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Eric Johnson

It’s way past time to regulate payday lenders

From the Observer:

As an industry, when you’ve got Tom Craddick, consumer groups, the Midland County District Attorney and Bible-quoting Baptists arrayed against you, most likely you’re facing a serious come-to-Jesus moment. Today, a House committee heard hours of impassioned testimony in favor of legislation that would curb Texas’ Wild West payday and auto-title lending business. As Melissa del Bosque has documented, payday lenders in Texas are virtually unregulated and frequently lock consumers into a cycle of debt. Craddick’s bill, along with three other identical bills, would close a loopholethat allows payday lenders to register as consumer credit organizations (CSOs) and escape regulation.

It was rather incredible to watch former Speaker Tom Craddick, who doesn’t exactly have a reputation as an advocate for the working poor, take the payday lenders to the woodshed. “No longer do I think the Legislature can stand back and watch these businesses take advantage of people in need,” Craddick said today. The impact of rates that can amount to 500 percent APR is “overwhelming – actually it’s awful,” he said.

Under the proposed legislation, payday and auto-title lenders could no longer operate as consumer credit organizations, but instead would be subject to the same laws and regulations as other lenders. A cap of 135 percent – still far above the 36 percent limit imposed by many states – would be imposed on the short-term loans offered by payday lenders.

Craddick’s bill is HB410, and it has a bipartisan plethora of co-authors. Other bills on the subject are HB 656 (Farias), HB 661 (Rodriguez), HB 1323 (Johnson), HB 2594 (Truitt), and HB 2592 (Truitt).

Among the consumer advocates and faith leaders, consensus seemed to be that the best approach would be imposing rate caps, closing the CSO loophole and imposing existing law on the lenders. That’s Craddick’s approach. However, the payday lender industry is basically telling legislators that they will go out of business if that happens and desperate consumers will have nowhere to go for easy credit.

The Craddick approach would “dramatically change the business model as we know it in a detrimental way,” said Rob Norcross, a lobbyist for the Consumer Service Alliance of Texas, an industry group.

Asked today if they could survive with ‘just’ 135 percent APR, Norcross said, “The answer is no. … Those rates aren’t sustainable.”

Cry me a river, dude. If your business isn’t sustainable at that APR level, you don’t have a viable business model and deserve to be made extinct. If that’s what happens, it’s a feature, not a bug.

Basically, payday lenders need to be treated like any other loan-making financial institution. As the group Texas Faith for Fair Lending notes, the problem is that’s not how they operate now.

payday and auto title lenders do not operate as lenders governed by the Texas Finance code as one might expect. Instead, they have found a loophole in a law called the Credit Services Organizations (CSO) Act that sets no limits on rates and fees they charge borrowers.

The CSO statute was enacted in 1997 and is designed to govern how credit repair services can help those repair bad credit. In this statute CSOs are given is the authority to “obtain an extension of consumer credit for a consumer.” The intent is clearly to enable CSOs to help Texans with bad credit build up a positive lending history in order to increase credit scores. Instead, over 98% of registered CSOs in this state are payday and auto title lenders that do anything but help people repair credit.

So, in practice, payday and auto title lenders are merely brokers, or arrangers of credit. They partner with banks or other large lenders who charge an interest rate of below the 10% APR constitutional limit, while the payday lender, registered as a CSO, charges an exorbitant fee. This diagram better illustrates the relationship –

The true lender, the financial institution, charges a small interest rate and makes a little money from the short loan. The CSO charges a high fee to arrange, collect and guarantee the loan. This is typically around $20 per $100 borrowed but there is no legal limit on these fees. The borrower never interacts with the actual lender.

They add nothing of value to the equation but reap huge profits by virtue of the loophole they squeeze through. That loophole needs to be closed. You can see videos of the TFFL press conference here, and more about TFFL, which is a Texas Impact project, here. If you’re a churchgoer, the odds are good that your denomination is involved in this effort. Please check it out and make your voice heard as well.

House Appropriations Committee passes a budget

It’s not much different than what they started out with.

House budget-writers were able to sprinkle some extra money into education and health care but otherwise did little to change the bare-bones proposal with which they started.

The 2012-13 budget will hit the House floor late next week after the Appropriations Committee approved House Bill 1 Wednesday morning in an 18 to 7 party-line vote.

