Another Fine School Finance Mess

When they were cobbling together the $3.8 billion education bill in the last days and hours of the legislative session, lawmakers bollixed up state funding for new and old school district debt, jeopardizing some future construction and possibly forcing some districts to raise property taxes to cover the costs of construction that has already been completed or that is underway.

The bill, which includes a $3,000 annual pay raise for public school teachers and an average $60 per year cut in property taxes for Texas homeowners, was also supposed to make it easier for school districts to pay for facilities. But in the confusion that has followed, some districts have put building plans on hold. Others, concerned that the bill undermines their current debt payoff plans, are hustling to find a way to pay for construction without raising taxes to make up for their lost state aid.

The problem has several layers. The school finance law used to say that so-called Tier 2 money could be used for anything legal, "including capital outlay and debt service." In their efforts to move facilities funding to Tier 3 of the school finance formulas, lawmakers changed that to say Tier 2 could be used for anything "except capital outlay and debt service."

What's that mean? According to the Equity Center, which represents low-wealth districts, it means that districts that funded facilities using lease-purchase agreements won't get new funds with which to pay off their debt, and their old funding has been cut off. About five dozen districts have outstanding lease-purchase agreements, and the total amount of money involved is about $400 million. State officials say that there may be a fix, possibly in the form of a favorable opinion from Attorney General John Cornyn. In the meantime, bond-rating agencies such as Standard & Poors have put some of those districts on credit watch, a way of alerting the bond markets to the problem.

Districts that want to finance new projects with lease-purchase agreements are more clearly in the ditch. The new law appears to prevent districts from using the state money for new lease-purchase deals (since they're not, by that reading, the kind of debt described in the law). Cornyn's office is sitting on new applications while it sorts this out. Three districts have applied and another dozen or more are thought to have lease-purchase deals in various stages of planning.

A Bad Year for School Districts to Borrow Money?

Another problem involves a mismatch of dates. Districts are allowed to include payments for old bonds in the new formulas, but not all old bonds are created equal.

School districts set their tax rates at the end of the summer (the beginning of the school year). Districts that issued debt during the current (1998-99) school year haven't yet set the tax rates that would raise money to service that debt. But the new law bases their state funding on this year's tax rates, so while the debt itself is in place, the tax rate needed to cover those payments has not been set. That could leave those districts without the state money they expected to help pay their obligations.

Put simply, that means many school districts that issued debt during the last school year will recover only part of their payments at best. At worst, they'll have to eat the payments. One remedy would be to use a state fund for school buildings, but that's already oversubscribed by districts.

A related bug in the soup: School districts regularly time their borrowing so that new issues go out as old bond issues are paid off. It's a way to level facilities spending over time. But if the timing was just right -- or just wrong -- districts that had been planning a new issue for next year probably won't be able to recover all of their future bond payments out of state proceeds.

An Unintended Result Built Like a Steel Trap

When you tally up the damage, there are 13 school districts on the Standard & Poors credit watch list as a result of Senate Bill 4. A total of 57 districts have outstanding lease-purchase deals that could be affected. State officials think they might be able to interpret the new law in a way that leaves the deals unscathed; others say the Legislature was all too clear about how the money can be used, and say it would take a change in the statute to escape this trap.

Both agree that Tier 3 money can't be used for lease-purchase deals; this will hinge on whether the state decides to let districts use Tier 2 money for existing deals.

Another 93 districts have facilities bonds to repay, but apparently will be prevented from using the new Tier 3 money to pay those old debts, since the debt service isn't already embedded in their tax rates. They're scrambling for money and for favorable interpretations that would bring in the state money they reasonably expected to get when they issued the debt in the first place. Otherwise, many of them will have no choice but to raise taxes.

Three school districts -- Fort Davis, Broaddus and Boles -- have actually got their paperwork to the right desk at the AG's office, only to find that it's a bad time to be asking about new lease-purchase financing. Several people we talked with said those deals are in real trouble. An estimated one- to two-dozen districts in varying stages of readiness on lease-purchase deals will have to refigure their plans.

