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Texas Comptroller Carole Keeton Rylander couldn't have picked a better time to slip out of town.

Democrats in Austin who have loathed her since she changed parties in the mid-1980s were trying to smear her with a Nixon-like scandal involving audiotapes of phone conversations that her staff attorney recorded clandestinely. She also was ducking questions about why a 27-year-old woman barely out of college, who happened to be the wife of Rylander's chief of staff, was the only person interviewed for a director's position in the comptroller's office that paid $55,000 a year.

It had been a rough month for the 60-year-old politician who was elected comptroller last year on an advertising campaign branding her as "one tough grandma."

But on a gentle day in October in the nation's capital, Rylander was among friends, a safe distance from the snide gossip in Austin. She would seize the moment, using a purely political setting to reveal for the first time some choice details about "e-Texas," a government reform initiative she considers the cornerstone of her administration. One month before she would formally unveil e-Texas to Texans, she would spill the beans at a luncheon in Washington put together by the influential conservative think tank the Heritage Foundation.

The inverse order of the announcements raises questions as to whether Rylander's e-Texas is less about Texas and more about politics.

"It's time for government to stop competing with the private sector," she told her Heritage Foundation audience. "E-Texas will be a true public-private partnership using new strategic tools such as activity-based costing, outsourcing, managed competition and benchmarking the best practices."

Those buzz words may send some heads spinning, but Rylander knew how to speak the language of her audience and play to the crowd. The foundation endorses outsourcing, or farming out, more government functions to the private sector, and Rylander has been an outspoken advocate of privatizing. During her 1998 campaign for comptroller, she called for a "Yellow Pages test" to gauge the efficiencies of state government. Her slogan: "Government should do no job if there is a business in the Yellow Pages that can do that job better and at a lower cost."

E-Texas, a medley of 14 task forces of ten to 15 people each, will recommend to the Legislature areas of government that can be outsourced to the private sector. In that way, Rylander is making good on her campaign promise to apply the Yellow Pages test across state government.

E-Texas, however, also appears to be a clever device to help Rylander build a political base so she can continue her advance to higher public office, which seems to be an overriding obsession of hers. That may explain why she's more at ease yukking it up with a bunch of political hacks in Washington than she is explaining the nuances, and foibles, of her administration to the people of Texas.


Rylander, who declined repeated requests to be interviewed for this story, is a five foot two workaholic and whirlwind personality who can't sit still.

Her rapid-fire auctioneer's speaking style wears thin, but her cornball shtick is a big hit with virgin ears. "I give my mother full credit for the reason I talk this fast because when I was a kid she'd let me help her in the kitchen and she'd let me lick the beaters on the electric mixer but she wouldn't turn them off," she said to a belly-laughing Heritage Foundation crowd who had never heard the tired line before.

The mother of five sons and a doting grandmother to four girls, Rylander is the daughter of beloved former University of Texas Law School dean W. Page Keeton, who died one year ago. One of her sons is a lawyer, one is a doctor, and another, Scott McClellan, is a press aide for Governor George W. Bush's presidential campaign. Rylander's daughter-in-law, Suzy McClellan, is Bush's appointee to represent ratepayers as the state's public utility counsel.

Rylander, who is twice divorced, authored a diet book that documents how she lost 80 pounds in seven months. She also hosted her own public affairs TV show on Austin's NBC affiliate. She was the first female president of the Austin school board and the only woman elected Austin mayor, Texas railroad commissioner and comptroller.

Rylander's life has been graced with plenty of rewards. But they never seem to satisfy her.

She has run for office nine times since 1972. She was elected to a six-year term as railroad commissioner in 1996 and quipped during her campaign that turnover on the commission over the past several years made the three-member panel as unstable as the price of oil. "I want to bring Cal Ripken-like staying power to the commission," she said, vowing to serve out her full term.

 

As it turned out, Rylander showed the team loyalty of a free agent. A mere six months into her term she declared her candidacy for comptroller, a more prestigious and influential position.

"In Texas, the comptroller shop is the heart and soul of state government," she told the Heritage Foundation crowd before describing her office in terms Washingtonians could understand. "It is the equivalent of the GAO, OMB, Treasury and IRS all rolled into one."

In fact, the comptroller is more than the state's accountant, tax collector and revenue estimator. Her predecessors, the late Bob Bullock and John Sharp, masterfully transformed the office into arguably the most powerful in state government. The comptroller has broad authority to scrutinize school districts and government agencies. After exposing shortcomings, the comptroller can then recommend changes that fit his or her political agenda.

