The Public Eye

January 13, 2013

California's lobby laws keep many influence-peddling details secret

Interest groups that spend the most money trying to influence policy in California's Capitol spend the bulk of it in secret, including hiring former politicians as consultants and launching ad campaigns to push their agenda with virtually no financial disclosure.

Interest groups that spend the most money trying to influence policy in California's Capitol spend the bulk of it in secret, including hiring former politicians as consultants and launching ad campaigns to push their agenda with virtually no financial disclosure.

Despite state laws that require detailed reporting of payments to registered lobbyists and activities such as wining and dining lawmakers, the largest share of what the big labor unions, trade groups, health care and energy companies spend to influence public officials falls into a mysterious category that requires no detailed reporting to authorities.

State law allows groups that hire lobbyists to report spending on scores of activities that are related to lobbying – but do not meet the legal definition of lobbying – as a single lump sum. In this category, listed as "other payments to influence" on disclosure forms, groups report how much they are spending, but not what they're spending it on.

The "other" category can cover myriad expenditures, from the heating bill in a lobbyist's office to hiring former legislators not formally registered as lobbyists to pull strings inside the Capitol. Among them: former Senate President Pro Tem Don Perata, former Assembly Speakers Willie Brown and Fabian Núñez, and former Assemblymen Alberto Torrico, Jim Brulte and Rusty Areias.

Some strike out on their own, while others attach themselves to existing lobbying firms, many of which offer a combination of services that don't require public disclosure including legal advice, political strategy and communications.

In reports interest groups file with the state, spending on office overhead – such as rent and phone bills – is lumped together with salaries for employees who support lobbyists but do not meet the technical definition of being lobbyists themselves. The "other" category also includes spending on more overt efforts to gain clout, including ad campaigns, grass-roots advocacy and contracts with politically connected consultants.

But because itemized reporting is not required, it is difficult to connect the consultants and PR blitzes with the groups that are paying for them.

It's a departure from the rigorous reporting California requires of political campaigns during elections, when they must detail spending in several categories, including postage, television time and individual consultants. It also defies the spirit of the state's Political Reform Act, which was meant to shine light on the interactions between government and the interests attempting to influence it.

"When we ask lobbying firms and lobbying employers what it is they're spending money on, it's so we can identify the means they use to influence legislative or administrative action," said Phillip Ung, an advocate with the watchdog group California Common Cause.

"If what we're seeing is that a lot of them are filing large sums being spent on 'other payments to influence,' that gives almost zero clarity on what they're spending – especially when the amount they're spending is almost five or six times larger than what they're paying lobbyists."

Spending close to $1 billion

About 27 percent of spending on lobbying falls in the "other" category, according to an analysis by The Bee. Lobby groups have spent $2.9 billion on their efforts in the past 12 years. Of that, $794 million fell into the non-itemized "other" category.

But the amount of "other" spending is a lot bigger at the top of the heap. The four lobbying groups that spent the most money during the first three quarters of 2012 each claimed more than 70 percent of their expenditures in this catch-all category, a review of disclosure forms shows.

That could be because many of the big unions and industry groups typically have a heavy presence in Sacramento that extends beyond registered lobbyists. They have offices near the Capitol, where rents are high, and a payroll that includes lawyers, government relations executives and communications specialists.

But there's really no way to know what gets thrown into the "other" category on disclosure reports.

For example, the oil industry's lobbying group, the Western States Petroleum Association, spent more on efforts to influence Sacramento than any other group during the first nine months of 2012. That included almost $953,000 to three outside lobbying firms, nearly $21,000 on entertaining public officials – and $3.2 million in non-itemized "other" expenses.

What was the association paying for? Rent on its L Street office? Advisers to help with political strategy? Research? Legal advice? Advertising?

The group would not say.

"We are very careful to comply with the state's requirements on reporting," said Tupper Hull, a vice president of the Western States Petroleum Association. "And beyond that we don't share our internal budgetary issues with members of the public or the press."

