Mark Flatten

Government Lobbying Payments Exceed $9 million

Posted on April 21, 2010 | Type: Investigative Report | Author: Mark Flatten
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The Goldwater Institute Watchdog Report is a periodic publication intended to identify government corruption and waste and to hold politicians and public agencies accountable to taxpayers.

Mesa lobbyists were pitching a bill to hike taxes and surcharges to build a new stadium for Chicago Cubs spring training games. But rather than work openly in the hearing rooms of the state Capitol, the city offered each of the state’s 90 legislators free tickets to a Cubs game at Hohokam Stadium last March.

Thirty-seven lawmakers accepted the offer. They got free parking and were treated to a barbecue before the game, so city officials and their paid lobbyists could work the crowd trolling for support. Also attending were Mesa’s mayor and City Council, as well as six paid lobbyists from the two outside firms the city has hired to push its agenda. The top item: legislation to pay for a new $84 million Cubs stadium.

The baseball and burgers are a small part of the more than $5 million that government agencies in Arizona spend annually to lobby legislators and state agencies, according to an analysis by the Goldwater Institute. From the biggest cities and universities to small towns and local school districts, governments throughout the state spend tens of thousands of dollars every year to hire high-priced, politically connected, private lobbyists. Most of the bigger agencies also have full-time lobbyists on their staffs to ensure the Legislature does not slice their share of state spending and to fight measures they deem would encroach on their own local control.

Another $4.3 million was spent by state and local governments for lobbying at the federal level last year, raising the total cost of government-to-government lobbying at taxpayer expense to more than $9.3 million.

Those figures do not count Arizona-based Indian tribes, which spent an additional $2.26 million in federal lobbying alone in 2009. This analysis  also does not include organizations such as the League of Arizona Cities and Towns, a private organization funded with tax dollars which lobbies on behalf of cities, or labor unions that represent public employees such as police, firefighters and teachers.

There are 274 government agencies in Arizona that have a total of 1,383 registered lobbyists, according the Secretary of State’s office. Many are government employees or elected officials who actually do little or no lobbying, but register to avoid running afoul of state reporting requirements in case they talk to a legislator.

Most of the money spent on lobbyists goes to a small cadre of outside firms that represent both government agencies and private clients. All of them are getting paid simultaneously by multiple agencies.

The biggest spenders are the state’s largest cities, counties and universities. Phoenix spends about $900,000 annually on combined federal and state lobbying. Maricopa County and Tucson each spent about a half-million dollars last year.

But the size of an agency does not necessarily reflect how much it spends trying to get its way. Some of the biggest spenders are obscure state agencies or small communities. For instance, the Town of Queen Creek  spent almost $100,000 lobbying the state last year, and another $90,000 on federal lobbyists, according to disclosure reports. The Arizona Historical Society, the state Board of Accountancy and the Arizona Medical Board all reported spending of more than $35,000 annually on lobbyists.

That level of spending by so many government agencies irks people like Sen. Russell Pearce, R-Mesa, chairman of the Senate Appropriations Committee. Governments across Arizona are using taxpayer money to convince the legislature to spend more money, said Pearce, co-sponsor of a resolution asking voters to ban lobbying by state agencies and local governments.

Pearce said he has no problem with government staff contacting legislators to provide information on how a piece of legislation might affect their agencies. He says he has offered to meet regularly with elected officials from his district, but so far they have not taken him up on his invitation.

However, Pearce objects to lobbyists for cities, counties, school districts and universities being paid with taxpayer dollars to pressure lawmakers on policy and spending decisions.

For the most part, what the lobbyists are seeking is money, Pearce said. It makes no sense that governments are cutting vital services like police protection and teachers, and imposing millions of dollars in new taxes, at the same time they are spending so much money on lobbyists, he said.

“I don’t need a lobbyist hanging around down here that is taxpayer-paid, who is only trying to get more taxpayer money,” Pearce said. “It’s like you’re funding your worst enemies.”

