You remember when Speaker Tom Craddick said the state was sitting on a $15 billion budget surplus?

That was only eight months ago. And now, lawmakers, budgeteers, and various soothsayers are telling agencies and other supplicants this Legislature will be writing a tight, tight budget.

The $15 billion was never really a surplus, but the state was in good financial shape and — compared to most other states — remains so.

And part of this is the normal budget whittling that precedes a session: It's easier to say "No" when there's no money than to say "No" when the state is flush.

But the economy, Hurricane Ike, state laws on education funds, federal investigations of state mental facilities and a mess of other details are making it easy to cloud the outlook. There's more here than the usual rhetorical trick.

Comptroller Susan Combs will present her biennial revenue estimate on Monday morning — a day before legislators come back. Nobody's seen it, but the budgeteers expect it to be gloomy.

Some things, they know. Sales tax income is still up, but the rate of increase has slowed considerably. Hurricane Ike will cost up to $2 billion. State law prohibits the state's education endowment from making payments when returns fall below a certain amount over ten years. The market drop triggered that (apparently; the attorney general has been asked to read the law closely to find an out) and the state might not get $1.5 billion to $2.3 billion it expected. The State Board of Education is having a special meeting on Tuesday — before the Legislature meets — to talk about that issue and try to produce something good for budget-writers to talk about.

The state's new business tax underperformed estimates, and the economic downturn could dampen those numbers even more. And the state has a "structural deficit" in the school finance swap approved by lawmakers in 2006. They promised to spend more on local school tax cuts than they are raising with the new business tax. The difference each year — up to $5 billion — has to be made up with other funds.

They'll start with a cash balance of about $2 billion. Two years ago, the corresponding number was $8.8 billion. To a budget writer, that looks like a $6.8 billion hole to fill, since the lower balance amounts to a loss in the amount of funds available at the start.

And whenever you hear someone talk about job growth in the state, know that those numbers figure into the formulas for some federal funds — like Medicaid. The better off we are relative to other states, the lower the matching funds. For budget purposes, that's another leak in the pail.

Texas has about $6.6 billion in its rainy day fund, but that's one-time money, and in a slow economy, anything spent now might not be replaced anytime soon. Budgeteers are — at least at the outset — saying they don't want to spend that money.

Comptrollers and their revenue estimators are always pessimistic — if you make a mistake on the estimates, it's better to be low than high. Go low, and you've got more money than you expected. Go high, and you've got a sea of red numbers. This is an ideal environment for a number-cruncher who wants to make a pessimistic estimate.

Play It Backwards

Joe Straus III is poised to become the first San Antonio speaker of the Texas House in 96 years, the first Baby Boomer in the job, and only the second Republican since Reconstruction. His victory capped a weekend of intrigue that was a tense, unpredictable, textbook case of how fast things can change in politics. Played in reverse, it all looks logical, but every step along the way was fraught with intrigue and uncertainty.

• Straus has a transition team helping to organize his office as he prepares for the vote that will make him speaker of the Texas House next Tuesday. Former state Sen. and Bexar County Judge Cyndi Krier, and former Rep. Clyde Alexander — a Republican and a Democrat — head the crew. Others on the inside: Lisa Kaufman, executive director and general counsel at the Texas Civil Justice League and a former staffer in the Texas Senate and the U.S. Congress, and Denise Davis, a lawyer/lobbyist with Baker Botts and a controversial former House parliamentarian.

• After meeting on Monday afternoon with several fellow conservatives who'd been loyal to current Speaker Tom Craddick, Rep. John Smithee, R-Amarillo, drops his bid for speaker and says he and Rep. Dan Gattis, R-Georgetown, will support Straus. They're the last remaining candidates.

"The numbers became obvious," Smithee says. "We had to get some of our people back, and we went the other way... I knew the odds were very long, so it was either surrender yesterday [Sunday] or try something. I've tried to do it in a respectful and courteous and professional way, and I hope that I've done that."

It turned out that members who'd made the hard decision to leave Craddick and found themselves with a winner in Straus weren't willing to go through the wringer again. Rep. Will Hartnett, R-Dallas, tells reporters that the group of Republicans who'd agreed to support Smithee will drop their opposition to Straus.

• Straus says he's won the support of more than 100 of the House's 150 members.