The California Chamber of Commerce also wouldn't talk about why it spent a lot more in the "other" category than on payments to registered lobbyists. Last year the chamber spent about $521,000 on salaries for its seven lobbyists and nearly $103,000 entertaining public officials, according to the group's disclosure forms that cover spending through September. It spent more than $2 million on "other payments to influence."

A spokesman for the California State Council of Service Employees, the umbrella organization for SEIU unions, said office overhead makes up the bulk of the $2.1 million it spent last year on "other payments." The union's disclosure forms from 2012 show that it also spent $572,000 on salaries for six lobbyists and almost $211,000 on contracts with two outside lobbying firms.

Michael Cox, the State Council's communications director, said the union includes anything related to its government relations efforts – including office space, operating expenses, subscription services and communications with members – when tallying up "other payments to influence."

"It's overhead costs, basically," Cox said. "It's not paying for outside consultants."

For several years, the Howard Jarvis Taxpayers Association has spent about 99 percent of its money to influence state government in the "other" category. That mostly includes communication with the group's members around the state, asking them to urge their representatives to vote one way or another on bills, said association President Jon Coupal.

"That is a reflection of the fact that we are a grass-roots corporation," he said. "I don't know of any other group in California that focuses their lobbying efforts in that manner."

Consultants avoid disclosure

Nearly 1,400 lobbyists do business in Sacramento, but the capital city is full of people who wield influence without registering as lobbyists. The distinction lies in the letter of the law – and determines how much information about their work is made public.

California's Political Reform Act says lobbyists have to register with the state if they are paid at least $2,000 a month to influence state government decisions, or if they spend more than one-third of their working hours in direct communication with state officials.

Registered lobbyists face strict rules concerning gift giving and campaign contributions. They must file quarterly reports with the state that disclose who's paying them and how much. Their pictures and financial disclosure reports are made public through online records with the secretary of state.

None of that applies to consultants who advise clients on navigating state government but do not meet the legal definition of lobbying. They work behind the scenes, with no public disclosure of their clients or limits on gifts and fundraising. Any public information about their income is lumped into the "other payments to influence" category on their clients' disclosure forms – if it is reported at all.

Because payments in the category aren't itemized, there is no way to link interest groups and the non-lobbyists representing them.

Many who engage in this kind of work around Sacramento are former lawmakers, staff members or gubernatorial appointees who have clout across state government.

Brulte, who is expected to become chairman of the California Republican Party, and Areias, whose wife is a prominent Democratic fundraiser, are principals at a firm called California Strategies. The business, which was founded by former Gov. Pete Wilson's chief of staff, Bob White, is made up of two companies – one for lobbying, the other for public affairs. Clients who pay California Strategies' lobbying branch are listed on the secretary of state's website, along with names of the eight registered lobbyists the firm employs.

California Strategies' website boasts of the many former government officials it has on staff – former lawmakers, Cabinet members and commission chairs. Most work for California Strategies' public affairs branch, which doesn't have to disclose who its clients are or how much they are paying.

Jason Kinney, a spokesman for California Strategies, said the public affairs firm does not compete with registered lobbyists because the nature of the work is different.

The public affairs practice involves a big-picture approach to policy issues, Kinney said, not focusing on specific votes on specific bills. That could include general strategy, media relations, political consulting, coalition building or community organizing, he said.

"Our differentiator is that we attempt to offer expertise about how to navigate the entire chess board, not just looking at one piece of it," Kinney said.

"I'm very proud of the work I do here. I'm very proud of the clients I work on. If our elected leaders in their wisdom think I should more specifically disclose some of the work I'm doing, I'll do it."

Joe Canciamilla, who served in the Assembly from 2000 to 2006, said he was frequently approached by people who weren't registered lobbyists but were being paid to influence him.

"What you have are some folks who are very influential because they know people, because they have connections. They don't necessarily lobby on particular issues," Canciamilla said.