“I just think we’re very careless and reckless with the taxpayer’s money,” Pearce said of government spending on lobbyists. “We forget that people work for this money. We tax it. We take it by force. And we ought to be a little tender in how we spend it. If they are paying for government, it ought to be going for government.”

The measure to ban government lobbying did not even get a committee hearing in the Senate.

HIDDEN COSTS

It’s not easy to figure out how much governments are spending on lobbyists in Arizona. They are required to register their lobbyists with the Secretary of State, the same as private corporations, unions and other interest groups. Public entities are supposed to report how much they spend every year on state-level lobbying. Federal lobbying is disclosed separately.

But the annual reports filed by most agencies contain scant information about their spending.

Some of the larger agencies include the cost of outside lobbyists as part of their overall expenses, but most do not, even when they have high-priced outside lobbyists on contract. Some do not report any expenses, even when they’ve paid thousands to outside firms.

For instance, the Public Safety Personnel Retirement System, which manages three public employee retirement funds, uses two outside lobbyists, which it pays a total of $210,000 annually. However, no expenses are listed in its annual report to the state.

Some agencies list only in-house expenses. Tempe reported about $42,000 of the salary of its staff lobbyist, as well as $1,000 for travel and lodging, in its 2009 report. Tempe did not report the $96,900 it paid to outside lobbyist Michael Williams.

Even when payments to outside lobbyists are reported, the figures can be misleading. Phoenix reported $192,109 in spending on lobbyists last year, including $77,700 for three outside lobbying firms. In reality, those firms were paid $310,800, according to city records. The full cost of those contracts is not reported because the lobbyists do not spend all of their time talking to legislators, said Karen Peters, government relations director for the city. The time the lobbyists spend talking with city staff, or doing anything else besides talking to lawmakers, does not need to be reported, she said.

“My obligation to the secretary of state is to report the time they spend lobbying,” Peters said. “That’s exactly what we do, lobbying within the meaning of the reporting statutes.”

All lobbying expenses by public entities, including the cost of outside firms, should be reported, said Matt Benson, spokesman for the Secretary of State’s office. But the law is so vague it is unclear what must be reported, he said. Besides, the secretary of state merely collects the reports, and has no power to check them for accuracy.

Government agencies did report about $1.97 million in lobbying expenses to the Secretary of State last year. The Goldwater Institute followed up on those filings by contacting dozens of government entities separately, focusing on those which reported the use of outside lobbying firms. The Institute documented about $5 million in annual state-level lobbying by government agencies. That figure is probably low because many agencies did not respond to repeated requests for information.

INSULT TO TAXPAYERS

The amount of money being spent by governments to lobby the Legislature is an insult to taxpayers, as is the unwillingness of many agencies to fully disclose the cost, said Darcy Olsen, president and chief executive officer of the Goldwater Institute. Taxpayer funded lobbying skews free speech by allowing agencies to push their agendas at public expense, she said. That makes it tougher for average citizens to be heard and blocks reforms that are needed, especially in lean budget times.

The lack of disclosure makes matters worse by hiding the true cost of government-to-government lobbying, she said.

“Taxpayer-funded lobbying promotes the best interests of agencies, not citizens,” Olsen said, adding Arizona should adopt a ban on any taxpayer money being used for lobbying. “Government shouldn’t have its own agenda. Its agenda should be set by the taxpayers. Instead, what this does is puts government in the driver’s seat and leaves taxpayers out in the cold.”

The Institute published a policy report in 2007 which concluded taxpayer-funded lobbying is a constitutionally questionable practice that pits the interests of government agencies against those of ordinary citizens. The ratio of government lobbyists to state legislators at that time was 10-to-one. Since then the ratio has grown to 15-to-one, but lawmakers have not imposed any new restrictions or clarified the state’s muddled disclosure laws.

“It’s an abuse of taxpayer trust and funds, but all the more so in a period of tough budget cuts and high unemployment,” Olsen said. “It’s just insulting.”

BIG SPENDERS

 

 

 

 

 

 

 

 

 

 

 

 

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The biggest spenders on state lobbying are Phoenix and  Maricopa County.  Phoenix spent $425,209 on state lobbying last year, including the full cost of the outside firms, while the county racked up $414,409 in state expenses. Phoenix spent another $484,000 on federal lobbying, which cost Maricopa County $80,000 last year, according to information compiled by the Center for Responsive Politics, which monitors federal disclosure forms.

The county uses seven outside lobbying firms, including two subcontractors who have expertise in specific issues such as health care and flood control.

Among the other major players:
• Tucson spent $234,937 on state lobbying and another $280,000 for federal lobbying.
• Pima County spent $217,034 for state lobbying and $80,000 federally.
• Mesa spent $132,914 on state lobbying, including $20,000 it paid to hire a lobbyist to work the Cubs bill. Mesa uses two outside lobbying firms and also has its own in-house lobbyist. The city spent $170,000 on federal lobbying.

Government officials contacted by the Goldwater Institute insist they are not trying to squeeze more money out the Legislature. Instead, they say they are playing defense, trying to prevent cuts in state-shared revenues and blocking efforts to shift vital and expensive state responsibilities to local governments.

“The notion that any local governments are down there asking that broke state for a dime is ludicrous,” said Richard Bohan, one of two staff lobbyists for Maricopa County. “Who is down there asking for money besides baseball teams?”

Since the start of the last recession, lawmakers have tried repeatedly to balance the state’s budget by forcing critical government functions to counties and cities, Bohan said. One recent example is a proposal by Gov. Jan Brewer to eliminate the state Department of Juvenile Corrections, and send incarcerated youth to the counties, he said. That would have saved the state about $68 million a year. But it would have cost Maricopa County alone $40 million, money it does not have and cannot legally raise given state-imposed spending caps, Bohan said. Worse, the transfer was supposed to have occurred by July 1, 2010. That would not have given counties enough time to set up their own agencies or build facilities to house juvenile offenders, he said.

County lobbyists were able to stall the governor’s original proposal, Bohan said. Lawmakers agreed to put off the transfers until 2011 and establish a study committee to determine the feasibility of the plan.

“They were more than willing to send us $40 million in responsibility and not one dime to handle it,” Bohan said of the juvenile corrections issue. “They make decisions, not based upon facts, but what’s easiest and what’s the path of least resistance.”

The county uses so many different lobbying firms in part because they have expertise in different areas, Bohan said. Another factor is the political reality that different lobbying firms have connections to different factions at the Legislature and in the governor’s office.

“Our outside people are diverse,” Bohan said. “So we have Democrats. We have Republicans. We have a myriad of different people with the ability to get to different factions inside the different parties.”

POLITICALLY CONNECTED

The county’s biggest contract is with HighGround Inc., which was paid $90,000 in 2009. The firm’s top two officers, Chuck Coughlin and Doug Cole, headed Brewer’s transition team when she became governor last year. Brewer’s re-election campaign is being managed by the company and Cole is Brewer’s campaign spokesman.

HighGround earns more money from government lobbying contracts than any firm in Arizona, more than $500,000 annually.

Cole said he did discuss the plan to shift juvenile corrections with the governor’s staff on the county’s behalf, but not with Brewer. While he would not directly answer whether his influence with the governor played a part in stopping the transfer of juvenile inmates, Cole did say the decision to delay implementation came from the Legislature. Brewer still supports the move.

“That was an all-hands-on-deck effort by all of the county lobbyists,” Cole said. “It was (because of) all of the counties working together that the governor’s policy was changed.”

Much of what government officials consider defense is protecting the flow of state money, even as the Legislature tries to trim billions in spending. A favorite target of budget-cutting legislators has long been state-shared revenue that gets passed on to cities through a decades-old, voter-approved law. Peters, government relations director for the City of Phoenix, said convincing legislators not to cut the allocations set in statute is not the same as asking for new money.

Peters also said it is unfair to suggest the money used to pay lobbyists could be used to protect the jobs of more vital government workers, such as police and firefighters. The city relies on state revenue sharing to build its budget, Peters said. If it is not protected by city lobbyists, then even more layoffs will result, she said.

“We pay for the police officers with the revenue we get from the state and our job is to make sure that people at the legislature understand that relationship,” Peters said.

Megan Courtney, intergovernmental relations liaison for Tucson, also said protecting the city from legislative efforts to cut city spending is an important part of what it hires lobbyists to do. Tucson uses two outside lobbying firms, HighGround and Policy Development Group.

“These companies have been central to the acquisition and defense of hundreds of millions of dollars for the core operations of the City of Tucson and have been essential to the successful defeat of legislation that is harmful to the finances and authority of the City of Tucson,” she said of the city’s lobbyists.

Some government agencies have made the calculation that outside lobbyists are not worth the cost in lean budget times. Last year, Navajo County paid $24,000 to R & R Partners for state-level lobbying. The contract was not renewed as part of a countywide budget tightening that included layoffs of about 10 county workers in January, said Rod Ross, government relations administrator.

“Navajo County made the decision to not renew our contract with R & R Partners because of budget constraints imposed by a declining economy and massive state budget impacts,” Ross said. “It was a budgetary decision. Navajo County, like every other jurisdiction in the state, is facing historic declines in revenue and has had to make tough decisions. This was one of those very, very difficult decisions.”

SELLING ACCESS

Lobbyists who have government contracts say what they are selling is their knowledge of the political system and access to key legislators. Several of the lobbying firms also do political consulting and help politicians run their campaigns. Most of the principals also make sizeable campaign donations.

Not all lobbying is done at the Legislature. And it does not always involve seeking more money.

In 2008, the Public Safety Personnel Retirement System hired two outside lobbying firms, including HighGround, to shepherd through technical changes in the law that will allow it to more efficiently manage the retirement funds it is responsible for, said Jim Hacking, the agency’s administrator. The total cost for the two firms is $210,000 annually.

One of the changes allowed the retirement fund to use outside fund managers, who have access to more investment markets than in-house staff, Hacking said. That resulted in a better rate of return for the retirement funds, he said.

Two firms were needed because different lobbyists hold sway with different lawmakers, Hacking said.

Cole said the work HighGround does for the retirement system is an example of how lobbyists are actually saving taxpayers money.

“Someone’s got to run this through the process,” Cole said. “We spend a lot of time trying to make government better. We rarely are down there asking for more money. That’s a misconception.”

Misconception or not, the cost of running agendas through the process is lucrative for the half-dozen firms that do most of the work for government agencies. Aside from the retirement system, HighGround’s clients include Maricopa County, the City of Yuma and Salt River Project, a water and power company that is akin to a municipal government in state law.

 

 

 

 

 

 

 

 

 

 

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Other top firms include:
• DeMenna & Associates, which makes about $426,800 from government clients. DeMenna’s biggest client is the Maricopa County Community College District, which paid him $180,000 last year. The payment is $60,000 more than his contract calls for because he made his staff available when two government relations workers left the district. The firm also gets $136,800 annually from Phoenix.
• Husk Partners, which makes about $236,000 from three government clients. Husk’s biggest client is Glendale, which pays him $120,000 per year. He also was hired by Mesa to work on the Cubs issue for $20,000.
• FirstStrategic Communication and Public Affairs, which made $228,000 from Salt River Project, the Phoenix Fire Department and the Chandler Unified School District.

Kevin DeMenna of DeMenna & Associates said the agencies he represents could not afford to hire someone with his experience and contacts for what they pay him. True, they would have their own full-time lobbyist, rather than a firm that represents multiple agencies as well as private interests, DeMenna said. But he argues that simultaneously representing multiple clients increases a lobbyist’s influence and access to lawmakers.

