Analysis: Governor Perry’s veto of Texas Department of Housing

On Friday Governor Perry vetoed the “Sunset Bill” for the Texas Department of Housing and Community Affairs (TDHCA) that would continue the agency in operation for 12 more years. Without passage of the Sunset Bill the state housing agency will wind down operations and cease to exist.

The Governor says he vetoed the bill because of a provision placed in the bill by recommendation of the Texas Sunset Advisory Commission, that requires the Governor to come up with a plan for how to better handle the rebuilding of homes after the next disaster.

By now no one, including the Governor, thinks things have gone well with the State’s administration of the State of Texas administered Hurricanes Ike and Dolly rebuilding program. Almost three years after the hurricanes, the State has managed to get only a small part of the federal funds to hurricane survivors.

If, like me, you are wondering why the Governor would veto the entire housing agency over a requirement to plan better for a program that is seriously messed up, then read on.

What happens next?

In his veto statement Governor Perry said,

“I do not take lightly the impact this veto may have in potentially shutting down TDHCA over the next year. That is why I have asked the legislature during this special session to amend language in pending legislation to continue the operation of TDHCA.”

So one of the following is what likely happens next:

1. The Governor opens the call of the Special Session to TDHCA Sunset legislation;
2. The Governor asks the Legislature to attach the Sunset Bill, minus the offending language and extend the agency’s life for some period of time; or
3. Let the Sunset process die for this session but attach language to legislation to extend the life of TDHCA for two years. If this happens the Sunset Commission will study TDHCA over the interim before the next Legislative session when the Legislature will vote on recommendations for reform, continuation or abolition of the department.
4. The Legislature overrides the Governor’s veto. (Don’t hold your breath waiting for that to happen).
5. If nothing else happens during the Special Session, TDHCA will wind down operations over a one year period and the programs administered TDHCA (which consist of billions of dollars in federal grants and state bond funds) will cease to exist for the future or be shifted to other agencies.

If, as I suspect, there are other contributing reasons behind the veto, the likely outcome is a continuation of TDHCA for two years and another Sunset review process, followed by another Sunset bill before the Texas Legislature in 2013 (option #3).

If the requirement to plan better with disaster recovery funds really is the reason for the veto then we may see a longer extension of the agency (option #2).

What are the consequences of the Governor’s veto of the TDHCA Sunset Bill?

One could almost hear the groans of dismay from the administrative offices of TDHCA when news of the veto came out. The agency may have to undergo yet another Sunset review which will distract from the work of the department.

The veto also means the Governor’s staff will have more work to do. Developers, stakeholders, and public interest advocates such as myself, will continue to be engaged in the Sunset process and the legislative process, possibly through the 2013 session. But this is what we do, so it’s no big deal for us.

What is in the bill that is lost if the bill dies and we start all over again?

There were several tweaks in program statutes in the Sunset Bill that would make programs work better. There were also some changes inserted into the bill by special interests to give them an advantage or enrich them. The latter provisions were not good but not devastating to the State’s housing programs. On balance, the Sunset bill the Governor vetoed contained really very few substantive changes.

With two notable exceptions:

First, there were changes fixing serious fair housing problems that represent a substantial legal liability to the State of Texas. These changes reduced the impact of NIMBY in the award of Low Income Housing Tax Credit funds. The most important change reduced the number of points awarded to letters of opposition from neighborhood associations in TDHCA’s scoring applications for Low Income Housing Tax Credits from the highest point category to a lesser level. The current policy has effectively blocked affordable housing produced under the State administered low-income housing tax credit program from middle class, all white neighborhoods in certain parts of the state (especially the Houston metro area).

Second, is the ostensible cause of the veto. The Sunset Bill contained requirements for pre-disaster planning developed by the bi-partisan Texas Sunset Commission designed to address for future disasters the slow performance of the State of Texas in providing disaster recovery through the use of federal disaster recovery funds that flow through the governor’s office.

In summary, those changes are:

• Require TDHCA, in consultation with the Texas Department of Rural Affairs and the Governor’s Office, to develop a comprehensive long-term disaster recovery plan.
• Require the Governor to designate the State’s lead agency for administration of any potential long term disaster recovery funding by May 1 of every even-numbered year.
• Require communities to add a long-term recovery component to existing emergency management plans.

Why did Governor Perry veto the TDHCA Sunset BIll?

In his veto message Governor Perry gave the following reason for his veto…

House Bill 2608 is the sunset bill for the Texas Department of Housing and Community Affairs (TDHCA). This bill would adopt the majority of the changes recommended by the Sunset Commission, most of which are technical clarifications on administrative procedures. The bill would continue the operations of the agency until 2023.