• Straus holds a press conference in the Capitol Rotunda to announce he's got 93 signatures from members and expects to be elected speaker of the House at the beginning of the session on January 13. "It's time to turn the page and to move to a more positive tone in the House, and that's what I'm dedicated to," he says in front of a bank of cameras and a throng of reporters, staffers, lobbyists and other gawkers that fills the floor, the balcony on the second floor, and a good part of the third-floor balcony. He praises Craddick's service to the state, takes care to say, "this is not a fully completed project," and says he hopes to meet with Smithee to talk about the situation.

Straus also answers reporter questions about his family's gambling interests, saying he'll beware of conflicts: "I'll stay away from it, I'll recuse myself and not allow that to be a distraction."

• Although Straus claims the support of well over half the House, a group of Craddick Republicans — 57, by Smithee's count — agrees over dinner to support Smithee to replace Craddick. They don't release the vote list, but say they considered five candidates before voting to support Smithee, including Reps. Warren Chisum, Dan Gattis, John Otto, and Vicki Truitt. It comes down to Smithee and Gattis and the group votes unanimously.

Craddick tells the group he got out of the race when he realized he couldn't win. And he realized he couldn't win, he told them, when he lost the support of a handful of Democrats who had supported him in the past. His press office issued a brief statement when it was over: "Tonight, Tom Craddick released his pledges for speaker."

Afterwards, Smithee repeats his argument that members who have committed their support to Straus should reconsider now that Craddick is out of the race and Smithee has taken his place as Straus' competition. He and others in the Craddick group say they are concerned that most of Straus' initial support comes from Democrats. Their fear is that he'll be beholden to Democrats rather than to Republicans.

• On Sunday evening, Straus announces he's got the votes to become speaker and releases a list of the 15 Republicans and 70 Democrats who support him. He says he'll hold a press conference the next day. "The needs of special interests and partisanship will take a back seat to doing what is right for our State at this critical time," he says in a press release. "It is time for a new tone and an atmosphere of trust in the Texas House of Representatives. Having received the commitment of a strong majority of my colleagues, it is my goal to restore civility, fairness and transparency to the House of Representatives and its public-policy making process."

• Smithee says the House should have more than two days to decide between him and Straus and makes a play to Straus supporters to reconsider, now that Craddick is out of the race. He claims Gattis' support. "I don't know if it's too late to try to make the case or not," he says.

• Craddick folds late Sunday afternoon, saying he can't get the votes he needs to win a fourth term as speaker. He frees his pledges, knowing Straus has locked up more than half of the members and that his tenure is over. Any other candidate will have to scoop up all of Craddick's voters and persuade some of Straus' to switch.

• Smithee, who's been in Colorado for the holidays, sends papers to the Texas Ethics Commission allowing him to campaign for speaker, joining candidates Craddick, Gattis, and Straus. Straus has been moving rapidly during the last 48 hours to lock up the 76+ votes needed to win in the 150-member House. Gattis has been in the contest for a while, with three other members pledged to him. And Craddick has been trying to get a majority of the votes since the November 4 elections, without success. Craddick has called a meeting with supporters at a downtown Austin steakhouse tonight (a meeting that was on the books before the weekend began). Smithee's play will only work if Straus is short of the 76-vote mark and if Craddick drops out and frees his supporters to go with someone else. If they chose Smithee over Straus and Gattis, that'd be that.

At this point, the arithmetic and the timing appear to favor Straus. Smithee and Gattis are now contending for two groups: Uncommitted Craddick opponents, and people who've been with Craddick to this point but who could become available if they think they're not with a winner. They're after people who don't think Craddick can or should get there and who don't want Straus for whatever reason. The question, with Craddick and Straus working so hard, is whether there are enough votes available to make Gattis or Smithee a viable candidate.

Meanwhile: Conservatives outside the House continue their attacks on Straus, who comes from a San Antonio clan with deep Republican roots, for his family's gambling interests (they own a share of the Retama Park horse track near San Antonio), and for his views and votes on abortion. He sends members an email, saying in part: "As you know I believe in the sanctity of life. I am consistent with existing restrictions on abortion including parental notification/parental consent. I believe exceptions should exist for rape, incest and harm to the life of the Mother."

• Straus works the phones and meets with members on Saturday, while Democrats caucus and collect votes (they reach the upper 50s on Saturday and add a dozen more on Sunday). Craddick and Straus both talk to so-called Craddick Ds — Democrats who've supported Craddick. Six of ten join Straus, followed later by three more.

