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From houstonpress.com
Originally published by Houston Press Jan 15, 2004
©2004 New Times, Inc. All rights reserved.
Moving Target

The city is rolling out the welcome mat for CITGO. But many workers want the company to get lost.

BY SARAH FENSKE

Billy Ray Sterling believed in working hard. An operator at the Lyondell-CITGO refinery, he took on 16-hour days, 80-hour weeks -- no sweat. On holidays, Sterling readily volunteered. "I always stayed on for the ones who had kids," he says.

His wife understood. They'd been together since junior high nearly 50 years ago; she knew what kind of man he was. "He's one of those rare people who liked to do his job," Donna Sterling says.

When Billy Ray Sterling had a heart attack in June 2001, his bosses at the refinery called an ambulance. Then they didn't contact him for five months.

In and out of consciousness in his hospital bed, Sterling didn't notice, not at first. He had a triple bypass. It failed. Doctors tried implanting stainless-steel tubing, but that only caused scar tissue. For a time he was unable to talk; later, he couldn't walk. His doctor told him he'd had a stroke on the operating table.

But when the hospital sent him home to recover, Sterling started bracing himself. He knew what was coming.

In November, his refinery bosses obliged, with a terse letter via certified mail. His sick time had been used up, it said. They were unable to continue his employment.

He had been fired.

"They just cut me loose," Sterling says behind eyes that remain a sad, patient blue. A slow drawl betrays both his Port Neches roots and his constant shortness of breath. At age 62, he's waiting to die. "I'm working with a third of a heart," he explains. "I still can't walk the length of my driveway."

As for his termination from Lyondell-CITGO, timing was everything. If the refinery had waited just one month, Sterling would have received another half-year of medical coverage. Instead, the firing sent him scrambling. Donna Sterling was forced to go back to work; the couple has to support a mentally disabled son as well as a grandchild. Medical bills were mounting.

His wife was angry, but Sterling wasn't surprised. "I knew what they were going to do," he says, "because that's the way they do things."

Sterling had seen plenty in his seven years at the refinery: In the past four years, the company has averaged more than 100 grievances annually and has fired a total of 46 workers, many for reasons far more spurious than a heart attack. Despite getting big bonuses, employees say morale is at an all-time low.

The strife made the embittered workers that much more stunned to learn the news last fall: The city of Houston was wooing a Tulsa-based industrial giant to relocate its headquarters here.

The name of the corporation: CITGO. And as the Greater Houston Partnership confirms, the usual grab bag of tax incentives is being proffered.

CITGO's main presence locally is the plant for which Sterling worked, a joint operation with Lyondell Petrochemical Company. And that refinery is hardly an argument in CITGO's favor.

It fought tougher state restrictions on pollution control. And though Harris County and the city of Houston granted tax breaks for a big upgrade, despite a promised $720 million in investment and $6.6 million in reduced taxes, it's hardly worth more today than it was in 1993.

Refinery workers insist that record -- and their workplace woes -- should be examined as Houston considers bringing CITGO to town. The promise of another tax break, they say, makes their problems relevant to everyone.

"We don't need a bad corporate neighbor here," says Richard Shaw, secretary/treasurer of the Harris County AFL-CIO. Of the 400 companies with which his unions work, CITGO is among the very worst, he says. "Someone needs to say to them, 'Straighten out your problems at the Lyondell plant,' " Shaw says. " 'Otherwise, go somewhere else.' "

Lyondell-CITGO's sprawling 677-acre complex on Texas 225 is 85 years old, but it looks more space-age than industrial, an otherworldly farm of short metallic smokestacks and huge cylindrical drums. The plant's operation is complex, but the end result is simple. Thick, sulfuric oil is processed into gasoline.

Lyondell Petrochemical Company was the operator of the plant until CITGO Petroleum Corporation acquired a 41 percent ownership interest in 1992. The two formed a joint venture, Lyondell-CITGO Refining. The Lyondell refinery would get a steady source of crude from CITGO, and CITGO would get adequate gasoline supplies for its service stations.

