The Super-Rich Have Found a New Way to Wield Political Power: Philanthropy

The Super-Rich Have Found a New Way to Wield Political Power: Philanthropy

The Super-Rich Have Found a New Way to Wield Political Power: Philanthropy

While traditional political giving has not gone away, a new source of influence is emerging.

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The uproar this spring over North Carolina’s “bathroom bill” has drawn new attention to Art Pope, a top conservative leader in that state. The law was passed by a Republican legislative majority that Pope helped engineer with millions in campaign contributions, while its biggest defender—the North Carolina Family Policy Council—gets much of its support from a foundation Pope chairs.

This isn’t the first time that Pope has mixed political and philanthropic dollars to push a policy agenda in North Carolina. In fact, such a dual-track approach has been key to his strategy for over two decades now, and explains why Pope has become among the state’s most powerful people.

Pope has keenly understood the different ways in which wealth can be converted into influence. Starting in the 1980s, he used the charitable funds stashed in the John William Pope Foundation, named after his father, to bankroll a network of conservative policy groups in North Carolina. Meanwhile, Pope has known that ideas count for little if they aren’t turned into law, which is why he’s also used his family fortune—created through retail stores—to spread donations to scores of GOP candidates, party committees, and PACs. In the past few years, these two tracks have converged with impressive force, as North Carolina’s one-party government has enacted a trove of right-wing policy proposals that were crafted and refined over many years—among them, the recent bathroom bill and a tough voter-ID law, passed in 2013.

Art Pope isn’t alone in blending political and philanthropic giving in a push to redirect politics in one state. Alida Messinger—an heiress to a Rockefeller fortune—has given millions of dollars to nonprofits working on environmental and energy issues in Minnesota, as well as to protect women’s reproductive rights, fight poverty, and mobilize low-income voters in the state. Along the way, Messinger has carved a parallel path as one of Minnesota’s biggest Democratic donors, backing state party committees and PACs, and supporting dozens of candidates for office. That giving helped orchestrate a Democratic takeover of Minnesota’s state government, and the passage of a burst of progressive legislation in 2013 and 2014 by Governor Mark Dayton.

Historic Fortunes, Grand Ambitions

At the national level, hybrid donors with deep pockets have been proliferating in recent years, and many are active in the 2016 presidential election. They include Tom Steyer, the Koch brothers, Michael Bloomberg, George Soros, Herbert Sandler, and Robert Mercer—all of whom are engaged in large-scale giving through both political and philanthropic channels to promote their views.

Mercer, who made his fortune in hedge funds, is the most notable newcomer to this terrain. He drew attention last year when he emerged as Ted Cruz’s top donor—financing the senator’s failed presidential bid to the tune of over $13 million. Mercer has also been the main donor to the John Bolton Super PAC, pumping $2 million into an effort to promote hawkish national security ideas in the 2016 cycle.

Mercer’s philanthropy leans just as far right. His Mercer Family Foundation gave out $18.3 million in 2014, with much of that money going to conservative and libertarian groups. The Federalist Society, for example, got $2 million. The Media Research Center, which attacks “liberal media bias” and has been working overtime this election season, got $3 million. Another grant, for $1 million, went to an obscure outfit in Florida, the Government Accountability Institute, which is headed by Clinton Cash author Peter Schweizer. GAI is a 501(c)(3), and Mercer gets the same tax deduction for donating to this group as he would to, say, the Salvation Army, but it appears that a chief mission of Schweizer’s operation is to wound the Democratic Party’s nominate for president.

There is nothing new, of course, about the wealthy writing checks for nonprofits and political candidates alike. Top contributors to the Democratic and Republican parties have long been turning up on donor rolls of groups like the Sierra Club, the Heritage Foundation, the ACLU, NARAL, and so on.

One difference now, though, is that America’s donor class is far wealthier than ever before—so they have more cash to pull every possible lever of influence. Since 2004, the combined net worth of the Forbes 400 has more than doubled. The Koch brothers alone saw their joint fortune grow tenfold during this period, from $8 billion to over $80 billion. George Soros’s net worth more than tripled, and Michael Bloomberg’s grew sevenfold, soaring to over $35 billion. The upper class is much larger, too, which means more people have the means to get into the influence game. A 2015 study found that 69,560 individuals living in the United States have assets of $30 million or more—a huge jump from a decade ago.