• Late Friday night, conservatives like David Barton of Wall Builders and Cathie Adams of the Texas Eagle Forum launch email campaigns against Straus, attacking his family's gaming interest and his votes on abortion, parental rights, casino gambling, and homosexuals as foster parents. They express concern about his short tenure in the House and about the fact that most of his supporters are Democrats.

• Eleven Republicans who've agreed to oppose Craddick and to pool their votes behind one candidate meet (ten in person, one by teleconference) at Byron Cook's Austin residence and after three ballots, pick Straus. Burt Solomons of Carrollton got five votes on that third ballot to Straus' six, participants said. The winner, 49, was in third grade when Craddick was first elected to the House in 1968. Straus was elected in 2005. Straus files as a speaker candidate from the meeting at Cook's house. He's been considering a candidacy for weeks, but didn't decide, he told reporters, until he got to the meeting.

Gattis is still in the race, and Smithee is openly thinking about it. Craddick issues a statement: "There are great challenges facing the state, and there are clear differences in experience and philosophy between Mr. Straus and myself. I am confident that I will be re-elected speaker."

• Rep. Brian McCall, R-Plano, files for speaker on Friday afternoon, before the meeting of the 11 ABC (Anybody But Craddick) Republicans. That Gang of 11 includes Cook, Rob Eissler, Charlie Geren, Delwin Jones, Jim Keffer, Edmund Kuempel, McCall, Tommy Merritt, Jim Pitts, Solomons, and Straus.

Before that tumultuous weekend, Smithee says he will decide over the New Year's break whether to run for speaker. He wants to talk to Craddick first. And the week's events begin on Monday, December 29, when House Democrats release five pages of signatures from 64 of the 74 Democrats who'll be in the House this year. They've pledged not to vote for another Craddick term. Craddick aides question the signatures, suggesting some of the signers have also promised to vote for the incumbent. They don't name names, and nobody on the list protests that their name is being used without permission. The ten Democrats who didn't sign became targets for Craddick and for the ABCs hoping to unseat him. And the game is on.

Totalizator

We're keeping this vote sheet handy on the theory that you and we will be referring to it in the future. That's what happened last time, right? A little history: Straus presented 85 names in claiming victory (the list grew later); Craddick, after the 2002 election that put Republicans in the House majority, had 102 on his list. Though both are Republicans, Straus had 70 Democrats and 15 Republicans on his first list; Craddick had 87 Republicans and 15 Democrats on his, six years ago.

Straus' first 85 votes:

Democrats (70): Alma Allen, Roberto Alonzo, Carol Alvarado, Rafael Anchia, Valinda Bolton, Lon Burnam, Joaquin Castro, Norma Chavez, Ellen Cohen, Garnet Coleman, Yvonne Davis, Joe Deshotel, Dawnna Dukes, Jim Dunnam, Craig Eiland, Kirk England, Joe Farias, David Farabee, Jessica Farrar, Kino Flores, Stephen Frost, Pete Gallego, Helen Giddings, Veronica Gonzalez, Yvonne Gonzalez Toureilles, Roland Gutierrez, Joe Heflin, Ana Hernandez, Abel Herrero, Scott Hochberg, Terri Hodge, Mark Homer, Chuck Hopson, Donna Howard, Carol Kent, Tracy King, David Leibowitz, Eddie Lucio, Diana Maldonado, Barbara Mallory Caraway, Marisa Marquez, Armando Martinez, Trey Martinez Fischer, Ruth Jones McClendon, Jim McReynolds, Jose Menendez, Robert Miklos, Joe Moody, Elliott Naishtat, Rene Oliveira, Dora Olivo, Solomon Ortiz, Aaron Pena, Joe Pickett, Paula Pierson, Chente Quintanilla, Richard Raymond, Tara Rios Ybarra, Allan Ritter, Eddie Rodriguez, Patrick Rose, Mark Strama, Kristi Thibaut, Senfronia Thompson, Chris Turner, Allen Vaught, Marc Veasey, Mike Villarreal, Hubert Vo, Armando Walle.

Republicans (15): Dan Branch, Byron Cook, Rob Eissler, Gary Elkins, Charlie Geren, Delwin Jones, Jim Keffer, Edmund Kuempel, Brian McCall, Tommy Merritt, Doug Miller, Jim Pitts, Burt Solomons, Todd Smith, Joe Straus.

