Looking Back From 2010 III

            I have to start by correcting our president who said I held degrees from—then listed off a very impressive list of universities. I attended all those universities but have no degree. And being the only undegreed member of the panel, I’ve been assigned to government work.

            After this impressive pair of presentations, I don’t want to sound like I’m whining, but I will for just a minute. These guys get to talk about the interesting stuff that has a future and bright possibilities. I have to try to depict what Texas state government will look like in the year 2010. I’m given the ugly topic to begin with, and how one could figure out where anything as eccentric and as personality-driven as Texas government will be in ten years is beyond me.

            But I will offer up five key points to help describe where our government might be in 2010, depending on the resolution of these five conflicts. But I’ll do so in as oblique a way as possible, so if you corner me on January 1, 2011, I can claim you’re wrong and I was right.

            There is this great myth of Texas government that it’s limited in size and scope, that we’re a state of low taxes. Until recently we were a one-party state in which all the major issues were settled by internecine warfare in Democratic primaries between two factions. Obviously, that last one has changed. I would suggest some of the other parts of that great myth have changed as well.

            But we face in the coming years five important battles that will decide how Texas state government looks not only in the year 2010 but in many years after that.

            The first one will take place shortly after the real Y2K, the real turn of the millennium, in January of 2001, and that will be the battle over redistricting. We are a rapidly growing state and will receive two or three additional members of the United States House of Representatives, and as required by our own constitution, the lines for our State Senate and State House will have to be redrawn. Redistricting is the ugliest, most important battle of Texas politics, and thank God we relegate it to one session every ten years so we only waste 20 percent of the time that our legislature is in session every decade.

            How this will come out, God only knows, but I do think that it is most likely to come out with something that we’ve never seen before.

            Before, redistricting has always been—in the 1971, 1981, and 1991 sessions, and the 1961 session—has been fair and impartial. It’s been designed to fairly and impartially represent Democrats in every possible position.

Because we face 2001 with Republicans dominating statewide offices and in control of the Senate, we’re likely to see the same degree of fairness and impartiality observed on the part of the Republicans toward their Democratic colleagues as was visited on the Republicans in the past, particularly since the Republicans now hold every seat on a board described in our constitution and generally ignored called the Redistricting Board.

            The lieutenant governor, speaker, attorney general, comptroller, and land commissioner constitute a board that writes the lines if the legislature is unable to come to a conclusion about the lines for the legislature. And this will have ramifications throughout the decade, because who will dominate the legislature will have an effect on the kinds of policies that our legislature enacts.

            The second system—the second big battle that could emerge in the coming decade that will impact how Texas state government exists in the year 2010 has to do with our tax system. There are two possible outcomes to this. We could have a battle and a new tax system could be written. Or we could avoid this tax-reform battle and let the existing tax system stay in place. Either instance will have huge ramifications for Texas in the year 2010 because we have a tax system that was written for the 1930s and 1940s that we’re trying to apply to an entirely different economy, an entirely different set of circumstances.

            The myth is that our tax system is regressive because it’s based on property taxes, a sales tax, and a corporate franchise tax. In reality, we have one of the less regressive systems of taxation in America because we don’t tax incomes and we don’t tax the essentials of life. We don’t tax your utility bill. We don’t tax your doctor’s bill. We don’t tax your grocery bill. But we do have a system that taxes capital intensive enterprise.

            If you are in a capital-intensive business like a refinery or manufacturing, good luck to you. If you’re a software company, law firm, service industry, or something that depends on getting a highly skilled, highly paid labor force that has very little in the way of capital in plant or facilities, the system benefits you. And if you’re smart enough to have a smart tax attorney, you can really jerry-rig this system.

            I have a personal amount of bitterness about this. I ran a small business with eleven people, and I paid more in corporate franchise taxes than the Austin-American Statesman and that’s because the Austin-American Statesman, one of the most profitable parts of the Cox newspaper chain, is not a corporate entity. It is a partnership in which the only real partner is the corporate entity existing in Atlanta, Georgia, and the newspaper thereby escapes any corporate franchise taxation.

