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The Contrarian

The Budget Deficit from Hell

Texas has 4th largest shortfall in the nation

For months the estimates of Texas’ budget deficit kept rising—$11 billion, $18 billion, $20 billion, $24 billion. Each seemed more unfathomable than the one before.

The high-end estimates were in the $22 billion to $24 billion range. Surely, it couldn’t be worse than that.

Well, yesterday, it officially got worse.

The Comptroller’s office released its official revenue estimate, and the news must have made jaws hit the floor (at least mine did): $27 billion.

And with that, Texas became one of those states—the kind of place that makes national news for its budget woes, the place that closes state parks, that doesn’t just cut public programs, but wipes them out entirely, that combines school districts and lays off thousands of public employees.

My friends, we’ve entered California territory.  

In fact, Texas now has one of the worst budget outlooks in the country—worse than California’s, in fact.

Texas has the fourth-largest budget deficit in the country for fiscal year 2012, according to the Center on Budget and Policy Priorities.

That $27 billion deficit accounts for about 25 percent of the budget. The only states with shortfalls that consume a higher percentage of their budgets are Illinois (50 percent—imagine that?), New Jersey (37 percent) and Nevada (37 percent). Then Texas.

Oh, and  California? Its deficit is 22 percent. So congratulations, fellow Texans. We’re now officially worse off financially than the state where good budgeting goes to die.

In 2003, the Legislature faced a $10 billion shortfall that seems so quaint now. Lawmakers took a slash and burn approach, instituting painful cuts that deprived hundreds of thousands of kids of health insurance, laid off several thousand state workers and shrunk numerous programs. It took years to recover. Some programs never have rebounded. And some Republican lawmakers later paid a political price for those cuts.

For those of us who covered the 2003 session, the notion that just eight years later, Texas faces a shortfall that’s nearly three times larger is a truly staggering thought.

I certainly don’t envy the people who have to write this budget. Even if they drain all $9 billion from the Rainy Day Fund, they’ll still have billions and billions to make up. Health care, K-12 education and higher education comprise about 80 percent of our spending. That means health care, public schools and colleges are about to get slashed.

I don’t think anyone knows how devastating those cuts will be or how fierce the public backlash could become. But neither will be pleasant.

On Friday, Willingham Inquiry Finally Goes to the Experts

After two years of probing, the Forensic Science Commission will hear from four arson experts.

The Texas Forensic Science Commission has been studying the validity of the arson evidence in the Cameron Todd Willingham case since 2008.

On Friday—more than two years into its investigation—the commission will finally hear from actual fire investigators.

The commission will devote its entire meeting tomorrow at an office building in downtown Austin to the Willingham case. It will hear invited testimony from four arson experts: Craig Beyler, John DeHaan, Thomas Wood and Ed Salazar.

Willingham was executed in 2004 for allegedly starting the 1991 fire that killed his three daughters. Every piece of physical evidence in the case has since been debunked.

Beyler is the nationally renowned fire scientist who produced a scathing report on the quality of the evidence in the Willingham case for the commission last year.

Beyler was originally scheduled to present his findings in late September 2009. But Gov. Rick Perry axed three members of the commission, including chair Sam Bassett. The brooding John Bradley took over as chairman and promptly canceled Beyler’s planned appearance. Fifteen months later, the commission will finally hear from the Baltimore-based expert.

Also scheduled to speak is John DeHaan—another giant in the field of fire science. DeHaan has written the book on fire investigation, literally. His Kirk’s Fire Investigation is the field’s most widely cited text. DeHaan, who’s based in California, typically testifies for the prosecution and has worked closely with the Bureau of Alcohol, Tobacco and Firearms over the years.

His testimony in several recent cases has landed DeHaan in some trouble. He offered the key evidence that convicted Curtis Severns—whose case the Observer profiled last year. (DeHaan testified that he believed Severns intentionally set the 2004 fire in his Plano gun shop, but the Observer investigation uncovered compelling evidence that the fire was accidental and that Severns is innocent. He remains in federal prison.) DeHaan also provided the key evidence that nearly sent a Louisiana woman named Amanda Hypes to death row for starting the fire that killed her children. Hypes was innocent, but DeHaan’s testimony helped get her indicted. She spent more than four years in jail awaiting trial. When the case was eventually thrown out due to procedural issues, DeHaan reconsidered his analysis and told prosecutors he was no longer sure of Hypes’ guilt. She was later released.  

But unlike those cases, DeHaan has said from the beginning that the evidence against Willingham was flawed. He was one of four experts who examined the case at the request of the Chicago Tribune back in 2004 and found the evidence of arson lacking.