Time on Task

Look at the seniority list of serious candidates and the non-candidates who picked Straus at a Friday night meeting in Byron Cook's living room. Ranked by their tenure in the 150-member House: Tom Craddick, 1; Delwin Jones, 3; Edmund Kuempel, 4; John Smithee, 6; Brian McCall, 17; Jim Pitts, 26; Burt Solomons, 33; Jim Keffer, 44; Tommy Merritt, 47; Charlie Geren, 67; Byron Cook, 77; Rob Eissler, 78; Dan Gattis, 80; Joe Straus, 109.

Signs at the End of the Road

The Texas Eagle Forum's Cathie Adams was one of Joe Straus' fiercest critics over the frenzied last weekend of the speaker's race. How do you know the race is over? Her last email.

"Friends, Rep. John Smithee withdrew from the Speaker's race late today. Rep. Joe Straus is expected to be the next Speaker of the Texas House. I look forward to working with the new Speaker and each of YOU in the upcoming legislative session. Thank you for all your help, Cathie Adams"

A couple of days later, she sent out emails alerting her list to a story about gambling interests' role in getting Straus elected.

A Year From Now

Put U.S. Rep. Michael McCaul, R-Austin, on your list of potential candidates for Texas attorney general in 2010. It's not open at the moment, but if it opens up, he'll be among the interested parties. And, we're told, he'll file papers this quarter allowing him to raise state campaign money for that gig.

AG Greg Abbott is looking at possibilities ranging from lieutenant governor to U.S. Senate. The implication there is that Abbott would run for whichever is open if and when Kay Bailey Hutchison resigns from the Senate. If Lt. Gov. David Dewhurst runs for reelection, Abbott would go for the federal deal. If Dewhurst runs for the federal deal, Abbott would run for the state gig. The filing deadline for both races is in the first days of January 2010 — about 12 months from now.

McCaul starts with an empty federal campaign purse, but he's personally wealthy and will be getting an early start raising money for the state race.

Abbott had $8 million in his state campaign account at mid-year. None of that is transferable to a federal account, since the state doesn't limit contributions and the feds do (to $2,300 per person). He'd have an initial advantage in a state race, but would start at scratch in a federal race.

The AG's office is on next year's ballot. Hutchison's Senate seat is up in 2012 — unless she resigns early.

• Semi-related: Former U.S. Senate candidate Barbara Ann Radnofsky of Houston says she'll shut down her political committees for now. She has talked about running for AG in 2010 (she's a Democrat), and might yet do so. But she's going dormant for now.

A Year from Now, Part B

U.S. Sen. Kay Bailey Hutchison started the New Year with a series of fundraising letters dissing Gov. Rick Perry and asking for support for her exploratory committee for governor.

She's thinking about running in 2010 and Perry says he'll be seeking reelection. That sets up a noisy primary a year from March.

"Ten years of one man in the Governor’s office has left challenges unanswered, too little trust and consensus, and too much infighting," she writes in the fundraising letter. "This tone comes from the top and we can do something about it."

She hit some themes you'll probably hear if there's a race, noting that the state budget has doubled over ten years, that "our state government ignores private property rights and property owners in a quest to cover our state with massive Toll Roads," and raising questions about scandals in the Texas Youth Commission and state mental facilities. She attributes the health of the state budget to high oil prices (that's only partly right) and says those won't continue.

She includes pitches from well-known Texans from around the state (different folks are signed on for different regions) and some of them have been Perry supporters up to now. Among the notables: Actor Chuck Norris, former pitcher Nolan Ryan, Houston beer distributor John Nau III, Austin lawyer Pete Winstead, Dallas investor Louis Beecherl Jr., former Temple-Inland CEO Kenneth Jastrow II, U.S. Rep. Kay Granger of Fort Worth, former U.S. Reps. Dick Armey of Flower Mound and Henry Bonilla of San Antonio, former Dallas Cowboy Roger Staubach, former Lubbock Mayor Windy Sitton, Amarillo investor Wales Madden Jr., Joci Straus of San Antonio (mother of speaker-apparent Joe Straus), and a group from Houston that includes Drayton McLane, Edd Hendee, Ned Holmes and former U.S. Education Secretary Rod Paige.

• A semi-related bit on this one: As promised, Democrat John Sharp filed papers on New Year's Day making him a candidate for the U.S. Senate seat now held by Hutchison. That enables the former legislator, railroad commissioner, and state comptroller to start raising and spending money for that effort.

