Education lobbyists' backers stay in the shadows

By | July 27, 2015

ALBANY – Three groups pushing education reforms that spent heavily lobbying state government this year funded at least a portion of their efforts though donations whose original sources are essentially untraceable.

Those question marks remain despite a 2011 ethics reform law meant to illuminate the sources of funding behind major lobbying efforts. Gaps in the law, however, appear to have allowed deep-pocketed groups or donors seeking anonymity to work around the requirements.

StudentsFirstNY Advocacy, the Coalition for Opportunity in Education, and Families for Excellent Schools spent more than $8.3 million during the 2015 legislative session lobbying state government to promote charter schools and other issues, according to recent lobbying disclosure filings. The three nonprofits allied themselves with Gov. Andrew M. Cuomo in an ultimately unsuccessful push for the Education Investment Tax Credit, which would have incentivized donations to educational efforts, both public and private.

The original donors behind more than $3.4 million of the spending remain murky in the groups’ biannual filings. In one instance, StudentsFirstNY Advocacy received a $1 million donation from a heavily overlapping but technically separate group run out of the same office, obscuring the original sources of the seven- figure gift.

Billy Easton, executive director of the union-backed group the Alliance for Quality Education – which does disclose its donors under the 2011 law – called the groups’ methods part of their effort to “not let New Yorkers know who is trying to control the politics of the state.”

Charter supporters have poured money into Albany lobbying efforts in an effort to counter heavy lobbying spending by teachers unions.

A group backed by union interests, dubbed Hedge Clippers, has in recent months held large protests at the residences of major charter school financial supporters. Those supporters’ identities are known in part because their names have surfaced in the past in public disclosure filings, and some surely would prefer to escape such treatment.

The 2011 state ethics reform law came amid criticism of a nonprofit that spent millions supporting Cuomo’s early agenda but didn’t have to disclose its financial backers. The reform – passed with Cuomo’s support – requires issue-oriented nonprofits, designated as 501(c)4 groups, spending more than $50,000 in a year on lobbying to disclose donations of more than $5,000.

The law took effect in 2013. Loopholes quickly became apparent.

The most generous education reform spender so far this year is the Latham-based Coalition for Opportunity in Education, which spent $4.7 million in an unsuccessful push for the Cuomo-backed education tax credit. The names of most of the donors to the group were disclosed, but one of its largest gifts came from a shadowy source.

On May 8 – roughly six weeks before the end of the legislative session – the coalition received $863,000 from Green Orchard Inc., an issues-oriented nonprofit founded in 2012 that lists an address in Harrisburg, Penn. A tax filing states that Green Orchard exists to steer money to other issue-oriented nonprofits that support its conservative stances on issues like “childhood education and development, free-market reforms and economic freedoms.”

Geen Orchard does not have to report its donors on its publicly available tax returns.

Brian Sullivan, Green Orchard’s treasurer and an attorney, did not return a phone call for comment.

If Green Orchard had itself spent $863,000 on lobbying in New York this year, it would have had to disclose its donors, according to the state’s 2011 ethics law requiring donor disclosure from such nonprofits. But because it gave to another 501(c)4 that then spent the money, only Orchard Green is listed as a donor to the Coalition – not the sources behind those dollars.

A spokesman for the Coalition said Green Orchard “donated to the effort, but beyond that I don’t have any more information. We reported the contribution in full compliance with the law.”

The issue has arisen before: If a donation is given to an intermediary that then gives to a lobbying group, only the intermediary’s identity must be disclosed under the 2011 ethics reform.

The state lobbying and ethics panel, the Joint Commission on Public Ethics, acknowledged in a February report that entities were currently able to “construct funding mechanisms that may avoid disclosure while still technically complying with the law and the regulations,” and suggested lawmakers might address the issue. The State Legislature has not done so.

A second deep-pocketed education reform backer, Manhattan-based group StudentsFirstNY Advocacy, which pushes for charter schools and other causes, spent $2 million this year, but the sources behind roughly half that spending are unclear for similar reasons.

One million dollars were donated to StudentsFirst NY Advocacy by another nonprofit, StudentsFirst NY Inc., that heavily overlaps with it: The two groups share an office suite and staff.

Both StudentsFirst NY Advocacy and StudentsFirst NY Inc. are issue-oriented nonprofits that must disclose their donors if they engage in substantial lobbying spending. If StudentsFirst NY Inc. had itself spent its $1 million on lobbying, it would have had to disclose the sources behind the funds.

But because the $1 million passed from StudentsFirst NY to StudentsFirst NY Advocacy, which then spent heavily on lobbying, only the name of StudentsFirst NY Inc. appears on the lobbying disclosure filing submitted by the Advocacy arm in July.

Asked if the money transfer was meant to obscure the identity of donors, a StudentsFirst NY spokesman maintained the $1 million came from pre- existing StudentsFirst NY funds – not from new donations funneled through the group.

Jenny Sedlis, executive director of StudentsFirst NY, added in a statement that “StudentsFirst NY is proud of the campaign we ran to increase high-quality school choices for kids.”

Sedlis is also listed as a lobbyist for StudentsFirstNY Advocacy.

Families for Excellent Schools, another Manhattan group that also lists the same address as StudentsFirst NY but says that it operates separately, has taken a much more direct approach that has allowed its donors to remain anonymous.

Families for Excellent Schools, which spent $1.6 million on New York lobbying so far this year, has an issue-oriented nonprofit arm that would have to disclose its benefactors. But the group does almost all its lobbying through its apolitical arm, which does not have to report its donors under New York lobbying laws and can take tax-deductible donations.

The apolitical arm spent a staggering $9.7 million on Albany lobbying in 2014, but it did not disclose a single donor.

Such apolitical nonprofits, categorized as 501(c)3 groups, face restrictions from the Internal Revenue Service on how much they can spend on lobbying – a likely reason why such nonprofits are exempt from disclosing their donors under New York law.

The heavy lobbying spending as defined by New York law, plus the IRS restrictions on lobbying by such nonprofits, could raise potential issues regarding the group’s tax status.

But David Grandeau, an attorney for Families For Excellent Schools and former top state lobbying regulator, has maintained that the IRS definition of lobbying is far narrower than the one found in New York law, a distinction that he says makes the heavy New York lobbying spending by the group permissible under federal regulations.

The group’s lobbying spending has also dropped this year from its 2014 heights.

Grandeau said last year that the group had “correctly disclosed its spending in New York State, and we are confident that our activity is within the limitations allowable.”