Diversions continue cheating and misinforming taxpayers

By Faith Chatham - DFWRC - May 13, 2010
DFWRCC consistently opposes diversions from dedicated funds and refusal of the Legislature to appropriate of full amount dedicated to specific sectors of the state budget when there are appropriate needs for such services. Slush funds do not benefit the citizens or the Governor to veto scuh appropriations.

Some examples of costs to the citizens from such diversions include:
- Toll Roads costing citizens more to travel per mile than on non-tolled roads while part of the premises for "justification" of financing by tolls is based on lack of funds. Transportation dollars have been spent on advertising, lobbying, travel for promotion of other departments, and transfers into the General Fund in years when the General Fund showed a surplus (violating the balanced budget laws of the state).

- Lack of funding for services by departments and non-profit organizations participating in the vanity license plate program. Organizations ranging from animal spay and neutering to state parks and children's groups such as the Boy Scouts were hindered in their mission by the refusal of the state to appropriate and release funds to them collected by the state through the vanity license plate program where individuals elected to pay additional dollars to the state in behalf of those departments or non-profit organizations. During the Rick Perry Administration this practice, in our opinion, has misled the public and defrauded citizens of dollars they were led to believe they were contributing to specific purposes. If private citizens conducted business in the same manner, they would be subject to arrest for fraud. The Legislature has acted to end some of these diversions but corrective action does not erase the dishonest actions of the Governor and many in the Legislature.

- The State Park budget has been a political field of misrepresentation, misappropriation and under-appropriation while maintenance and services suffered.

- During a period when the number of oil and gas production sites, storage sites and pipeline construction sites and miles of pipeline to be inspected and enforced by the Railroad Commission and TCEQ increased by 300% the number of inspectors and budget for staffing has consistently been reduced for the past decade. Currently fines and fees paid by the industry to these agencies goes into the General Fund instead of being paid to adequately fund field inspections and air quality and water quality testing/monitoring by these agencies. It is dishonest to show a "surplus" in the General Fund when funds paid for specific purposes are not spent to adequately protect the citizens of Texas.

- Employment Insurance Fund:

Below is a post from Bill White about how Rick Perry diverted payroll taxes into his Texas Enterprise Fund and failed to plan ahead for the Unemployment Insurance Trust Fund. His actions resulted in a massive tax increase on small businesses, the engine of job growth in our state.

Download this white paper, How do payroll taxes and the Texas Enterprise Fund work?, to learn more about payroll taxes, Rick Perry's slush fund, and what can be done about the problem.


Job growth in the private sector, especially in small businesses, is the key to economic recovery. Yet this year Texas nearly doubled the payroll taxes on our businesses. This massive tax increase on Texas jobs was caused in part by the diversion of $161.5 million which Gov. Perry used to subsidize companies he selected and publicized at numerous press conferences.

A sharp increase in payroll taxes hurts job growth.

Employers know better how to manage job growth than a politician does. You can see that from the track record of the Enterprise Fund. Failed subprime lenders Countrywide and Washington Mutual received $35 million. Another $35 million was paid to struggling biotech firm Lexicon Genetics, so it could give mouse stem cells to a non-profit affiliated with Texas A&M. Rick Perry announced this project would create 5,000 new jobs. Instead of adding jobs, Lexicon laid off much of its workforce, and lost more than $500 million.

Before the Perry Administration, all payroll taxes were used to fund the Unemployment Insurance Trust Fund and workforce development activities. The Trust Fund is now empty. More than $52 million was diverted from payroll taxes last year alone, when demands on the Trust Fund were rising. Almost every month, these tax dollars are given to various favored companies, including some associated with Perry's campaign contributors. Meanwhile, Perry will have borrowed more than $2 billion from the federal government to plug its holes, without a plan for paying it back.

Three simple reforms can help avoid further hikes in state payroll taxes, establish public accountability and avoid this type of tax increase during a recession in the future.

Restore diverted funds. The Enterprise Fund should pay into the Unemployment Insurance Trust Fund the full $161.5 million diverted from Texas' payroll taxes. The governor previously vetoed a bipartisan bill to limit these diversions, but there is no excuse for keeping this money in the TEF now that the Unemployment Fund is broke. When these funds are returned to the Trust Fund, all employers will benefit from the reduced tax burden and the employers--not a politician--can decide how best to allocate payroll dollars to strengthen business and expand employment.

Audit the Enterprise Fund. There should be an independent audit of tax dollars used for subsidies. The auditors should report on: (1) whether the Governor conducted sufficient and independent analysis of each application before awarding a subsidy; (2) whether each subsidy recipient fulfilled every promise made; (3) whether these dollars were necessary to accomplish the intended purposes; (4) whether there was any political influence used or lobbyist paid to influence these decisions; and (5) whether the subsidized firms competed with other Texas businesses not receiving a subsidy.

