do. The pay question is something nobody thought to address before now and the lawyers are still researching and tinkering. That issue could arise next week when state reps vote on changes to their internal rules as the session gets underway. That's not the only cloudy picture: The House will change its rules on record votes, but members who've been working on that haven't reached consensus on what changes to make. Some types of legislation require record votes, usually when something more than a majority is needed to pass something. Constitutional amendments need 100 votes, for instance, and it takes a supermajority to get a bill to take immediate effect on passage. But on everyday stuff, record votes aren't required unless at least three members request a record vote. The Dallas Morning News has led other media outlets to bang the drums on the issue, and lawmakers are stuck between the rock of tradition and the hard place of ugly editorials back home. The papers want record votes on everything of substance, so they and their readers and other voters will know what their senators and representatives are doing when they're in Austin. That's hard to argue against, and the House is considering several options, from record votes on everything to lower thresholds for requesting votes (something less than three members asking) to record votes on final passage of bills. The rules people also talked about and then discarded the idea of sanctions against members who deny a quorum with organized walkouts or bus trips to Oklahoma or pilgrimages to Albuquerque that stifle redistricting and other issues. The House has apparently decided to leave that alone.

The state's Child Protective Services agency needs a $329 million overhaul, according to the Health and Human Service Commission's report on problems there.CPS is part of the bigger agency and after revelations of injuries and deaths of children who should have been on the agency's radar, Gov. Rick Perry ordered HHSC to investigate and clean up the mess. Their recommendations are done and Perry is putting some of them into effect and asking lawmakers to take care of others. The agency is opening an investigations division and asking the Legislature for money to hire caseworkers and lower caseloads by 40 percent, to add support personnel for caseworkers, to cut response times when abuse or neglect are reported, to privatize foster care, adoption and other case management services to "community-based organizations," to increase training, to undo a reorganization that changed CPS from nine regions to five, and to office CPS workers with law enforcement people and prosecutors when it's possible to do so. HHSC looked at 2,221 CPS cases and found the agency had dropped the ball in one way or another in half of them. To cut caseloads, the agency will have to hire 828 investigators. That would cut the number of cases per worker to 45 from 74. The plan already came in for some criticism; the Center for Public Policy Priorities says HHSC is going in the right direction, but asking for too little. Scott McCown, who heads the CPPP, remembers former Gov. George W. Bush declaring the state's foster care in a state of crisis when the caseload average was 24, and calling for more caseworkers then. HHSC is now trying to cut it to an average of 45. McCown says the state would have to cut the load to 12 to 15 cases per worker to meet national accreditation standards.

