The Brains Behind the Curtain

Rick perry has said that his 2010 book “Fed Up! Our Fight to Save America from Washington” is not the kind of book one would typically write before running for president. Fed Up! is filled with radical assertions plucked from the fringes of conservatism. There’s the infamous labeling of Social Security as a “Ponzi scheme.” There’s the argument that global warming is “all one contrived phony mess that is falling apart under its own weight.” Perry fulminates against the 16th Amendment (establishing a federal income tax) and 17th Amendment (popular election of U.S. senators). The governor writes that the 16th Amendment was “the greatest milestone on the road to serfdom,” an explicit nod to The Road to Serfdom, a 1944 book by Austrian economist Friedrich Hayek—popular now with libertarians—that describes economic meddling by centralized governments as leading inevitably to fascism. Perry repackages Hayek’s thesis, accusing modern-day “statists”—whom he identifies as liberals—of believing in “a powerful, activist central government that advances a radical secular agenda in the name of compassion.” Perry also asserts in his book that “we are in the midst of an unprecedented assault on free markets,” and traces the current economic malaise to the New Deal and populist movements of more than a century ago. In many ways, Fed Up! reads like a screed from an anti-government, right-wing think tank. That’s not a coincidence.

Open “Fed Up!” and you’ll find that the copyright belongs to an Austin-based think tank called the Texas Public Policy Foundation. You’ll learn in an “Author’s Note” that the foundation has “played a tremendous role in helping Texas achieve its economic success of the last two decades.” You’ll find out, too, that Perry is donating the proceeds from Fed Up! to the foundation’s Center for Tenth Amendment Studies, a new project that purports to defend Texas from the scourge of federal intrusion. The book speaks TPPF’s language—a type of free-market fundamentalism drawn from Milton Friedman, Ayn Rand and the currently in-vogue Austrian school of economics that, practically speaking, translates into policies of deregulation, privatization, tax cuts, and austerity.

It’s probably safe to say that the Texas Public Policy Foundation—whose officially stated mission is to “promote and defend liberty, personal responsibility and free enterprise”—is not a household name. But for Rick Perry, the influential think tank—modeled after the nationally known Heritage Foundation—has been a fast friend. During Perry’s 11 years as governor, the Texas Public Policy Foundation has provided the intellectual heft for his administration.

The foundation informs Perry’s views on markets and government—views that have landed him in trouble on the presidential campaign trail. TPPF has introduced Perry to economists like Arthur Laffer, a former Reagan adviser and economist best known for the idea that tax cuts lead to economic growth. Former TPPF president Jeff Judson says that Laffer, who serves as a foundation fellow, is “very influential with the governor because of TPPF.” Judson says that the foundation has had “a positive influence on the depth of Gov. Perry’s intellectual grasp of economic issues, which I think is fortunate, because if you don’t have a basis in a philosophy like Austrian economics, what you’re left with is crony capitalism.”

But it’s more than just ideology. TPPF has played a central role in shaping and promoting some of Perry’s most controversial proposals. When the state began tackling an unprecedented $27 billion budget shortfall earlier this year, TPPF and Perry teamed up to advocate against new taxes or use of the state’s $9 billion Rainy Day Fund. The foundation even paid for television ads featuring former U.S. Sen. Phil Gramm and his wife Wendy Gramm—longtime chair of TPPF—to support the most austere version of the budget. And last year, when Perry and far-right conservatives in the Legislature talked briefly of Texas’ “opting out” of Medicaid, TPPF was credited with helping breathe life into the proposal.

Close association with Perry has benefited the foundation as well. In Perry’s time as governor, the TPPF has enjoyed a meteoric rise from an obscure band of ideological crusaders to one of the most influential forces in Texas politics.

Today the group—with its innocuous-sounding name—is a bedrock institution of the Texas right, with 40 employees, an annual budget of $4.5 million, and the fealty of top-shelf conservative politicians including Perry, Lt. Gov. David Dewhurst, and U.S. Sen. John Cornyn. In 2009, the group agreed to purchase a historic building a block and a half south of the Capitol, appraised at $1 million, for its new headquarters. More important, the free-market fundamentalism preached by TPPF has become the lingua franca of the modern Texas GOP. “The grassroots depend on TPPF for the intellectual ammunition to go to battle,” says Justin Keener, a former TPPF staffer who now runs a consulting firm.