            So me, employing eleven people, paid more franchise tax than a giant printing plant sitting on South Congress Avenue. And if you think that is the rarity, you’re kidding yourself. There is a guy in Texas who goes around and tells every newspaper how to turn itself into a partnership.

            I was out in California last summer, and a guy said, “Geez, I bought this wonderful company in Texas. It makes ta-da-da-da and ta-da-da-da. It’s fabulous. What a wonderful company.” He said, “Not only that, but when we bought the company we turned it from a corporation into a limited partnership, and I pay no state corporate tax. Isn’t that great?”

            Our tax system is increasingly out of touch and out of sync with the reality of modern Texas. It’s great if you’re a software company because you may pay a little bit in franchise taxes, but you don’t have a personal income tax that hits your employees, and we’re in a relatively low-cost state compared with other high-tech states. But if you run a big petrochemical facility, you’re worried about your franchise taxes. Increasingly, our system taxes those who are the departing portion of our economy as opposed to the rising part of our economy.

            How this will play out, I have no idea, and whether it will be played out at all is a big question. I suspect it will not be. But how it’s played out affects the revenue stream and the fiscal health of our state in the long term.

            The third battle that may take place that will have a big impact on how Texas state government looks in the year 2010 and how Texas looks for decades after that has to do with our educational system. We are beginning, after a fifteen-year battle, to reap the benefits of educational reform in Texas. Now, when exactly educational reform started is a question itself. I think it started in 1982 when Bill Clements took the first step toward educational reform by literally doing away with the part of the Texas state law that apportioned how much time in each school day had to be spent teaching what subjects in what grades.

            In 1982, we had a law that existed in Texas for thirty-some-odd years that spelled out exactly how every minute of the classroom day was to be spent—that you had to spend fifteen minutes in each day teaching health, for example. The law had been changed continually so it had gotten wonderfully complicated throughout the years. But we had clearly made the reforms in 1984 on class sizes and classroom discipline and first started the accountability system.

            The pace of reform picked up in 1995 when Senate Bill 1 strengthened the accountability system, with tougher, higher standards, removing ways that people gamed the accountability system. We had a new reading initiative that used important diagnostic tools to identify kids at risk of not learning to read by the third grade and giving them extra help to catch up.

            We had a great new curriculum that’s winning awards all around the country for being the best. It’s focused not on how do we teach but what is it that we expect the child to know. And we had a pretty dramatic effort in 1999 with the ending of social promotion.

            Think about this. In 1992, there were 42,000 kids who failed the third-grade reading test. Now, this is not the reading test that requires a perfect score to pass. Forty-two thousand kids could not read at the minimum acceptable level of reading in the third grade.

            Do you know what happened to them? Thirty-eight thousand of them went to the fourth grade. Now, do that over decades and years, and there’s a gigantic pipeline full of functionally illiterate Texans who cannot learn to read and never catch up. And we’ve taken steps to end this kind of bigotry of soft expectations.

            The changes are pretty dramatic. You talk to people in other states who observe these things around the country, and they’re amazed at the progress we’re making in Texas. Our improvement in African-American and Hispanic reading and math scores leads the country because of our tough accountability system.

            Thirty-seven percent of the schools that are deemed to be failing—do you know what happens to them? Within one year the principal is gone because the local community demands change, because we’ve empowered teachers and parents and communities to know whether their schools are succeeding or not. Yet this educational reform, as hard fought and as long fought as it has been, is very fragile, and it faces opposition from the right and the left.

            The right has been attacking it over the question of standardized tests, the heart of the accountability system. Some people on the right don’t want tests. Do you know why? Because there are some who want the public school system to fail. They know instinctively that the accountability system makes it more likely that public schools will perform, and they don’t like the public schools. And I admit that as somebody from the hard right.

            There are those on the left who attack the accountability system with equal vengeance and equal vituperativeness, and it’s because they don’t like standardized tests for the same reason—testing shines a spotlight on failure.