As a result, a savvy comptroller can guide the direction of state government even more than the governor and the lieutenant governor can, even though the comptroller's position is not nearly as prestigious. Bullock left the job in 1990 to become lieutenant governor, and Sharp tried unsuccessfully in 1998 to make the same leap.

Rylander's political shrewdness is undeniable. Barry Williamson beat her in the 1992 Republican primary for railroad commissioner, but it was Rylander who had the goods for a scandal on the Democrat in the race, Lena Guerrero, an appointee of then-governor Ann Richards. Williamson beat Guerrero after Rylander's defeated campaign let loose of its little secret that Guerrero had lied about having a college degree.

Rylander was undeterred by that 1992 defeat, which came two years after she co-chaired Clayton Williams's unsuccessful run for governor. She ran for railroad commissioner again in 1994 against Mary Scott Nabers, another Richards appointee, and defeated her. Two years later she won easily over Hector Uribe to keep her seat. She returned to campaign mode six months later to run for comptroller.

Frank Cahoon, a Midland oilman who was the only Republican in the Texas Legislature in 1964, says Rylander has followed in the footsteps of other past railroad commissioners, who used the office as a stepping stone and bled dry the oil industry to get to where they wanted to be, he says.

"I am disappointed when people assume that job, raise money from the industry and quickly move on to another," Cahoon says. "But I would have to say I am no more disappointed in Carole than I am in several others."

Sharp, eight years after he left the railroad commission, was still able to tap into the oil industry to help fund his unsuccessful 1998 Democratic campaign for lieutenant governor. Cahoon believes those in the oil industry, including Republicans, continued to support Sharp because they always felt he would be a short-timer in the job and therefore did not feel betrayed when he left. "I think we always had it in the back of our minds that he was on a career path aimed at being governor of Texas," he says.

The oil industry saw Rylander differently, Cahoon says. "We viewed Carole as a tremendously energetic person and a great campaigner. I think the general feeling was that she would get on the commission and she'd be pretty hands-on. And even though she didn't know much about the oil industry initially, I do think we believed that she would stay on for a protracted period of time."

Rylander told them as much, both on the campaign trail and when she privately telephoned them for contributions.

"I would say she was an aggressive fund-raiser," Cahoon says. "She is just an aggressive personality in anything she does."

The oil industry happily donated money to her 1998 campaign for comptroller when she asked for it, which may have had more to do with self-preservation than adoration. Rylander continued as a commissioner while campaigning and thus still had a hold over the industry she regulated. Moreover, had she lost the race, she would have been eligible to serve out the remaining four years of her term. The industry couldn't afford to snub her.

As comptroller, she is no longer able to rely on the gusher of oil industry money to catapult her political career. Now, she can rely on the wealthy businesspeople who benefit most from e-Texas.


When Rylander finally unveiled e-Texas during an Austin news conference in November, she did not emphasize the outsourcing aspects as much as she did its electronic gizmo angle. How do you think e-Texas got its name, anyway?

The goal of e-Texas, according to the first sentence of the comptroller's news release, is "to transform Texas government from its traditional bricks and mortar foundation to a national technological leader that uses bytes, chips and satellite airwaves to deliver services."

 

At the news conference Rylander stressed that government needs to work toward the day when Texans can renew their driver's licenses or motor vehicle registrations over the Internet and small business owners can pay all their taxes and obtain various permits in one sitting at a computer. "Government is stuck in the age of Atari and Commodore, while the rest of the world is on fast-forward to Web-based management and e-commerce," she said.

E-Texas bonds Rylander to the ankles of a sleeping giant in the political world: Texas's high-tech businesses. Until recently, the computer geek was a minor player in the high-stakes enterprise of influencing politicians. All that changed with the national debate over whether to tax e-commerce. It didn't take long for the high-tech crowd to realize that steering government policy in its favor means filling the campaign coffers of the politicians who make the decisions. Politicians were quick to pick up on that new campaign revenue stream.

"It's pretty clear that e-Texas is an attempt by Carole Rylander to build a relationship with an emerging group of folks who up to this point have had tenuous ties to government," says Dee Simpson, political director of the Texas AFSCME labor group, which represents state prison guards. Simpson is among only a few union officials who admit to giving any thought to e-Texas and its potential effects on state employee job security.

The e-Texas mission to make government consumer-friendly via the Internet is not novel. At the urging of an El Paso senator, the Legislature passed a bill during the 1999 session that required the governor to convene a committee to do something remarkably similar.