Each year, Texas’ top elected officials truck to the nonprofit’s annual policy orientation to put a sheen on the year’s legislative agenda. The group churns out reams of research, much of which provides an intellectual veneer for otherwise difficult-to-defend decisions. Enacting crippling cuts to the Children’s Health Insurance Program translates to “finding efficiencies” in a bloated system. Electricity deregulation isn’t an unpopular ideological experiment that benefits big utility companies, but rather the liberation of consumers.

Perry’s run for the presidency has put TPPF and its ultra-conservative ideology in front of a national audience. In campaign appearances, and especially during the debates, Perry has articulated a pro-corporate, free-market position that could have, and in many cases did, come straight from TPPF policy papers. And while Perry seems unlikely to win the GOP nomination, think tanks like TPPF are playing the long game. The goal is not necessarily to elect a particular politician, but to push free-market, anti-government ideology into mainstream debate. Few think tanks in the country have been so successful at taking such radical ideas mainstream.

The Texas Public Policy Foundation was once just a gleam in a billionaire’s eye.

It was 1989 and the billionaire was James Leininger who made his fortune selling specialized hospital beds. At that time, Perry was a charismatic if unremarkable state representative who had just switched from the Democratic Party to the GOP and was preparing to run against Democratic Agriculture Commissioner Jim Hightower. Leininger was an evangelical from San Antonio who’d only recently made his first foray into politics by pumping almost $200,000 into Republican races for the Texas Supreme Court. Leininger’s success transforming the court—four out of six contested seats were taken by conservatives in 1988—increased his appetite. He didn’t just want to swap one politician for another; he wanted to permanently change Texas.

“I realized there wasn’t any intellectual capital in the state of Texas,” Leininger told the Houston Chronicle in 1997, in one of the few media interviews he’s granted. Leininger set out to amass that intellectual capital, and his first goal was to bring his two favorite issues out of the wilderness: school vouchers and tort reform.

Leininger reached out to Fritz Steiger, who at the time was the public relations director for Wal-Mart, for ideas. Steiger agreed to conduct some research for Leininger. His errand led him to a congressman from Wyoming named Dick Cheney, who suggested taking a look at the Heritage Society, a think tank based in Wyoming and patterned on The Heritage Foundation, the granddaddy of conservative think tanks. At the time, state-level think tanks were still a novel idea. Just a handful existed, none in Texas. Leininger jumped at Steiger’s proposal to launch a Heritage-type organization in Texas. “[He]said, ‘I’ll fund it, you’ll run it!” Steiger recalled in 2009 to Veritas, TPPF’s house publication.

Leininger understood something important: In the long-run, ideas are more powerful than dollars. Politicians come and go, but changing the terms of the debate can produce a revolution.

At its inception, the Texas Public Policy Foundation had an $80,000 budget and just two employees working in an old warehouse in San Antonio, far from the state’s political establishment.

In the early days TPPF floundered. The media paid hardly any attention and the group’s main issues—taxpayer-funded vouchers for private schools and attacks on public school “inefficiencies”—were largely treated as fringe causes.

“When I started at TPPF we were definitely operating on the margins,” says Judson, the group’s president from 1994 to 2002 and a former aide to former Republican House Majority Leader Tom DeLay. “We had to struggle to get attention.”

Still, the small cadre of activists clustered around Leininger was slowly laying the groundwork for a rise to prominence. One of the main tasks was securing a donor base for the nonprofit beyond Leininger’s personal fortune. The foundation’s laissez-faire bent and championing of big-business agendas (tort reform, tax cuts, deregulation) created wealthy allies.

Melinda Hasting—who served as the foundation’s vice president from 1996 to 1998 but has since broken with the conservative movement—says one fundraising tactic involved approaching corporations, wealthy businessmen, and corporate-funded foundations with a pitch. Hasting (formerly Melinda Wheatley) describes it: “We think this is beneficial to your industry and would you consider providing us with a non-profit contribution. … Here’s the timeline for the completion of the research; the parameters of the research are this; we expect it will result in some savings or outsourcing.”