Finally, there's something called the 50-cent test, a rule of thumb that has been used in recent years to determine whether a district could borrow new money. If bonds could be paid off with a combination of certain state aid and a local tax rate for debt of 50 cents or less, the attorney general would usually approve a new issue. But under the new law, there is no Tier 2 money to add to the proceeds of that 50-cent tax rate, and districts that would previously have met that test won't measure up. That's another one for the new attorney general to sort out: Get rid of the 50-cent test, revise it, or leave it be. This is another one that the policy types think they can work out.

All in all, most of the policy and legal types we talked with said the finance problems in the new law potentially affect 200 to 300 school districts. And all said they'd like to have definitive answers to all of these questions before school boards set tax rates at the end of the summer.

That's $3,000, and Not a Penny Less

That same bill has a couple of other glitches, both of which are being worked out by the Texas Education Agency. The first, believe it or not, is whether teachers should get a $3,000 annual pay raise. We're not aware of a single state official in Texas who said anything but that teachers should get that money and that each teacher should get that amount.

Still, this is school finance, a subject that strains to be misunderstood even in the face of apparent clarity. It turns out that some school districts have been wondering how this is supposed to work.

Not every district in Texas has its teachers on the same pay schedule, and the school finance bill works from just one such schedule. The Legislature is stretching the limits of its authority by trying to dictate that every district give every teacher the same raise. Many districts pay teachers more than the state minimum, so raising the minimum doesn't always work. Many teachers were due raises anyway, and some administrators wondered whether the $3,000 is in addition to those increases, or if the total increase should be $3,000. At least one teacher organization wrote to superintendents, telling them to pass along the full raise or be sued; now TEA Commissioner Mike Moses is preparing a letter, in which he'll tell the districts it's $3,000 per teacher in addition to whatever they were going to get.

And then there is the issue of teachers in prison. The Texas prison system has its own school district -- the Windham ISD -- and its teachers were left out of the bill. They'll get their raise, though: Moses can use $5.8 million in emergency funds to fix the Legislature's goof.

Bush Watch: Explore No More

Go ahead and watch the play, but don't forget to watch the audience. Voters in the north were clearly wowed when Gov. George W. Bush showed up in boots and a big silver belt buckle, and it's obvious that sitting in Austin for six months did nothing to tarnish his presidential bid.

But voters aren't really the focus yet. At this stage of the show, it's more instructive to watch the press coverage and the financial end of the game. The coverage is where most people will get their first looks at the candidate. If they were watching his first week out of the chute, it was almost like watching a long commercial. He's staring out of the covers of Time and Newsweek, two of the most visible magazines (checkout counters, eye-level on magazine racks, etc.).

His surrogates were all over TV. Almost none of the coverage could be tagged as antagonistic. Most could almost be called scripted. The pictures were worthy of commercials. Everything worked, in other words, and it worked on a couple of levels.

Look at coverage of other candidates. At this point in the game, candidates are typically in a horse race, with the red horse ahead on Tuesday, the blue horse on Wednesday, and so on.

But opponents of both the Republican and Democrat stripe find themselves framed in terms of Bush no matter what they do. An example: Many newspapers treat candidacy announcements as a sort of demilitarized zone, a free shot for candidates that allows them to say what's on their minds without also having to answer or listen to sniping from opponents. Bush not only found his way into many of the stories about Vice President Al Gore, Jr.'s official announcement, he did a fair job of sneaking into many of the headlines, and even stealing some entirely. It seems like a small thing, but if you're paying attention to the audience, it's a thing worth noting.

The Primary That Precedes the Votes

Who's taking notes? The finance folks. They're essentially risk averse, and it's always nice to be able to make the right decision at the outset so there's no money to be spent making amends. The second of the governor's finance reports is due at the end of the month; speculation about the amount in the bank hovers around $20 million, with some bettors going higher.