The governor's ten-member task force is chaired by Phil Barrett, the director of e-business and technology research for the state Department of Information Resources. Barrett says his panel has a specific assignment to develop an experimental Internet site to handle simple government transactions, such as renewing a driver's license. Ironically, the comptroller's office is helping develop it.

"I believe e-Texas is looking at very many of the same issues we are looking at," Barrett says.

Mark Sanders, Rylander's special assistant for communications, says, "The more eyes that are looking at this, and hands that are working on it, the better product we are going to have at the end of the day."

But the duplication adds to the debate about Rylander's real motives with e-Texas. It also raises questions as to whether her emphasis for it to move government services to the Internet is actually a cover to disguise a bigger purpose: to open the floodgates of privatization. E-Texas allows Rylander to curtsy to the business sector, which can benefit from further outsourcing. She in turn can benefit politically from businesses rewarding her with financial support.

Ed Sills, communications director for the Texas AFL-CIO, says the labor organization will keep close tabs on e-Texas. "There is no question there are opportunities out there to serve people well by having government use technology and the Internet," Sills says. "But we think e-Texas is a stalking-horse for massive privatization proposals. And those need to be closely examined on their merits on a case-by-case basis."

E-Texas will suggest new areas of privatization to the 2001 Legislature, and Sills says lawmakers ought to consider those recommendations with a healthy dose of skepticism. Rylander is in the process of soliciting hundreds of thousands of dollars in contributions from the private sector to help pay for e-Texas. The money would go into a special agency account. She spins this wedlock as a positive example of public-private partnership and as a way to save taxpayer money. The private sector, not the state, will cough up the $400,000 in travel, meal and lodging expenses for the approximately 150 task force members.

"It would be foolish for anyone to believe that a $1,000 or $5,000 contribution to e-Texas in any way is going to have any kind of impact on the work we are going to do and the recommendations that we are going to make," Sanders says.

But others see the co-mingling as a taint on the task force's independence. "Polls have shown that Texans don't think it's ever appropriate for politicians to take contributions from those who have business before their agencies, and we as a state do not allow legislators to take contributions during the session from lobbyists and others who are advocating positions," says Tom Smith, state executive director of Public Citizen, a government watchdog group. "So why are we allowing large business interests to contribute to fund a government study which will create policies that will benefit those same large business interests?"

 

The e-Texas task force to focus on outsourcing is chaired by Bill Hammond, who says his committee will take a thoughtful approach in recommending which services should be shifted to the private sector. Hammond, an advocate of outsourcing, has been president and CEO of the Texas Association of Business and Chambers of Commerce since April 1998.

"We're not in this to get business for our members," Hammond says. "We are in it to reduce the cost of government, if possible, and make government more customer-centric than it is now."

Hammond says he expects his so-called competitive government task force to get help from Bill Eggers, a top Rylander aide. Eggers co-authored the 1995 book Revolution at the Roots, which offers glowing accounts of privatization efforts nationally. The book is a bible for outsourcing proponents. Hammond sounds like he prefers that representatives of state employee unions, who have been the most vocal critics of privatization, do not become members of his task force.

"As far as getting input from them, we'll be happy to do that," he says as a compromise.

Sanders says Rylander wants people involved on e-Texas task forces who follow her philosophy that government is bloated and should be streamlined. "For over a year the comptroller campaigned across the state for smarter, smaller governmentŠ.We are giving the public what we told them we would give them. Is e-Texas going to come out and recommend a return to the Great Society? The answer is no."

But that doesn't necessarily mean e-Texas is a self-fulfilling prophecy on privatization, Sanders says. Hammond says e-Texas will ask independent experts to analyze the costs and benefits of business doing certain government services. Those are complicated analyses, Hammond admits, but ones he thinks can be done free of bias.

Michael Granof, a University of Texas professor who wrote the textbook for the governmental accounting course he teaches, warns that assessing the benefits of outsourcing is a tricky endeavor.

"There are many ways to determine cost and benefit," Granof says. "Give me ten minutes, and I can make an argument both for and against outsourcing the same service by making different assumptions. I can tilt the argument either way."

When social and political issues come into play, such as state employee job security, the outsourcing debate gets more difficult to assess objectively. Granof says some government functions should be outsourced but the public should be skeptical of any recommendations because of the difficulty in doing an objective cost-benefit analysis.

"Should Carole Rylander do this kind of review on outsourcing? I offer a resounding yes," Granof says. "Should we privatize everything that comes under review? I would say probably no."

