Missouri Gov. Eric Greitens is the state’s first chief executive to set up nonprofit groups that can raise unlimited amounts of money from unknown donors.
The governor’s chief advisor, Austin Chambers, says there’s nothing unusual about it — and he’s right. Governors in Michigan, Illinois, Massachusetts and Georgia, as well as New York Mayor Bill DiBlasio, are among the politicians who have set up similar nonprofit organizations, or have allies who have set them up.
Most of the officials’ nonprofits are known as 501(c)(4)s, which refer to a provision in the federal tax code that allows them to keep two things secret: their donors and how they spend their money. The groups are barred from spending more than half their money on political activities, but in Missouri it’s up to the IRS to monitor them.
Greitens, who campaigned promising transparency, has two nonprofits. The first, A Committee for A New Missouri, raised money for his inauguration, and the second, A New Missouri, Inc., was set up just a few weeks ago to push for his priorities.
“Look, the fact is, we have supporters around the state, conservatives around the state who want to promote and advocate for our agenda,” the governor told reporters last month.
As various publications -- including Governing magazine -- note, officials set up such nonprofits to pay expenses that otherwise might be covered by campaigns or taxpayers. Chambers, for example, is paid by A New Missouri, Inc. He is not on the state’s payroll; he’s often around the Capitol and frequently travels with the governor.
Hard to track
The 501(c)(4) nonprofit organizations are being formed, in part, because of campaign-finance laws that limit donations to campaign committees and political parties, according to Ray LaRaja, a professor at the University of Massachusetts at Amherst.
“Mayors and governors are using this to tout their legislative wins,” said LaRaja, who studies the growth of such groups. “The other way they’re doing it is in anticipation of their own re-election, by just showing the public, ‘I’ve been here for you.’ It’s like going to ribbon cuttings. ‘Look at all I’ve been doing.’ This is the modern-day ribbon-cutting.”
Some states, including New York, impose some disclosure requirements on how 501(c)(4)s spend their money. That's what prompted a federal probe of DiBlasio, who at one point had three nonprofits. He voluntarily made the donors public, but questions were raised about some of the donors who conducted business with the city. The investigation is believed to be winding down, according to various news reports. No charges have been filed.
In Missouri, the state's Ethics Commission monitors campaign finance activity and requires regular disclosures of donations and spending. But the agency has no power to police nonprofits like the ones Greitens set up.
The ethics commission’s executive director, James Klahr, said his panel had been asked last summer to examine some nonprofits’ political activities that critics believed violated state laws.
“Right now, there’s no real means to oversee the activities of 501(c)(4)s,’’ Klahr said.
Enter state Sen. Rob Schaaf, a Republican from St. Joseph, who is sponsoring a bill to require such groups to identify their donors.
“I think it’s a problem that Gov. Greitens has this desire to keep the sources of his money hidden,’’ Schaaf said. “I would like to see him open that up and have transparency. After all, he ran on a ‘drain the swamp’ platform, and now he’s not doing it.”
In fact, Greitens had pledged transparency during a January 2016 appearance on St. Louis Public Radio’s Politically Speaking podcast early in his campaign. He also criticized setting up political groups that don’t disclose their donors.
“We’ve already seen other candidates set up these secretive super PACs where they don’t take any responsibility for what they’re doing,’’ Greitens said. “That’s how the game has been played.”
He went on: “I’ve been very proud to tell people, ‘I’m stepping forward and you can see every single one of our donors, because we are proud of our donors and we are proud of the campaign we are running.”
Greitens has not said publicly why he changed his mind.
Long-active outside nonprofits
Missouri long has had powerful nonprofit groups tied to both parties. Progress Missouri, for example, is a Democratic-leaning group believed to be funded by teachers and unions, but there’s no way to know for sure.
Republican consultant Gregg Keller, who runs a conservative 501(c)(4) called the Missouri Century Foundation, said donors should be allowed to keep their privacy. In fact, Keller has threatened to go to court if the state tries to impose more disclosure requirements.
Keller also predicts more Missouri politicians will follow Greitens’ lead.
“I think C4s are becoming more common,” Keller said. “That’s what I believe happens with campaign finance law. I think that every single time you try to micromanage how people are funding political organizations, you end up with more politics, not less.”
More 501(c)(4)s also will come about due to Amendment 2, which voters approved in November to impose donation limits on statewide and legislative candidates, St. Louis Democratic consultant Angela Bingaman said.
“The C4 itself does bypass some of those limitations on what you can receive, and from who,’’ Bingaman said. “They are within the legal system of Amendment 2. So yes, C4s are being tossed around for campaigns, and they have been since December 8.”
That’s when Amendment 2 took effect. There are still legal challenges over the new law, centering primarily on who’s allowed to donate. That fight is underway in federal court in Jefferson City.
Former Missouri GOP chairman John Hancock, who has returned to being a political consultant, isn’t a fan of nonprofits like 501(c)(4)s. But he believes they’re an understandable offshoot.
“As long as the law allows you not to disclose who your donors are, I think you’re going to see this replicated all across the country,” Hancock said, referring to the groups. “Is that a good thing? No.
“It is my position that the ‘least bad alternative’ is unlimited contributions with full public disclosure,’’ Hancock added. “And I do think the transparency part of it is absolutely critical.”
But speaking broadly, he wryly observed: “I don’t know that the voters particularly care.”
Marshall Griffin contributed to this report.
Follow Jo on Twitter: @jmannies