Political People and Their Moves

Former Rep. Dianne Delisi and Heather Vasek, who's been at the Texas Association for Health Care, are joining Delisi Communications, the lobby/PR/strategy firm run by Ted Delisi and Texas Highway Commissioner Deirdre Delisi.

John Howard Jr. leaves Vinson & Elkins to hang a shingle; his Clarendon Strategies will focus on environmental and energy policy.

Damon Withrow, formerly of the Public Utility Commission, is Xcel Energy's new regional government affairs guy. He's replacing Eric Woomer, who left Xcel to join Reliant. Michael Jewell left Direct Energy for Reliant. He and Woomer and Elizabeth Brock will do that firm's Texas lobbying.

Bob Cash is the new director of the Texas Fair Trade Coalition. He's been chief of staff to Rep. Kevin Bailey, who lost his reelection bid last year. Cash was previously with the Texas AFL-CIO.

Harrison Keller — the education policy wonk for House Speaker Tom Craddick — is going back to the University of Texas, where he worked before jumping to state government.

Press Corp Moves: Karen Brooks is ditching print, leaving the Dallas Morning News for Austin's KXAN-TV, where she'll be "digital executive producer," overseeing content on their website and helping with other political coverage... John Moritz, the former Fort Worth Star-Telegram writer whose articles have graced Texas Weekly for the last few months, joins Quorum Report, where he'll write about energy and utilities and such... And the Houston Chronicle moves Matt Stiles from Houston to Austin for the session. He'll cover the local delegation and work on what newspapers call "projects" — stories that require more than a few hours of digging.

Speaker Craddick appointed Don Wood of Odessa to the board of the Employee Retirement System of Texas.

Deaths:J.L. Huffines, a Dallas car dealer, political player and former Texas A&M Regent. He was 85.

Quotes of the Week

Rep. Pat Haggerty, R-El Paso, defeated in the GOP primary last year by House Speaker Tom Craddick's candidate, talking to the San Antonio Express-News about Craddick losing the speakership: "The rich irony is that he and I go out together. Isn't that sweet?"

Appropriations Chairman Warren Chisum, R-Pampa, who supported Craddick to the end: "I'm probably a lame duck budget guy."

Rep. Leo Berman, R-Tyler, telling reporters during the speaker race why he thought John Smithee could attract members who had already promised their votes to Joe Straus: "These are the same people who signed pledge cards for Speaker Craddick. If they violated their pledge card once, they'll violate it again. There's no honor among them."

Amadeo Saenz, executive director of the Texas Department of Transportation, on the fate of the Trans-Texas Corridor, quoted in The Dallas Morning News: "The concept has been diminished. We must recognize the inevitable: The TTC is not the choice of Texans."

Gov. Rick Perry, telling reporters why he went to Iraq to visit Texas troops: "I think it's important for me to see them, to tell them they're doing a great job. I'm the commander-in-chief of the Texas state forces."

Colin McEnroe, a former Connecticut capitol correspondent, quoted in Governing about the shrinking press corps in statehouses: "It's like some French Foreign Legion outpost up there. Everyone around you is dead and you've got six bullets left and 20 people running at you."

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Texas Weekly: Volume 26, Issue 1, 12 January 2009. Ross Ramsey, Editor. Copyright 2009 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited. One-year online subscription: $250. For information about your subscription, call (512) 302-5703 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.

Staffers for House Speaker Tom Craddick were told today to clear their desks before tomorrow — the first day of the legislative session.Staffers we've talked to say Terral Smith told them this morning that Speaker-apparent Joe Straus isn't keeping any of them after he's elected speaker tomorrow. Smith met this morning with Straus' chief of staff, former Rep. Clyde Alexander. After that meeting, he told staffers to clear their things out, and said some clerical employees are being asked to stay through the end of the month. House employees in the clerk's office, the sergeant-at-arms' office, and the like, were not included in the layoffs. The House convenes tomorrow at noon, swears in its members and elects a speaker. Barring a surprise, Straus is the only candidate for that job, having secured pledges from well over half the 150 members of the House. He's putting together a staff now and will have a couple of weeks to name committee chairs and members. When Craddick took over from Laney, he kept a handful of the 25 to 30 people who work in the Speaker's office. And he also had more time for a transition. Craddick's win was apparent right after the elections put the Republicans in the majority with 88 members. In the current case, the race for speaker was open until the first week of the New Year. Straus, compared to Craddick, and to Laney, too, has to organize in a hurry.

