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Publicopoly Exposed (cont’d)

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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.

SIDEBAR: 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.”

SIDEBAR: ALEC and Its Tea Party Sugar Daddies

ALEC claims to be an independent, nonpartisan, public-private partnership, but the best metaphor for the organization is an aspen grove. An aspen grove appears to be a cluster of individual trees, but a look beneath the surface reveals that each tree is an offshoot of the same large root network, each tree genetically identical to the other.

In the case of ALEC, a common filament in that network is the Koch brothers, Charles and David. Through the profits of Wichita, Kan.-based Koch Industries (and other Koch-controlled corporations), the two billionaire brothers fund myriad right-wing public policy foundations.

ALEC has received significant funding from the Charles Koch Foundation (CKF), which also funds the Cato Institute, a libertarian think tank. In 1974, Cato was originally incorporated as The Charles Koch Foundation. David Koch is currently on its board of directors.

David Koch is also a trustee of The Reason Foundation, a libertarian public policy institute and prominent ALEC member that promotes the privatization of government (and also receives CKF funding). Michael Flynn, Reason’s current director of government affairs, served as a director of ALEC policy and legislative activities/strategic initiatives for several years ending in 2003.

David Koch also currently chairs the Americans for Prosperity Foundation (AFPF), formerly known as the Citizens for a Sound Economy Educational Foundation (another prominent ALEC-contributor), largely funded by CKF and Koch Industries. Joining him on that board is Koch Industries Executive Vice President Richard Fink, who is also the former executive vice president of the Mercatus Center, yet another Koch-funded, right-wing ALEC public policy member.

In 2003, AFPF incarnated two more foundations: Americans for Prosperity and FreedomWorks. As noted in AFPF’s 2003 tax records, the group paid U.S. House Majority Leader Dick Armey (R-Texas) $429,583, via FreedomWorks, as a “consultant”–his first year salary as chairman of FreedomWorks.

As Kate Zernike noted in our October 2010 cover story, “Tea Party Confidential,” Armey and the group’s president Matt Kibbe wrote an op-ed article in 2007 proposing the Boston Tea Party as a model for putting grassroots pressure on a central government. She writes, “Presaging Tea Party tactics in the summer of 2009, they described how Samuel Adams packed town hall meetings with his supporters to drown out Tory voices and used each new British policy or tax as ‘an excuse to rally new recruits to the cause of American independence.’ They wrote, ‘Adams was the first American to recognize that “it does not require a majority to prevail, but rather, an irate, tireless minority keen to set brush fires in people’s minds.’ “

Beginning in 2009, FreedomWorks was instrumental in creating the faux-populist Tea Party. The mainstream media uncritically hyped the scores of Tea Party tax day protests orchestrated by FreedomWorks and the National Taxpayers Union (another Koch-funded ALEC group headed by former ALEC executive director Duane Parde), thus helping enable unprecedented Republican legislative majorities in states across the nation.

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

Beau Hodai, a former In These Times Staff Writer, is the founder of DBA Press (, an online news publication and source materials archive.

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