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Istook bill on advovacy by nonprofits
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Date: Sun, 10 Sep 1995 14:39:39 -0500
From: "Michael Chui"
Analysis of the Istook Nonprofit Gag Order
At a little after 1:00 a.m. on August 4, the House of Representatives passed the Labor, Health and Human Services, Education, and Related Agencies Appropriations bill for FY 1996 (H.R. 2127). In the bill was a provision authored by Reps. Ernest Istook (R-OK), David McIntosh (R-IN), and Robert Ehrlich (R-MD) that will force many nonprofit organizations to choose between providing community services and speaking out on public policy matters. Rep. David Skaggs (D-CO) offered an amendment to strike the Istook bill, which failed 187-232.
Proponents of the Istook provision argued that nonprofit organizations use federal grants to pay for lobbying activities. Despite the claims, there has been no evidence of systemic patterns of grant abuse. In fact, during the floor debate, as well as during three hearings on the subject, there has not been one specific verifiable example of misusing federal funds for lobbying purposes.
Nonprofit organizations are currently prohibited from using federal funds for lobbying purposes, defined as attempts to influence legislation. An appropriations rider, in place since 1979 (P.L. 98-139, 92 Stat. 1589), clearly states the prohibition. Furthermore, OMB Circular A-122, Cost Principles for Nonprofit Organizations, describes more specifically the types of lobbying activities that are unallowable federal expenses. The OMB Circular, which applies to all nonprofit organizations, except hospitals, universities, and state, local and tribal governments, prohibits the use of federal funds for lobbying on legislation at the state or federal level either directly or through grassroots initiatives. (The nonprofit provisions also apply to government contractors.) Furthermore, if a grantee wishes to receive reimbursement for indirect costs, the grantee must comply with additional information about all lobbying activities in order to assure that indirect costs are not subsidizing such activities.
Penalties for violating Circular A-122 include having to repay all "associated" costs for lobbying, immediate suspension or termination of grants, and debarment from all future federal funds. Thus, for random violations, there already are powerful enforcement penalties. So why the need for the bill? There is no evidence of rampant grant abuse; if there were, the solution would be to improve enforcement, not to rewrite law.
Proponents of the Istook plan claim there is a need for grant reform, but really they are concerned about limiting the advocacy voice of groups they believe oppose their political agenda. The heart of their proposal incorporates five points. First, they want to expand the lobbying prohibition to include general advocacy activities -- in this way, federal funds could not be spent on advocacy activities even if permitted by statute. Second, nonprofit organizations will lose federal grants if they use too much of their private funds for advocacy activities. This will force many community-based groups to face a difficult decision: continue advocating on behalf of people they serve or take federal grants to provide services -- both activities consistent with their missions. Third, they attempt to limit any association with other organizations or coalitions that use 15% of their money for advocacy activities. Fourth, they require posting on the Internet information from all federal grantees on how much of their private funds were used for advocacy activities and a description of those activities. Fifth, they encourage the public to serve as bounty hunters to find nonprofits in violation of the various provisions of the Istook plan.
There is little doubt that the Istook plan is a gag on nonprofit organizations and the people they serve. This effort, lead by conservatives, was started as a "defund the left" initiative. But it has turned into an attack on the entire nonprofit sector. Unfortunately, the greatest impact will be felt by small community-based organizations, many of which do not even know they get federal grants because the money passes through the state or local government.
According to the Congressional Research Service, the Istook plan to limit the amount of private funds to be used for advocacy purposes raises serious constitutional issues. (See Maskell, Jack H., "Constitutional Issues Raised by Proposals to Restrict Privately Financed Advocacy Activities of Federal Grantees,"
Congressional Research Service, July 28, 1995.) "Although Congress may clearly limit, regulate or condition the use of the funds it appropriates, it has been a principle of federal constitutional law that the government may not condition the receipt of a public benefit upon the requirement of relinquishing one's protected First Amendment rights." The Istook plan, according to CRS, "may thus potentially encounter significant First Amendment difficulties."