The commission will also hear from Thomas Wood, an investigator with the Houston Fire Department. And from Ed Salazar, the assistant State Fire Marshal.

It was an investigator with the State Fire Marshal’s office, Manuel Vasquez, who led the original fire investigation at the Willingham house and who compiled the flawed arson evidence. Vasquez has since passed away. Meanwhile, the State Fire Marshal’s office has stood behind his work in the case, even though nine national experts have called the evidence outdated, sloppy and false.

This will be the commission’s first meeting on the Willingham case since its confrontational hearing in September, when the scientists on the commission rebelled against Bradley’s attempts to wind down the investigation. Instead the scientists voted to expand the inquiry and begin hearing invited testimony.

It will also be the first action on the Willingham case since Gov. Rick Perry was reelected. With the governor having secured another four-year term, the Willingham inquiry may be drained of its political implications and focus instead on the wider problem with arson evidence. There are still 750 people in Texas prisons on arson convictions. Quite a few are likely innocent.

The Statesman and Grits have more on the hearing.

I’ll be at tomorrow’s meeting and will post updates in this space and on Twitter.

It’s New Year’s Eve, which means it’s time for customary best-of-2010 lists. In my case, I’ve compiled the most surprising, ridiculous, hilarious and mendacious utterances in Texas politics—the top contrarian stories of 2010.

No. 5: Gov. Rick Perry says the Anthony Graves case shows the system is working.

Anthony Graves, you’ll recall, spent 18 years incarcerated, 12 on death row, for a crime he didn’t commit. Graves ended up death row for murder despite almost no evidence connecting him to the crime (except for made-up witness testimony) and despite multiple alibi witnesses. His wrongful conviction was stunning example of everything that’s wrong with the Texas criminal justice system, from a flawed police investigation to a overzealous, unethical prosecutor to the multiple appeals court judges who unthinkingly rubber-stamped the outcome in the case. (For more details, read Pam Colloff’s excellent recent coverage of the case in Texas Monthly.)

Perry was asked about the case after Graves was released in October.  He said he thought the case showed that “our system is working.”

Most people would look at the Graves case and conclude it was a heart-breaking injustice, and reveals the ugly flaws in the system. But Gov. Perry apparently believes the case shows the system is working. I’m not going to agree with him, but it’s an awfully contrarian position.

No. 4: Marc Katz plays it coy.

In January, Austin restauranteur Marc Katz launched lost-cause campaign for lieutenant governor. Katz’s campaign announcement was one of the more unusual political events I’ve attended in Texas. Katz held it at a gay bar in downtown Austin, replete with buff, shirtless men handing out campaign material.

In an interview after Katz’s speech, I asked him if he’s gay, and he provided one of my favorite quotes of the year. “My sexual preference is nobody’s business. Let’s talk about the issues, not about whether Dewhurst wears makeup.” Then he laughed and added, “If you print that, I’ll love you forever.”

No. 3: The massive voter fraud in Houston that never was.

On Aug, 24, Harris County Tax Assessor Leo Vasquez—a lame duck official who was overseeing the Houston voter roles—held one of the more bizarre press conferences you’ll ever see. Several dozen Tea Party supporters gathered to hear Vasquez  accuse a nonprofit group named Houston Votes of fraud. The group had been registering new voters and turned in duplicate forms—apparently the result of some workers looking to get paid by registering the same people multiple times. The group had clearly made mistakes. But Vasquez took it a step further and accused Houston Votes of a voter fraud conspiracy.

He announced that the Harris County voter rolls were under an “organized attack” and raised the specter of ACORN-like fraud

Vasquez never produced much evidence of an organized fraud. But the accusations did inhibit Houston Votes’ registering of voters, which was perhaps the goal all along.

No. 2: David Bradley and the quote of the year.

Just when I thought I’d heard it all from the irrepressible State Board of Education, David Bradley authored an unforgettable quote.

On Feb. 1, the Texas Tribune ran a story about the SBOE overseeing the multi-billion-dollar permanent school fund despite a lack of any experience with high finance.

Bradley defended his board’s lack of experience:

“If you sit on the mental health commission, do you have to be retarded? If you sit on the [Texas Alcoholic Beverage Commission], do you have to be a drunk?”

No. 1: Gov. Perry says the forensic evidence in the Cameron Todd Willingham-arson case was sound.

Perry takes the top spot. The governor was asked about the Willingham case during a pre-election interview with the Texas Tribune, (Willingham was executed in 2004 for starting the 1991 house fire that killed his three children.)

Perry said, “I’m very comfortable that the science was good.”