Weighing in at $164.5 billion — about $23 billion less than the current two-year budget — the bill still follows the no-new-taxes, deep-cutting approach that state leaders have long advocated.

“It is a budget that reflects the money we have,” said Chairman Jim Pitts, R-Waxahachie. “There’s a lot of members of the House, this is as far as we can go.”

Basically, take the original cut-everything, fund-nothing budget, add the $4.3 billion we got back from using a little bit of the Rainy Day Fund to close the last biennium’s shortfall (which as far as I know has yet to be ratified by the House), and leave it at that. Rep. Pitts sounds like he realizes what a turd this budget is.

Rep. Jim Pitts said he’d like to see House-Senate budget negotiators massage the budget his Appropriations Committee approved Wednesday — and even “make it better.”

But Pitts, R-Waxahachie, the House’s chief budget writer, said Texans alarmed at the budget’s deep cuts in spending will need to change some minds in the House, which has an unusually large number of freshman, many elected with tea party support.

“There’s a lot of members of the House, this is as far as we can go,” Pitts said. Asked to elaborate, he said, “They don’t like anything else put in this bill. They feel like they were elected to make cuts.”

I’m glad we’re all clear on that, because I for one will be happy to make the 2012 and 2014 elections all about it. Democrats did the right thing and unanimously voted against this budget, while all Republicans voted for it. Which, again, is fine by me. A press release about this from four of the Dems on Appropriations is here, but I’ve included it beneath the fold because it’s worth quoting in full.

Putting questions of electoral politics aside, there is still the very real matter of whether the House and the Senate can agree on a budget. Texas Politics explores that a little further.

The day before the House Appropriations Committee approved a budget that’s about $23 billion less than the current two-year budget and that includes huge cuts for health care and education, Lt. Gov. David Dewhurst was expressing confidence that the Senate would be able to come up with additional revenue to make cuts all agree are inevitable slightly less injurious.

Asked whether a Senate subcommittee was looking for $5 billion in non-tax revenues, he said, “I’m not sure that I or the committee are looking for a specific number, but we’re looking for an alternative if we don’t go into the rainy day fund as much as some of the members in both the Senate and the House are considering. And what I would rather see is a larger list rather than a smaller list, so that we can very carefully and thoughtfully go through and pick those, if any, that we think make sense and that will fund our operations. In some cases, some of the non-tax revenues are one-time; some of it is recurring.”

Sale of state property is among the list of possibilities, Dewhurst said.

He was parsing his words carefully, knowing that an internecine budget battle looms and knowing also that he’s likely the one who will have to find a solution that somehow mollifies zealous anti-tax, anti-spend members in both houses while avoiding cuts that go deep into the muscle and bones of many state services.

Good luck with that, a sentiment I mean half sarcastically and half sincerely. We’ll let you know how you did next year. EoW, Trail Blazers and Texas Politics has more, and here’s an LBB analysis of HB1, which you’ll either have to figure out how to rotate or risk getting a kink in your neck trying to read.

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The itty bitty budget deal

It’s not nothing, but not by much.

Gov. Rick Perry and House leaders struck a deal Tuesday to spend $3.2 billion from the state’s rainy day fund to fix one piece of the state’s budget shortfall.

[…]

Perry said at the start of the session that lawmakers should not use any rainy-day fund money, but he has softened his position in recent weeks to say the money should be used as a last resort. By endorsing the House vote Tuesday, he in many ways abandoned his last-resort position, since the January-to-May session is only halfway over.

Still, Perry’s posturing could go a long way in shaping the debate about how lawmakers should combat their much larger shortfall as they write the budget that begins in September.

“As we craft the next two-year budget, Texas leaders will continue to focus on a more efficient, fiscally responsible government, essential state services, and private sector job creation,” Perry said in a statement. “I remain steadfastly committed to protecting the remaining balance of the Rainy Day Fund, and will not sign a 2012-2013 state budget that uses the Rainy Day Fund.”

Many Republican lawmakers, fearful of looking weak to conservative activists by twice taking money out of the fund, are likely to agree with Perry.

