2018 Lane Reports

“Dark Money” Nonprofit Donors to Go Unnamed

The Lane Report, August 2018
Wednesday, August 1, 2018 10:00 am
by Marc J. Lane

In 2010, the U.S. Senate came within one vote of passing the DISCLOSE Act that would have significantly expanded disclosure of the source of political ads and nonprofit organizations’ donors. But the Trump Administration has moved ahead to make it even easier for “dark money” donors to keep their contributions in the dark so long as political activities aren’t the primary purpose of the organizations they help fund.

The same day the Justice Department announced the arrest of Maria Butina, the Russian national who is accused of unlawfully influencing conservative members of Congress by forging an alliance with the National Rifle Association, the Treasury Department lifted the requirement that politically active advocacy groups like the NRA, along with unions, social clubs and trade organizations, identify their donors to federal tax officials.

It’s U.S. Treasury Secretary Steven T. Mnuchin position that, “… [T]he change will in no way limit transparency. The same information about tax-exempt organizations that was previously available to the public will continue to be available, while private taxpayer information will be better protected. The IRS’s new policy for certain tax-exempt organizations will make our tax system simpler and less susceptible to abuse.”

To the contrary, repealing donor-disclosure rules will allow hidden, unscrupulous donors, including the agents of hostile governments, to surreptitiously funnel money into the political system. As Norman Eison, the Obama administration’s chief ethics Lawyer who is now a governance studies fellow at the Brookings Institute put it, “It is another Trump blow against transparency and for obscurity—hardly his promised swamp drainage.”

The NRA will certainly benefit from the Treasury’s action. As a social welfare organization, it spent $35 million on elections in 2016 through its NRA Institute for Legislative Action and $54.4 million in total. So will groups created by billionaire libertarians Charles and David Koch as will the liberal American Votes and Patriot Majority USA.

While the NRA and others may want to keep their donors under wraps, some in Congress are pushing for more disclosure. Senator Sheldon Whitehouse is sponsoring a new and improved version of the DISCLOSE Act while the Honest Ads Act, with bipartisan support in both the House and the Senate, would take on the influence of foreign money and require full disclosure of political dollars spent on line.

Let’s urge our legislators to get behind those efforts.


Marc J. Lane is a Chicago attorney and financial adviser and the vice chair of the Cook County Commission on Social Innovation.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems.

A SIB isn't a traditional bond where investors are guaranteed a fixed return but a contract among a government agency that agrees to pay for improved social outcomes, a private financing intermediary and private investors. SIBs shift the risk of experimenting with promising but untested intervention strategies from government to private capital markets, with public funds expended only after targeted social benefits have been achieved.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system.

The government decided which goals would be supported, but exactly how those goals would be achieved was left to the private sector. It was the investors, through a bond-issuing organization, who ultimately endorsed the allocation of investment proceeds — how much would be invested in job training, drug rehabilitation and other interventions.

If the Peterborough plan eventually shrinks recidivism rates by 7.5 percent or more, the government will repay the investors' capital and share the taxpayers' savings with them, delivering up to a 13 percent return. If the target isn't hit, the investment will have failed and the government will owe the investors nothing.

Illinois' SIB effort was spearheaded by the state's Task Force on Social Innovation, Entrepreneurship and Enterprise — the governor's think tank on social issues, which I am privileged to chair — with support from Harvard University's John F. Kennedy School of Government, the Rockefeller Foundation and the Aurora-based Dunham Fund. A request for information issued by the Office of Management and Budget on May 13 yielded responses from service providers eager not only to reduce recidivism here but also to create jobs, revitalize communities, improve public health outcomes, curb youth violence, cut high school dropout rates and alleviate poverty.

Now the governor has issued a request for proposals intended to spur better outcomes for Illinois' most at-risk youth — by increasing placement stability and reducing re-arrests for youth in the state's Department of Children and Family Services, and by improving educational achievement and living-wage employment opportunities justice-involved youth most likely to re-offend upon returning to their communities.

Kudos to Mr. Quinn for bringing SIBs to Illinois. May they soon start delivering on their promise.

- See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf
The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpu

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