For example, she says, the Associated General Contractors of Texas and the Consulting Engineers Council of Texas helped fund a 1997 TPPF study called “Sundown on Big Government.” The study purported to show that the Texas Department of Transportation and 11 other state agencies could collectively cut more than $737 million from their budgets by, in part, privatizing and outsourcing agency functions—a potentially lucrative proposal for the contractors and engineers that had helped fund the study.

“I remember that as the watershed moment for TPPF,” says Hasting, who spearheaded the report. “That set into place that TPPF was a real player.” She says the foundation estimated that it earned between $2 million and $2.5 million worth of media coverage and, more important, got 20 or so of the Sundown report’s recommendations passed into law or adopted as administrative changes.

The study caused a stir at the Capitol, but few people knew that the study was paid for by the same special interests that stood to gain from its recommendations. (The two industry groups didn’t respond to request for comment.) Like other 501(c)(3) nonprofits, including the Observer, TPPF isn’t required to disclose its donors.

TPPF’s vice president for communications, Josh Treviño, says that the foundation was a different place before its current president, Brooke Rollins, arrived. “Whatever Melinda told you, she may in fact be telling you the entire truth,” he said. Treviño added that TPPF could neither confirm nor deny Hasting’s story, but noted, “That would never happen today. That’s just something we don’t do, and we wouldn’t do.”

By the end of the 1990s, TPPF could point to some key victories. The group helped defeat light-rail proposals in San Antonio, Austin and Houston by casting doubt on whether mass transit was worth the up-front investment. In 1997, TPPF played a major role in nearly passing a taxpayer-funded voucher program through the Legislature. The bill failed in the House on a 68-68 vote.

The successes showed that TPPF and Leininger could wield tangible political power. They were oddball outsiders becoming establishment figures.

Confirmation came in January 1999, when almost every statewide elected official—including then-Gov. George W. Bush, who had a rocky relationship with the group—showed up for the foundation’s 10th anniversary celebration. “That was kind of like a milestone for us, because just four or five years earlier it would’ve been hard to get an appointment with them, much less [get them to] attend an event,” Judson says.

At the gala, Perry, who just the year before had received a last-minute loan of $1.1 million from Leininger and two other Texas high-rollers in his bid for lieutenant governor, was effusive about “school choice.”

“We cannot be afraid of competition in our public schools,” Perry told the audience. “If it’s parental involvement, if it’s increased competition that’s going to make our children’s academic achievement better, I say let’s go for it.”

For years, Perry had been close to Leininger, spending time at his Webb County ranch, Hasting says. He’d often sat in on TPPF board meetings in the 1990s. As Perry ascended to the governor’s office and the Republican Party swept Democrats out of office, Perry and TPPF found that their interests often converged.

In 2004, The Dallas Morning News reported that the governor had spent a three-day weekend in the Bahamas with a group including foundation president Brooke Rollins, anti-tax guru Grover Norquist, and Leininger. When confronted, Perry spokesman Robert Black shrugged it off as a “working retreat.” At the time, lawmakers were gearing up for a school finance battle, and the Texas Public Policy Foundation had recently held a conference on that very topic.

“You can describe [the weekend in the Bahamas] as a continuation of the TPPF conference,” Black told the newspaper.

In 2005, Perry issued an executive order directing Texas schools to spend at least 65 percent of their funding directly in the classroom. A month before, TPPF had pushed the same initiative during a legislative special session, writing policy briefs in support of the rule. When the bills failed, Perry created the rule on his own, letting the foundation brag in its 2005 annual report that the new standard was one “of the Foundation’s most far-reaching proposals.” Four years later, Republican legislators worked to repeal the order amid complaints from school districts. Perry himself had to sign the bill that ended the rule TPPF so proudly championed. But the fact that a rule despised by many school districts was even in place for four years shows TPPF’s influence.

The connections between Perry and TPPF are numerous. Brooke Rollins, who has headed the foundation since 2003, held several offices in Perry’s administration before she landed at TPPF. From 2001 to 2007, Perry appointed Kathleen Hartnett White to the board of the Texas Commission on Environmental Quality, where she earned a reputation for being especially hostile to environmental concerns while rubber-stamping new coal-fired power plants. After she left the state agency, Hartnett White settled in at TPPF as its resident energy and environmental expert. Hartnett White now criticizes the EPA, one of Perry’s favorite targets, from her TPPF perch.

