In 2002, Morales had been expected to run for the vacant U.S. Senate seat held by the retiring three-term Republican Phil Gramm, however, he entered the Democratic gubernatorial primary for Governor of Texas but lost the nomination to Tony Sanchez by a landslide on March 12, 2002.
After his primary loss, Morales endorsed the successful Republican nominees for Governor of Texas and Lieutenant Governor of Texas, Rick Perry and David Dewhurst, respectively.