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May 31, 2017

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Trying to regulate the secret political contributions known as dark money is an uphill battle. Current state regulations approach dark money with an outmoded perspective that doesn’t recognize how plutocrats operate to command policy. The regulators at Office of Campaign and Political Finance will need to modify their thinking about financial reporting.

Back in February I wrote that the OCPF has ample precedent to investigate the Great Schools Massachusetts ballot committee and its dark money patron Families for Excellent Schools for hiding the “true source” of the $17 million GSM got from FES for the 2016 ballot question. The only stumbling block I saw was that GSM/FES might claim the money came out of FES’s “general treasury” funds and thus would not require disclosure under Massachusetts law. But recent scholarship points to the conclusion that the general treasury dodge is nothing but hokum.

Here’s an example of how the general treasury distinction works, as I understand it. Let’s say there is a charitable organization called “Save the Massachusetts Trout” that promotes healthy waters, stocking, and other conditions that are helpful to trout. Wealthy individuals who like trout give to that organization’s general treasury to promote its work. No problem. But what if that organization goes to its donors and says, “There is a Massachusetts ballot question that is pro-trout and we’d like you to donate so we can support that question,” then the organization has to form a ballot committee and disclose its donors. If it doesn’t, it is hiding the “true source” of the money and is in violation of M.G.L. c. 55, sec. 10. (see also 970 C.M.R. 1:22).

Modern philanthropists have been described with various titles: “Boardroom Progressives” (by Sarah Reckhow in Follow the Money): “Philanthrocapitalists” or “Venture Philanthropists” (cited in Dan Drezner’s new book, The Ideas Industry) or “Policy Plutocrats” by Professors Kristin Goss and Jeffrey M. Berry. The way they operate is to make specific, targeted investments to influence public policy, and not no-strings-attached bestowals to do-gooder charities.

Reckhow studied how wealthy philanthropists have been trying to influence education policy. She finds that givers have become open about their efforts to influence politics and policy, and they follow the practices they use in business to target specific issues and locales. They follow “venture philosophy” or “results oriented” metrics to calculate their “return on investment.”

Dan Drezner made similar findings in surveying donations to academic institutions and think tanks in The Ideas Industry. The current crop of philanthropists from Silicon Valley and Wall Street want to make “impact investments” that will push policy in their favored direction in short order. They don’t give to think tanks to advance the general progress of ideas, but to promote specific projects. And they don’t pay for ideas that diverge from their preferences.

In The Givers: Wealth, Power, and Philanthropy in a New Gilded Age, David Callahan also notes that the newer generation of philanthropists want to use their wealth to achieve specific policy goals. One example from Callahan is the Massachusetts based New Profit, whose leader raises money from donors who want to achieve specific targeted goals, or “buy capital;” and do not want to contribute money toward general support funds, or “build capital.”

This accurately describes the activities of the wealthy individuals who through Strategic Grant Partners founded Families for Excellent Schools in Massachusetts. FES has concentrated on promoting more charter schools in the state. It has also been obvious that when the political branch of FES commenced its giving to Great Schools Massachusetts, it did so with financial resources that dwarfed anything available to it before; resources targeted toward the ballot question and not general support activities. (For the details on how FES raised funds specifically to assist GSM in its ballot question, see Dark Money: Pro-Charter-School Fat Cats Took A Page From Off-Shore Gambling Tycoons).

What we had in 2016 was “Philanthrocapitalists” following “venture philosophy” to put $25 million (most of it dark money) in “impact investments” into a “results oriented” campaign seeking a “return on investment.” This was not “build capital” to encourage a general result but “buy capital” to buy a certain policy.

The general treasury concept is all but dead. GSM/FES is not a “general treasury” case but a “true source” case.  

OCPF, Office of Campaign and Political Finance, Great Schools Massachusetts, Families for Excellent Schools, Strategic Grant Partners

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