It’s hard to know what to do with a comment like that, which so obviously contravenes the available facts. Perry has long contended that Willingham was guilty. Nothing wrong with that argument. Many people believe he was innocent, but we may never know for sure whether he was guilty. But what we do know for certain, 100 percent, utterly without a doubt, is that the forensic evidence in the case was flawed. That is simple fact. So says every national fire expert who’s looked at the case —and nine of them have examined it so far.

In fact, the very same week Perry made this comment, two of those experts testified at a court of inquiry in Austin and eviscerated the supposed evidence of arson against Willingham. Perry apparently wasn’t convinced, all evidence to the contrary. But he does get serious points in my book for contrarianism.

So apparently there’s some sort of budget shortfall in Texas. You may have heard a news report or seven about it.

The new and improved Republican majority in the Legislature (now 101 House members and counting) will enter the 2011 session in a budget-cutting mood. GOP leaders have made clear they intend to cut every program in sight rather than raise taxes.

With Texas facing a shortfall that may reach $24 billion, according to some estimates, it’s likely that we’re about to see major reductions in spending—in a state that already spends less per resident than any state in the nation.

There’s one major potential problem with that strategy—you know, a problem besides the ones created by laying off teachers and depriving vulnerable Texans of state services. The problem I speak of is lawsuits.

Texas is under legal obligation not to reduce spending in two major areas. One is Texas’ institutions for the mentally disabled (formerly state schools, now called state-supported living centers). After a major abuse scandal, the state reached a deal in 2009 with the  U.S. Justice Department. The feds agreed not to sue us, if the Legislature boosted funding for the facilities and improved conditions. We’re still being held to that agreement. The Legislature can’t reduce funding for state schools without risking a court battle with the Justice Department.

The state is also under federal court order to improve its children’s Medicaid program. This is the so-called Frew lawsuit settlement reached in 2007. It’s unlikely the Lege could make reductions in children’s Medicaid without being dragged back into federal court.

Then there are the many other programs that, while not subject to a lawsuit right now, very well could be if deep cuts were implemented. Those include Child Protective Services, the Texas Youth Commission, Texas Department of Criminal Justice, and the entire public school system.

The GOP may be eager to cut spending. But it comes with a lot of legal risk.

Medicaid Withdrawal Idea Gets Spiked

Report downplays Medicaid opt out, favors 'market' reforms

It’s official: Withdrawing from Medicaid would be a disaster for Texas. That’s the take-home message from a much-anticipated state report released today.

A few conservative Republicans—mostly Gov. Rick Perry and state Rep. Warren Chisum—have broached the idea of Texas opting out of Medicaid to help solve the state’s budget gap. Their comments had given political weight to a previously little-known joint study by the Health and Human Services Commission and the Department of Insurance examining the consequences of Texas losing Medicaid funding.

The report’s conclusions leave little doubt that Medicaid withdrawal would harm the state economically; deprive poor, elderly and disabled people of access to health care; likely raise property taxes; rob the state of tax revenue; and lead to increases in insurance premiums.

None of those conclusions are surprising. We’ve previously written about the potentially devastating consequences of Medicaid withdrawal. It never seemed a viable option for solving the state’s budget problems.

What I do find surprising is how stridently the report endorses certain Medicaid reforms. When it discusses Medicaid reform, the report reads like a product from a conservative think-tank.

It discusses the need for a “market-oriented” reform that would convert Medicaid funding to block grants and provide states wide latitude to spend federal money as it sees fit. That could include funneling Medicaid money into private savings accounts that individuals could use to purchase coverage from private insurers on the open market. I don’t know if that kind of market-based system would spend Medicaid money more efficiently, as the report claims. What I do know is that semi-privatized approach would funnel billions of dollars in Medicaid money to the insurance industry. (More on that proposal below.)

The report’s suggestions also happen to jibe with the Medicaid reforms that Gov. Perry has been promoting—that is when he hasn’t been talking about Medicaid withdrawal.

Here’s the statement Perry’s office released this afternoon about the Medicaid report:

“The current Medicaid system is financially unsustainable for states and the federal government, as costs increase about nine percent per year in Texas alone. Without greater flexibility and the elimination of federal strings, Medicaid will strangle state budgets and taxpayers as Obamacare and other programs expand Medicaid rolls.

“Texas, the states and the federal government would be much better served by increasing flexibility and innovation in Medicaid, even block granting funds to the states, so we can tailor Medicaid dollars to best serve the needs of Texas patients, families and taxpayers. I have discussed these issues with other governors and policy experts, and will be working on ways to improve the utilization of Medicaid dollars in Texas.”

What you’ll notice about Perry’s statement is that it doesn’t mention withdrawing from Medicaid at all. What it does endorse is “greater flexibility and elimination of federal strings” and “block granting” Medicaid funds to the states.