Relations between the two owners, however, haven't always been cordial. Lyondell sued its partner in 2002, claiming CITGO unfairly reduced the amount of oil supplied to the plant from 1998 to 2000.

CITGO is wholly owned by the Republic of Venezuela, which has been run for the last four years by President Hugo Chavez, a former paratrooper. Unabashedly leftist, Chavez wooed Venezuela's poor with his strong pro-worker stance and condemned oil executives as whiskey-drinking hedonists. Under his rule, however, more than half of CITGO's Venezuelan workforce was brusquely terminated.

Despite the eventual tension between the partners, the city of Houston saw a benefit to CITGO's arrival. To ready the plant for CITGO's crude oil, the refinery needed a $720 million upgrade, and that gave the city an opportunity to demand better environmental controls.

The city had sued the refinery in 1993 over a host of infractions, alleging pollution releases and more than 400 leaks that Lyondell took its time fixing, according to records. As part of the upgrade, Lyondell-CITGO promised $6 million in improvements to burn off pollutants instead of sending them into the air. It also agreed to pay $700,000 in fines and $50,000 in legal fees, according to court documents.

That was good enough for the city. It settled. Says Deborah McAbee, the city's senior assistant attorney, "We really want the company to focus on actions they can take to prevent the problem from reoccurring."

But even with the upgrade, the refinery continues to release noxious discharges. Permits allow it to emit 4,916 tons of nitrogen oxide each year. That compound is one of the biggest challenges to clean air locally -- and Lyondell-CITGO contributes about 2 percent of the total in Houston's eight-county region, says John D. Wilson, executive director of the Galveston/Houston Association for Smog Prevention.

The Environmental Protection Agency cited the refinery last May for two sudden chemical expulsions. In one incident, it released 60 times the allowable amount of carbon monoxide, says EPA spokesman Dave Bary. In the second, it released a cocktail of sulfides and oxides in excess of its permit. The matter remains in negotiation; the company faces up to $220,000 in fines, Bary says.

Lyondell-CITGO hasn't exactly been eager to cut its pollution. Under Texas's federally mandated plan to cut smog in the Houston area by 2007, the refinery was ordered to decrease nitrogen oxide releases by some 84 percent, Wilson says.

But the company joined with several others to wage war against the plan in court. And the state folded. It agreed to a compromise that would allow the refinery to release 1,240 tons of nitrogen oxide each year -- less than before, certainly, but nearly 500 tons more than in the state's original plan.

"This is one of several decisions the state has made that means it's not going to achieve clean air by 2007," Wilson says. The revised plan, he says, is "the biggest setback we've faced in the past few years in the fight for clean air."

At first it didn't look like the new partnership with CITGO would bring many changes to the workers. After all, Lyondell continued to run the refinery, and it holds a perennial spot on various "Best Places to Work" lists.

"Everything was good then," says Robert Greenlee, an instrument technician who's worked at the plant for 24 years. "Everybody kicked in."

They were good jobs. Union officials put the average salary at $54,000, and there was plenty of overtime. A guy like Billy Ray Sterling, who was eager to take it, could make as much as $100,000.

Sterling considered himself lucky. Growing up in Port Neches, he knew his choices were limited. "Either you went to college, or you married the buck-toothed girl next door and worked at the filling station."

Instead, he joined the marines at age 16 and spent the next five years in places like Japan and Vietnam. He was on a ship heading to Korea when President Kennedy was shot. "I was disillusioned by a lot of things," he says. "I don't think I ever got over it."

Back in Texas, he married his sweetheart and started refinery work.

As an operator in the coker, he had one of the most dangerous jobs at Lyondell-CITGO. The backs of his hands are still scarred from a fire four years ago. "The worst I ever saw," he says matter-of-factly. He reveled in the danger; coker workers, he explains, are "a different breed of people altogether."