Sometimes people travel the other way; Mary Katherine Stout served as director of TPPF’s Center for Health Care Policy until Perry appointed her director of the Budget, Planning and Policy Division in the governor’s office.

But despite TPPF’s sway with the governor’s office, its more extreme policy positions sometimes backfire.

In 2008, TPPF and Perry corralled leaders from the state’s colleges and universities into the Stephen F. Austin Hotel in Austin to discuss ways to transform higher education with “seven breakthrough solutions.” Jeff Sandefer, a former University of Texas business professor, moderated. Sandefer also served on the TPPF board.

The seven solutions were ripped straight from TPPF’s free-market wish list, and included a voucher program for Texas students to attend private or public colleges and universities, splitting teaching from research, and measuring faculty productivity by how much money teachers attracted to their schools.

By 2011, Perry and TPPF had become more forceful in trying to implement such radical changes. The University of Texas Board of Regents, made up entirely of Perry appointees, installed former TPPF research fellow Rick O’Donnell in the newly created role of special adviser reporting directly to the board. It wasn’t hard to see O’Donnell’s goal in his new position: implementing the seven solutions. He laid out his vision for the UT System, including his dim view of taxpayer-funded universities’ research—in a widely circulated TPPF policy paper titled, “Is Academic Research a Good Investment for Texas?” His answer, for the most part, was “no.”

Public outcry, led by the powerful alumni association Texas Exes, soon put an end to O’Donnell’s efforts. The governor quickly backed off, and O’Donnell was fired just months after his appointment.

Even in this apparent loss, however, TPPF can point to progress. This fall, UT System Chancellor Francisco Cigarroa presented a new plan for reforms, more moderate than the discarded “seven solutions,” but nonetheless significant changes to the current system. And TPPF is hardly out of the loop; both the UT and A&M system boards share a member with TPPF’s board.

Occasionally, TPPF’s and Perry’s dealings with special interests put them crosswise with the conservative grassroots. Case in point: the politically disastrous Trans-Texas Corridor, a $175 billion transportation system proposal that would have used government power to seize land while allowing private investors to toll Texas drivers.

From the plan’s unveiling in 2002, TPPF was an enthusiastic booster. Foundation transportation fellow Wendell Cox called it “ambitious and visionary.” The group was especially enthused about the widespread use of tolling to pay for the infrastructure and warned in a 2005 paper that the corridor needed to be “as profitable as possible for private developers.”

Anti-toll activists like Terri Hall of Texans Uniting for Reform and Freedom, which helped torch the Trans-Texas Corridor, blast TPPF’s support of the corridor, and toll roads, in general as contradicting free-market principles.

“We’re essentially handing over taxation to a private company,” Hall says. “As a conservative, I’m going, ‘Have these people lost their minds?’”

TPPF is doing its part to defend Perry and the policies that he and TPPF have promoted. The organization’s website now has an entire section devoted to “The Texas Model” and its success in creating an advantageous economic climate. When New York Times columnist Paul Krugman wrote a piece earlier this year calling the state’s success a myth and poking holes in Perry’s assertions, TPPF soon had a response titled “The Texas Model Works.” Perry took more hits in September on Texas’ huge uninsured population and the number of government jobs he was using to bolster the state’s job-creation numbers. TPPF stood by its man. “The Texas uninsurance rate is not as problematic as critics claim,” announced one September policy piece. Another read: “The Texas Model … continues to outshine other models, create jobs, and grow the economy.”

TPPF’s Treviño, who also co-founded the popular right-wing site RedState.com, said when buzz about a Perry presidential run took hold this summer, “We made a decision that we as a foundation were going to participate in the national discussion,” he said, “only in as much as it involved explaining and defending the Texas record.” Treviño notes the foundation has been “very careful and very diligent” about keeping a separation from the Perry campaign.

Was this an independent think tank at work, or an offshoot of Perry’s presidential campaign? At times, it’s been tough to tell the difference. A President Perry would be quite the triumph for this little-known foundation. But even if Perry doesn’t win the White House, the foundation has already won in a way. It’s managed to move hard-line positions bit by bit into mainstream politics. Long after Perry has left the stage, TPPF will continue its work. Because it’s true: With a lot of money and a little learning, you can change the world.