Political Intelligence

OH, SINNER MAN

While the governor titillates his base with a proposal to add a $5 surcharge to strip club cover fees, Rep. Lon Burnam (D-Fort Worth) has a bill on file aimed at his base that’s smarter and more inclusive, if a bit less sexy.

Burnam proposes a tax on air-polluting practices, on the premise that ogling nekkid ladies is a lot less of a “sin” than poisoning the air we all have to breathe. And unlike the governor’s sin tax proposals, Burnam’s bills would tax those who could presumably afford it: power plants, SUV owners, and coal-burning industries. “It’s time we started taxing the sins of the 21st century,” Burnam told reporters at a sparsely attended press conference on the Capitol steps.

Cyrus Reed, director of the Texas Center for Policy Studies, said Burnam’s proposals could raise $1.2 billion over the next two years. A one percent surcharge on the sales price of vehicles that emit high levels of smog-producing gases could raise $200 million. Another tax on power plants that burn high levels of nitrous oxide—an element of smog—could raise $700 million. A tax on industry use of coal would raise another $200 million. Coal is by far the dirtiest of the fuels used to produce electricity, yet unlike oil or natural gas, it is currently untaxed.

Like traditional sin taxes, Burnam’s proposals would raise revenue for the state while discouraging behaviors that cost the state money. While Burnam concedes that revenue from the pollution taxes would drop over time, the state would presumably recoup those losses in, say, decreased healthcare expenses for children with asthma.

SOURED DREAM

Each year Home and Garden Television (HGTV) gives a brand new, custom designed home worth more than a million dollars to a lucky person chosen from tens of millions of entries. For DreamHome 2004, the network gave a fully furnished 3000-square-foot house on two acres overlooking the southeast coast of Georgia to a state bureaucrat from California. And now, HGTV has decided where DreamHome 2005 will be situated: Lake Tyler, Texas.

HGTV’s web site waxes poetically about all the amenities the new homesite, tucked away in an exclusive enclave, will have. It paints a bucolic picture of “approximately 100 acres of dedicated greenbelt” and “a private 39 acre waterfront club and resort.” Photos of pastoral scenes of leafy glades and anglers casting against a dawn-streaked sky intersperse the text. All this nature, and it’s still just “eight minutes from the apex of Tyler’s shopping and dining hub.” The web site relates how the mini-mansion that is at the heart of the prize was designed to “draw from the environment” as well as to be “responsive to the rich heritage of East Texas.”

Well, they got that right.

The rich heritage of Texas is to draw from the environment. The winner of the HGTV contest is about to learn how the extraction game is played in the Lone Star State. It’s a lesson a new group of well-to-do property owners calling itself the Save Lake Tyler Association is having the misfortune of discovering the hard way.

As the Observer went to press, a state district judge was set to rule on a lawsuit by lakeside residents of unincorporated Tyler against the city. The suit stems from a city council decision to make 5,500 acres of city-owned property on the lake open to oil and natural gas drilling. Oil and gas drilling could be as near to the HGTV site as across the street, according to association members. From the dock of the house, the lucky winner will likely be able to see derricks in action, says Mark Flynn, president of the association.

The city opened up the leases for less than $2 million upfront and royalties of between 20 and 25 percent for all oil and natural gas sold.

The lease the city granted to Longview-based C.W. Resources to develop oil and gas resources has restrictions. Drilling is not allowed in the lake itself, on residential properties, or within 100 feet of the lake. That leaves the green spaces scattered about the lake as fair game, in violation of Parks and Wildlife Statutes, or so claims the Save Lake Tyler Association, the group that filed the case. There is a hang-up however. The Lake Tyler area is owned by the city—residents have rolling leases—but it is not an incorporated part of the city. (The same goes for the HGTV site.) The lease owners do not pay city taxes or receive city services. They do not vote in municipal elections. And though some properties along the lake have evolved into de facto parks, the city does not maintain or recognize them as such.

An HGTV official insists that the company’s dream home is far enough removed from the drilling. HGTV spokeswoman Emily Yarborough said the company was aware of the issue and did not expect it to be a problem.

Still, one can just see the ad copy: “Relax to the rhythmic sounds of oil and gas derricks.”

But it gets worse.

The city depends upon two adjoining reservoirs for most of its water—Lake Tyler East, which was opened to drilling about a year and a half ago, under the watch of then-mayor and now newly minted State Sen. Kevin Eltife—and Lake Tyler West, which was opened to drilling in December, when the city council approved a recent lease with C.W. Resources. Both water sources could be threatened. As the association members have taken out ads, grown its membership, and demanded a greater say in the process, the company has defended its safety record. The city has maintained that it has done no wrong and it has continued to tout the economic benefits of natural gas exploration. Despite the lawsuit, C.W. Resources says it will go forward with its drilling.