What’s also new is that donors are getting more strategic about blending various forms of influence spending. Many now grasp, as Art Pope long has, that there’s a wide spectrum of choices for converting wealth into power—from traditional campaigns gifts at one end to cause-focused philanthropy at the other. In between are 501(c)(4)s that can drive messages and mobilize voters, as well as hard-hitting 501(c)(3)s that are skilled at pushing policy agendas. The wealthiest, and savviest donors, can and do take advantage of all these choices.

Knitting things together are donor networks such as the Democracy Alliance on the left and Koch network on the right—both which steer a mix of political and philanthropic money. One role of these networks is helping new donors navigate an expanding menu of options for deploying their money for influence. For example, the DA educates its donors on both 501(c)(3) and (c)4 “investment” opportunities.

Contested Terrain

While billionaires like Tom Steyer and the Kochs get all the attention, hybrid donors are everywhere these days, influencing key policy areas. Among the most successful of recent years are wealthy LGBT advocates like Tim Gill, Jon Stryker, and David Bohnett.

Gill became a philanthropist in this space in the 1990s, tapping a tech fortune to create a Denver-based foundation that has since given out some $300 million to nonprofits. Early on, though, Gill realized that he needed more ways to further the LGBT cause, beyond what his foundation could legally do. So he also became a major political donor, strategically targeting funds in states where LBGT issues were in play. In 2005, Gill created Gill Action, until very recently a 501(c)(4), that aimed to rally other donors and channel funds to different federal and state contests. It’s become a key vehicle by which top LGBT donors coordinate their giving, and just this June, chose its 2016 slate of candidates to support.

Gill’s own giving has gone largely to state legislative races, through over 500 campaign contributions over the past 16 years. In the 2014 cycle alone, he gave money to over 50 different state races, often in coordination with other LGBT donors. Gill has also pumped money into nearly 20 different state ballot-initiative fights over the years, and he’s sent a wave of checks to state Democratic Party committees. Meanwhile, his foundation has continued to pump out grants to the tune of around $11 million a year.

Stryker and Bohnett have pursued a similar strategy. Stryker’s Arcus Foundation ranks among the largest funders for LGBT rights, while Stryker has also given millions to sway state-level political races. Bohnett’s LA-based foundation has given out over $20 million in grants since 1999 for LGBT causes—and he, too, has also made millions in campaigns contributions, with a big focus on state battles. For example, Bohnett was among the biggest donors seeking to defeat Proposition 8, the 2008 anti–gay marriage initiative in California.

Education is another area where wealthy hybrid donors have been major players. The billionaire Eli Broad has not only given out tens of millions to shape education policy through his foundation, he’s also made over $6 million in contributions to influence state and local political contests. These two streams of giving have operated hand-in-hand at times. For example, before Broad’s foundation introduced an ambitious plan to move more Los Angeles public-school students into charters last year, he and the other key funders backing the plan contributed over $2 million to influence the city’s 2015 school-board elections. Among the donors joining Broad in this push were Doris Fisher and Carrie Walton Penner. Both are also major education philanthropists who see political cash as a complementary tool to move their agenda, mainly in California, which has been ground zero in battles over charter schools. Fisher has given $4 million for state political contests; Penner has given $3 million. (See last year’s Nation investigation of how billionaire philanthropists/campaign donors used similar tactics in New York State to push charter schools.)

Maybe the oldest stomping ground for hybrid donors is environmental policy. David Brower helped found the League of Conservation Voters (LCV) in 1969, a federal PAC, as a way to bolster the nonprofit advocacy he was involved with through the Sierra Club and Friends of the Earth. LCV has gone on to attract millions in campaign money from many of the same philanthropists who also make tax-deductible donations to green groups. For example, Larry Linden—a retired financier with a foundation focused on conservation—has lately been a steady donor to the league. In the 2014 election cycle, LCV moved over $9 million to candidates, parties, and outside groups.

That same election cycle saw the emergence of Tom Steyer’s mega-size political giving on climate change through his PAC, NextGen Climate. Steyer got lots of press for putting $67 million into the PAC, which he’s been revving up again for 2016. What’s drawn less attention is the billionaire’s ongoing giving as a philanthropist. The foundation he runs with his wife, the TomKat Charitable Trust, made $78 million in grants between 2012 and 2014, with much of this money flowing for work on climate and clean energy.