The new numbers from the comptroller aren't all that bleak, to tell the truth, but if you read the report that came with them, you'll rush out and buy an umbrella and some galoshes.

Comptroller Susan Combs says the state Legislature will start with $77.1 billion available for general revenue spending in the 2010-2011 biennium. That's down more than 10 percent from what was available to the budgeteers two years ago.

And put the first asterisk here: Combs' new "biennial revenue estimate" also comes with the biggest balance ever reached in the state's Rainy Day Fund — enough to nearly cover the difference between this year's estimate and the one Combs made two years ago. At the end of the biennium, that fund is expected to have a balance of $9.1 billion. Put it another way: If they can get two-thirds of the Lege to go along, they can use that money for general spending.

The lower numbers are based on two things, mainly: Lawmakers start with a cash balance of about $2.1 billion, as against $9 billion two years ago; secondly, Combs and her forecasters appear to have adopted negative assumptions about the economy wherever they had the choice. They could well be right, but any mistakes they've made will bring relief — more money — rather than grief. It would be hard for the state to do worse than she's predicting, financially; it could do better, adding money to the pot.

The comptroller expects actual general revenue — not counting that starting cash balance — to drop by $2.2 billion, to $75 billion (general revenue is what they call non-dedicated state funds in the $167 billion budget).

And she's expecting the Texas economy to share the national economy's troubles — if later and to a lesser extent. "Our new economic forecast indicates Texas will be affected in fiscal 2009 before regaining economic momentum in 2010."

They're predicting Texas will lose 111,000 nonfarm jobs between now and mid-summer before starting to add jobs again in the fourth quarter of the year. In fiscal 2009, they're forecasting gross state product will increase by 1.8 percent, then by 1.9 percent in 2010, and 3.8 percent in 2011.

The state's biggest revenue-producer — the sales tax — is expected to rise, but more slowly. Combs expects a drop in income from several other taxes, including the natural gas tax, the insurance tax, motor vehicle sales and rentals, and oil production and regulation taxes.

The state franchise tax, she says, will be flat over the next few years. This is an example of a place where she's taking the dimmest possible view. A one-time break cut the franchise tax revenues in its first and only year of collection by hundreds of millions of dollars. But in her projection for the second and third years of that tax, Combs didn't add those numbers back in. That might turn out to be right, but it's another place where a little light could shine and the numbers would grow. That said, it's clear the tax isn't producing what the comptroller and her predecessor predicted. When that tax was revised in 2006, the comptroller said it would produce almost $6 billion a year; in fact, it's producing only about $4.4 billion annually.

That puts some pressure on budgeteers. The state is obligated to spend about $14.2 billion every two years to fulfill a promise to offset cuts in local school property taxes. That was the deal in 2006: Cut local property taxes, replace the money lost with state funds. But the property tax fund doesn't cover that nut: The $14.2 billion cost stacks up against a fund that's projected to have $8.5 billion this biennium. Lawmakers will have to make up the difference out of general revenue.

Combs expects the Texas Lottery's numbers to slide about three percent.

The whole BRE is available online, with charts and tables galore. Read the executive summary up front — you'll see what we mean about the bad weather gear.

Rep. Joe Straus III, R-San Antonio, is officially the speaker of the Texas House.Straus was elected by acclamation after six nominating speeches on a day marked by ceremony, crowds of families and friends, and the start of another legislative session. He was sworn in by a fellow San Antonian, Texas Supreme Court Chief Justice Wallace Jefferson, and gave a short speech. He said the Biblical line invoked by Houston and by Lincoln applied here: "A house divided against itself cannot stand." And he ended on a similar note: "Let their be no walls in this House." The House will do rules within the next two weeks or so. Straus will assign committees, and they'll be off to the races early next month. The Senate, meantime, made Robert Duncan, R-Lubbock, the president pro tempore. That body's expected to organize more quickly, since it has only two new members and no management and staff overhaul in process. And the Senate revved up an old fight over its two-thirds rule. That body won't take up legislation unless two-thirds of the people in the room agree. Democrats have just enough members to block partisan bills, and some Republicans, led by Sen. Dan Patrick, R-Houston, want to get rid of the rule or lower the requirement to, say, 60 percent. That argument was deferred for now. Notes from the opening: Rep. Senfronia Thompson, D-Houston, on Straus' nomination by a group of eleven Republicans: "I wasn't surprised. I was shocked." Rep. Jim McReynolds, D-Lufkin, in his nominating speech: "In this 140-day sesion, policy should transcend politics." Rep. Veronica Gonzales, D-McAllen, in hers: "With the numbers [of Republicans and Democrats] so close, I take comfort in knowing that bills will live or die based on their merit and not on a partisan basis." Rep. Burt Solomons, R-Carrollton, will oversee changes in the House rules. Among the things in that grab-bag: How many committees the House will have and how many people will be on each of them. Gov. Rick Perry ended the day with a rhetorical flourish: "The first day of a session is a beautiful thing — it's like a blank canvass. Here's hoping we paint a masterpiece." One last note: We filed this from the House, on the public wireless system that was put in and activated in the last week. For several years up to now, the House has been one of the few wifi-free zones in the state Capitol, due to "technical problems."