It took a different breed of managers to poison the atmosphere at the plant. And while guys like Sterling didn't see it coming, union representatives did. David Taylor, who is secretary/treasurer of the plant's Local 4-227, says he knew of CITGO's reputation for contentious labor relations from other leaders in the Paper, Allied-Industrial, Chemical and Energy union, or PACE. "I knew what was coming," he says.

Still, it was not until 2000 that the refinery brought in two new managers, one from CITGO and one from the outside. One of them soon summoned Taylor into his office.

There were two years before the labor agreement was due to expire. But, Taylor recalls, the manager announced that the agreement was too rigid. "It will not allow me to make the changes I need to make to be as successful as the owners want me to be," he said. When Taylor balked, the manager told him, "I accept that you and I will bump heads."

"And from that point on," Taylor says, "we had a rocky relationship."

Some of the changes were big: Workers were told they had to wear pagers and be on call for blocks of off-duty time. Others were small: Management reduced the stipend for overtime meals, says machinist Ronnie Larson. It cut a half-cent from the 39.5-cent mileage reimbursement; it eliminated the company picnic. And it was no longer enough that workers not read newspapers on the job -- suddenly, even carrying a newspaper was grounds for termination.

As a supervisor explained in an e-mail provided to the Houston Press: "Is reading the sports section worth losing your job?" The boss wrote that at least one worker apparently was ready to risk that. "No one wants to be put into a position to discipline anyone, but make no mistake about it. I will execute my job duties without hesitation."

The refinery averaged six terminations per year from 1995 to 1999; after 2000, that average quickly jumped to 17, according to company records.

In a letter from Steve McCarthy, the refinery's union relations manager, to Congressman Gene Green, the company defended its record. "We want to assure you that we only take action to terminate an employee's relationship with [the refinery] when the employee engages in egregious conduct."

Arbitration records would indicate otherwise.

Since 1999, the union has challenged 22 of the firings by the Lyondell-CITGO refinery. Of those, arbitrators sided with the company only five times. The other workers were reinstated -- nine of them with back pay.

At times, arbitrators have reacted with disgust to company policies. Ray Byars, a 25-year employee, was fired in December 2001. The sole reason: "deliberately misrepresenting" his need for an emergency vacation.

According to the arbitrator's report, Byars was in good standing with the company when he requested Thanksgiving week off to go to San Antonio to help his 77-year-old mother, who is legally blind.

Thinking Byars had to take his mother to a doctor's appointment, the refinery granted the request. But the paperwork Byars submitted post-vacation explained instead that he'd been needed to help her search for a new apartment.

Byars, the company argued, had therefore lied -- "good and sufficient cause for his discharge."

Arbitrator Mark R. Sherman gave Byars his job back, blasting the company. The case, Sherman wrote, "served as an embarrassing example of an approach to employee discipline that had run amok." He added that the company was lucky -- at least the matter was decided privately and not "in open court, or worse yet, the court of public opinion."

Union leaders accuse the company of firing older workers like Byars to save money on health benefits and retirement. They point to the company plan, first proposed in 1998, to offer early retirement to 212 employees. After the first 86 employees accepted the offer, however, the company dramatically reduced the eligibility, and only three more were allowed to go, Taylor says.

Soon after, union leaders say, the firings began. Of the 35 workers fired most recently, Taylor says, 18 have been at least 50 years old.

PACE representative Jim Lefton says the refinery has had to pay out some $750,000 under arbitrators' orders, often giving back pay to reinstated employees. Still, he says, "They continue to go down the same road. It makes you wonder. Either they're incompetent, or they don't care."

He has to figure it's the latter. After all, the battles seem to be hurting the union more than the refinery. "It costs $5,000 per party for an arbitrator to hear a case," says Carey Smith, the union's mobilization chairman, who was himself recently fired. "And they have a lot more '$5,000' than we do."

Mike Todd was 23 when he bought his dream house, a five-bedroom brick home in La Porte, two years ago. The house was maybe a little too big -- there was only Mike and his wife, Rachel. Their baby, Jackie, wasn't born until six months later.