Relay Race

It’s getting easier than ever these days to become a hybrid donor, as 501(c)(4) groups proliferate. One striking trend is that more of these groups are offshoots of traditional 501(c)(3) nonprofits. Many large policy and advocacy groups now have c4 arms, often formed long after their parent nonprofit. A great example is Heritage Action for America, which was founded in 2010 by the Heritage Foundation. In announcing this move, Ed Feulner, Heritage’s president, said the organization would seek to harness “grassroots energy to increase the pressure on Members of Congress to embrace The Heritage Foundation’s policy recommendations.” The NRDC Action Fund was started 26 years after the Natural Resources Defense Council was formed. Demos, the New York–based policy group founded in 2000, just created its own c4 within the past year.

There are obvious reasons why more traditional nonprofits are moving into political terrain. It’s a way to broaden their toolbox of tactics and increase impact. But offering one-stop shopping also allows nonprofits to keep major donors who are looking to hit harder under the same roof.

Amid a new blending of philanthropic and political giving, efforts to change policy can look a bit like a relay race. In the first stage, 501(c)(3) groups—fueled by tax-deductible dollars—work to set the overall terms of a debate, through policy and advocacy work carried out over years. In the second stage, when an issue reaches a political inflection point, the 501(c)(4)s take over, along with the PACs and lobbyists, to sway public officials.

The Iran nuclear debate offers a case study. Years of tax-deductible gifts to think tanks and advocacy groups helped to shape the larger terms of the Iran debate long before negotiators reached a final deal. For example, scholars at the American Enterprise Institute, heavily backed by Wall Street donors, had endlessly pounded the point—in op-ed eds, congressional testimony, and TV appearances—that Iran couldn’t be trusted, as did outfits like the Center for Security Policy. On the other side, the peace group Ploughshares, backed by foundations and major donors, played a key behind-the-scenes role in pushing forward US-Iran dialogue starting in the early 2000s. The Rockefeller Brothers Fund was among Ploughshares’ biggest backers, with over $5 million in grants.

Yet when it came time for Congress vote on the Iran deal, last summer, 501(c)(4) groups—like AIPAC-spinoff Citizens for a Nuclear Free Iran—moved to the center of the action, pulling in millions of dollars in dark money, mostly to block the accord.

J Street was a lead group supporting the Iran deal. It’s also a perfect example of the convergence of different strands of influence spending. J Street, which was founded in 2007, in part with money from George Soros’s foundation, has both a 501(c)(3) and 501(c)(4) component, as well as a PAC. It can play every position in policy fights, and take in every kind of money—from tax-deductible philanthropic grants to campaign cash that pays for lobbyists and TV ads.

* * *

More hybrid donors keep appearing on the scene, and big ones, too. One reason Mark Zuckerberg and Priscilla Chan created an LLC to give away all their money is because they wanted a vehicle flexible enough to engage legally in political giving. In a letter last year explaining the controversial move, the couple wrote: “We must participate in policy and advocacy to shape debates. Many institutions are unwilling to do this, but progress must be supported by movements to be sustainable.” Zuckerberg had previously made a big foray into politicized giving with his support of FWD.us, a 501(c)(4) launched in 2013 to advocate for immigration reform.

Another emerging tech philanthropist, Sean Parker, has also embraced a hybrid model. Last year, Parker gave $600 million to his foundation, which backs cancer research, among other things. But Parker has also set aside quite a bit of his Facebook fortune for politics, emerging as a major campaign contributor and, this year, becoming a top backer of a ballot initiative in California to legalize marijuana. Other tech leaders, like Reed Hastings and John Doerr, have also emerged as big political donors at the same time as they have expanded their philanthropy.

What, if anything, can be done about the growing clout of hybrid donors over public policy? That’s conversation is only just beginning. While there’s a shelf-full of proposals around to curb money in politics, there’s little agreement—even among progressives—on how to limit the influence of philanthropy over public life. Even modest proposals, like stripping super-ideological 501(c)(3) groups of their tax-exempt status, have run into fierce opposition.

A starting point for reform is simply more understanding of how policy influence really works in America. Political giving, which draws so much media attention, is one path to power. But philanthropic contributions can be even more effective in charting policy debates. If we’re serious about getting “money out of politics,” all the ways that wealthy sway public life will have to be better regulated.

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