Disclose the plan for repaying borrowed federal stimulus funds. Gov. Perry declined federal grants to strengthen the Unemployment Insurance Trust Fund, but has accepted federal loans under the stimulus legislation. No family or business or governmental entity should borrow money without a plan to repay, but in April the chair of the Texas Workforce Commission did not have a plan in place on how and when to repay these amounts. A repayment plan should be made public immediately.

In prior years Gov. Perry took credit for the beneficial effects of modest decreases in employer payroll taxes. Because of lack of planning during economic growth and the diversion of payroll taxes, payroll taxes have almost doubled for many Texas businesses. Obviously this hurts employment, at a time when the number of Texans unemployed is near a record level. Texas must put all payroll taxes into the Trust Fund to reduce further tax increases, the Legislature must have an independent audit of the use of TEF funds, and taxpayers should not have to wait until after an election to find out how the massive borrowings will be repaid.

For some Dallas-area legislators, donations fund the good life

By EMILY RAMSHAW and MARCUS FUNK - The Dallas Morning News - Sunday, February 1, 2009

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AUSTIN – Luxury car payments and private airplanes. Five-star hotels and exotic resort stays. Upscale condos, gym memberships and maid service.

They're just some of the ways North Texas lawmakers spend their campaign donations.

Some of this money, which is designed to fund runs for office, comes from individual supporters; the rest comes from special interest groups that have a stake in legislation. But Texas lawmakers are permitted to use the contributions for other expenses associated with holding elected office.

What qualifies is often subject to debate. A Dallas Morning News review of two years' worth of North Texas elected officials' spending habits shows their expenditures run the gamut from bare-bones to lavish, largely depending on how much they raise.

North Texas lawmakers say their spending is justified because of the personal and professional sacrifices they make to hold office. Lawmakers are paid $600 a month, plus a $128 personal allowance every day they're in session,

"It's a very expensive obligation – we have to live in Austin, we have to travel throughout our districts," said Sen. Florence Shapiro, R-Plano, who has used her contributions to fund car lease payments to Mercedes Benz and conference stays at the Ritz Carlton Palm Beach, the Venetian in Las Vegas, a Puerto Rican resort and the Hay-Adams, a luxury hotel in Washington, D.C.

"Otherwise, the only people who could afford to be elected would be the wealthiest of the wealthy."

Critics: slush funds

But watchdogs say the campaign accounts have effectively become lawmaker slush funds, where special interest groups can give unlimited contributions to augment elected officials' lifestyles. In the last two years, 34 percent of North Texas lawmakers' total spending – roughly $3.4 million out of nearly $10 million total – has gone to fund things beyond traditional campaigns, according to The News' analysis.

In a review two years ago that included only Dallas-area lawmakers, The News found that nearly half of their spending went to noncampaign expenditures.

"They're using the lobby's money to enhance their lifestyles, a perk that is technically legal but a clear conflict of interest," said Craig McDonald, executive director of Texans for Public Justice, which tracks the influence of money in state politics. "There ought to be a better wall between campaign contributions and what appear to be personal expenditures."

Combined, 36 North Texas lawmakers have spent nearly $560,000 on travel and entertainment, $470,000 on Austin living expenses and $290,000 on food since 2007. The bulk of their noncampaign spending – just over $2 million – was on charitable donations, gifts and campaign contributions, many of them to one another.

It's common for officials at all levels who don't face serious competition for re-election to donate to colleagues, often to help a fellow party member or to try to secure future support from them.

Of the five highest North Texas spenders, three are senators and two are House members, and all but one is Republican. Only one had a highly competitive race in the last election, which could have required unusually high expenditures.

Of the five lowest-spending North Texas lawmakers, three are Republicans and two are Democrats. All are House members.

Sen. John Carona, R-Dallas, spent more than $1 million in the last two years, more than any other North Texas lawmaker. The Senate transportation chairman's campaign reimbursed his property-management company nearly $62,000 for using the company's corporate jet for travel between Austin and Dallas – and other states where his firm has offices.

"The only expenses that we charge to the campaign are related to my service here in office," Carona said.

Carona's airplane costs were second only to Sen. Craig Estes, R-Wichita Falls, who spent nearly $95,000 on fuel and fees for a prop plane he leases. Estes, whose district includes parts of Denton and Collin counties, said that ground travel from his district to Austin is time-consuming and that the lack of direct flights means flying commercial is as tedious as driving.

"I'm a little envious of my colleagues in Amarillo and El Paso, since Southwest flies there straight from Austin every day," he said

.