“I think the governor wants to make sure that we don’t come back for more,” said House Appropriations Committee Chairman Jim Pitts, who says the $3.2 billion is all the House will take from the rainy day fund. “I cannot get votes to use it for anything else.”

While it’s better to use some of the Rainy Day Fund than none of it, this will do very little to mitigate the huge cuts that are still coming for public education, Medicaid, and everything else. And that’s just how Rick Perry and the most radical factions of the Republican Party want it. Burka sums up what happened.

Perry steamrolled the House. He limited the spending of the Rainy Day Fund to 3.2 billion, all of it to balance the budget by paying the state’s bills. The rest of the 4.3B necessary to balance the budget will come from more cuts ($800M and $50M).

Then, for good measure, he vowed to veto the budget if lawmakers attempted to spend any of the remaining money in the Rainy Day Fund.

I don’t know what the leadership in the House has been doing, but Perry has been calling in House members to lobby them against using the Rainy Day Fund. He has also been lobbying the committee. Obviously, he is a heckuva good lobbyist.

The House won nothing in the negotiations except the ability to spend $3.2B from the Rainy Day Fund, but only for the purpose of balancing the budget. It was a hollow victory because the state cannot constitutionally fail to balance the budget. All the $3.2B achieves is to spare the state the embarrassment of being technically broke.

Democrats on the Appropriations Committee voted for HB275, which authorized the use of the RDF for the 2010-11 biennium, then voted against companion bill HB4, which made the further cuts Burka mentioned.

State Rep. Mike Villarreal, D-San Antonio, said the leadership is using the rainy day fund to avoid the embarrassment of failing to pay its bills, which Comptroller Susan Combs has said would be result if they didn’t use some of the $9.4 billion reserve fund for the current deficit.

“We’re willing to tap the rainy day fund to save face but we’re not willing to tap the rainy day fund to mitigate the harm that is going to be inflicted upon our children,” Villarreal said. “That, in a word, is irresponsible.”

Appropriations Chairman Jim Pitts, R-Waxahachie, took the criticism from Democrats in stride, acknowledging that this is the political reality.

And that needs to be the message that gets through next November. The Republicans wanted the cuts that are to come. They’re going to get them, and they need to be held responsible for them.

UPDATE: The Trib has more.

The House Appropriations Committee voted 27-0 Tuesday afternoon to move HB 275 to the floor. The substitute bill authorizes the state to draw down about $3.1 billion from the Budget Stabilization Fund, commonly referred to as the Rainy Day Fund. A companion bill, HB 4, passed out of the committee on a party-line vote. That legislation is controversial because it outlines where the savings will come from. Lawmakers began the day short about $4 billion. After the Rainy Day funds are taken into account, the rest of the savings comes from Combs’ revised $300 million sales tax revenue estimate and more than $800 million in cuts. That latter figure is alarming, but officials say most — if not all — of those reductions have already been implemented by state agencies over the past two years.

Democrats objected to the effects the potential cuts may have on education and health care services. They also spoke out against the governor’s refusal to consider using any additional Rainy Day funds to cover the next biennium’s shortfall, especially since Perry has clearly stated he will not support any kind of tax increase.

“[This statement] ties our hands,” said Rep. Sylvester Turner, D-Houston. “To say you cannot consider the Rainy Day Fund for fiscal years 2012 and 2013 is irresponsible.”

I suspect we’ll be hearing that word a lot. In related news, more specific cuts were made.

The Appropriations Committee just approved deep cuts to the Health and Human Services Commission and the four departments it oversees. The vote was 16-8. It wasn’t quite along party lines, as Rep. Susan King, R-Abilene, joined dissenting Democrats.

Chief social services budget writer John Zerwas, R-Spring, said addition of $2 billion from Tuesday’s decision to spend rainy-day dollars eased the pain a bit. He said that allowed members to “to get it to a place that’s at least a little more comfortable than where we started.”

Still, cuts to home-based care for the disabled and seniors, nursing homes, prevention programs for child abuse, programs for developmentally disabled children and health care providers remain far deeper than any belt-tightening taken in the last fiscal crisis in 2003.

If you’re lying on a bed of broken glass and rusty nails and someone gives you one of those little airplane pillows for your head, you’ll be a little more comfortable than you were before. But you’ll still be a long way off from being in a good place. A statements from Rep. Villarreal is here, and from Rep. Eric Johnson is here.