However, overly prescriptive language was added to House Bill 2608 that would impose a new layer of bureaucracy that makes unrealistic demands of the state, delay assistance to communities hit by disasters and duplicate disaster planning conducted by the Texas Division of Emergency Management.

While this language may have been well-intentioned, in many instances it would require the state to issue plans for expenditure of federal disaster recovery funds before federal agencies have announced the rules governing the expenditure of those funds.

First, a word of caution about the Governor’s veto statement.

Publicly stated reasons for vetoing bills are often not the whole story. Veto statements are the justification offered to the public. The real causes are often more complex.

The Governor’s staff went into this session unhappy with TDHCA and wanting,”to clip their wings.”  TDHCA was perceived as “arrogant” and engaged in “empire building.” Precisely what that means is not clear. But let’s just say they were not happy with TDHCA.

I thought that would abate with the resignation of TDHCA Executive Director Mike Gerber last month. But apparently not. I have no way of knowing for sure, but I surmise that Gerber’s resignation is related to the Governor’s staff’s feelings about TDHCA.

The Legislative session began with a number of bills filed at the behest of the Governor’s staff designed to do some serious “wing clipping” of  TDHCA. These bills stripped TDHCA of weatherization funds, housing trust funds, mortgage revenue bonds and so on. These bills clearly originated in the Governor’s office and not in the offices of members of the Legislature. This legislation was not well thought out, made no policy sense, and would have either cost the State more money or made the programs greatly less efficient. They were all about punishing TDHCA and not about good public policy. We, other members of the public interest community, and legislators committed to the State’s effective role in providing housing for the poor fought against these bills and the bills were generally defeated.

Another agency that was punished successfully was the Texas Department of Rural Affairs (TDRA). Designated the lead agency for Hurricane Ike/Dolly disaster recovery by the Governor, TDRA had serious problems managing the program. The executive director of TDRA resigned, I presume, under pressure from the Governor’s staff. After burning through a very large portion of the funds available to administer the program with little in the way of actual on the ground disaster recovery spending, most of the TDRA staff administering the federal disaster funds were transferred to a private engineering firm who assumed responsibility for managing the infrastructure rebuilding programs. (More on this private engineering firm in future posts).

Then came the Governor’s staff’s furtive attack on colonia programs. There ensued a very strange behind-the-scenes effort to find another agency to take over administration of those programs instead of TDHCA. That initiative went nowhere.

Is chastisement and “wing clipping” behind the Governor’s veto? Probably.

If the Governor’s staff wants to take another shot at breaking up TDHCA next session, a veto of the Sunset Bill is one possible move to set up that effort. But are the Governor’s staff really advantaged by having to devote substantial time and attention to another Sunset process? Only they know.

Now let’s consider the Governor’s stated reason for the veto. According to the veto message this was because the Sunset bill imposed “…a new layer of bureaucracy that makes unrealistic demands of the state, delay[s] assistance to communities hit by disasters and duplicate[s] disaster planning conducted by the Texas Division of Emergency Management.”

This offending part of the bill was adopted by the Texas Sunset Advisory Commission through the Commission’s report on TDHCA.

After studying TDHCA over the interim the number one finding of the Commission regarding TDHCA was:

Finding 1: Lack of State Planning Delays Funding to Hard Hit Texas Communities Recovering FromMajor Disasters.

Texas has faced major hurricanes in recent years and will face them again. The federal government has responded to recent storms with about $3.5 billion in long-term disaster recovery funding to help rebuild infrastructure and housing on the Texas Coast. The State has jointly administered these disaster recovery programs through the Texas Department of Housing and Community Affairs and Texas Department of Rural Affairs, under the guidance of the Office of the Governor. To date, the State has not effectively planned for long-term recovery or the use of these funds, increasing the amount of time it takes to rebuild Texas communities, and increasing the harms suffered by communities. Requiring the Department, in consultation with the Texas Department of Rural Affairs and the Governor’s Office, to develop a long-term recovery plan, and train local administrators on its implementation, would help ensure that communities and state agencies are well positioned to more efficiently administer any future federal recovery funds.

To address this finding the Commission made three recommendations:

Key Recommendations

• Require TDHCA, in consultation with the Texas Department of Rural Affairs and the Governor’s Office, to develop a comprehensive long-term disaster recovery plan.
• Require the Governor to designate the State’s lead agency for administration of any potential long term disaster recovery funding by May 1 of every even-numbered year.
• Require communities to add a long-term recovery component to existing emergency management plans.