Money is important twice in this race. The ads and political infrastructure that come later are only the most visible piece. In the early part of the race, a pile of dough in the hands of one candidate is a pile of dough that no other candidate has, and the finance primary, if you can call it that, is going Bush's way so far. Bush has been lucky that way. This race marks the first time he's had a primary opponent. His 1978 congressional race was all in the general election against Kent Hance. And in 1994, Bush and Rob Mosbacher held their primary in Mosbacher's office. The two entered the room as friends and opponents, and when they walked out, it was to announce that Mosbacher had decided not to make a run for governor against Ann Richards.

Some chinks that might or might not develop into running story lines. Several reports have tried to draw a parallel between Bush's early popularity and the early momentum that U.S. Sen. Edward Kennedy, D-Massachusetts, built up in 1980. Another gripe that surfaces regularly in the press is about Bush's aversion to getting into the details of any particular issue.

Bush drove Richards (and the Texas press corps) crazy in 1994 with his "just four things" mantra. He kept everything else to a minimum and pulled all the talk back to tort reform, welfare reform, juvenile justice and education. Whether he can do that on a national level is still to be determined.

But the people at the leading edge of the national media -- political cartoonists -- are fiddling with this. Strange as it sounds, those are the folks who often are first to a theme, and the twin themes they're exploring now are Bush's distaste for detail, and his relative inexperience.

The Austin American-Statesman's Ben Sargent, who regularly gets his drawings into national papers, had one version the other day with a panel showing a boyish Bush in a diner deciding what to eat. "I'll have a plate of Food!" he says. A staffer promises the waitress that they'll have specifics later.

Now Available Online: Dallas Voting Records

One of the interesting things about the Internet is the splash it can make when public records that were always available become easily accessible. Reporters, researchers, private eyes and others have known that this or that information could be had by visiting this or that agency, but the public has often remained in he dark about what's available and what's not.

The latest case in point: You can now peek at Dallas County voting records over the Internet, thanks to something called the Internet Open Records Project in Dallas.

On their site (http://www.openrecords.org), you can type in a voter's name (or some part of it) and find out whether that person voted over the last several years. You cannot find out how someone marked their ballot, but you can find out which primary someone voted in. Voting information, including names and addresses and voter certificate numbers, has been public for years and years, but it hasn't been available to people sitting at their computers, until now.

The group that maintains the site apparently started with the Dallas ISD's finances, posting all of those numbers for everyone to see. They've added the vote records for Dallas County, and say at the site that they'll add Dallas school test scores, Waco and Highland Park ISD finances and scores, and Texas Judicial Contributions, to their archives.

At various points along the way, the project has involved the Dallas Examiner, the San Antonio-based Texas Justice Foundation (one of several organizations in the loose-knit Dr. James Leininger web), which provided backing for some of the project's legal battles with the DISD, the NAACP, LULAC, and a large Dallas-based computer club.

A Biennial Bolt of Lightning

Texas Monthly's list of the ten best and worst legislators -- the biennial manna from heaven for political researchers and potential legislative opponents -- is out. Voters now get their chance to see what made legislators so nervous and goofy every time the writers and photographers showed up.

The best, according to the magazine: Reps. Pete Gallego, D-Alpine; Patricia Gray, D-Galveston; Scott Hochberg, D-Houston; Rob Junell, D-San Angelo; Ken Marchant, R-Coppell; Paul Sadler, D-Henderson; Steve Wolens, D-Dallas; and Sens. Bill Ratliff, R-Mt. Pleasant; David Sibley, R-Waco; and Royce West, D-Dallas. That's seven Democrats and three Republicans.

The worst, by their reckoning: Reps. Kevin Bailey, D-Houston; Norma Chavez, D-El Paso; Charlie Howard, R-Sugar Land; Rene Oliveira, D-Brownsville; Sylvester Turner, D-Houston; Arlene Wohlgemuth, R-Burleson; and Sens. Troy Fraser, R-Horseshoe Bay; Jon Lindsay, R-Houston; Drew Nixon, R-Carthage; and Florence Shapiro, R-Plano. That's four Democrats and six Republicans.

