Status Woe



The idea behind sunset reviews is straightforward enough: On a staggered 12-year schedule (in most cases), Texas’ state agencies, commissions and boards submit to examination by an independent commission charged with rooting out waste, fraud and defunctitude. The agency under review may get a clean bill of health or an opportunity to reform. If it’s judged to have outlived its usefulness or is otherwise beyond saving, it may be mothballed. In practice, the outcomes are rarely that simple.

When the largest and most important state agencies undergo sunset review, political fisticuffs are almost always the result. Such was the case this session when the Legislature tried to reform two of Texas’ most controversial bureaucracies: the Texas Department of Transportation and the Texas Department of Insurance.

Both agencies arrived at their day in the sun trailing the same basic stories. Each deals with a contentious political issue. In TxDOT’s case, it’s the building of toll roads. For the insurance department, it’s the high price—highest in the country—Texans pay for homeowners insurance. Each agency has long been dominated by powerful industries. Contractors and road builders have long held sway at TxDOT, while major insurance companies have had the run of the insurance department. In both cases, consumer advocates hoped the sunset review recommendations would spur the Legislature to call for reforms curtailing industry influence.

The Legislature did file bills reauthorizing the agencies, but that’s as far as it went. Industry hijacked both bills midway through the session, and both jumped the tracks on the session’s final weekend. So did the so-called safety net bill—which simply ensures an agency’s continued existence—that lawmakers usually pass when sunset bills fail. As it stands now, both TxDOT and the insurance department are set to expire in September 2010. Lawmakers will have to return for a special session just to keep the agencies alive for another two years so they can go through the process again.

Maybe consumers will fare better in 2011. This year, though, the TxDOT and insurance department sunset bills are excellent examples of how much weight big industries still carry at the Capitol.

Ensuring Failure

No pocketbook issue facing Texas this year was more pressing than homeowners insurance. Texans pay, on average, the highest homeowners rates in the country, an average annual premium of roughly $1,300. The national average is about $800.

With foreclosures on the rise and the economy contracting, costly home insurance could contribute to people losing their homes. They’re also barriers to homeownership for working families.

While Texans have suffered, the industry has made a killing. The past five years in Texas have been among the most profitable ever for home insurers, even with the occasional hurricane rolling ashore (see “Are You in Good Hands?” Dec. 12, 2008).

The insurance companies have long contended that they set high rates in Texas because of the unpredictable weather. Consumer advocates say the weather has some influence, but they attribute the high rates mostly to the state’s lax regulation.

Insurers have wide latitude in Texas to set their own rates. Under the system in place since 2003, home insurers are required only to notify regulators of rate increases. If the rates are deemed too high, the Department of Insurance can object and take the company to court—after the hike has gone into effect. The department has had little success winning large rate reductions in court.

Consumer advocates hoped the sunset process would spur lawmakers to tighten regulation of the home insurance market. They wanted a prior-approval system, in which insurance companies would have to gain regulatory approval before raising rates.

But when the insurance sunset bill came to the Senate floor, the insurance industry once again prevailed. With Republican senators leading the way, the Senate rejected prior approval and passed a bill that would have kept the system of minimal regulation for years to come. One consumer advocate called that outcome “catastrophic” for homeowners.

Consumer advocates hoped for a better result on the House floor, but the bill never got that far. It got hung up behind the voter ID legislation that bottlenecked the Legislature at session’s end. House members could have voted to suspend their rules and bring up the insurance sunset bill out of order, which many Democrats and some Republicans wanted to do. The move would have required a two-thirds vote. But more than a few in the GOP wanted to stall the sunset bill to death. With many Texas homeowners angry over high rates, some Republicans feared that voting with the insurance industry would carry too high a price come re-election time. So they did nothing and let the bill die, an approach that comes with its own political risks.

That outcome means the status quo will remain in place for as long as two more years while the Insurance Department goes through the sunset process all over again.