 The more you read the report and Perry’s statement, the more it seems the idea of Medicaid withdrawal was perhaps never a serious proposal. Perry may have floated the idea as a way to further these preferred “market-oriented” reforms of Medicaid.

As for Medicaid withdrawal, the numbers aren’t pretty. The report’s headline conclusion is that Medicaid withdrawal could result in 2.6 million Texans becoming uninsured.

Texas would surrender $15 billion in federal matching funds. “At the same time, Texas residents and businesses would continue to pay federal axes in support of other states’ Medicaid spending,” the report states.

Meanwhile, the spike in Texas’ uninsured population would also swamp the state’s hospitals in billions worth of uncompensated care. That would hike local property taxes.

We’d collectively pay higher taxes and higher insurance premiums and receive fewer benefits in return, while seeing kids, new mothers and the elderly kicked off services. Doesn’t sound like much fun.

But the report also highlights the rising costs of Medicaid—with booming caseloads leading to a 170-percent increase in Texas’ spending on Medicaid the past 11 years.

 So something has to be done: “Without significant reform at the federal level, states are left facing a no-win dilemma. Opting out of Medicaid means giving up federal tax dollars paid by the state’s residents to provide health care for our most vulnerable residents. Staying in the program forces states to pay for a federally-mandated expansion of Medicaid with little control over the program’s ever-rising costs, exacerbating an already unsound financial situation.”

 What’s surprising is how stridently the report discusses possible solutions to this “no-win” scenario.

The report concludes that the federal government should allow the state to “incorporate market oriented principles and greater accountability into the Texas Medicaid program.

“Under one waiver proposal, the state would establish consumer-directed medical accounts with sufficient funding to allow a client to purchase an individual or family high-deductible private insurance policy and fund a related health savings account.

“The proposal would empower Medicaid recipients to use health saving accounts for out of pocket health care expenses, job training, child care, or other qualifying purchases.”

This would represent a fundamental shift in how Medicaid functions. In the current model, the government reimburses doctors and other providers for the health care services they offer Medicaid patients.

Under the Perry plan, the government would fork over Medicaid money directly to individuals who would then shop for and purchase a private insurance plan. Instead of one money transfer (government to health care providers), we would have three (government to patient to insurance company to providers). Perry and the report authors pitch the latter system as more efficient, despite the added bureaucracy that would no doubt come along with these added transactions.

I don’t know if it would be more efficient. But it certainly would be a boon for the insurance industry and whatever financial institution would maintain these health savings accounts.

Still, the report’s recommendations are rather fantastic at the moment. The federal government determines how the Medicaid program operates. And it seems doubtful the Obama administration will allow Texas to implement these reforms.

 So until a Republican wins the White House (and perhaps that will be Perry), these Medicaid reforms (and Medicaid withdrawal) are likely nonstarters.

Chet Edwards Ousted from Congress

Anti-incumbent wave too much for veteran Democrat

Chet Edwards’ two-decade career in Congress has come to an end tonight.

The result wasn’t a huge surprise, though it is a tremendous loss of seniority for the Texas delegation. Tom DeLay’s redrawn 17th District finally ousted Edwards, though it took six years longer than the GOP had hoped.

What took down Edwards, ultimately, wasn’t the conservative 17th District that DeLay’s people manufactured. Edwards seemingly could have continued winning had this been a typical election. Rather, what sunk Edwards was the anti-incumbent, pro-Republican wave that’s sweeping the country tonight. This was a national election. And though Edwards tried to make the race about local issues, it was no use. Anecdotes abound of conservative-leaning voters who like Edwards and voted for him in the past who this year turned against him simply because they were angry with Obama and the nation’s direction. That proved too much to overcome—even for a campaigner as skilled as Edwards.

The night began poorly for Edwards. He was trailing 17 percent in early returns and was even behind in his home base of McLennan County. When initial returns from Brazos County—which, as I wrote earlier, is a key battleground in the district—showed Edwards trailing by a margin of two-to-one, the gig was up for the long-time Democratic incumbent. (The AP called the race about 30 minutes ago.)

Bill Flores becomes the 21st Republican in the 32-member Texas congressional delegations. And that number could grow later tonight, with Democrats Ciro Rodriguez and Solomon Ortiz in serious trouble.  I’ll have more updates on those two races later tonight.

Could Be Rough Night for Democratic Congressmen

Early returns show trouble for Edwards, Rodriguez and Ortiz

UPDATE: AP calls CD-17 for Flores, Edwards returning to Waco.

The national news media is already calling the U.S. House for Republicans.