The magazine gave Rookie of the Year honors to Rep. Phil King, R-Weatherford, an honorable mention to Sen. Robert Duncan, R-Lubbock, and noted almost a dozen others who came closest to making it on the list of the top ten.

Oh. Well. Ahem. Never Mind, Then.

Here's a misfire from the self-styled "Campaign for a Colorblind America," a Houston-based group that opposes the use of race as a basis for hiring and college admissions, among other things. They're calling on Gov. Bush to "use his line-item veto to strike several racially divisive provisions" before he signs the electric utility deregulation bill passed by the Legislature.

Move to the back row: Under Texas law (other states, too), the line-item veto only applies to the state's budget; the governor can't pick and choose what parts of a normal bill he likes and doesn't like.

The activists are worked up over provisions of the utility bill that require companies to produce five-year plans of their efforts to diversify in employment and contracting and that require state officials to consider race, gender and geography when appointing members of an oversight committee. Bush can either approve or disapprove of the entire bill, but can't do a cafeteria-style veto. At our deadline, he had scheduled a public signing ceremony for the legislation.

Who You Gonna Call?

Sometime soon, the state's three appointed Public Utility Commissioners will be busy writing rules and starting to hear cases involving the telecommunications and electric utility legislation that passed this session. But they won't have to do a lot of catching up before the first administrative reviews of that law, since they were on the scene when lawmakers wrote the new laws and even provided some of the language they'll be interpreting later in their roles as regulators.

Their participation raised some questions: Was it legal for more than one of them to be there at a time? And doesn't it blur the lines between the two branches of government to have regulators in the room telling law-writers how their words might be interpreted when they get to the agency?

But the people who brought the commissioners to the table have a decent line of defense: The commissioners were the only people who know their way around the regulations and who weren't working for one of the companies trying to get a competitive advantage in the negotiations. Sen. David Sibley, R-Waco, says he had to have someone around who could give him straight answer to a question without worrying about the effect on this or that lobby client. That was echoed by Rep. Toby Goodman, R-Arlington, who sponsored the phone bill in the House.

Like their counterparts at other regulatory agencies, public utility commissioners are strictly limited in what they can say to each other, or in each other's presence, when the subject is utilities. That stands to reason: Part of their job is to act as judges.

They're also part of a public panel, and since it only takes two to form a quorum of that panel, they have to watch out for open records violations. Lots of people who serve on three member panels in Austin won't even have lunch with their fellows, for the sake of appearances.

PUC Chairman Pat Wood III, an attorney himself, has run it by other lawyers, and says their consensus was that it's legal to work on legislation, even if it involves the agency, since it's not law at the time it's being worked on, and since the commissioners aren't the people making the decisions.

While we're on the subject, a couple of the state's big utilities are making moves that point to why lawmakers were looking at all this. El Paso Energy, a gas pipeline company, says it will spending $150 million installing a fiber optic data line between Houston and Los Angeles. Why? They already owned the right of way, and it should make some money.

Meanwhile, Dallas-based TXU, which was Texas Utilities until just a few months ago, is experimenting with bundled services. In a relatively small real estate development (about 330 acres) just north of Austin, the company will offer residents an all-in-one package of utilities that includes electricity, gas, telephone, Internet service, and cable TV.

Politics and Real Estate

Add Ron Kapche to the pack running for the Republican nomination in CD 7, the race to replace U.S. Rep. Bill Archer, R-Houston, who is retiring after this term. Kapche, a successful businessman who also served on Texas Employment Commission (now the Texas Workforce Commission), would be making his first run for office. His entry would make this a six-pack. Already in the race, in no particular order: Mark Brewer, an attorney, state Rep. John Culberson, Rev. Wallace Henley, GOP activist Cathy McConn, and Peter Wareing, a businessman. All are Republicans; Archer hasn't anointed a successor for his seat.

Rep. John Shields, R-San Antonio, has been ducking our calls, but friends say he's seriously considering a challenge to Sen. Jeff Wentworth, also R-San Antonio. Some Republicans consider Wentworth too liberal, in part because of his abortion rights stand. That's a huge district that runs all the way north to Williamson County and all the way west to Tom Green County.