So how can the public fairly assess whether the e-Texas outsourcing recommendations are good for the state or merely good for the businesses that would get the work? Essentially it's a question of whether the public believes Rylander wants to do what is best for Texas or simply what is best for herself. It comes down to whether the public can trust her.


The Texas Democratic Party got a tip during the summer that Steve Koebele, Rylander's general counsel, had recorded phone conversations in his office without the other party's consent. Playing on a hunch and a hope, the party asked the comptroller's office in a formal open records request for copies of the tapes.

The office responded that the tapes did not exist. Reporters began asking Sanders, Rylander's spokesman, what his boss knew, when she knew it and what she was hiding. He again responded: "There are no tapes."

"The questions were answered honestly," Sanders still says.

There's a fine line between honesty and dishonesty, trust and mistrust. Sanders's statement was true, but only because Rylander allowed him to play an insulting game of semantics with the press and the public. There were no tapes because they already had been destroyed. Only when the Democrats and reporters got wise and asked if there ever had been any tapes did Rylander begin to come clean. She conceded that Koebele had taped four phone conversations without her knowledge or permission but that the tapes no longer existed.

Koebele, who had left the agency under the guise of a voluntary resignation, wrote a memo ultimately supplied to reporters that described each of the four recordings. According to his accounts, none of the tapes contained anything inflammatory that could be used against Rylander.

"No other audio tape was made. No other audio tape exists," his memo ends. Sanders says the agency was within its legal right to toss the tapes because they were the equivalent of written notes taken during meetings.

As the comptroller's story about the tapes kept changing, so did the original line that Koebele had left the agency on his own to pursue other interests. Rylander decided it was in her best interest to let everyone know that she had fired him for secretly taping phone conversations. She wanted the public to know that she wouldn't allow such deception to occur in her office.

 

She didn't have a problem, though, in allowing herself and her aides to purposely mislead the public and press for a time about the existence of the tapes.


The Texas Tomorrow Fund is a state-run program that allows families to set aside money to cover a child's future college tuition costs. Earlier this year the Rylander administration decided to create a liaison post with the professional advertising and public relations firms hired to market the fund.

Eight job applicants stepped forward, some of them with impressive résumés for the position.

Jeff Whitehurst applied, citing his graduate degree in international marketing and his company, which developed private, prepaid tuition loan programs for financial institutions -- experience that might have come in handy in trying to market the Texas Tomorrow Fund.

Another applicant, David Hurlbert, had been executive director of an outpatient mental health and substance abuse center in Belton since 1992. His résumé noted that he "manages all community relations" for the center.

Hurlbert says he has conducted numerous management training and education seminars and has had 75 research articles published. "I have advanced knowledge of human behavior. I also have experience in public relations, and as a consultant, I've done marketing studies for various businesses," he says.

However, the comptroller's office never got the chance to explore the breadth of experience of Hurlbert, Whitehurst or five of the other applicants. "I did not even get an acknowledgment," Hurlbert says.

Instead, the only job hopeful interviewed was a 27-year-old woman who was just 18 months out of college. Helena Colyandro had only five months of full-time work of any kind.

But she was the one hired in June. In what smacks of nepotism, Colyandro is also the wife of John Colyandro, Rylander's chief of staff.

A formal posting for the job says applicants are required to have a college degree. Helena Colyandro graduated from the University of Texas in December 1997 with a double major in Latin American studies and history. The job qualifications also say applicants are required to have a minimum five years of marketing and advertising experience. Sanders, speaking on behalf of Rylander and the Colyandros, could not demonstrate from looking at Helena Colyandro's résumé that she met this requirement, even though agency personnel records indicate she had.

"Exceptions are made for exceptional people," Sanders says. "It is foolish to look at job requirements and job postings and the incredible, ridiculous bureaucracy that surrounds who can get a job in state government. We post jobs as best we can, but it shouldn't penalize the best people from getting the job. We're not worried around here about minimum requirements but rather maximum capability."

According to the résumé Helena Colyandro submitted to the comptroller, she worked off and on from 1990 to 1997 on temporary projects for an Austin-based marketing company and the U.S. embassy in Mexico City. Her focus in those jobs was to increase the number of U.S. and Mexican companies doing business across the border.

Her most recent job was doing contract work for an Austin marketing firm, where she analyzed focus group research for companies trying to market their products to Latinos. She did that for about a year. Her résumé lists her fee at $100 an hour. Before that, she had a five-month stint for an Austin public relations firm specializing in Hispanic markets -- the only permanent job she ever held before working for the comptroller. At the public relations firm, she earned less than $1,700 a month.

