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Inside ALEC, The Koch-Funded Group Behind Right-Wing State Laws

How ALEC, the Koch brothers and their corporate allies plan to privatize government.
 
 
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The following article first appeared at In These Times magazine. For more news and analysis like this, sign up to receive In These Timesweekly updates.

On February 25, 2011, Florida State Representative Chris Dorworth (R-Lake Mary) introduced HB 1021. The bill sought to curtail the political power of unions by prohibiting public employers from deducting any amount from an employee's pay for use by an employee organization (i.e., union dues) or for any political activity (i.e., the portion of union dues used for lobbying or for supporting candidates for office).

Furthermore, HB 1021 stated that, should a union seek to use any portion of dues independently collected from members for political activity, the union must obtain annual written authorization from each member.

In effect, this bill defunds public-sector unions--like AFSCME, SEIU, the American Federation of Teachers and the National Education Association--by making the collection of member dues an onerous, costly task. With public-sector unions denatured, they would no longer be able to stand in the way of radical free marketeers who plan to profit from the privatization of public services.

Given the similarities between HB 1021 and a rash of like-minded bills in states across the country, including Wisconsin, on March 30 a public records request was sent to Dorworth's office seeking copies of all documents pertaining to the writing of HB 1021, including copies of any pieces of model legislation the American Legislative Exchange Council (ALEC) may have provided.

Within an hour of submitting this request, Florida House Speaker Dean Cannon's (R-Winter Park) Communications Director Katherine Betta responded: "We received a note from Representative Dorworth's office regarding your request for records relating to the American Legislative Exchange Council and HB 1021. Please note that Mr. Dorworth's legislative offices did not receive any materials from ALEC relating to this bill or any 'model legislation' from other states."

But two weeks later Dorworth's office delivered 87 pages of documents, mostly bill drafts and emails, detailing the evolution of what was to become HB 1021. Buried at the bottom of the stack was an 11-page bundle of neatly typed material, labeled "Paycheck Protection," which consisted of three pieces of model legislation, with the words "Copyright, ALEC" at the end of each.

Dorworth legislative assistant Carolyn Johnson claims that, although Dorworth is an ALEC member, neither she nor her boss have any idea how the ALEC model legislation found its way into Dorworth's office. Dorworth could not be reached for comment.

 

Enter the Koch Brothers 

Nov. 2, 2010 saw a radical cohort of Republicans swept into office in states across the country.

When the legislative sessions began in January, the American news-consuming public was shocked by the tenacity of this new breed of Grand Old Partier as it set to the task of breaking public employee unions, dismantling state government and privatizing civic services.

While battles still rage in the nation's legislatures and statehouses, mainstream media attention peaked in February and March with the culmination of the fight over Gov. Scott Walker's budget bill AB 11, which sought to curtail the collective bargaining rights of government employees and thus disempower Wisconsin's public sector unions.

When on February 23 the Buffalo Beast published recordings and transcripts of a prank call to Walker from a Beast reporter posing as billionaire GOP donor David Koch, it became apparent how intimately involved brothers David and Charles Koch were in Walker's efforts to break public sector unions.

Subsequently, bloggers and editorialists began batting around possible scenarios involving myriad right-wing public policy foundations funded by the Koch brothers and proceeds of Wichita, Kan.-based Koch Industries (and other Koch-controlled corporations). During such speculation, one name arose as the favorite villain behind the multitude of bills aimed squarely at public employee unions. That name was ALEC (see sidebar detailing the organization's Koch connections).

An exhaustive analysis of thousands of pages of documents obtained through public records requests from six states, as well as tax filings, lobby reports, legislative drafts and court records, reveal that these suddenly popular anti-public employee bills, while taking different forms from state to state, were indeed disseminated as "model legislation" by ALEC.

Not coincidentally, bills similar to those in Florida and Wisconsin have been introduced in Arizona, California, Illinois, Iowa, Indiana, Kansas, Maine, Maryland, Michigan, Minnesota, Missouri, North Carolina, New Hampshire, New Jersey, New Mexico, Ohio, Oklahoma, Rhode Island, Tennessee, Texas, Utah and Vermont.