But Todd was making close to $80,000 at the Lyondell-CITGO refinery, thanks to generous overtime, and the $167,000 mortgage was supposed to be an investment. "One thing people tell you is 'Buy everything you can afford,' " the 25-year-old worker says.

Now the Todds are moving out; the only things not in the U-Haul boxes lining the den are Jackie's Fisher-Price toys.

The Todds had to sell fast, and the price they got reflected that. There was no profit, not for the hardwood bathroom floors they added or for the carefully sodded backyard. And their next step is no upgrade: They're moving in with Rachel's parents in Rosenberg.

As Mike Todd tells it, his misfortune was made worse by the refinery's obstinacy. He was lifting something heavy in May when he tore a ligament in his wrist. Months later, a specialist told him he'd have problems for the rest of his life if he didn't have surgery quickly.

Recovery was supposed to take about ten weeks. Todd had some sick time saved up and figured he could return early for light duty.

"We could hold on if I just make base pay," he says. "Either that, or we'd be jumping off the cliff."

But when Todd's sick pay ran out November 3, his supervisor announced there was no light duty for him. Nor would the company give him vacation pay until the end of the year, since he was already out on medical leave. With his wife pregnant again and unable to work, Todd had to take loans from his 401(k) and put their dream house on the market.

He'd been angry at Lyondell-CITGO before, but it was nothing like how he feels today. "You slip up in the slightest way and break a company policy, and somebody's going to get fired over it," he says. "And this is stupid stuff that doesn't make any difference in how much money we make."

Co-workers seem to share that sentiment. The union recently rented a billboard along Texas 225 to display this message: "Lyondell-CITGO Refinery: Record Terminations. Last in Employee Appreciation & Morale."

CITGO has tried to disavow responsibility for the worker complaints -- spokeswoman Kate Robbins notes that CITGO still has only a minority ownership in the plant. Robbins referred questions to officials at the refinery, but they did not return repeated calls for comment.

In letters to the union and local politicians, refinery officials insist they've done no more than try to make money. Indeed, profits have soared. According to the company's figures, the refinery's income rose from $24 million in 1999 -- admittedly a slow year -- to $213 million in 2002.

As the refinery's chief counsel, Nancy Corbet, wrote to PACE officials in May, the plant has seen significant improvements in every category: employee safety, environmental safety, reliability and profitability. "To achieve this dramatic improvement, we have made significant changes in how we operate our business…By nature, change is challenging."

Employees have shared in the wealth. Their bonuses in 2001 and 2002 were at 8 and 9 percent of their annual salaries.

That still didn't alter the view many workers have about the company. "People just hate it now," says Larson.

The union has been crusading against the changes. It says the management is pushing even minor issues into costly arbitration, that it's firing too many workers, that it's making unfair changes to their contract without renegotiating. Recently, the union has been protesting management's edict that workers wear pagers when off-duty, an issue that's won the support of Congressman Green.

Union members have picketed Lyondell night at an Astros game. They picketed at the River Oaks estate of William T. Butler, chairman of Lyondell's board. Since Butler is chancellor of Baylor College of Medicine, they also picketed there.

The prospect of CITGO's relocating its headquarters to Houston has intensified their efforts. The AFL-CIO's Shaw urged Pam Lovett, president of the Greater Houston Partnership's economic development division, not to offer the company any tax breaks. "…Houston does not need another bad corporate neighbor," he told her in a letter.

Union representatives also have attacked the potential tax abatements. Ten years ago, Harris County and the city of Houston gave Lyondell-CITGO a major tax break in exchange for its upgrade. It was a typical plan: The refinery was to get a big discount for ten years, then would pay more in taxes because the improvements would make it worth far more. And, as in most similar deals, the refinery promised to add new jobs as a condition for the tax break.

The union is convinced that the refinery reneged on the deal and actually cut jobs. Today both Harris County and the city of Houston insist the refinery has met the terms of the deal. But there's good reason for the confusion: Those terms don't match what was publicly stated about the agreement in 1994.