Who are these people behind the bill provisions the Governor objects to?

The recommendations were added to the Sunset Bill by Texas Representative Linda Harper-Brown (R-Irving), a member of the Commission and the Sunset Bill sponsor.

These are not exactly people likely given to, in the Governor’s words, “imposing a new layer of bureaucracy that makes unrealistic demands of the state”.

Why did the Sunset Commission recommend the disaster planning language?

They felt they put their finger on a problem that needed to be addressed.

In the words of the Texas Sunset Advisory Commission report…

Five years after Hurricane Rita, the vast majority of TDHCA’s Rita Round I work is completed, however, for each round of funding that Texas has received so far, local and state partners will likely take more than five years to finish recovery work. Appendix C specifies timelines for each round of funding Texas has received to date. In general, no matter the method of distribution of funds, it takes Texas at least two years from the date of the storm to completion of the first house.

• The State has not effectively planned for the long-term recovery from major disasters.
• Failure to plan slows the pace of recovery, increasing the harms suffered by communities and individuals.
• To be successful in recovery efforts, Texas needs to take action to address structural and administrative roadblocks to recovery before the next storm hits.
• The State has an opportunity to better meet the long-term needs of communities in the wake of disasters by planning for a better organized and efficient distribution of funds and services.

How did it get to the point where the bill was vetoed?

Governor Perry has been appropriately outspoken in his criticism of the federal government’s initial slow response to the interim housing needs of disaster survivors, but notably silent about the problems his administration has in delivering infrastructure and permanent housing to disaster survivors with the three billion dollars in federal assistance the Bush and Obama Administrations have given the Governor to administer.

For several months state agency officials tried to blame first HUD and then my organization for the delays because of an administrative complaint we filed over the State’s use of the funds. But those excuses were just smokescreens for the real problems the State has with handling the funds. That complaint was filed in reaction to the state’s problems, it didn’t cause the state’s problems.

If the Governor’s staff had a problem with the Sunset Commission’s language by the time the Legislature passed the TDHCA Sunset Bill, they did a great job of keeping it a secret.

The Governor’s staff did insist on and get changes to the provisions in the TDHCA Sunset Bill related to disaster planning.

Legislative sources tell me that the Governor’s staff requested and obtained changes in the bill language related to disaster recovery planning. Legislators understood that by agreeing to those changes the Governor’s staff had no remaining issues. One change allowed the governor to move the planning process to an agency or office other than TDHCA (rumored to be the Texas Land Commissioner). Another change struck language giving infrastructure planning the TDRA. A third change, done through the House/Senate conference committee, stated there was not a private right of action (ability to sue) if the law was violated. The latter was highly unusual and really hard to figure given the State’s sovereign immunity. But nevertheless, the Legislature gave the Governor’s staff all the changes they requested.

And the Governor still vetoed the bill. Go figure.

Conclusion

It is looking increasingly like the Governor does not know what to do with regards to running disaster recovery programs. He gave first authority to Texas Department of Rural Affairs and decided after two years that was not working. So he forced out the director and is dismantling that agency.

After giving TDHCA responsibility to administer the housing part of the disaster recovery programs and resolving our administrative complaint, the Governor then forced out the executive director of TDHCA and vetoed the department’s Sunset Bill, throwing that agency and the housing part of disaster recovery into turmoil.

In the next chapter of the Texas disaster recovery saga it appears the Governor is planning a hand off responsibility (again) to run the disaster recovery program to the Land Commissioner and a multinational engineering firm. I have long advocated that the disaster recovery programs needed an elected official to embrace responsibility and provide leadership. I always assumed that would be the Governor. But I have great respect for Land Commissioner Jerry Patterson and I sincerely hope he succeeds. Given what I have seen of the engineering firm’s capabilities I have grave doubts about their ability to manage the disaster funds successfully.

Handling disaster recovery is a responsibility Congress gave to the Governor. He is responsible for making the program work.

The Sunset Advisory Commission looked at what has happened (and what has not happened) over the past three years and concluded:

• The State has not effectively planned for the long-term recovery from major disasters.
• Failure to plan slows the pace of recovery, increasing the harms suffered by communities and individuals.
• To be successful in recovery efforts, Texas needs to take action to address structural and administrative roadblocks to recovery before the next storm hits.
• The State has an opportunity to better meet the long-term needs of communities in the wake of disasters by planning for a better organized and efficient distribution of funds and services.