Sibley in for SD22 special election

With the official resignation of State Sen. Kip Averitt, his predecessor in SD22, David Sibley, has announced that he will be a candidate for the May special election to fill the remainder of Averitt’s term.

The winner of the expected special election isn’t guaranteed a shot at the general election to serve during the 2011 legislative session.

That will be decided by the county party chairs in the district. The chairs from the Democratic and Republican parties each will meet to select replacement candidates on the general election ballot.

But Sibley made it clear in his statement that he’s running to position himself as his party’s choice in November.

“I believe I have a proven conservative track record at getting results, the understanding of the legislative process and the familiarity with issues of importance to Senate District 22 that will benefit all 10 counties in the district during this tough upcoming session,” he said.

Darren Yancy, who lost to a non-campaigning Averitt in March, is also in. I feel confident that several others will jump in as well. I’ll be surprised if Sibley wins this election and does not get named the Republican nominee for November. He’s the strong favorite for each. More from the Trib, which notes that there will also be a special election in HD100 to fill out Rep. Terri Hodge’s term. No word yet if Eric Johnson will be in for that – he may as well, it’d be some added seniority for him – but he’ll be the representative from HD100 next year regardless thanks to his win in March.

Election results: The Lege

There are way too many races to recap here, and since the Trib has done such a thorough job of it, I’ll leave the heavy lifting to them. A few highlights:

– Steve Ogden easily won re-nomination in SD5, and Kip Averitt was returned to the ballot in SD22. Each faced fringe opponents, so these are good results as far as maintaining a functioning Senate goes. Averitt as we know had sought to drop out. He may yet do that, at which time we’ll get appointed nominees from both parties; if he changes his mind, he’s in, as no Dem filed originally.

– Borris Miles won by a razor-thin margin over Al Edwards in HD146. The margin as of this morning was all of eleven votes. Yes, you can expect a recount, and that’s a small enough number that there’s a chance the outcome could change. Don’t carve anything into stone just yet. A statement from Miles’ campaign is beneath the fold.

– Despite some predictions that Rep. Terri Hodge, who recently pleaded guilty to lying on her tax returns and stated her intention to resign after being sentenced, would still win her primary, challenger Eric Johnson defeated her by a large margin. There is no Republican challenger, so Johnson will be sworn in next January.

– Rep. Betty Brown, best known for her inability to handle Asian names, lost. That’s good. Rep. Tommy Merritt of Longview, who had faced primary challenges every cycle this decade for his opposition to Tom Craddick and other acts of heresy, also lost. That’s not good. Rep. Delwin Jones is in a runoff. On the Democratic side, Reps. Dora Olivo of Fort Bend and Tara Rios Ybarra of South Padre Island lost, and Rep. Norma Chavez of El Paso is in a runoff. Go click those Trib links for more.

That’s all I’ve got for now. I’ll post links to more coverage later as I see them.

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Hodge pleads guilty, will resign

Well, at least this got resolved before the primary.

State Rep. Terri Hodge, D-Dallas, pleaded guilty early this morning to lying on her tax returns in connection with the FBI’s Dallas City Hall public corruption investigation, an act that ends her 14-year political career.

Hodge, 69, now a convicted felon, is dropping her re-election plans, and will resign her position as District 100 representative in the Texas House when she is sentenced. At Wednesday’s hearing, U.S. District Judge Barbara Lynn said she wanted sentencing to occur as soon as possible.

“Ms. Hodge will have pleaded guilty today to a felony and will still be representing her district,” Lynn said. “I’m not real keen on that notion.”

Attorney Jeff Kearney said Hodge needed about 90 days to close down her legislative offices. “There are thousands of files” in her offices, he said, dealing with district and constituent business amassed during seven terms in office. “She can’t throw those in a dumpster.”

It must be noted that the deadline to officially withdraw from the ballot has passed, even for deceased candidates, so it is possible that Hodge could still win, in which case she’d have to be replaced on the ballot; as there is no Republican candidate, the Dallas County GOP would then get to pick someone as well, much as it would be in the case of Sen. Kip Averitt. One hopes that won’t happen and that the voters will choose challenger Eric Johnson, who has run a strong campaign and who received the DMN endorsement last month, but one never knows. It would have been nice of Hodge to step down before it came to this, but I suppose she kept believing she could beat this right up till the point where she agreed to take the plea.