When then-mayor Bob Lanier pushed the plan, it was supposed to be a $720 million investment. Quoting the company, the Houston Chronicle also reported that the upgrade would create "120 to 140 permanent jobs."

In 1994, the refinery had about 1,200 workers, according to its tax abatement application. Today it reports 1,033 full-time employees -- certainly not an increase, much less one of 120 to 140 jobs.

But, despite the Chronicle story, the actual contract with the county requires only that the refinery retain 1,400 jobs and add 80 "new permanent" ones. As Harris County development director David Turkel explains, "permanent" is a relative term. It includes subcontractors who work at the refinery for at least a year, even though they lack union protection or status on the company payroll.

If the county's math seems fuzzy, it's still an improvement over the city's. Despite written promises of at least 80 new jobs, the city's formal agreement with the refinery requires only that it keep at least 25 employees. That's it.

Suzy Hartgrove, a spokeswoman for Houston's economic development office, says that until the city changed its policy in 1995, such contracts used only the minimum investment required by law -- not a company's promises.

Beyond the jobs, the promised tax bonanza has failed to materialize. Houston, for example, had estimated that the project would increase the value of the refinery within its city limits by some $260 million, according to records. By the time the tax break expired in 2005, the refinery would be paying some $3.5 million in property taxes annually.

It hasn't happened. First, the value of the upgrade in the city proved to be only $53 million -- less than a quarter of what was promised. And time and new technologies have dramatically lowered the assessment of the plant's value. Even without the tax break, it's paying just $1.78 million in property taxes to the city -- less than it paid in 1993.

The reasons are complex. The plant has depreciated significantly, lowering its overall value. What's more important, explains Jon Neely, an appraiser who has examined the site for Harris County, the state granted the new upgrade a big break of its own. It determined that a large part of the project would help the environment, he says, and deemed about 40 percent of it exempt from property taxes.

"It's probably the biggest exemption that's been granted in Texas," he says. Unlike the city and county deals, the state tax break is permanent.

Despite the AFL-CIO's entreaties, the Greater Houston Partnership continues to see CITGO as a prize to be won. Lovett says CITGO's 800 jobs would likely have an impact of about $520 million on the local economy -- every year. "We're talking a lot of high-paying jobs, a lot of Class A office space," she says. "It would be a tremendous benefit to the Houston region."

Local politicians are salivating. "Anytime you're creating new jobs, I'm all fired up about it," says City Councilman Mark Ellis. "Any new jobs for the city is a good thing."

"We want more headquarters coming to our city," says Councilwoman Shelley Sekula-Gibbs. "There are some companies that have left, and we need to be as aggressive as possible in bringing jobs back to the city."

It would also be a boon to real estate agents. Vacancies downtown are at an alarming 17.6 percent, says John Parsley, a principal at Colliers International. They're expected only to worsen with the Enron building opening for tenants. A company the size of CITGO could use as many as 13 floors in a good-sized building. "That would be big-time," he says. "Everyone would jump all over that deal."

Everyone except, perhaps, Lyondell-CITGO employees. "Just what we need, an anti-American, anti-union company coming here," Greenlee says.

Lovett can't understand that attitude. "We'd like to enable them to make a decision to come here," she says. "I can't imagine why union officials wouldn't be supportive of a project of this nature." She's met with representatives from the union, and she's talked to the AFL-CIO's Shaw; in her polite way, she makes it clear she'd like them to shut up: "We need people making this company feel like it's the best place for them to operate."

Billy Ray and Donna Sterling won't be joining that chorus. "CITGO doesn't value anything," Billy Ray says. He thinks about his own seven years of service, ended with an abrupt letter and no expression of sympathy. "Sure, they want that tax break, but they are not a good company."

Mike and Rachel Todd have no plans to lay out the welcome mat, either. They've done their best to stay positive. Even though Christmas was bleak, Rachel says, she feels blessed that Jackie is still a toddler.