The news isn’t any better at this hour for Democrats in Texas congressional races. All three endangered incumbent Democrats are trailing in early returns.

It’s still very early, but it’s not looking good at all for Waco Democrat Chet Edwards. He’s trailing Republican challenger Bill Flores 63 percent to 36. Only 59,000 votes have been counted. Not only is Edwards down 17 points, but he’s trailing Flores in McLennan County (Waco), which is supposed to be his base, by 2,000 votes.

More worrisome for Democrats are the early returns from the Ciro Rodriguez and Solomon Ortiz races.

Rodriguez trails Republican Francisco Canseco 49 percent to 40 percent with 76,000 votes counted. But Rodriguez, the incumbent Democrat, is trailing in Bexar County (San Antonio), the district’s major population center.

In South Texas, Solomon Ortiz looks to have a major fight on his hands from Republican newcomer Blake Farenthold. Ortiz is trails by 8 percent with 52,000 votes counted. But he’s trailing in Nueces County (Corpus Christi). Moreover, Farenthold is leading even though no returns have come in yet from the largely Republican San Patricio County. Of course, few precincts from the Democratic counties of Cameron and Willacy have reported. But this is shaping up as a close race.

Democrats poured a lot of resources into protecting Rodriguez and Ortiz. If one or both lose, that would portend a disastrous night for congressional Democrats.

Bryan-College Station Key Battleground in CD 17

Whoever wins Brazos County will likely capture the race

The polls closed a few minutes ago in most of Texas, and now we wait for results in the state’s three key U.S. House races.

In closely watched Chet Edwards-Bill Flores race, the Bryan-College Station area could be a decisive battleground. The 17th Congressional District spans a swath of Central Texas from Waco—where Democrat Chet Edwards has his base—through the southern Fort Worth suburbs and east to College Station.

When Tom DeLay’s map-makers drew the district in 2003, they included the ultra-conservative Brazos County, which covers Bryan-College Station. They hoped that area would make the disctric Republican enough to overwhelm Chet Edwards.

But Edwards worked hard to make inroads in the area. He took advantage of his connections to Texas A&M, where he went to school, courted local politicians, and perhaps most beneficial of all, brought home federal pork for the university.

In his previous three races, Edwards has performed well in Bryan-College Station. In 2004, he polled even there against Republican Arlene Wohlgemuth. In 2006 and 2008, Edwards won the county by double digits.

This year could be different, though. Republican challenger Bill Flores lives in Bryan and there have been early indications that he will perform well there. As the early results come in, keep an eye on Brazos County. If Flores beats Edwards there, he’ll likely have himself a seat in Congress.

I’ll have more updates on Texas’ congressional races as results come in.

Will Corporate Ads Help Sink Solomon Ortiz?

Drug company front group attacks Democrat over health care bill.

Until recently, Blake Farenthold wasn’t given much of a chance to win his race against Democrat Solomon Ortiz, who’s represented Corpus Christi in Congress since 1982. 

But grassroots Tea Party activists have helped make the race competitive. And, now, last-minute corporate-funded ads may put Farenthold over the top.

Farenthold, 48, runs a computer consulting business in Corpus and is the grandson of Texas liberal icon Sissy Farenthold. He’s the one congressional candidate in Texas who, until recently, could claim to be running a grassroots campaign. Nearly all of the $379,000 Farenthold reported raising as of Oct. 13 had come from individual contributions or loans to himself; he’d received almost no PAC money, according to the Center for Responsive Politics.

On-the-ground campaigning by Farenthold’s enthusiastic Tea Party supporters in a district tilting toward the GOP has made this a close race. As the campaign gained more attention—and Ortiz began to look vulnerable—shady third-party groups showed up on the scene.

A group called The 60 Plus Association, which bills itself as a conservative answer to the AARP, has been running attack ads against Ortiz the past two weeks, ripping him for supporting the national health care reform bill. It reported spending $166,000 on the ads, according to filings with the Federal Election Commission

Third-party groups like 60 Plus Association don’t have to disclose who their donors are. Since the U.S. Supreme Court’s Citizens United ruling, third-party groups like this can raise and spend corporate funds on elections—as long as the expenditures aren’t coordinated with campaigns.

The 60 Plus Association has long been rumored to be a front group for the pharmaceutical industry.

So in Texas’ 27th Congressional District, we have a front group that may be using hundreds of thousands in drug company money to unseat a congressman who voted for the health care reform bill, which the drug companies certainly didn’t like, and to replace him with a novice Republican who might repeal the bill.

If Farenthold does pull the upset, the Tea Party will likely get the credit. But corporate interests will have made the difference.

See more of our Election Night coverage.

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