"I can't say anyone in that position ever approached me in a way I felt was lobbying on a particular bill or crossed that line between strategic advice and lobbying. But that tends to be a hard line to follow anyway: the difference between being hired by someone to deal with a range of issues vs. advocate a particular issue in that group."

Registered lobbyists from other firms frequently gripe that they do face competition from well-connected consultants – like those at California Strategies and other firms – who don't have to report much about their business but can wield tremendous influence because of their stature as former politicians.

"It's an unequal playing field when you have one group of folks considered lobbyists who must disclose everything, and you have another group of folks who exert the same amount of influence, if not more, but they don't have to disclose," said David Quintana, a lobbyist who represents many Indian tribes.

"That doesn't serve the public well."

Quintana was up against one of those nonregistered advocates last year, when he was fighting a group pushing a bill to legalize Internet poker. Sources familiar with the players involved said the California Online Poker Association was represented by former Assembly Speaker Brown, who registered as a lobbyist in 2005-06 but has not registered since.

Because he's not registered, there is no paper trail to confirm Brown's relationship with the poker group. The disclosure forms the association filed last year show it paid $185,000 to the Governmental Advocates lobbying firm in Sacramento, which is not affiliated with Brown. The poker association's disclosure forms also show "other payments to influence" of more than $1 million.

Was that money paid to Brown? Neither he nor the association, which disbanded in October citing lack of progress on an online gambling bill, would answer questions for this story.

Issue ads not transparent

Money that interest groups spend on issue advertising is also included in the "other" category of their lobbying disclosure forms – a lot less transparency than what is required for campaign ads.

The California Teachers Association has spent $50.4 million on influencing Sacramento since 2000, with 80 percent of it accounted for as "other payments to influence."

The portion of money CTA spends on "other payments" has varied from year to year, spiking at almost 92 percent in 2005 when the union engaged in an ad war with then-Gov. Arnold Schwarzenegger. The governor had announced a budget proposal reneging on a school funding deal he had made with the union the prior year. He also suggested he might sponsor a handful of union-busting ballot measures.

The teachers union hit the air with ads blasting the governor for not keeping his word on the budget deal. The ads never mentioned the potential ballot measure or urged anyone how to vote – that would make them campaign ads and subject them to detailed reporting requirements. Instead, as issue ads, the millions spent were lumped into the "other" category, along with staff time, office overhead costs and other expenses.

Union spokeswoman Claudia Briggs said the association is not required to include in "other payments" the salary for Joe Nunez, who is not a registered lobbyist but heads the association's government affairs division. She said Nunez, who is considered a key player in state budget negotiations every year, is a "strategist" and does not lobby.

Bob Stern, a government watchdog who helped craft the Political Reform Act in 1974, said it's time for the law to be updated to reflect new realities in the influence industry. Lobby groups should no longer be allowed to lump so many kinds of spending together under the heading of "other," Stern said. He thinks they should have to report more about expenditures on issue advertising and hiring consultants who help with political strategy.

"If I were doing it over again I would certainly include those to be itemized," Stern said. "I think it's important we find out large payments going to organizations or groups assisting lobbyists in providing information. Those types of payments are clearly different from rent or utilities."

The Fair Political Practices Commission that enforces the law originally required more detailed reporting in the "other" category, Stern said. But it changed to lump-sum reporting a few years later after lobbying groups complained that itemizing was too onerous and frequently included irrelevant expenses.

But the influence game in Sacramento has evolved since the 1970s, Stern said, and now includes a lot more people who do work that doesn't meet the legal definition of lobbying.

How to publicly account for those people while protecting the rights of individuals to privately petition government is the balancing act the FPPC must strike in setting disclosure rules, said Commission Chairwoman Ann Ravel.

Ravel said she previously was unaware of how much money is unaccounted for. She noted that the commission will be updating its lobbying rules this year.

"No question, I think the fact that so much extraneous issues are contained in there such as overhead and the like makes it very difficult to really discern what is related but not actually lobbying under the definition in the Political Reform Act," Ravel said.

"That's a valid criticism and concern about the way it's formulated now."

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