Everybody in School Finance Land seems to agree the state needs a new "broad-based business tax" to help buy down local property taxes. You can hear those four words from Gov. Rick Perry, Lt. Gov. David Dewhurst, and from House Speaker Tom Craddick. You'll hear them a lot more over the next six months.But before you grab the leftover holiday champagne, see what they say about the details. Dewhurst has been most forthcoming, and most likely to say he's closest to a deal that his half of the Legislature would approve. At a pre-session lunch with reporters, he says he's looking at a "bold" plan that would lower property taxes to $1 -- from a maximum of $1.50 now. That $1 could be in the form of a statewide property tax or a local property tax, depending on what lawmakers and voters will swallow. Local schools would be allowed to raise some local money, something between a dime and a quarter for every $100 in property value. One math-equipped lobbyist we know points out that lowering it to a $1 and then allowing local enrichment is a lot like lowering taxes to $1.15 or $1.25. But when you put it that way, many lawmakers tell you it's not a big enough cut to sell voters on the state taxes needed to pay for it -- they like calling it a one-third cut. The ratio of state to local funding would flip; where the state now pays slightly less than 40 percent of the costs of public schools, it would pay "north of 60 percent" under the plan Dewhurst is talking about. If you're looking for a number to stick on here, that's about a $7 billion to $8 billion increase in state funding. The math isn't as tricky as the politics: the policymakers' hope is that voters would look at it as a swap instead of a tax hike. Craddick, in a separate interview, heard former Michigan Gov. John Engler say his state used state taxes to knock down some local property taxes, without costing any lawmaker at the ballot box. Dewhurst says he would raise cigarette taxes. He's open to video lottery terminals (slot machines), and in code, he says they'd have to be at existing racetracks (what he actually said was that he's against expanding gambling in Texas beyond its current "footprint" and that VLTs could have a surprisingly positive impact on agriculture in Texas; we translate that to mean he'd support slot machines at racetracks that are already in business and if we hear different we'll return to this). He says the school finance plan would leave the current balance of business and personal taxes more or less in place, but says more businesses would be paying taxes after the reforms. This is where you get the "broad-based business tax," and the story is similar from all corners. Current franchise taxes hit only one business in six. More businesses are figuring out legal ways not to pay those taxes, and the state needs more money and needs a fairer tax. Several flavors of broad-based business taxes have been examined here over the last few years: general taxes on gross receipts -- the top line on a business income statement -- on income, the bottom line -- or on business activity, a tax on the overall proceeds of commerce. Most folks in the Pink Building are talking about business activity taxes. Within that are many variations: Dewhurst is apparently talking about a low-rate tax applied to business profits and employee compensation. Another variation adds in capital spending and subtracts depreciation. They're trying to raise somewhere between $3.5 billion and $5.5 billion a year with whatever variant they end up liking. One version of the plan -- we've seen several -- includes a half-cent increase in taxes on sales and motor vehicle sales, and a 1.5 percent tax on real estate transactions. Some have suggested cutouts for "passive income," which would protect investment companies and venture capitalists and others from any "broad-based business tax." But you have to watch those exemptions: Dewhurst says he'll avoid a tax bill that would generate "intra-fraternal genocide," his term for what happens if one group has to pay a tax while another group escapes. Such arguments kill bills. Craddick is also talking about knocking property taxes to $1, with room for local enrichment, and he says he's for a broad-based business tax. But he says he hasn't seen any consensus on the issue either inside the House or outside. Everybody's working together and playing nice, he says, but no deal is evident. Craddick says "most members think the system is broken," but is also aware of the Legislature's history of not solving problems like this one until the courts have had their say. The school finance system was ruled unconstitutional late last year, and the appeals to the Texas Supreme Court are less than two weeks old. It could be a while before the Supremes have loaded the gun that is pointed at the Lege's head. Craddick's attention has been on what he calls the "reform side" of education, and he says the House leadership is pretty close -- one or two issues remain -- to having a bill ready for mass consumption. It's the Senate's turn to start the budget and Dewhurst says it'll be done with the first round in early to mid-March. Sounding a little wary of the comptroller's pending revenue forecast, he says the Senate is assuming her numbers will be in line with estimates of personal income growth over the next two years -- estimates issued late last year by the comptroller herself. When she speaks and the Legislative Budget Board lets loose its first draft of a spending plan, he thinks the shortfall will be between $1 billion and $2 billion. Craddick came up with the same numbers, and both men cautioned that they don't have a clue what Carole Keeton Strayhorn will say when she presents the biennial revenue estimate next week. Dewhurst says he thinks state employees deserve a pay raise, particularly those in law enforcement. He says teacher pay is a problem, with young teachers leaving for other professions, and older teachers retiring earlier -- at an average age of 56. He says he wants to restore cuts made to children's health insurance, reverting to 12-month application periods from six-month periods, reinstating coverage for vision, mental health and possibly extending dental benefits to beneficiaries. Both he and Craddick say worker's compensation insurance is in for a fix, and both cited rates that are higher in Texas than in other states. The Senate will lay out a plan next week, and the House will work from the Sunset Committee's report. Two more from Craddick. He says, first, that the two remaining election challenges in the House won't be a distraction from other business. And he shrugs off a question about distractions from the Travis County courthouse, where prosecutors and grand jurors continue to grind away on a two-year-old investigation of campaign finance in the 2002 House elections. "Nobody's talking to me about it," Craddick says. "The only people talking to me about it are the press."

Matthews to college... Jones to Railroad?Texas Railroad Commissioner Charles Matthews is the sole finalist for the chancellor's job at the Texas State University System, but won't be collecting that paycheck for at least 21 days, and apparently won't be giving up the job he's got until the new job is actually his. The system's regents named him the lone candidate for the job but have to leave it posted for three more weeks before it's official. As we noted a month ago, Rep. Elizabeth Ames Jones, R-San Antonio, is most often mentioned as his replacement. Assuming this goes smoothly and Matthews resigns, Gov. Rick Perry would appoint a replacement to serve the rest of his term, which ends in 2006. She apparently can't take the appointment if she's sworn in for another term in the House on Tuesday, since they're both elected offices and the terms overlap and so on. If Jones is in line for the job, she won't be among the members settling into the House's leather chairs next week. That would put her in the odd position of hanging out until Matthews is gone for sure before she could step into her next job. (Want to play games with it? Jones could skip the oath next week and, if the RRC deal doesn't come through, could always run in the special election called to fill the seat she didn't take the first time. Or she could bide her time and run for RRC in 2006.) Matthews, who is finishing up his doctorate in higher education administration at the University of Texas, will be replacing Lamar Urbanovsky, who is retiring from the post. TSUS' schools include Angelo State University, Sam Houston State University, Texas State University, Sul Ross State University, and several branches of those institutions. Matthews has been at the Railroad Commission since 1994, the year national Republicans overwhelmed Democrats and took Congress, and a guy named Bush began his political rise by winning the governor's race. He's a former banker and a former mayor of Garland.