"How do you explain to a five-year-old that there is no Christmas this year because Daddy doesn't have any money?" Rachel looks around the house, their dream house, with its bare walls and packed boxes. There's no Christmas tree, no stacks of presents. "It's harder on me," Rachel says. "I'm glad she doesn't realize it. Because I think about it, and I want to cry."

And that has primed Mike Todd for action against CITGO. "I was planning to go down to Tulsa, Oklahoma, to picket at their headquarters," he says. "This will just make it more convenient. We'll be on their doorstep picketing the moment they arrive."

Houston steps up effort to snare Citgo headquarters

By RALPH BIVINS

Top officials with Citgo Petroleum Corp. are in Houston this week as the courtship heats up to bring the oil company's corporate headquarters to Texas.

While the oil company will only say Houston is still very much a player in this high-stakes battle, Gov. Rick Perry has invited Citgo CEO Luis Marin to the Super Bowl, a Citgo spokesman said.

The decision time in a corporate tug of war with Tulsa appears to be near.

"At this time, we are waiting for the state of Texas' proposal," said Antonio J. Rivero, executive vice president of Citgo. "It's important to clarify, it's not a done deal."

The winning city gets 1,000 high-paying jobs and a corporate tenant that will fill a huge amount of office space -- between 250,000 and 300,000 square feet.

Also, as part of the deal, Citgo has said it will spend billions to double its refining capacity in Texas.

"We've been in discussions with Citgo. But it's at the point now where an incentive package must be finalized for Citgo to make a decision," said Pamela Lovett, president of the economic development division of the Greater Houston Partnership. "It's a tremendous opportunity for Houston and the state of Texas."

The decision is going to be weighed against the economic incentives that will be offered by government officials in Texas and those in Tulsa, where Citgo has its headquarters.

A spokeswoman for the governor's office declined to comment.

Perry has made corporate recruiting a priority and has $295 million in an economic development fund to pursue prizes like Citgo.

Citgo is expecting to receive a proposal outlining the incentives from the governor's office in February, Rivero said.

The merits of staying in Tulsa or moving to Houston will then be reviewed by the board of directors of Citgo and the board of its parent company, Petroleos de Venezuela, the national oil company of Venezuela.

If Houston is selected, Rivero said he would like to have Citgo employees moving from Oklahoma by this summer to avoid disrupting employees' children who are in school.

The firm anticipates 500 to 700 employees would be relocated from Tulsa to Houston. Citgo would build its Houston staff to about 1,000 by hiring additional people locally.

As part of the package, if Houston is selected, Citgo would agree to spend $2 billion over 10 years to expand its chemical plants in Texas, Rivero said. Citgo owns an interest in a refinery in Pasadena and and is sole owner of a refinery in Corpus Christi.

Citgo officials have been conducting a careful study of the Houston office market.

Rivero said the firm has considered four buildings for a new headquarters: the 64-story Williams Tower, the Aspen Technology building in west Houston, a BMC Software building on the West Belt and the 1500 Louisiana building, formerly known as Enron Center South.

Citgo employs about 4,000 people, with 1,000 of them in Tulsa.

Citgo markets gasoline through 13,400 service stations across the nation. It has two asphalt plants on the East Coast, and a large refinery in Lake Charles, La.

After the firm announced last fall that it was studying a possible move, Citgo received overtures from officials in New Mexico and Louisiana, Rivero said. But he said Houston is the only option being considered as a relocation site, and a feasibility study has shown Houston to be outstanding.

Relocating is expensive, he said, and if the state of Texas' offer is not sweet enough, Citgo officials will reject it, Rivero said.

"We are fine in Tulsa. We have been in that location for 20 years. We have an excellent relationship with our employees," Rivero said.

And not everyone is excited about the prospect of moving to Houston.

The Paper, Allied-Industrial, Chemical and Energy International Workers Union has been lobbying economic developers and elected officials to keep Citgo from moving its corporate headquarters to Houston unless it can get its problems resolved with the Lyondell-Citgo Refinery in Houston, where about 500 union-represented employees work.

