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revenue cycle. Consequently, the LBB has only planned to use about a billion of the surplus. But even Hobby fears that his safety fund will evaporate when the Legislature gets down to business. A serious attempt at school finance reform could use up the $500 million and a whole lot more. The Texas State Teachers Association is asking for a $2 billion raise in public school funds for a new financing scheme and for bigger teachers’ salaries. The Texas Research League, a business-oriented, b usiness-financed research group, predicts that if legislators appropriate all of the available surplus on the two-year budget, they will be forced to pass a $1.4 billion tax bill in 1977 just to maintain this higher level of spending. Spend it all now and you’re liable to have to pass a corporate or a personal income tax during the next session, the TRL warns. So there is some pressure not to spend the surplus at all. Rep. Ray Hutchison, RDallas, wants to use some of the surplus to set up a trust for financing a state building program out of interest earnings. Most of the LBB’s recommended budget increases are in the area of education, where the state spends half of each revenue dollar. The LBB wants to boost spending for state colleges and universities by more than $410 million; junior colleges by $99.5 million; health institutions by $169 million; technical institutes by $6.5 million; the college coordinating board by $17.6 million; and other types of education beyond the high school by $53.2 million. Meanwhile, Governor Briscoe says he will recommend an emergency increase of $212 million a year for public schools, state employees’ salaries, and retirement benefits to teachers and state employees. Money, money, money. Until the economy got so quirky, this seemed like the ideal year to institute long-needed reforms in the state’s social services. Scandals involving Texas reformatories, prisons, mental hospitals, and schools for the retarded have brought new public awareness to the sad state of Texas institutions. Legislative committees and, in some cases, the courts have been urging , that the state abandon large institutions in favor of community programs. It would be a shame to abandon the work and thinking that has gone into retooling Texas’ out-moded caretaker institutions, just because of fear of future taxation. Then there will be a hopper full of bills concerning new areas of state concern and spending. Texas will probably get some form of utilities commission this time around. Not so likely to pass, but equally important, are strip mining legislation, new funds for water planning and ground water regulation, funds for pesticide regulation, money for a state-owned superport, state ….immeariftek 4 The Texas Observer aid to mass transportation, and a blueprint for land-use regulation. The men and women who will be deciding how to appropriate some $3 to $4 billion for the next two years will each be making $4,800 a year for their labors. They can’t legislate themselves a salary increase it takes a constitutional amendment but they are certainly justified in making yet another pitch to their constituents for a living wage. And now on to some specifics. Utilities regulation The Southwestern Bell scandal came along just at the right time to virtually guarantee passage of a utilities regulation bill this session. It’s the sexiest scandal to hit the state since Sharpstown. The story broke back in October when T. 0. Gravitt, the head of the Texas telephone system, committed suicide and left some revealing letters and memos behind \(see Obs. then, Gravitt’s family and James Ashley, a friad of Gravitt’s and a phone company rate negotiatior, have filed a $29 million libel and slander suit in San Antonio against Southwestern Bell. The story that is being pieced together from the memos and the preliminary court proceedings is better than Peyton Place. There’s talk of sexual promiscuity among Ma Bell’s employees, wiretaps of company people and outsiders, questionable campaign contributions, and free plane rides for politicians. Perhaps the most damaging information to date comes from internal phone company memoranda that indicate Bell may use misleading and possibly false information when lobbying for higher phone rates in Texas. Apparently the company plays certain games in Texas that it can’t get away with in states that have vigorous utilities regulation. According to one memo quoted by the Associated Press, since 1947 Bell’s Texas policy dictates “as high a rate base and expense level as possible combined with a rate of return low enough that it would not be challenged seriously.” Bell uses different assessment techniques, depending on which best serves its purposes. In December a Houston tax assessor-collector said he has discovered Bell using high figures as the basis for rate requests and low figures for paying property taxes. One consultant called the company’s rate-making procedure in Texas a “deliberate attempt to flim-flam city councils.” Memos indicate that Bell can make twice as much profit as it owns up to before city councils. Texas is the only state in the nation that does not regulate the phone company. That duty is left up to city councils, and the under-staffed, under-budgeted city staffs usually go along with whatever Bell requests. Ashley and Gravitt both were urging Southwestern Bell to alter its bookkeeping methods, and that got them in dutch with their employer. The company started investigating both men, pressuring them, and the pressure got to be too much for Gravitt, his family maintains. Ashley was fired eight days after Gravitt killed himself. State Sen. Ron Clower of Garland, who heads a Senate subcommittee on consumer affairs, called one of the Bell memos on rate-making “the most shocking thing I have ever read.” Clower is introducing a bill to set up a three-person elected public utilities commission with authority to regulate phone service, electric utilities, natural gas, and private water and sewage companies. Municipally owned utilities would be exempt, and cities by majority vote could retain local control over rates. Clower’s bill would change the phone service rate base to a formula based on an original cost of equipment and facilities provided by the company. The present rate is based on a “fair value” system that takes replacement cost as well as original cost into consideration. The Texas Committee on Natural Resources and the Texas Environmental Coalition are asking that the commission also have the following powers: Public control over siting of power plants and facilities in order to protect streams, significant natural areas, etc. Evaluation of rate policies for electrical and gas power on the basis of energy conservation. Controls over lighting, appliances, building, and other standards to reduce the growth rate of electrical energy consumption, and Research and development of the state’s renewable sources of energy, such as solar, windpower, and geothermal. Governor Briscoe is advocating a state corps of rate and regulatory experts rather than a commission, Under his scheme, cities could call on the experts when they wanted help and unincorporated areas would somehow be under the jurisdiction of the experts. Lieutenant Governor Hobby has expressed some interest in Clower’s activities and has endorsed a utilities commission with elected members. Bill Clayton has opposed utilities regulation in the past, but he seems to be softening. He recently said he will not try to influence the House decision on whether the commission should be elected or appointed, but he said he personally feels that it would be best to let county commissioners set rural rates, with the advice of state experts. Despite Bell’s recent troubles, the phone company has not backed down from rate increase requests in a number of Texas cities. Most of the cities, however, are trying to be tough for a change. Some are even threatening to launch investigations of local phone policies.