Lease holder Flynn moved back to his native Tyler after 20 years in Austin, motivated in part by memories of the beauty of Lake Tyler. “You are putting in jeopardy a reservoir that is the primary drinking source for the city,” he says. “It’s just greed, pure and simple.”

BRINGING THEM THE GOSPEL

Suzii Paynter says she never wanted to know anything about gambling. But today the public policy director of the Christian Life Commission—a wing of the Baptist General Convention of Texas—has a bookshelf of books on gambling, a file cabinet of gambling-related articles, and a subscription to the Journal of Gambling Studies.

Now, Paynter is taking her near-encyclopedic knowledge of gambling to the Capitol, urging legislators to oppose proposals like the governor’s that would use so-called video lottery terminals to partly finance the state’s education system.

Supporters of VLTs—which resemble slot machines—lump them with other “sin” taxes, like the $1 extra tax on cigarettes or the governor’s other proposal, a $5 additional cover charge at strip clubs. The argument is that sin taxes are voluntarily paid—hardly real taxes at all. That’s convenient for many statehouse members who took White House Ideology Czar Grover Norquist’s no-tax pledge. Politically, a vote for sin taxes carries a low cost; lechers and smokers don’t get as much public sympathy as school kids, property-tax payers, or even business owners.

But, as Paynter is quick to point out, VLTs run exactly counter to the purpose of sin taxes, which are supposed to raise revenue at the same time they discourage unhealthy behaviors. Unlike cigarette or “adult entertainment” taxes, which tax existing practices, VLTs create a new and costly vice by which the state and the gambling industry profit.

VLTs don’t target casual gamblers and occasional lottery players; revenues from VLTs depend on addicts. A study conducted by the Louisiana Gaming Board estimated that nearly a third of the revenue from that state’s video poker games comes out of the pockets of gambling addicts—even though genuine addicts represent only about 2 percent of the general population.

A study headed by Robert Breen, associate director of the Rhode Island Gambling Treatment Program, found that VLTs create pathological addiction nearly four times faster than other popular games of chance. Using a central computer to track players’ gambling style, VLTs adjust the game accordingly, making it seem that gamblers are perpetually on the brink of a big win. Breen estimates that fully 75 percent of addicts treated in the Rhode Island program are addicted to slot machines or their electronic equivalents.

Gambling supporters often put forward the morally dubious argument that gambling doesn’t cause unhealthy behaviors, just takes advantage of them. Most pathological gamblers, they say, already suffer from depression, alcoholism, or other mental problems. Not so, Breen found: the typical addict in his study was a middle-aged professional with a family. The average addict in Breen’s Rhode Island program had lost between $75,000 and $80,000.

The gambling addiction that VLTs create is costly. Much of this hidden “tax” is shunted to local governments. According to research by Baylor University economist Dr. Earl Grinols, casinos create crime in surrounding areas. Grinols estimates one pathological gambler can cost local governments more than $13,000 for illness, addiction treatment, incarceration, and costs related to crime and bankruptcy. Taxpayers in areas surrounding casinos pay roughly $3 for every $1 of gambling revenue.

Perry hopes VLTs will raise $2 billion for the next budget cycle. To support those estimates, the state’s 300,000 or so new gambling addicts will need to lose a total of $540 million. City and county governments could pick up a tab of around $1.6 billion in related costs.

If Perry can’t add these numbers up, Paynter would be happy to do it for him. Paynter and others with the General Baptist Convention of Texas, which has about 2.4 million members across the state, have made several requests for a meeting with the governor, but as the Observer went to press, the governor hadn’t found the time. (Perry’s office promises a meeting will be arranged.)

Paynter’s had more success meeting with legislators. “They tell me they don’t want to vote for this, but they feel like they have to,” she says. “There’s pressure on them from above.”

It’s not hard to guess where that pressure is coming from. If VLTs are legalized, a number of major GOP contributors stand to make some serious money. Under Perry’s plan, 90 percent of the money raised by the VLTs is pay-off for the winners. The remaining ten percent is split even-steven between the state and the VLT operators.

VLTs also mean big money for owners of racetracks where the terminals would be installed. Business has been slowing down at racetracks across the state, and track owners figure VLTs will bring in the marks. Many loyal campaign contributors just might strike it lucky.

WORKING THE SYSTEM

The state’s dwindling Medicaid population received a rare bit of good news on April 13, courtesy of U.S. District Judge Sam Sparks. He issued a preliminary injunction that prevents the Texas Workforce Commission and two other state agencies from enforcing punitive rule changes that likely would have swiped government-sponsored health insurance from thousands of Texas’ poorest citizens.

At issue is something known as the Personal Responsibility Agreement. It’s a deal-with-the-devil style contract that qualifies poor Texans for cash-assistance grants as long as they adhere to a lengthy list of rules (go to work, take their kids to school, obey the law, and so on). Keep in mind that these aren’t your stereotypical welfare moms. To qualify for Texas welfare, a family of three must earn less than $2,289 a year. (No, that’s not a typo; the program ceiling really is a daily income of $2.09 per person. If your family earns $2.10 per person each day, well, tough.)