Anyway. Here’s more from the Trib, with background from me and the Observer. A statement from Rep. Hodge is beneath the fold.

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Election tidbits for 9/28

Two weeks till Early Voting begins.

Psst! Hey, Peggy! Rep. Kristi Thibaut represents HD133 here in Houston, not Galveston. Just FYI.

As for the news that the GOP will be targeting State Rep. Abel Herrero, given the 2008 partisan index of HD34, plus the apparent likelihood that the Dems are once again punting on the statewide races and don’t have much of a plan to engage their base in South Texas, it makes sense. On the other hand, Herrero performed pretty decently against a well-funded opponent (he had more money, but not that much more), and I don’t at this time see him as being in much danger; at least, I don’t see him as being in as much danger as some other Democrats. But if I were a Republican, I’d want to take a shot at him, even if I thought it was a long shot.

Republican State Rep. Charlie Geren may face another primary challenger. After taking Tom Craddick and James Leininger’s best shots, I doubt he’s seriously worried.

Speaking of primaries, Democrat Eric Johnson boasts about raising over $100K in his effort to unseat State Rep. Terri Hodge. I think the verdict in the Dallas City Hall corruption case, for which Rep. Hodge has been indicted but not yet tried, will be the bigger determinant in his race than his fundraising, but it can’t hurt to have the resources to run.

Empower Texans, one of the conservative agitprop groups in the state, wants to know if you think Sen. Hutchison should resign or not. Not sure why they think if she does resign it will “save taxpayers up to $30 million”, and I’m not sure why that’s her responsibility and not Governor Perry’s, since the cost of the special election is in part a function of the date he sets for it, but whatever. I don’t expect logic from these guys anyway.

Was that Rasmussen poll that showed a KBH bounceback against Rick Perry a bogus result?

Last week, the Press named Sheriff Adrian Garcia the Best Democrat, and County Judge Ed Emmett the Best Republican. I can’t argue with either of those choices.

Mayoral candidate Gene Locke has recordings of numerous robocalls being made on his behalf by various elected officials that support his candidacy. I’ll say again, I think you ought to be spending your money on other forms of outreach, like mail – in this case, why not do these recorsings as radio ads – and save the robocalls for GOTV efforts. I say this as someone who generally hangs up on robocalls. Maybe I’m the exception here, I don’t know. But I suspect most people find these things more intrusive and annoying than anything else.

Speaking of ads, Peter Brown is set to release his third TV ad tomorrow. I’ll post the video when I get it. So far, that’s Brown 3, Parker 1, Locke 0, and I haven’t seen Parker’s ad on the tube yet. Still wondering when we’ll see new poll numbers so we’ll know if Brown’s air war has moved anyone into his column.

Terri Hodge draws a challenger

State Rep. Terri Hodge, a fixture in HD100 since 1996, has drawn a challenger for next year.

Dallas lawyer Eric Johnson announced [Friday] that he is running for the District 100 seat in the Texas House.

That’s the seat currently being held by embattled Democrat Terri Hodge.

Hodge is currently under federal indictment on bribery charges and is expected to go to trial this summer.

She has not had a major opponent since being elected to the House in 1996.

Several candidates have expressed interest in running for the District 100 seat, but most of their plans were contingent on Hodge being convicted of a felony that would have disqualified her from office.

In his release that I’ve attached below, Johnson appears to be running no matter what happens to Hodge at trial.

Expect other candidates to join the fray if things don’t go Hodge’s way.

I got that release late last week as well, and a subsequent one that I’ve put beneath the fold as well. Here’s a couple of updates on that bribery case. Most of those charged are going to trial on June 22, though Rep. Hodge will be tried separately. It ought to be a high-profile case.

The Observer wrote a profile of Rep. Hodge last year after no one filed to run against her despite the charges that had been filed. She’s been a staunch advocate for her district, where the article notes the charges are seen (or at least were at the time) with skepticism, and a tough competitor. At the end of this legislative session, she asserted her innocence to the DMN. I’ve no idea how this will go for her, but it’ll be very interesting to watch.

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