How the education fight plays out in the years ahead is going to be really critical to the nature of Texas state government in the year 2010 and to the nature of Texas itself. If we have a society that’s divided into two classes of people—those who we gave up on at an early age and passed on through and those who succeeded—where are we going to be as a society in 2010? A large group of people will enjoy affluence and the American dream, and a significant underclass will be doomed forever to look at but not taste that dream.

            The fourth battle is similarly important in the long term, and it has both practical and practical-tactical considerations to somebody like me who’s a political hack, and it also has importance to Texas as a whole, and that is the racial diversity of our political parties.

            We face the possibility of creating a new myth here, and it’s unfortunately a bad myth. Modern American political parties in the South could be divided between a party for whites and a party for minorities. And in Texas, we avoided this by having everything fought out within the Democratic Party, and then papered it over for the last 20 years as the Republican Party emerged.

            But we do face the possibility that in the year 2010 we can find most whites in the Republican Party and the Democratic Party dominated by an even greater degree than it is today by blacks and browns. And I would suggest that this is unhealthy and unacceptable, both to our society as a whole and to the party that I care about, the Republican Party.

            If Republicans fail to broaden their appeal by the year 2010, then some time shortly after that, they will drop into permanent minority status because sometime in the year 2015, 2020, or 2025, our state becomes not a state where the population is majority minority—it will be that before then—but a state where the voters will be a majority minority.

            The hopeful news here is that we have qualified and capable people like Tony Garza and Michael Williams who are Hispanic and African-American and serve as Republicans in statewide elected offices, and there will be something hopeful for the Texas to come if the influence of those two and others like them continues to grow.

            The final interesting question is, Will government grow or not grow? Now, government in Texas is going to grow because we’re a rapidly growing state. We add 70,000 schoolchildren to our school system every two years. You’ve got to spend more money for that. But the question is, How will it grow in proportion to population, inflation, and personal income? Because if you’re like me, you might believe that growing government faster than those measures is a sign of something that will impede economic growth.

            We have had this myth of limited government and low taxes in Texas, but it is not a myth borne out by the facts. For example, in the six years between 1989 and 1995, adjusted for population and inflation, real state spending grew at 31 percent, which meant that state government was taking a 20 percent larger share of personal income in Texas in 1995 than it had been in 1989.

            Yet between 1995 and the year 2001, our state budget will grow in adjusted terms, adjusted for population and inflation, 2.7 percent, all while the budget has been reoriented toward education and justice system and roads.

            We had, in the late 1980s and early 1990s, the highest percentage or per capita of full-time equivalent state employees of any of the ten megastates. We had more state government employees per capita than New York and California and Illinois and Pennsylvania and Michigan, states which are traditionally thought of as having much bigger government.

            But whether or not we’ll continue on the current path of limited growth of government and reorientation of priorities within the money that government spends, again, will be a big battle that will be fought out over the coming ten years.

            Where do I think these things will end up? Well, I’ve said where I think redistricting will end up. It will be as fairly and impartially done by the Republicans as it was done unto them over the past fifty years.

            I don’t believe the tax system will be changed, and as a result, it will grow more decrepit and more out of touch and more distorting in its impact. There will come a fiscal crisis in Texas sometime, maybe in the coming decade in which the train will hit the wall and something will happen. Whether it will be good or bad depends on the quality of leadership that Texas will enjoy at that moment.

            I’m hopeful, probably too hopeful, about the ability of our state’s leadership to withstand challenges to the wonderful, bright, optimistic, and hopeful educational vision that we have created in Texas in which our schools are being redirected to really serve the needs of our children, and I’m hopeful about racial diversity in our political parties and about the ability to keep government limited.

            But whether or not we will achieve these things will be one of the great dramas of Texas for the next ten years, played out, unfortunately, by a less colorful group of characters than have populated our politics in the past, but with consequences as great as those for which any group has ever been responsible.

            Thank you.