The Texas Trial Lawyers Association emptied out their building adjacent to the Capitol and set up temporary camp elsewhere. But it's not because tort reform broke their backs: They'll return before the next legislative session to open a new six-story building on the site. The lawyers will take two floors and rent the rest to other associations and businesses.

Political People and Their Moves

After 12 years with the Austin political consulting firm of Emory Young (five of them as a partner), Jeff Crosby is going out on his own to start a direct mail firm... John Crowe leaves public relations at IBM for Public Strategies, the Austin-based public affairs firm. He'll concentrate on technology clients... Beaumont-based Entergy names Jack Blakley director of regulatory affairs. He's been with that utility company for 20 years, and replaces Hugh McDonald, who moved up the company's food chain to a non-lobbyist role as senior vice president of retail services... Mickey Herskowitz, the Houston Chronicle sports columnist and seasoned ghostwriter of autobiographies, has been tapped to write the official version of George W. Bush's life story. Herskowitz helped Mickey Mantle and John Connally write their autobiographies, among others. He's late to the race, but he'll be the only one to get an interview. Dallas Morning News writer Bill Minutaglio has been working on a Bush book for months... We mentioned the big Kahuna earlier, but there are other post-season legislator awards: Texas Lawyer names Sen. Robert Duncan, R-Lubbock, and Rep. Pete Gallego, D-Alpine, its "Rising Stars" for the last session... Gov. Bush appointed real estate investor and developer Raul Fernandez of San Antonio to the Texas Higher Education Coordinating Board... Houston lawyer Keith Ellison sailed through committee hearings in the U.S. Senate and could be on his way to a federal judgeship. If confirmed by the Senate, he would replace U.S. District Judge Norman Black, who died two years ago... Lois Moore, who until recently headed the Harris County Hospital District, is now the interim dean (for six months) at the College of Nursing at Prairie View A&M University, but this is not a quiet transition. She's replacing Dollie Brathwaite, who told colleagues she was ousted only a month after she got a $12,000 merit raise... A couple of head-crackings from the Texas Commission on Judicial Conduct: Former Hopkins County Judge Joe Minter got a "Public Admonition" for endorsing his successor, Cletis Millsap, during the 1998 elections. Judges aren't supposed to do that. In Harris County, Woody Densen, a visiting state district judge, was admonished for overeager fundraising: Running a year ago for a County Criminal Court at Law position, he distributed invitations for a funder from the bench and from the court coordinator's office.

Quotes of the Week

Gov. George W. Bush, in Des Moines, Iowa, dropping the other foot: "This exploratory stuff is over. I'm running. I am some kind of fired up."

Former Vice President Dan Quayle on Bush's prodigious fund-raising in the presidential race: "It's definitely the big sucking machine down there."

Window-washer Marvin Ellis of Midland, talking about Bush's first press conference as a bona fide presidential candidate: "It was like the reporters were a firing squad. They were trying to trip him up and get him to say something that they could jump on, but he kept his cool... It was great."

Louisiana Sen. Jay Dardenne, R-Baton Rouge, reflecting on a proposal to hold Louisiana's caucus on the Internet instead of traditional voting booths and lines: "My take on it is www.bad.idea.com. Maybe I'm just a stick in the mud, but I like the old-fashioned way. I realize we're entering a new century, but I'm not sure we're ready for this yet."

The majority leader of the Colorado House, Doug Dean, on the balance between state and local law: "We are real good as legislators at picking or choosing our mandates. Sometimes we'll trample all over local control if it suits our objectives."

Sen. Robert Duncan, R-Lubbock, on whether he'd like to see the Border law institute in El Paso grow into something larger: "We have enough law schools already."

U.S. Rep. Tom DeLay, R-Sugar Land, in a debate on gun control, on what is wrong with America's young people: "We have sterilized and contracepted our families down to sizes so small that the children we do have are so spoiled with material things that they come to equate the receiving of the material with love."

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Texas Weekly: Volume 15, Issue 49, 21 June 1999. Copyright 1999 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited.