Governors’ groups rely increasingly on ‘dark money’ affiliates

Introduction

The Democratic and Republican governors’ associations are increasingly relying on nonprofit affiliates to get their candidates elected and influence ballot initiatives, a move that allows them to avoid disclosing the identity of their donors.

The Washington, D.C.,-based Republican Governors Association and Democratic Governors Association are the most prolific outside spending groups in state-level elections, but as so-called 527 political organizations, they are required to make their donors public.

Their nonprofit affiliates, however, are not.

The RGA’s Republican Governors Association Public Policy Committee nonprofit spent $1.3 million between 2005 and 2009. During 2011, spending spiked to nearly $10 million, Internal Revenue Service filings indicate.

The DGA, meanwhile, established a nonprofit called America Works USA in 2011, which raised and spent $4.4 million.

The governors associations still spend far more through their 527 groups. The DGA spent $49 million and the RGA spent $77 million during the 2012 election cycle.

But rising spending by the RGA and DGA’s nonprofits, which have funded state-level battles over union rights, supreme court seats, tax policy and national healthcare reform, has gone largely unnoticed — and is likely to increase this year and next when 38 governorships are up for election.

The increase, says RGA spokesman Michael Schrimpf, is because “the number of GOP governors has increased along with the importance of their role as policy leaders.”

The 2010 Citizens United Supreme Court decision allowed nonprofits to accept unlimited donations from corporations, unions and individuals and spend the money on advertising in an attempt to elect or defeat candidates.

As spending by nonprofits and super PACs has exploded in federal elections, the same trend can be seen at the state level, says Stetson University law professor Ciara Torres-Spelliscy.

“The governors associations are sophisticated players, so if there’s a new tool to influence politics, they’re going to be early adopters,” she said.

Primary purpose

The new prominence of nonprofits has come with controversy.

Watchdog groups, and now a U.S. senator, have called on the Internal Revenue Service to investigate and New York’s attorney general has proposed new disclosure rules for nonprofits that spend money on elections in the state.

At the center of the dispute are vague IRS rules that require 501(c)(4) nonprofit groups to be primarily focused on promoting “social welfare,” not election campaigns.

“The rule of thumb,” says Torres-Spelliscy, “is that 50 percent of a nonprofit’s money has to go to something other than politics.”

Despite the requirement, America Works USA — the Democratic nonprofit — spent about 70 percent of its budget on “media buys and production” in two races for governor in the last half of 2011 and the first half of 2012, according to a Center for Public Integrity review of unreleased tax records.

DGA spokesman Danny Kanner says America Works USA’s “primary purpose is not political.”

When the RGA nonprofit applied for tax-exempt status in 2004, it told the IRS it would host policy forums and workshops, not get involved in campaigns for elected office.

The RGA said 60 percent of its money would be devoted to educational forums and only 20 percent of its resources would go to “mass media, including direct mail, newspaper, radio and television advertisements and websites.”

By 2011, however, the nonprofit had spent only 2 percent of its budget — $196,000 — on conferences and 50 percent of its budget on ads, according to IRS filings.

Spreading the wealth

The RGA nonprofit and its Democratic counterpart have also channeled a good portion of their funds to a network of state-level nonprofit groups.

In what has become a common “Russian nesting doll” funding technique, the RGA nonprofit has given 40 percent of its budget since 2010 to other nonprofits — some of which passed the money onto other nonprofits and political committees.

For example, the RGA nonprofit gave $200,000 to a D.C.-based nonprofit called ReAL Action in 2010. ReAL Action is an affiliate of Renewing American Leadership, a nonprofit founded by former presidential candidate Newt Gingrich.

It is “dedicated to renewing America through the restoration and application of biblical values,” and shares an office with the conservative Christian nonprofit Concerned Women for America.

ReAL Action then distributed the funds to three Christian groups focused on unseating Iowa’s Supreme Court justices who had ruled unanimously in 2009 in favor of gay marriage rights.

One of those nonprofits, the political arm of the Mississippi-based American Family Association, in turn gave money to support yet another political committee called Iowa for Freedom.

Run by Republican and failed gubernatorial candidate Bob Vander Plaats, Iowa for Freedom ran ads attacking “liberal, out-of-control judges ignoring our traditional values,” and was successful in unseating the three judges who faced a retention vote in 2010.

Midwest battleground

The DGA nonprofit doled out a fifth of its budget to other nonprofit groups in 2011. It sent its largest grant to the Midwest, where the nonprofit Greater Wisconsin Committee was mobilizing against Republican Gov. Scott Walker’s budget bill.

Greater Wisconsin put the $425,000 grant toward a multimillion dollar ad campaign against Walker’s controversial budget plan, which sparked mass protest at the state capitol.

It also launched ads opposing David Prosser, a conservative candidate who won his re-election bid to the Wisconsin Supreme Court in 2011.

Both the RGA and DGA fueled a ballot initiative in Ohio to repeal Republican Gov. John Kasich’s law curtailing union bargaining rights for public employees.

The RGA made its largest grant to Make Ohio Great, a nonprofit, which shares a D.C. address with the RGA and supported Kasich’s law.

The nonprofit hired Rex Elsass, an Ohio-based political consultant whose business counted Kasich as a client and would later produce ads for Todd Akin, a former congressman and failed Republican candidate for U.S. Senate in Missouri.

Kasich’s anti-collective bargaining law was repealed by 61 percent of Ohio voters in a 2011 special election.

Funding phantoms

The RGA nonprofit gave a large grant to a shadowy Missouri-based nonprofit called Take Initiative America, even when it appeared the group was running afoul of the IRS.

The group is run by a Missouri lawyer and Republican operative named Charles A. Hurth III. His group has never filed annual tax returns, leading the IRS to revoke its exempt status in 2011.

Still, the RGA nonprofit gave $700,000 to the organization that same year, funds put toward “the expansion of public choice,” according to its tax filing.

Hurth was infamously arrested for biting a woman’s buttocks in a bar, for which a jury ordered him to pay $27,500 in damages. He did not respond to multiple requests for comment.

In 2010, Hurth’s group spent around $532,000 on a petition drive in Texas to place a Green Party candidate on the ballot for governor. The state’s Democratic Party, whose candidate lost to Gov. Rick Perry in the race, sued unsuccessfully to keep the Green candidate off the ballot.

RGA spokesman Schrimpf defended the contribution to Take Initiative America, calling it a “well-known” organization.

Meanwhile, the DGA nonprofit has itself has kept a low profile.

Its vague name, America Works USA, conjures no connection to its parent group. It has a shell of a website with no contact information on it, and nothing on the DGA’s website mentions its nonprofit group.

Kanner, however, says the DGA is “proud and open” about its support for America Works USA.