Texas senators stepped into the first partisan fight of the new session, with Republicans trying to cut out an exception to rules that govern how many senators it takes to consider legislation. UPDATE: Senators voted 18-13 in favor of the exception: Voter ID legislation won't require the two-thirds vote required for other issues. And Sen. John Carona, R-Dallas, was the lone Republican voting against the change in the rule.The upper chamber has a rule barring consideration of bills that are objectionable to more than a third of the senators. And with 12 Democrats among the 31 senators, there are enough votes to block consideration of partisan bills. Republicans, led by Lt. Gov. David Dewhurst, want to pass a Voter ID bill — one that requires voters to show a photo identification before they're allowed to vote. Republicans say that's a security measure against voter fraud. Democrats say it suppresses votes disproportionately, hurting their side more than the GOP side. And the only way to bring the legislation to the floor — with the Democrats in opposition — is to change the rules. The debate echoed the arguments over redistricting that sent 11 Democratic senators packing to New Mexico several years ago, where they denied the Senate a quorum by leaving the state. That incident — like a previous one that saw House Democrats decamping to Ardmore, Oklahoma — ignited a call within the GOP for an end to the two-thirds rule. Voter ID is the issue of the day; redistricting — up for consideration every decade — will be the issue in its place in two years. The Senate spent its first two days in Austin working on that battle, with Republicans — Sen. Tommy Williams, R-The Woodlands, suggesting the two-thirds rule should have an exception for partisan issues in general and, as the battle went on, for the Voter ID bill in particular. Every preliminary vote along the way had the same result: 19 Republicans to 12 Democrats. Senators did much of the negotiating and debate — as is their custom — behind closed doors (thus the headline above). They came out at one point and actually did some debating in public. With Republicans proposing an exception for Voter ID, the Democrats proposed several amendments, forcing Republicans to vote against amendments that would have substituted the Voter ID exception with other issues, like insurance reform, higher veterans benefits, job programs, public school finance, college tuition rollbacks, and the Children's Health Insurance Program. They disappeared again for several hours, emerging with a proposal to send the Voter ID bill to a Committee of the Whole — that's the whole Senate at once — so that everyone can debate there before the bill comes to the floor. But it could come to the floor with a simple majority vote — and without the two-thirds support required for other legislation. Carona told senators he favors the Voter ID bill, but didn't want to change the Senate rules. He was the lone Republican voting against the change. Williams argued that this is a one-time thing on "an issue of bipartisan concern" that won't necessarily lead to other exceptions. But Sen. Dan Patrick, R-Houston, is hoping this is the first step in undoing the two-thirds rule. He has argued for years that it's undemocratic and that the Senate should do away with it or at least lower it to 60 percent. Either option would give the Republican majority a final say in any partisan issues before the Senate. Sen. John Whitmire, D-Houston, said the Voter ID episode will lead to more exceptions and said senators were drawing a road map for outside partisans and political consultants who want to pressure the Senate to vote on other "emotional issues." So why the first day? Because you can change the rules on the first day with a simple majority. Wait until later in the session, and you have to have a two-thirds vote to bring it up. The Democrats can't block it now, but could do so later.

While they were debating, a court in Georgia said that state's voter ID bill is legal.