“This is a complete and utter failure of leadership to address the very clear desire and need of homeowners in this state,” said Alex Winslow of the consumer advocacy group Texas Watch. “The industry wanted nothing to pass. They wanted to get out of this session with the status quo. They got what they wanted.

“It’s clear from our polling and our research that Texans expect their lawmakers to do something about high rates. Not doing so is, I suspect, going to come back to haunt them.”

The one bright spot in the muddle is that because nothing passed, consumer advocates will get another crack at reforming the system in two years, perhaps sooner. Winslow hopes that Gov. Rick Perry, once he calls the inevitable special session, will put insurance reform on the agenda.

More likely, lawmakers will use the special session to pass the safety net bill that simply extends the life of the department. In that case, Texas homeowners will most likely continue to pay the highest home insurance rates in the country through 2011.

Toll Road to Nowhere

Just six months ago, legislators seemed eager to reform the Department of Transportation. The Sunset Advisory Commission had issued a scathing report summing up the agency as “permeated with an atmosphere of distrust.” The public and legislators complained that the agency was intent on building toll roads at taxpayer expense. Some legislators pledged to follow the commission’s recommendations and trim the bloated department into a lean, transparent agency that would be more responsive to the public.

But by May, the sunset bill that was intended to reform TxDOT—House Bill 300—had been so larded down with amendments that some reformers felt the legislation in its final form would do more harm than good. The 344-page bill was left stranded when negotiations broke down in the final weekend. Some advocates weren’t sorry to see it die.

“It was horrible,” said Terri Hall, founder of a grassroots organization called Texans Uniting for Reform and Freedom, which opposes toll roads. “It was a taxpayer’s nightmare that did not even remotely represent the original sunset recommendations.”

It’s no surprise that TxDOT created controversy in the Legislature. For two years legislators had politicked and debated whether to reform the agency and, if so, how.

As the session progressed, the House and Senate took markedly different paths: Some House members wanted to rein the agency in, much as the Sunset Commission recommended. The Senate preferred a softer touch, fearing that anything too drastic would result in a veto by the governor, who has long favored toll roads. By the time the TxDOT sunset bill surfaced in the Senate in the waning days of the session, senators were so miffed with the more than 100 House amendments—many of them handwritten and nearly illegible—that they chucked the House’s version and crafted their own.

The tension between the two chambers peaked on the next-to-last day of the session over an amendment to add a local-option gas tax. Sen. John Carona, a Dallas Republican, was pushing the idea as a way for local governments to boost their transportation funds. The House’s refusal to accept the amendment in conference committee got Carona’s Sicilian blood boiling. He issued a news release written partially in Italian: “Dai nemici mi guardo io, dagli amici mi guardi iddio.” Which more or less translates to “Y’all screwed me over big time.” Carona, who chairs the Senate Transportation Committee, wrote that HB 300’s demise would be no real loss anyway.

There was loss, though: The bill would have allowed the state to sell $2 billion in general obligation bonds for road building. Steven Polunsky, Carona’s spokesman on transportation, said the senator hopes during the upcoming special session to pass legislation allowing the state to sell the bonds, and to let TxDOT reform wait until 2011.

Many experts say Texas needs billions of dollars worth of infrastructure additions and improvements. The big question is how to pay for it all. It may be two years before we have an answer. A local-option gas tax is off the table for now, and TxDOT’s much-maligned “comprehensive development agreements” to allow private companies to build toll roads will evaporate at the end of August unless the Legislature reauthorizes them.

It seems unlikely that Gov. Perry will be looking to overhaul his signature agency in a special session, and Republican legislators aren’t likely to have the stomach to address such a contentious issue headed into next year’s primaries.

Polunsky says Carona will hold a transportation hearing this August in Fort Worth. No doubt angry Texans will show up to vent their frustrations about TxDOT. Now they can add their frustration that the Legislature doesn’t seem willing to do anything about it.