Last session, state lawmakers passed a bill that tethered Medicaid benefits to the Personal Responsibility Agreements, as well. The legislation declared that if welfare recipients violated one of the state’s numerous welfare rules, they—and every other adult in their family—would lose not only cash assistance but Medicaid too. No other state in the nation has enacted such harsh penalties.

The workforce commission was tasked with implementing this vindictive bit of public policy. That proved tricky. Federal law forbids states from stripping people of Medicaid benefits unless they aren’t paying child support or they refuse to work. So the commission tried an end run around federal law by redefining “refusal to work” to include any violation of the Personal Responsibility Agreement. The commission’s new rule means that thousands of welfare recipients could lose Medicaid if their kids cut class or don’t go to the doctor’s office.

Before this policy went into effect, however, the Texas Welfare Reform Organization, El Paso County Health District, and two individual plaintiffs sued to stop it in federal court. Judge Sparks’ injunction handcuffs the state for the moment (the liberal think-tank Center for Public Policy Priorities had won an earlier injunction in state court). Workforce commission spokesman Larry Jones said the agency was disappointed with the ruling. “Respectfully, we disagree with his decision. We are considering further legal options that are open to us.” He refused to divulge more and wouldn’t specify what legal options the commission is considering.

COURT AT TUNNEL’S END

For lawmakers in our citizen’s legislature who signed up for a five-month session every two years—and need to work for a living—this year must have a death-march feel to it. Instead of just one regular legislative term, they are working on their fourth special session with no end in sight. But the analogy that might work better goes to the root of the word “deadline.” It was coined in the Civil War, for the line in the military prison camp beyond which guards were authorized to shoot prisoners for escaping.

Savor the irony. Today, legislators face a deadline on school finance not of their own making. On July 26th the Travis County District Court is set to hear West-Orange Cove v. Alanis, the lawsuit brought by nearly 300 Texas school districts alleging chronic under-funding by the state.

As originally filed three years ago by the wealthiest districts, the suit alleged that the wealth-equalizing “Robin Hood” system deprived them of meaningful local control. As of late last year, however, the suit has been joined by hundreds of poor and mid-wealth districts, and the focus has shifted away from eliminating recapture. The litigation now asks the state to step up it’s share of school funding.

To appease districts now, says David Thompson, an attorney for the plaintiffs, legislators will have to decrease reliance on local property taxes and make up the loss with state money, as well as substantially increase the amount of money that goes into the system. And, Thompson says, they’ll have to do it without increasing the funding gap between rich and poor schools.

No strategy offered to date would seem to meet the suit’s requirements. The governor proposed a statewide tax, capped at $1.40 per $100 of valuation, on commercial property; local governments would keep revenues from residential property, capped at $1.25. This plan essentially excuses so-called “mansion districts,”—those whose property wealth is in high-dollar homes—from the equalization system. Under the plan, the ritzy Highland Park district would keep $13,900 per student, while kids in Dallas ISD’s largely poor and minority schools would get $179.

If legislators were hoping to derail the lawsuit by bribing wealthy districts to drop their case, they’ll be disappointed.

“We’ve had these conversations, and we’re all in this together,” Thompson says. “The idea that you’re going to peel off particular groups, we’re going to resist that. You’re going to see a proposal that serves all districts equally or you’re going to see the lawsuit move forward.”

A funding distribution plan unveiled by House Select Committee on School Finance Chair Kent Grusendorf (R-Arlingt
n) may offer equity of a sort, but proposes a paltry amount of additional state funding. Grusendorf’s plan would scrap the state’s weighted attendance system, which offers districts a percentage of additional per-student funding for students in expensive-to-educate groups, like special education or limited English proficiency. Instead, Grusendorf proposes a flat payment of $4,459 for kids in grades kindergarten through eighth, and a thousand dollars more for high school students. Additional sums would be offered for students in special groups: $450 for students in bilingual education, $300 for students in special education, etc. Altogether, Grusendorf’s proposal entails only about $730 million extra for the 2005-2006 school year—a budget increase of barely 3 percent.

The proposal is based on a study by Texas A&M University researchers, which measures educational outcomes with levels of funding. The funding level in Grusendorf’s proposal predicts a mere 55 percent of students will pass the state’s assessment exams, and allows a drop-out rate of 25 percent.

Grusendorf’s revenue proposal included a statewide property tax on both residential and commercial property, and has already drawn criticism from a coalition representing almost all of the state’s 1,031 school districts. According to a statement the coalition signed on April 24, a state property tax would remove local control from school districts. The districts, many of whom have fought with each other in the past over sharing property taxes, also said that any funding plan should include some measure of wealth-sharing.

Unless legislators want to start again after the Travis County District Court rules this summer, they’ve got little more than three months to settle the West-Orange lawsuit and send the districts and their lawyers home.

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