February 24, 2020; San Jose Inside
Politicians at all levels have discovered that nonprofit organizations, both 501c3s and 501c4s, provide a way to raise great amounts of financial support for their campaigns, often without having to identify their donors. These efforts have mushroomed since the much-decried Citizens United Supreme Court ruling, which eviscerated campaign finance restrictions. This is no secret. However, less attention has been paid to how elected officials use nonprofit organizations outside campaign season for political and personal benefit.
Donors and politicians have exploited a regulatory gap that allows them to raise political funds using nonprofits without the public disclosure and other oversight that would apply if they were doing that during campaign season. If we continue to let these groups operate in secrecy, we risk further allowing shadowy funding to dominate our politics.
In a recent series of articles, San Jose Inside shows how the misuse of nonprofit status is alive and well in California. According to data compiled by CalMatters, “nonprofits affiliated with California legislators or caucuses grew from at least three in 2010 to at least 12 last year, with total revenue of about $2.9 million.” All told, behested payments—that is, donations made to nonprofits at the request of politicians—have increased in California from $105,000 in 2011 to $2.9 million last year.
Richard Hasen, a professor of law and political science at the University of California, sees these politically controlled nonprofits as providing lawmakers “another way…to wield influence as well as a way for those who seek to influence the legislator to curry favor. This gives a donor some potential extra influence that they couldn’t buy through a campaign contribution.”
Misuse of nonprofit status appears alive and well. The California Democratic Party firmly states its members will not accept political donations from oil or tobacco businesses. Yet nonprofits controlled by legislators have been open in accepting their support even as key legislation is under consideration:
- “[Vape company] Juul gave $105,000 to the Black Caucus foundation in 2018, a month after federal regulators threatened to remove flavored vaping products from the market.”
- “GEO Group, which runs private prisons, donated $20,000 to the Irish Caucus in July 2019 as the Legislature considered a bill to end the use of private prisons in California.”
- “Dialysis company DaVita gave nearly $250,000 combined to the Black, Latino and Women’s Caucus foundations between 2017 and 2019, as it fought a union-backed ballot measure, and then a bill, that would curb profits at dialysis clinics.”
The benefit for politicians is money they can use both personally and politically. For example, in 2017 California Assemblyman Rob Bonta created the Bonta California Progress Foundation. He directly solicited contributions from groups lobbying at the state capital. His foundation then made a $25,000 donation to another nonprofit directed by his wife. Bonta also solicited more than $500,000 in direct donations to nonprofits associated with his wife.
California Assemblyman Evan Low helped bring together a legislative tech caucus and the closely connected Foundation for California’s Technology and Innovation Economy. Low solicited “$290,000 for the foundation, including donations from internet and cable providers, tech trade associations, Uber and Walmart.” For their support, donors were able to arrange closed-door meetings with legislators at conferences organized by the Foundation and the caucus. A video of tech executives and politicos alike lauding Low for his work added up to a direct benefit to his political career.
These activities may all be legal, but they’re not benign. The challenge has been assembling the political will to make a change. Clearly, politicians who use nonprofits in these ways have no reason to change the rules, and nonprofits worry that new regulations may make everyone’s life more difficult.
Two years ago, the Brennan Center proposed a way to take on the problem by establishing a mechanism for identifying nonprofits with close ties to politicians. For these organizations, they proposed “two rules that are standard components of campaign finance and conflict of interest laws: donor disclosure and donation limits.” Their approach would not burden the entire nonprofit world for the sins of a few political players.
Those proposals gather dust. San Jose Inside’s reporting tells us the issue has not gone away, and that for the benefit of clean politics, and for the health and welfare of the nonprofit community, while we shouldn’t need new rules, we do. And we need them today.—Martin Levine