Hutchison moved $7 million to her state account; Perry has $6.6 million on hand; Combs starts the cycle with $3.6 million on hand.State campaign finance reports are due today (they can be postmarked, so it'll take a few days to fill out the lists). Big news so far: • Gov. Rick Perry reached the end of 2008 with $6.6 million in hand, raising $4.7 million in the second half of the year. • U.S. Sen. Kay Bailey Hutchison's exploratory committee will have enough money to chart Antarctica if they want to: She moved $8 million ($1 million first, then $7 million more) from her federal account to her state account. That's probably a one-way street: She can't move it back — the rules are different — without some serious lawyering. Hutchison's detailed report isn't available yet. Her actual fundraising was skimpy: just over $30,000. Perry himself ducked the chance to comment on the finances, saying his attention is on the legislative session and suggesting the federal government (that'd be the senator, see) could help the state out by working on immigration and border security and such. His spokesman, Mark Miner provided the towel-snap on finance: "It’s clear her campaign is already faltering when they have to use their federal campaign dollars to bailout their dismal state efforts. It’s just like a Washington politician to use money intended for one purpose and spend it on another." Hutchison is still in exploratory mode, but she's inching toward a commitment. "Today, as we file the first campaign finance report for the committee, we are starting fundraising in earnest, and making a major step toward a campaign for Governor," she said in a press release. "In the coming weeks, I will be taking additional steps toward a race for governor. This is a critical time for our state and nation. I am going to be traveling our state, talking to Texans from all walks of life, and working hard to make certain that the wisdom and opinion of people across our state is heard." Perry says flatly that he's in the race for another term after his current one. • Comptroller Susan Combs starts the 2010 cycle with $3.6 million in the bank and has said she plans to stay where she is, if voters will go along. She raised $1 million during the last six months of 2008. • Attorney General Greg Abbott ended the year with $8.6 million in the bank — more than either Hutchison or Perry. He was coasting, though, raising $582,514, and spending $318,994. Abbott has feinted at a run for U.S. Senate should Hutchison step aside for the governor's race; his state money is incompatible with federal finance laws and he'd have to start all over again. He's also got his eye on the lieutenant governor job, should David Dewhurst run for Senate or something else. • What of Dewhurst? He's been paying down his loan balances, now at $1.3 million. Dewhurst raised $3.1 million during the second half of the year, spent all of it, and ended the period with $759,856. He's generally suspected of wanting Hutchison's spot — since the race for governor is crowded — and could self-finance all or part of a federal race, giving him a leg up on other candidates. • Deposed House Speaker Tom Craddick, R-Midland, ended the year with $2.1 million in his political account after bringing in $314,987 and spending $511,390 during the last two months of the year (his report, since he was on the ballot in 2008, covers everything since his last report filed in October). • Craddick's successor, House Speaker Joe Straus, ended the year with $647,966, raising $50,650 since his October report and spending $26,562. Interesting tidbit: Straus' mom recently showed up on a fundraising notice for Hutchison (she's pulled out of that now that her son is speaker); Straus' campaign report shows a mid-November contribution of $1,000 to Texans for Rick Perry.

Not Guilty: Former Rep. Borris Miles, D-Houston, who'd been accused of brandishing a gun at a couple of parties. Miles lost his reelection bid after publicity about the incidents.

Sen. Kirk Watson, D-Austin, left the KLGates law firm for Brown McCarroll.

Angela Hale, a former TV reporter who's been employed as an advisor to Attorney General Greg Abbott, is the new communications director for House Speaker Joe Straus.

Joanne Molina is the new deputy executive commissioner for social services at the state's Health and Human Services Commission. She'd been an associate commission in the agency's office of family services.

Jim Lee resigned from the Teacher Retirement System of Texas board. Gov. Rick Perry named Linus Wright of Dallas to chair the board in Lee's place. Wright had been vice chairman.

The Texas Department of Public Safety has a new general counsel: Stuart Platt, who's currently the U.S. Magistrate for the

Western District of Texas in the Midland/Odessa Division.

Andrew Smith joins the University Health System in San Antonio, heading government relations and public policy; he's been doing similar work for the City of San Antonio.

Trey Blocker is going solo, hanging out a lobby shingle with his own name on it.

Anthony Gutierrez is the new deputy executive director at the Texas Democratic Party. He's been a regional field director there and worked on former U.S. Rep. Nick Lampson's unsuccessful reelection campaign.

Department of Corrections: We botched Amadeo Saenz' name in last week's edition. He's the head of the Texas Department of Transportation. Sorry, sorry, sorry.

Deaths: Dallas developer and political financier Trammell Crow, who started building commercial buildings in the 1950s and kept going through the 1990s. He was 94 and suffered from Alzheimer's Disease.