The purported goal of this nationwide movement has been to reduce the budgetary burden posed by public employee salaries by limiting the right of public employees to collectively bargain for pay and other benefits. These restrictions, along with "paycheck protection" laws, curtail the political power of public employee unions by cutting off funds for political campaign and lobbying expenditures. These measures would effectively thwart attempts by public employee unions to resist privatization of government functions and to support candidates opposing elected officials who vote for corporate giveaways of public resources.

 

'Publicopoly' in play

ALEC contends that government agencies have an unfair monopoly on public goods and services. To change that situation, it has created a policy initiative to counter what it calls "Publicopoly." ALEC's stated aim is to provide "more effective, efficient government" via privatization--that is, the shifting of government functions to the private sector. ALEC lists its initiatives on its website (alec.org/publicopoly).

Though the specifics are secret and "restricted to members," ALEC openly advocates privatizing public education, transportation and the regulation of public health, consumer safety and environmental quality including bringing in corporations to administer:

• Foster care, adoption services and child support payment processing.

• School support services such as cafeteria meals, custodial staff and transportation.

• Highway systems, with toll roads presented as a shining example.

• Surveiling and detaining convicted criminals.

• Ensuring the quality of wastewater treatment, drinking water, and solid waste services and facilities. (After all, when someone mentions a safe and secure public water supply, the voter's next immediate thought is: "Only if it's cost-effective!")

To accomplish these initiatives, ALEC contends that "state governments can take an active role in determining which products and services should be privatized." ALEC advocates three reforms: creating a "Private Enterprise Advisory Committee" to review if government agencies unfairly compete with the private sector; creating a special council that would contract with private vendors if they can "reduce the cost of government"; and creating legislation that would require government agencies to demonstrate "compelling public interest" in order to continue as public agencies. (Who then oversees these committees to ensure the private sector doesn't unfairly profit by monopolizing public goods and services? One can only assume it is the same "Private Enterprise Advisory Committee.")

 

ALEC nuts and bolts

ALEC is a 501(c)(3) not-for-profit organization that in recent years has reported about $6.5 million in annual revenue. ALEC's members include corporations, trade associations, think tanks and nearly a third (about 2,000) of the nation's state legislators (virtually all Republican). According to the group's promotional material, ALEC's mission is to "advance the Jeffersonian principles of free markets, limited government, federalism, and individual liberty, through a nonpartisan public-private partnership of America's state legislators, members of the private sector, the federal government, and general public."

ALEC currently claims more than 250 corporations and special interest groups as private sector members. While the organization refuses to make a complete list of these private members available to the public, some known members include Exxon Mobil, the Corrections Corporation of America, AT&T, Pfizer Pharmaceuticals, Time Warner Cable, Comcast, Verizon, Wal-Mart, Phillip Morris International and Koch Industries, along with a host of right-wing think tanks and foundations.

ALEC is composed of nine task forces--(1) Public Safety and Elections, (2) Civil Justice, (3) Education, (4) Energy, Environment and Agriculture, (5) Commerce, Insurance and Economic Development, (6) Telecommunications and Information Technology, (7) Health and Human Services, (8) Tax and Fiscal Policy and (9) International Relations--each comprised of "Public Sector" members (legislators) and "Private Sector" members (corporations and interest groups).

Each of these task forces, which serve as the core of ALEC's operations, generate model legislation that is then passed on to member lawmakers for introduction in their home assemblies. According to ALEC promotional material, each year member lawmakers introduce an average of 1,000 of these pieces of legislation nationwide, 17 percent of which are enacted. For 2009, ALEC claimed a total of 826 pieces of introduced legislation nationwide, 115 of which were passed into law--slightly below the average at 14 percent. ALEC does not offer its model legislation for public inspection.

ALEC refused to comment on any aspect of the material covered here.

 

'Paycheck Protection'

The three pieces of model legislation contained in the ALEC "Paycheck Protection" bundle (archived at dbapress.com here) provided by Rep. Dorworth's office were titled "Employee Rights Reform Act," "Labor Organization Deductions Act" and "Political Funding Reform Act."

Employee Rights Reform Act (ERRA): This bill establishes limitations on fees that may be charged to nonunion public employees who are part of a collective bargaining unit represented by a union.