Jim Lefton, international representative for PACE in Houston, said he met for two hours Friday with the Venezuela ambassador, Bernardo Alvarez Herrera, in Washington about some of the problems, including the 23 employees who have been terminated for taking family leave or breaking minor work rules, as well as the company's refusal to bargain over labor/management issues.

"We told them we didn't need another bad corporate neighbor and that what Lyondell does as its Houston refinery directly affects how the citizens of Houston perceive Citgo," Lefton said.

Chronicle reporters L. M. Sixel and Nelson Antosh contributed to this story.

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Copyright 2004 Houston Chronicle

Measure shuts teachers' Social Security loophole

Much-watched bill now in Bush's hands

By JOHN C. HENRY
 

WASHINGTON -- The House approved and sent to the president a bill to close a loophole in federal law that allows Texas teachers to keep their own state pensions and the full Social Security benefits of deceased spouses.

The bill, which cleared the House 402-19, was designed to crack down on fraud by people who manage the affairs of Social Security beneficiaries unable to keep track of their own finances.

The measure, which passed the Senate by voice vote Dec. 9, also bars illegal immigrants and felons from receiving Social Security benefits except under certain circumstances. It now goes to President Bush for his signature.

The main focus of the legislation is protection of beneficiaries from abuses by so-called "representative payees," who are appointed by the Social Security Administration to manage the financial affairs of almost 7 million Social Security recipients.

The bill would require stricter scrutiny of individuals who serve as surrogate payees and set tougher eligibility requirements. Tougher penalties were included in the bill for anyone convicted of abusing the system.

Eighteen of the votes against the bill were Texas lawmakers, most of them Democrats, who objected to a provision that will prohibit teachers, beginning July 1, from taking advantage of the so-called "last-day exemption" in federal retirement law.

The exemption has allowed some Texas teachers and other government employees to get around a law that reduces spousal benefits available under Social Security for government retirees who were exempt from paying Social Security taxes.

Tucked away in current law, last overhauled in 1977, is a provision that allows government workers full spousal benefits if Social Security taxes and retirement plan contributions are withheld from their paychecks on the final day of employment.

The "last-day exemption" has prompted thousands of retiring teachers to seek temporary jobs just before retirement at a handful of Texas school districts that participate in both the state Teacher Retirement System and the Social Security system.

The legislation approved Wednesday changes the eligibility rule to require a surviving spouse to work in a Social Security-covered job for at least five years to qualify for the higher benefits.

Gayle Fallon, president of the Houston Federation of Teachers, and other area teachers have watched the issue closely, particularly those who want to consider retiring before the law takes effect.

"I think the House may not realize they are about to cause a crisis as far as teacher shortage in a number of states including Texas," said Fallon of the teachers nearing retirement. "Of course, the other problem is, a lot of our people who came into teaching from other fields won't stay, and it's really not worth it for them to stay."

A study last year by the General Accounting Office found that almost 4,800 Texas teachers and dozens more in Georgia had taken advantage of the last-day loophole.

The GAO study estimated that teachers who took advantage of the last-day exemption could pay as little as $3 into the Social Security system and receive an average $93,000 in spousal benefits over the length of their retirement.

"We can't have two classes of families in America -- those who have Social Security loopholes and those who don't," said Rep. Kevin Brady, a Republican from The Woodlands who sits on the House Social Security subcommittee.

Rep. Gene Green, a Houston Democrat who led the fight against ending the last-day exemption, said it represents a double hit for teachers whose health care benefits were reduced because of cuts in the state budget in 2003.

The bill approved Wednesday "will make it worse for these folks, especially widows ... who are counting on their husbands' Social Security benefits" to supplement their teacher retirement checks, Green said.

Houston Chronicle reporter Rosanna Ruiz contributed to this story.

Copyright 2004 Houston Chronicle - Washington Bureau