“It’s simple, synergistic math,” he said.

Outside lobbyists also can move more freely in the political world than government employees, Demenna said. Making political donations and advising campaigns are staples for a private lobbyist, but are activities government lobbyists normally shy away from, DeMenna said.

“I have the ability to assist in helping to return legislators that I think do a good job,” DeMenna said. “It isn’t always those who just vote for my issues. I never make apologies for fundraising. But that is essential to explaining to voters who they are voting for. That is an element that is simply off limits to the public lobbyists.”

GOVERNMENT CONTROL

The assertion that government lobbyists are actually saving taxpayers money or protecting their clients from an overbearing legislature is a faulty one, said Jason Clemens of the Pacific Research Institute, a free-market think tank in California. Clemens authored a study, published in March, of state disclosure requirements for public-sector lobbyists, and the extent of government spending on lobbyists in California.

Claims that agencies are justified in protecting themselves from budget cuts during tough economic times assumes they are operating efficiently and performing only legitimate and critical functions in the first place, Clemens said.

In the private sector, harsh economic times force companies to trim budgets with layoffs, pay cuts and elimination of unneeded or unproductive functions.

But government-to-government lobbying is aimed at protecting the status quo and preventing reforms that would lead to cost savings or more efficiency, Clemens said. With less revenue coming into state coffers, legislators are forced to make tough decisions: cut spending, raise taxes or resort to accounting gimmicks to meet constitutional balanced budget requirements, he said. To the extent government lobbyists protect their clients from state budget cutting, they increase pressure to raise taxes, he said.

“Government-to-government lobbying is inherently about more government,” said Clemens, who rated Arizona’s public-sector lobbyist disclosure laws among the best in the nation. “Government-to-government lobbying is not about ‘governments shouldn’t be doing this’ or ‘government should be doing it in a different way.’ It’s government lobbying another level of government to try to get a piece of the pie, which creates a strong incentive to increase that pie, which means to increase the tax burden.”

Beyond creating pressure to spend and tax more, government lobbying makes it tougher for average citizens, businesses and other interest groups to shape public policy, said Benjamin Barr, who authored the 2007 report on the issue for the Goldwater Institute.

Government-paid lobbyists drown out calls for reform from private citizens who do not have the luxury of having their advocacy paid for by others, said Barr, now a consultant who advises several state-based think tanks on issues of constitutional law.

“This arms the government with increased power, while disarming citizens, businesses and civic organizations from having an effective voice before government,” Barr concluded. “The possibility that the voices of government lobbyists would become louder and more effective than our citizens’ voices poses grave implications for the democratic process.”

Arizona would not be alone if it enacted a ban on lobbying by government agencies. Florida has a long-standing law that prohibits executive-branch agencies, universities, community colleges and water districts from hiring outside lobbyists. The prohibition does not extend to counties, cities or school districts.

But it is unlikely Arizona voters will have a chance to decide the issue anytime soon. The referendum to put the issue on the 2010 ballot is effectively dead at the Legislature, according to its sponsors. Prior attempts in recent years have also failed, but backers of the measure say they will try again next session.

Sen. Ron GouldSen. Ron Gould, R-Lake Havasu City, said there will be a significant turnover in the legislature after the 2010 election. That should help the chances of passing the ban, he said.

“Maybe we will get some people that the government lobbyists don’t already have their ear,” Gould said, adding private lobbyists hired to protect government interests have been effective in killing the proposal in prior sessions.

“To actually let agencies go out and hire their own lobbyists to keep their funding is essentially like taxpayer cannibalization,” Gould said. “Rather than having the citizens in control, you have government in control of itself.”
 
Mark Flatten is an investigative reporter for the Goldwater Institute. Nora Avery-Page, Ronald Reagan fellow at the Goldwater Institute, contributed to this report.

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