The new thing for state politicians? Some sweet charity from nonprofits
The California Legislature’s Latino Caucus recently circulated a memo offering a potential perk for members: A trip to Cuba to learn about “culture, history and possibly government structure and policy making.” The caucus’ nonprofit foundation, the memo said, would help pick up the tab. A visit to Israel for the Jewish Caucus was similarly underwritten, in part, by its nonprofit. The nonprofit Irish Caucus has organized three trips to Ireland for legislators and lobbyist friends.
A nonprofit run by a California assemblyman has helped fund a literacy organization led by his wife, who, as CEO, was drawing a six-figure salary. Nonprofits run by lawmakers and their staff are hosting fundraisers where lobbyists can mingle at the Disneyland Hotel with politicians, and policy conferences where tech executives can dine in Silicon Valley with legislators shaping California’s laws on data privacy and the gig economy.
These organizations also underwrite charitable work — scholarships, cultural celebrations, community film screenings — and let public officials help the state or advance causes they care about without tapping taxpayer money. But unlike campaign accounts, they often offer a tax break and can raise unlimited sums from powerful special interests, with fewer disclosure requirements.
In California, their numbers, as well as their donations, are surging. According to a CalMatters analysis, the number of nonprofits affiliated with California legislators or caucuses grew from at least three in 2010 to at least 12 last year, with total revenue of about $2.9 million.
Much of the money has come from corporations and unions with business before the Legislature, including oil, tobacco and other lobbies whose political contributions are officially or unofficially shunned by the member’s party. The upshot, experts say, is a monetary backchannel that, while legal and even sometimes beneficial, has also become an increasingly common way for politicians to raise and spend money outside the limits even of California’s tough regulations.
“It provides another way for the lawmaker to wield influence as well as a way for those who seek to influence the legislator to curry favor,” said Rick Hasen, a professor of law and political science at the University of California, Irvine. “This gives a donor some potential extra influence that they couldn’t buy through a campaign contribution.”
“We have stricter campaign finance laws than many states,” added Ellen Aprill, a professor at Loyola Law School who specializes in nonprofit tax law. “And money will find an outlet. If you can’t do it one way, they will do it another way.”
Nationally, ethical concerns have been raised about nonprofit organizations tied to Republican President Donald Trump and his 2016 rival, Democrat Hillary Clinton. Trump recently paid $2 million to settle a lawsuit by the New York attorney general and admitted misusing Trump Foundation funds. Clinton faced years of scrutiny over whether donations to the Clinton Foundation conflicted with her work as Secretary of State; an investigation, which found no wrongdoing, just wrapped up.
A 2018 report by the nonpartisan Brennan Center for Justice at New York University School of Law named presidents, governors, members of Congress and prominent mayors from both major parties who had used nonprofits to raise millions of dollars. Among them: Trump, Barack Obama, Sen. Bernie Sanders, New York Gov. Andrew Cuomo and, in California, Los Angeles Mayor Eric Garcetti. The report found, in particular, that “spending by nonprofits that coordinate with elected officials after they take office goes almost entirely unchecked.”
Closer to Sacramento, a politician’s nonprofit played a role in the corruption case that hit the California Capitol
in 2013. An undercover FBI agent posing as a film producer bribed then-Sen. Ron Calderon of Montebello to advance legislation in part by paying $25,000 to a nonprofit run by his brother, former assemblyman Tom Calderon.
Wiretaps captured the senator saying, essentially, that the charity could be fattened in the short term and then tapped to generate a paycheck after he was out of public office. Both brothers wound up in prison. The nonprofit dissolved in 2015.
Despite the high-profile scandal, nonprofits with ties to the state Capitol have mushroomed over the last decade. The strategy isn’t limited to lawmakers with shared heritage. Oakland Assemblyman Rob Bonta, for example, created his own eponymous nonprofit foundation in 2017, and a group of legislators from Los Angeles County created one in 2019. Sylvia Rubio, the sister of two state lawmakers who is herself a candidate for Assembly this year, created a nonprofit Rubio Foundation last year as well.
The trend underscores the expanding role of money in politics since restrictions on political spending by corporations, including nonprofits, were lifted by the U.S. Supreme Court’s 2010 Citizens United decision. While California law caps the amount donors can contribute to politicians’ campaigns, donations to nonprofits are not limited.
“Supreme Court decisions that have opened the floodgates for corporate spending have knocked against state laws that have attempted to limit direct contributions to legislators and candidates in order to avoid corruption,” said Kathay Feng of Common Cause, a government watchdog organization.
“There are a lot of special interests that have creatively found one loophole, which is to direct those corporate or union dollars to nonprofits. What legislators have figured out is that if they can control those nonprofits, it becomes a handy backdoor to continue receiving donations from special interests.”
Where the money comes from
Nonprofit entities offer politicians enormous flexibility in how much they tell the public about who’s giving them money. Federal law generally does not require that nonprofits disclose their donors to the public.
State law does require California politicians to publicly report payments of $5,000 or more made to a group at the politician’s request for a legislative, governmental or charitable purpose — a transaction called a “behested payment.” Most of the nonprofits affiliated with California lawmakers report the bulk of the donations they receive as behests to the state’s Fair Political Practices Commission. The amount of money lawmakers reported raising as “behested payments” for their nonprofits grew from $105,000 in 2011 to $2.9 million in 2019, for a total of nearly $13.3 million over the nine years.
Much of it comes from industries that routinely have business before the Democrat-dominated Legislature and are consistently big spenders on state politics. Labor unions gave lawmakers’ nonprofits more than $1.9 million between 2011 and 2019, while health care organizations gave $1.4 million and telecom/cable companies gave $1.6 million, according to state data on behests.
But Democratic lawmakers are also using their nonprofits to solicit donations from businesses their party has rejected for being anti-union or damaging to the environment or public health. The California Democratic Party does not take money from oil or tobacco companies, or Walmart. Yet oil companies have given lawmakers’ nonprofits $1.2 million over the last decade. Tobacco and ecigarette makers have given $507,000. Walmart gave $95,000.
“We are not the party,” said Assemblywoman Shirley Weber, a Democrat who chairs the Legislature’s Black Caucus.