Questions have been raised about lawmakers' use of private airplanes in the past. Between 1996 and 2004, the Texas Republican Party repeatedly attacked former Democratic House Speaker Pete Laney for using campaign funds to pay for his own airplane, once filing a Texas Ethics Commission complaint against him. Laney, whose district was in West Texas, was never cited for it.

Hans Klingler, spokesman for the state Republican Party, said if the ethics commission is OK with it, the party is, too.

"We always hope they put taxpayer interests first, and it sounds like both of these people, along with Speaker Laney, did that," said Klingler, who did not work for the party then.

Common practice

Using campaign funds to pay for other expenses is a common practice across the country, though the level varies from state to state, said Nick Nyhart, president of the nonprofit group Public Campaigns, which works to reduce the role of special interest money in politics.

In some states, lawmakers use the funds to sponsor Little League teams and community events. In the most severe cases, Nyhart said, lawmakers have used the campaign accounts to get around gift-giving rules and other ethics laws.

"The money can help purchase you a lifestyle above and beyond what you can afford were you not a lawmaker," Nyhart said.

Rep. Dan Branch, R-Dallas, and Sen. Jane Nelson, R-Lewisville, were two of the most generous donors – contributing $343,000 and $165,000, respectively, to the campaigns of their colleagues and to charitable causes across North Texas.

Branch attributed most of his spending – which totaled nearly $800,000 over the last two years – to having a Democratic challenger for his seat that "we took really seriously." But he argued that because of relatively low pay, it's appropriate for them to use their officeholder accounts for business purposes.

"There are a lot of sacrifices being made to be here," Branch said. "That said, there are laws set out for what's appropriate. Each member needs to be thoughtful about what these appropriate uses are."

For Sen. Chris Harris, R-Fort Worth, these uses include spending more than $15,000 on rental apartments for himself and his staff in Austin, and using campaign funds to cover his renters and auto insurance, his Sirius satellite radio and his maid service. He put a $12,000 down payment on a car at Park Place Lexus, then made more than $8,500 in lease payments.

In addition to car payments and luxury hotel stays totaling more than $13,000, Shapiro spent nearly $10,000 on Austin apartment rent, plus more than $2,000 on DirecTV and home cleaning services. Shapiro says she pays for half of her expenses out of pocket and funds the other half with her campaign account.

"The people who give us money recognize what it's going for and know that we're citizen legislators," she said.

Among other lawmakers' expenditures:

•Rep. Burt Solomons, R-Carrollton, spent more than $20,000 on rent for his Austin apartment, plus more than $4,500 on cable TV and cleaning service.

•Sen. Royce West, D-Dallas, was the top-spending Democrat, using campaign funds to make nearly $16,000 in car payments.

•Rep. Todd Smith, R-Euless, spent nearly $15,000 on Austin living expenses, including rental furniture, TV repairs, insurance, carpet cleaning and a gym membership.

•Sen. Bob Deuell, R-Greenville, spent more than $27,000 on car lease payments, auto insurance and repairs. He also spent nearly $18,000 on hotel stays. He said logistics getting to and from Austin, as well as travel within his own district, make up the bulk of his noncampaign-related expenses.

"If anybody thinks I'm making money out of this, they can call my
accountant," said Deuell, a physician. "I lose a lot of money every year
as a senator, as do a lot of other folks."

The Dallas Morning News surveyed campaign finance records from 36 lawmakers in Dallas, Tarrant, Rockwall, Denton, Collin and Ellis counties to measure campaign-related and noncampaign-related spending over the last two years. The study classified anything related to pursuing or supplying an office as "campaign spending" – everything from campaign mailers to office fax machines. All other expenses were divided into four categories: food, often for meetings; travel and
entertainment, including gasoline charges; gifts and political contributions, including donations to colleagues and local civic groups; and Austin living expenses, including apartment rent and utilities. The six North Texas lawmakers elected for the first time in 2008 had very few noncampaign expenses and were excluded from this survey.

Also Online:


Lawmaker living expenditures (.pdf)
http://www.dallasnews.com/sharedcontent/dws/img/02-09/0201living1.pdf

Lawmaker gifts, donations and dues expenditures (.pdf)
http://www.dallasnews.com/sharedcontent/dws/img/02-09/0201gifts1.pdf

Lawmaker travel and entertainment expenditures (.pdf)
http://www.dallasnews.com/sharedcontent/dws/img/02-09/0201travel1.pdf

Lawmaker food expenditures (.pdf)
http://www.dallasnews.com/sharedcontent/dws/img/02-09/0201food1.pdf

Texas Ethics Commission
http://www.ethics.state.tx.us/

Blog:
http://trailblazersblog.dallasnews.com/