Blanco initially asked legislators to make permanent a tax on business utilities, but she had to compromise down to a five-year extension when the House balked. She also offered lawmakers a sweetener in the form of two bills to phase out a pair of hated business taxes over a seven-to-eight-year period. Legislators in both chambers were anxious to cast pro-business votes, even while extending a "temporary tax" on business utilities.
Blanco was right to compromise on the utilities tax, not because it represented good public policy but because it was smart politics. She didn't have the votes to make it permanent. Rather than suffer a defeat on the House floor in her first outing, she took what she could get. The five-year extension is a far sight better than the annual or biennial renewals that governors have been getting for the past 18 years. She won't have to deal with this issue again until her second term, which gives her some budgetary breathing room.
The bills that phase out business taxes passed with one major concession to business -- the phase-out will now occur over six years. Blanco agreed to the accelerated phase-out. In addition, she wanted the phase-outs to begin July 1, 2005; business folks want them to begin this year. They will begin this year if the state Revenue Estimating Conference forecasts higher revenues for the fiscal year beginning this July 1. That was an easy deal to cut.
What's most interesting about the session is not what Blanco accomplished, but how she accomplished it. When the utilities tax appeared to be 10 votes shy of the two-thirds majority needed in the House, she worked lawmakers overnight and struck the five-year compromise. It passed the next day with no votes to spare. Picking up 10 House votes for a tax is no mean feat. Doing it overnight requires some deft politicking.
Moreover, the "smart" political move then would have been to hold up the other two bills -- the ones lowering business taxes -- until the Senate bought into the five-year compromise. That's the way all other governors would have played it. Blanco didn't.
Instead, her floor leaders sent all three bills to the Senate almost back-to-back, giving the Upper Chamber control over the entire package at once. That was a risky move in the oft-played game of legislative one-upmanship between the House and Senate. Many House members thought at the time that Blanco was making a serious tactical mistake -- all but inviting the Senate to go its own way and use the bills as leverage for more "goodies" from the governor.
But then a funny thing happened. The Senate passed the five-year utilities tax extension quickly and without amendments, giving Blanco a huge victory and removing any chance of the usual "let's make a deal" shenanigans that typically mark tax-writing sessions. The other bills were amended slightly to make their application broader, and a conference committee of House and Senate members struck a compromise that won quick approval in both chambers. The 16-day session thus ended in 10 days.
I was among those who were perplexed when Blanco sent the tax reduction bills to the Senate right away. Governors don't normally cede leverage during a legislative session. History tells us that power abhors a vacuum. But, in the end, what looked like an amateurish mistake by Blanco turned out to be a bold (and smart) move. It was an act of faith on Blanco's part, and senators responded in kind. As a result, we didn't see the usual political games or an eleventh-hour showdown between the House and the Senate.
That would never have happened under any other governor. Kudos to Blanco for showing what a little faith -- and well-timed compromises -- can do.