ERRA states that no nonunion public employee may have more than a proportionate share of collective bargaining union costs withheld from their pay by a public employer. Chargeable activities are defined as expenditures for purposes of collective bargaining, contract administration and grievance adjustment. ERRA states that whether or not a public employer can deduct funds from a public employees pay for political activity--union organizing campaigns, contributing to political campaigns of elected officials, lobbying on behalf of their members, or raising money from their members to pay for union organizing campaigns--is dependent on "controlling court decisions."

Labor Organizations Deductions Act (LODA): This is the only piece of the "Paycheck Protection" trilogy not aimed specifically at public employee unions (although the bill does name both the National Education Association and the American Federation of Teachers as entities that must comply with restrictions). LODA establishes a stringent set of criteria governing the means through which any labor organization may collect and use funds for political activity, such as lobbying, electoral and political activities, including contributions to any candidate, party or voter registration campaign.

LODA establishes criminal penalties for any labor organization found to have made a political contribution derived from dues or any other fee paid by union members. Further, LODA prohibits unions from soliciting funds for political use from any individual other than union members and their immediate family members.

Political Funding Reform Act (PFRA): While ERRA and LODA seek to significantly limit the amount and type of funds that may be deducted from employee pay--particularly as those funds may apply to union political activity--PFRA is designed to eliminate all withholding of public employee pay for use in any political activity. Simply put, under PFRA, unions would have to raise money for political purposes by directly fundraising to their members or other union supporters.

 

Florida: A case study

In the case of Florida's HB 1021, e-mails provided by Rep. Dorworth's office through a public records request reflect that the initial version of the bill had been drafted in January by then-Florida Chamber of Commerce (FCoC) Vice President of Government Affairs Adam Babington. A member of the FCoC Foundation's board of trustees, Cincy Marsiglio, the senior manager of public affairs and government relations in Florida for Wal-Mart, is the Florida ALEC "private sector" chair (see sidebar below for more on ALEC's public and private chairs). Babington's original draft (evidently based on ALEC "Paycheck Protection" model legislation) underwent a revision aimed at curtailing the political activity of public employee unions. This revision was made by Florida State Senate staff who were working with Babington to create a Senate companion version of the bill.

This companion bill, SB 830, was sponsored by Sen. John Thrasher (R-Jacksonville). Thrasher worked for the influential Tallahassee lobby firm of Southern Strategy Group, Inc., from 2002 through his election to the Florida Senate in 2009, where he represented several FCoC and ALEC member corporations, many with interests in the privatization of state governmental functions (particularly in the areas of mental health and healthcare service contracting).

The primary actor on the Senate end of HB 1021's formation was Andy Bardos, special counsel to Senate President Mike Haridopolos (R-Merrit Island). After a stringent anti-public employee union dues collecting provision was added by Bardos, Babington wrote in an e-mail to Dorworth and Johnson: "So, paycheck protection is about to go on steroids. Apparently the Senate wants to be more aggressive."

Bardos, prior to joining the office of Senate President Haridopolos in early 2011, had worked since 2005 for the Florida law firm of GrayRobinson as an attorney specializing in governmental affairs.

Bardos' former colleague, GrayRobinson attorney Fred Leonhardt, is currently on the board of directors of the FCoC, of which he was the former chair. Leonhardt is a member of Enterprise Florida, Inc., a "public-private partnership" that works as the economic development arm of the state.

Another director of Enterprise Florida is former Florida House Speaker Allan Bense (R-Panama City). Bense is the present chairman of FCoC, who derives a large portion of his annual income from a company he co-owns: GAC Contractors, Inc. As reported on his 2009 statement of financial interests (filed pursuant to his membership on the board of the quasi-public Enterprise Florida), Bense held nearly $5 million in GAC asssets, much of which was money earned from contracts to repair state and federal highways.

GAC is a prominent member of Associated Builders and Contractors, Inc. (ABC), which through its legislative efforts seeks to encourage the free flow of public-sector cash to nonunion private companies. ABC bills itself as being the nonunion "construction industry's voice within the legislative, executive and judicial branches" of government. The bundled "Paycheck Protection" package containing ERRA, LODA and PFRA in Dorworth's office had originated in ABC's 2010 "legislative handbook."

