| ► San Antonio Express-News – 08/21/10 - Lawmaker use of stipends disputed |
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San Antonio Express-News – 08/21/10 - Lawmaker use of stipends disputed By Gary Scharrer – Express-News
August 21, 2010
AUSTIN — Most San Antonio and Houston state legislators pay for lodging and related living expenses here out of their campaign accounts and then pocket the $168 per diem from taxpayers — a practice an ethics watchdog called “de facto fraud.”
Lawmakers say their conduct is both ethical and legal. But the handling of their per diem, totaling at least $23,520 each in legislative session years, could put them in a gray area with the IRS.
Dave Palmer filed complaints this week with the Travis County district attorney and the Texas Ethics Commission against lawmakers who pay lodging and utility expenses with campaign money instead of using the per diem they get every day they're in the Capitol on state business.
“When outside sources pay 100 percent of a legislator's lodging expenses, he or she has no lawful right to pocket state reimbursements paid to defray those costs, right?” Palmer asked in his complaint to the prosecutor. “It would be difficult to imagine that this conduct does not constitute de facto fraud.”
His complaint covers 34 of 46 legislators from San Antonio and Houston. Palmer said his complaint soon will expand to include about two dozen Dallas and Fort Worth lawmakers. He's also looking at the campaign finance records of other lawmakers scattered across Texas.
Palmer is a Californian and disabled Army veteran who has spent much of the past 18 years examining financial records of public officials in Texas, California, Ohio, New Jersey, New York and Louisiana and several other states.
Prosecutors didn't return phone calls regarding Palmer's complaint, which didn't cite any alleged violations of specific criminal statutes.
But the use of money from political supporters to cover Austin living expenses raises questions about potential tax implications.
“You can't have the same expenses reimbursed from two sources and not declare one source as income. That's pretty clear. That's how the law works,” said John Robinson, a federal tax expert and accounting professor in the McCombs School of Business at the University of Texas at Austin. “At the least, this is questionable.”
Internal Revenue Service officials declined to say how state legislative per diem pay should be handled when living expenses are paid from campaign funds.
Campaign records and Palmer's research indicates Sen. Leticia Van de Putte, D-San Antonio, has used nearly $130,000 in campaign funds to cover Austin living expenses over the past seven years.
This year, Van de Putte reports monthly “Austin apartment rent” of $1,650 paid from her campaign account.
“The Election Code specifically authorizes legislators to pay for Austin lodging and some other expenses from legislators' campaign accounts, so that is what my campaign does,” Van de Putte said. “Per diem doesn't cover the extent of the many expenses associated with being in Austin while working on legislative business. It is not, therefore, taxable income, nor do I report it as such.”
Van de Putte and other lawmakers say they don't favor raising the per diem, but also note they have to use campaign money or personal funds to finance living costs exceeding their per diem — which amounts to more than $4,000 a month during legislative sessions.
There are no state rules on the proper use of per diem pay, and lawmakers are allowed to use political funds to pay for business-related expenses, according to the Texas Ethics Commission.
“It's legal and ethical to do so,” Rep. Jose Menendez, D-San Antonio, said about using campaign funds to pay for lodging and related expenses in Austin.
Menendez said he didn't use campaign money during his first eight years in the Legislature as he made daily commutes to the Capitol – even though the state reimbursement is limited to one trip per week while lawmakers are in session.
His routine changed after his children were born, and he wanted to spend more time with them — in his Austin apartment. He paid about $1,700 a month for apartment living during the 2009 legislative session.
“Austin is a very expensive city,” Menendez said. “It costs more money than what we get in per diem. We have greater expenses than just our rent and utilities.”
Robinson, the UT business professor, said per diem is designed to cover traveling costs when making an overnight trip.
“The law enumerates what those expenses can be — meals and lodging and a number of things under miscellaneous. There's a limited amount of expenses that can be reimbursed under the tax law for travel,” he said. “All the per diem does is release you from substantiating all those little expenses. It doesn't open it up to reimbursing things that would not otherwise be deductible.”
Lillian Mills, also a federal tax expert and accounting professor in the McCombs School of Business at the University of Texas at Austin, said per diem pay generally is not taxable.“But you can't then use the same amount of expense to avoid paying tax on some other reimbursement like a draw-out of that campaign fund,” she said.
Texas lawmakers do not have to provide invoices or documentation for their expenses or file for the per diem checks when they're in session. The payments are made automatically, according to leaders in the House and Senate business offices.
When not in session, legislators get up to $2,016 per month, or a maximum of 12 days, in per diem pay to cover expenses. They don't have to be itemized.
The salary for a Texas legislator is $600 per month.
San Antonio-area legislators who've used little or no campaign money to pay for Austin living expenses are: Democratic Rep. Joaquin Castro, Republican Speaker Joe Straus, Democratic Rep. Joe Farias, and Republican Rep. Frank Corte.
Castro said he normally drives back and forth between San Antonio and Austin and uses his per diem to cover hotel expenses when he spends the night instead of setting up an apartment.
He doesn't use campaign money to cover living expenses. “I just use my per diem instead,” he said.
Houston-area legislators who haven't used campaign money to pay for Austin living expenses, according to Palmer's research, are: Republican Sens. Glenn Hegar and Joan Huffman and Democratic Sen. John Whitmire, and Democratic Reps. Rep. Carol Alvarado, Ellen Cohen and Scott Hochberg and Republican Reps. John Davis, Rob Eissler and Rep. John Zerwas.
Palmer, 66, who lives in Folsom, Calif., and has been described as “an equal opportunity exposer,” said he's not guided by ideology or partisan politics.
“I don't care who they are,” he said. “The thing I hate the most is hypocrisy.”
Palmer said he spends up to 10 hours a day looking at public records. He has no staff.
“It's David vs. Goliath, so to speak,” he said.
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