Gubernatorial hopefuls are suiting upAdd two names to the Kay Bailey Hutchison political squad: Chad Wilbanks, former political director for the Republican Party of Texas and a veteran of previous Hutchison campaigns, and Keats Norfleet, who most recently helped Louis Gohmert, R-Tyler, unseat U.S. Rep. Max Sandlin, D-Marshall, in Congress, and who worked for Rep. Dan Gattis, R-Georgetown, in the state Legislature. The two have signed on a political operativess for the senior U.S. senator from Texas (Wilbanks as a consultant, and Norfleet as a staffer). Hutchison is flirting with a run for governor next year against Rick Perry, the incumbent fellow Republican now in that spot, while also keeping open the option of running for reelection. Several of Wilbanks' former colleagues at the Texas GOP would be on the Perry side of the race, if such a thing comes to pass, including former chairwoman Susan Weddington, who heads a nonprofit started by Perry, Wayne Hamilton, former executive director of the Party, and Robert Black, flack for the GOP then and for Perry now. Weddington was one of several well-known conservatives who announced they'll support Perry's reelection for a term that would make him the state's first ten-year governor. The rest: Cathie Adams, Texas Eagle Forum; Jim Cardle, Texas Club for Growth; Bill Crocker, Republican National Committeeman for Texas; Becky Farrar, Concerned Women of America PAC; Kay Goolsby, Texans for Texas; James Graham and Elizabeth Graham, Texas Right to Life PAC; Tim Lambert, Texas Home School Coalition; Norm Mason and Jeanne Mason, Texas Christian Coalition; Allan Parker, Texas Justice Foundation; Joe Pojman, Texas Alliance for Life; Marisa Rummell, Republican National Hispanic Assembly of Texas; Kelly Shackelford, Free Market Foundation; Janelle Shepard, Texans for Texas; Peggy Venable; and Kyleen Wright, Texans for Life Coalition. The Perry gang is maneuvering for further signs of support. If they get the ducks lined up, they'll announce endorsements from other Republican statewide officials in the next few days; a list we're told could include almost all of the non-judicial elected honchos. Probably not on the list: U.S. Sen. John Cornyn, who'd have more to lose than to gain by getting involved, and Comptroller Carole Keeton Strayhorn, who is widely believed to be the third potential candidate in the governor's race. The Perry folks are also calling around to financial supporters, trying to compile a list of GOP heavies who'll say they're with Perry -- and not Hutchison or Strayhorn -- in the 2006 race for governor. Sidebar: Nobody has successfully knocked off a sitting governor in a primary since John Hill beat Dolph Briscoe in the Democratic primary in 1978. Hill went on to lose to Republican Bill Clements...

Catching up from our break...James LeBas quit his job as the state's chief revenue estimator to take over as chief financial officer of the Texas Water Development Board. That move isn't as unusual as the timing: Comptroller Carole Keeton Strayhorn, LeBas' former boss, is uncorking the biennial revenue estimate next week, and she'll do it with a new forecaster. The new guy, John Heleman, is a veteran revenue estimator who started at the agency in 1988 and has survived three comptrollers. While he and his staff are forecasting state income over the next two years, LeBas will be working on bond and finance programs. That biennial revenue forecast tells legislative budgeteers how much money they can spend in their next budget without running an unconstitutional deficit. In recent years, legislators have accused Strayhorn of cooking the numbers for political reasons, and you might be hearing more about that in a week's time, when the new BRE comes out... Dan Lambe decided to leave Texas Watch to take a job in his hometown of Lincoln, Nebraska, with the National Arbor Day Foundation. The new executive director here is Alex Winslow. Texas Watch is a consumer protection group that regularly lambastes insurance companies for high rates on home and auto policies... Janice Steffes is the new chief of staff for state Sen. Troy Fraser, R-Abilene. She's been his legislative director for several years, and will replace Bill Scott, who had been the chief. Scott is leaving the Pink Building to become manager of public affairs in the Austin offices of Exelon, a Chicago-based electric utility with regulatory interests here. Bill Bragg, who worked for Rep. Jack Stick in the House and has done campaign work for Supreme Court Justice Scott Brister and others, is also joining Fraser's staff... Susan Steeg, until recently the general counsel for the Texas Department of Health, is the new executive director of the Public Health Law Association, a relatively new group for people in that specialized area of law. She'll remain in Austin... Damaris Barton, daughter of Texas GOP Vice Chairman David Barton, will be that party's new director of community partnerships. That announcement described her as a "grassroots outreach specialist"... Deaths: Mack Kidd, a judge on the state's 3rd Court of Appeals in Austin and a former president of the Texas Trial Lawyers Association. He was 63... Roy Evans, former president of the Texas AFL-CIO. He was 79... Bill Stump of Georgetown, who served in the Texas Legislature back when Harry Truman was President of these United States. He was 93...