In addition to his FCoC, GAC and ABC connections, Bense is chair of the Florida-based, Koch-funded, ALEC-member public policy foundation, the James Madison Institute (JMI). FCoC baord member Leonhardt serves on the JMI board with Bense.

When asked why the FCoC was so deeply concerned with protecting the paychecks of public employees (to the point where FCoC top lobbyists were drafting legislation to such effect), FCoC Director of Public Affairs Edie Ousley declined to comment.

Both HB 1021 and SB 830 died in their respective chambers following pressure exerted on the FCoC by public employee union members.

According to materials obtained through a public records request, news of a large-scale opposition action made its way back to Dorworth in the form of an e-mail from Ousley, with the terse subject line "here's the issue." That e-mail contained a press release from a coalition of unions known as Floridians Outraged at the Chamber of Commerce's Attack on Workers, which read in part: "Wednesday, April 20...Workers respond to attacks from the Chamber of Commerce... Labor organizations and members withdrew close to $10 million in funds from the Chamber's largest banks." The press release went on to indicate that the group was prepared to issue further "wave(s) of withdrawals" and other actions.

Weeks later, on May 7, the bills' sponsors withdrew both bills from legislative hearings calendars.

 

Blueprint for privatization

Should state employee unions be effectively prohibited from politicking, as "paycheck protection" legislation seeks to do, other pieces of ALEC model legislation seeking to privatize state functions would meet with less resistance. Three of these model bills--the Council on Efficient Government Act (CEGA), the State Council on Competitive Government Act (SCCGA) and the Public-Private Fair Competition Act (PPFCA)--call for the creation of state "councils" or "committees" tasked with streamlining state agency performance and identifying services to be outsourced to the private sector.

PPFCA calls for the broadest scope of privatization. The act seeks to prohibit state governments from "engaging in any commercial activity of any goods or services to or for government agencies or for public use which are also offered by private enterprise." It also calls for the creation of "Private Enterprise Advisory Committees" (PEAC). The committee members--the majority of whom are business owners or corporate officers--would review what services, if any, government should continue to provide citizens.

 

The nonprofit roach motel

Public records requests demonstrate a clear tradition of ALEC model legislation being passed from ALEC-member corporate lobbyists through the offices of ALEC's elected public-sector chairs to other lawmakers. In essence, ALEC has created a web of lawmakers and public employees who act as lobbyists/agents on their behalf and on behalf of their corporate and special interest members.

It is important to note that ALEC, as a 501 (c) (3) entity, is strictly prohibited by federal tax code from taking part in the formation of legislation. In the past year, ALEC has vociferously insisted (since falling under increased scrutiny as a result of the July 2010 In These Times cover story, "Corporate Con Game," which documented ALEC's role in disseminating model legislation based on Arizona's SB 1070), that it simply passes model legislation along to lawmakers. As such, ALEC claims it is not engaged in the crafting of actual legislation, nor is it engaged in lobbying.

Despite such protestations, ALEC is a conduit, an intermediary between Corporate America and the Republican Party--a legislative roach motel controlled by corporations, special interest groups and right-wing think tanks through which lawmakers (whose election campaigns are often funded by the same corporations and interest groups) gather model laws to take home and introduce in state legislatures.

Taken together, ALEC's efforts to shape legislation, beguile lawmakers and privatize government services have one clear goal: to eliminate the public sector altogether.


Playing Fast and Loose With Nonprofit Status 

ALEC annually spends more than $1 million for corporate lobbyists to meet state lawmakers at lavish retreats--lawmakers who will return home and try to shepherd ALEC's corporate-sponsored "model legislation" into law.

However, through an accounting sleight of hand, ALEC hides the identity of the corporations that are paying for the lawmakers' junkets and backing the group's model legislation.

In recent years, ALEC has taken in about $6.5 million in tax-deductible donations: From 1999 through 2009, ALEC reported $743,446 in legislative ("public sector") membership dues, with a two-year membership at $100; during the same 10-year period, ALEC reported $54,504,702 in "gifts," "grants" and other contributions from its corporate and special interest members.