As marketing director of the Texas Tomorrow Fund, her starting salary was $4,579 a month, her having secured from the outset the high end of an annual pay scale that ranged from $41,000 to $55,000.

The job posting for marketing director says that bilingual and multicultural marketing experience is preferred, although its lengthy descriptions of the job say nothing about an emphasis toward marketing the fund to Hispanics. Yet Sanders says Rylander is keenly interested in increasing the number of Hispanics who sign up with the fund, and Helena Colyandro's knowledge of Hispanic markets along with her fluency in Spanish gave her an advantage over other applicants.

But what helped her the most, he says, is that Rylander already knew her and recruited her for the job. The fact that she was the wife of the chief of staff was not an issue, he says.

 

"The comptroller wants to hire the best and brightest that she can attract," Sanders says. "There is no marriage penalty here."

There is, however, an agency nepotism policy that says an employee cannot be in a direct line of supervision over his or her spouse. Although John Colyandro is chief of staff, Sanders says Helena Colyandro answers to fund manager Aaron Demerson, who works at the pleasure of the fund's investment board, which is chaired by Rylander. As a result, Sanders says, the hiring of Helena Colyandro does not violate the agency's nepotism policy. But the lines of duty are fuzzy as Demerson is considered an employee of the comptroller, who oversees the program.

Another person involved in the hiring of Helena Colyandro, however, definitely calls John Colyandro boss. That would be human resources manager Morris Winn. In a June 10 memo, Demerson recommended to Winn that Helena Colyandro be hired "based on her strong background related to marketing various programs, her level of involvement with multicultural organizations and [her] bilingual ability."

Sanders maintains that no one at the comptroller's office felt pressured to hire Helena Colyandro even though she was the wife of the chief of staff and someone Rylander specifically wanted for the job. Sanders dismisses any notion that Rylander's recruitment of Helena Colyandro was done as a favor to her husband. In fact, Sanders says, John Colyandro advised his wife not to take the job.

"Whether that sounds self-serving or like bullshit, it's not," Sanders says.


When Sanders discusses the political aspirations of his boss, his words also can't help but sound self-serving.

"There has not been a single discussion with anybody about her political plans or her political future," he says. "She's solely concentrating on doing a good job at this agency."

During her speech to the Heritage Foundation, however, it seemed as if Rylander were auditioning for another political race. Or maybe she just never stops campaigning. She touted herself as the "state traffic cop" looking for ways to cut government waste.

"My vision for the 21st century is paychecks and jobs for Texans, limited government and unlimited opportunity," she said. "My philosophy is quite simple. What we all need from government is less, not more. Less mandates, less regulation, less taxation, less government spending. Every single decision I make is based on that philosophy."

Those words aren't much different from those she offered in her run for comptroller. But in her D.C. speech, Rylander detoured to set off alarms that she may be campaigning for something new yet again. She told the Heritage Foundation that her national defense philosophy could be summed up in the words of gangster Al Capone, who once said, "You can get more done with kind words and a gun than you can with kind words."

"I don't want us to be held hostage by Iran or Iraq or any Middle East ayatollah ever again," Rylander said.

The Texas comptroller is involved in a lot of things. National defense policy is not one of them. Ambitious though she might be, one thing is certain: Rylander isn't running for president. But her governor is. And if Bush wins, that creates a scramble in Texas politics in 2002. Rylander could run for governor, but more conventional wisdom has her targeting the lieutenant governor's seat if incumbent Rick Perry, who would be elevated to governor in 2001 if Bush becomes president, runs to retain the chief executive post.

"It is premature and stupid in this current flux that we're in here in Texas politics to speculate," says Sanders, Rylander's press aide. It's even more stupid, however, to think that a politician like Rylander isn't already obsessing about it.

Perhaps Rylander is auditioning for the U.S. Senate. She already tried to get to Congress once, losing in a 1986 election to represent Travis County in the U.S. House. To make that race, she switched parties and ran as a Republican. Last year U.S. Senator Phil Gramm took the extraordinary step of chairing Rylander's comptroller campaign. Wendy Gramm, the senator's wife, is one of the three people chairing Rylander's e-Texas. It's conceivable that Phil Gramm might not run for re-election in 2002 and is grooming Rylander as his successor.

Rylander, meanwhile, grooms e-Texas as a means to forge new political alliances and sidle up to those willing to contribute to her cause -- not necessarily her cause of "smaller, smarter government," as she likes to call it, but rather the cause of satisfying her own political ambition.


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