In 2009 alone, ALEC tax returns show that the group spent a combined $2,620,343 on organizing conferences and a membership services program that manages "the recruitment and retention of ALEC state legislator members" and "provides assistance to ALEC state chairs in raising state scholarship funds, tracking the expenditures of these funds, and ensuring that members of ALEC leadership are operating in accordance with ALEC policies and procedures." In 2009, ALEC held $1,042,629 as "scholarship" funds to reimburse lawmakers attending ALEC functions. That's listed on the tax returns not as an expenditure, but as a liability. Through this accounting trick, ALEC retains its tax-exempt status while simultaneously wining and dining thousands of the nation's state lawmakers--who then go on to introduce ALEC's legislation. In each state, ALEC has both a "public sector" and "private sector" chair.

In a memo to its "public sector" chairs, on Oct. 29, 2010, ALEC justifies its active role in creating model legislation while maintaining its not-for-profit status this way:

 

[L]aws are not passed, debated or adopted during this process and therefore no lobbying takes place. That process is done at the state legislatures. ... Just like teachers, farmers and ranchers, senior citizens and other groups, businesses have the right to representation and to inform legislators about their industry."

 

Case study: Arizona

Documents released following a public records request to the office of then-Arizona Senate President Bob Burns (R-Peoria) indicate that in 2009 and 2010, Arizona ALEC lawmakers requested more than $60,000 in reimbursement for travel, lodging and registration fees from ALEC's scholarship fund for their time at ALEC functions--including the December 2009 event at which State Senator Russell Pearce (R-Mesa) submitted his draft of SB 1070 for approval as a piece of ALEC model legislation, the law known as "breathing while Brown" to its critics. (See "Corporate Con Game: How the private prison industry helped shape Arizona's anti-immigrant law," In These Times, July 2010.)

Records indicate that Burns approved all of these requests. Disbursements ranged from around $1,000 to $3,000. This is a considerable sum, given that an Arizona legislator earns $24,000 per year and that the maximum allowable contribution from an individual or political action committee to legislative candidates in the state is $424.

But because the monies raised for the ALEC scholarship fund are donated by member corporations and their representatives, and because the identity of these donors is impossible to determine, ALEC may be operating in direct opposition to a provision of Arizona's "gifting" law.

Arizona Revised Statutes (ARS), title 41-1232.03, section (I), states: "A person or organization shall not make a gift to or an expenditure on behalf of a member or employee of the legislature through another person or organization for the purpose of disguising the identity of the person making the gift or expenditure." In addition, Arizona law requires lawmakers to disclose all "gifts" over $500.

Yet ALEC does not give "gifts," according to ALEC Senior Director of Public Affairs Raegan Weber, based in Washington, D.C. "It's not a 'gift,' " she says. "It's a 'scholarship.' We don't give gifts. A gift is something given out of kindness. I'm gonna give you this. A scholarship has specific specifications which must be met."

According to Weber, the scholarship funds do not come from ALEC. Rather, Weber says that all funds are raised in each state by either the state's public or private sector chairs, independent of ALEC. After being raised, the funds are simply given to ALEC for the group to hold until each state's public sector chairs request a disbursement, she says.

On Nov. 8, 2010, the Tucson chapter of the American Friends Service Committee (AFSC), a Quaker social justice organization, called on the Arizona Secretary of State and the Arizona Attorney General to investigate what it describes as ALEC's "influence peddling."

"Any rational person can look at what these corporations are doing through ALEC and on their own and know that essentially for-profit corporations are writing legislation in Arizona," said Caroline Isaacs, AFSC program director. "The spirit of the law--which I think most of us believe is there to prevent money from buying undue influence in politics--is clearly being violated."

When asked to provide a list of specific donors to the Arizona ALEC scholarship fund, Russell Smoldon, the ALEC Arizona "private sector" chair, utility lobbyist and a member of the ALEC Private Enterprise Board task force that raises those funds, declined to do so. "No. I don't want to start scaring people off. I have a hard enough time raising money." 

The source material for this story, including ALEC model legislation and an extended version of this story, is archived atdbapress.com, a website maintained by the author.

Beau Hodai is a freelance journalist and publisher of DBA Press, an online news publication and source materials archive. He can be reached at publisher@dbapress.com
 
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