There has been a long-standing partnership between government and the nonprofit sector to provide services and research in this country. This partnership put the nonprofit sector in a unique and well-qualified position to comment on gaps in service delivery, identify problems and strengths with existing law and regulation, and, in general, help to reinvent government to make it more efficient and responsive to public need. The nonprofit sector has become the voice for vulnerable populations and those that do not have the resources or skills to assert their basic rights. While there is a wealth of perspectives within the nonprofit sector, there is one common theme: we speak for the public interest, not a private interest.
The Istook plan, under the guise of fixing a problem that doesn't exist, would cut off the ability of nonprofits to provide commentary to local, state, and federal governments, and would have a chilling impact on the entire nonprofit sector. And although House Republican leadership has spoken of strengthening
public charities and the voice of the grassroots, the message of the amendment is clear: you should be seen (and do the work), but not heard. Such efforts only work to undermine the strength of the nonprofit sector.
Key Elements of the Bill
The Istook provision covers any entity that receives a federal grant, including federal funds that pass through a state or local government, or a subgrant of federal funds. Contracts, loans, entitlements, and other forms of assistance are not covered by the bill. Additionally, grants and scholarships to students for educational purposes (e.g., Pell grants) are excluded.
One of the authors, Ehrlich, stated on the floor, "This bill does not cover individuals." Yet, either because of poor draftsmanship or by design, individuals are only exempt from the advocacy threshold limiting use of their private funds (see below). Individuals that receive grants must still comply with other parts of the bill, including the annual disclosure requirements and the responsibility to prove "by clear and convincing evidence" that they are in compliance with all other provisions of the bill.
The definition of "grant" is quite broad. With few exceptions, a grant is the "provision of any Federal funds...or thing of value to carry out a public purpose of the United States." (italics added) Since the government provides many things of value to carry out public purposes, the Istook bill would have enormous impact. As Skaggs pointed out on the House floor, some examples include: anyone getting FEMA disaster relief; meals on wheels, women receiving WIC vouchers; students receiving subsidized school lunches; or families receiving day care subsidies. Since individuals must comply with portions of the bill, the Istook bill could reach into nearly every home in America.
If the bill becomes law, nonprofits will need to be keenly aware of its content especially because of powerful enforcement provisions. For example, there is a "bounty hunter" clause that allows anyone to bring suit on behalf of the government to recover funds from grantees in violation of the bill. The people bringing the law suit will receive a share of the money recovered.
Since this covers federal grants that pass through the state or local government (and may be commingled with state or local funds), many nonprofits may not even know that they receive federal grants and are covered by the Istook requirements. Additionally, the way the bill is drafted there is no effective date, thereby allowing bounty hunters to bring suit for past violations.
More specifically, the bill:
* Prohibits use of federal grants for "political advocacy," which is significantly broader than lobbying on legislative matters (see definition below). It also prohibits the use of federal grants to do business (including for dues and membership fees) with any organization that spends 15% or more of its overall budget on political advocacy. This means, for example, that federal grantees could not rent space from an organization that spends 15% or more on political advocacy.* Bars nonprofits that use private money to engage in political advocacy above a specified threshold from receiving federal grants. If any one year during the preceding five years exceeds the threshold, then the organization will be ineligible from receiving federal funds. (The look back cannot occur before FY 1996, allowing these provisions to phase in.)
An organization's threshold is determined by subtracting out all federal grants from the organization's expenditures and then taking 5% of the remaining amount, if $20 million or less. (If the organization's non-grant funds exceed $20 million, 1% of the excess would be added to the 5% figure to determine the total threshold.) Thus, any organization that is heavily dependent on federal grants -- even those that pass through state and local governments -- such as community-based organizations, could easily become barred from receiving federal grants if they advocate.
Example: Organization X spends $1 million, 80% of which comes from the state through a federal block grant. Organization X must subtract the $800,000 from overall expenditures, leaving $200,000. Take 5% of the remaining $200,000, which equals $10,000, and that is the maximum amount of money Organization X can spend on advocacy without being barred from receiving federal grants. (By way of comparison, the tax code permits Organization X to spend up to $175,000 on lobbying activities.)* An organization that receives a federal grant cannot engage in political advocacy above the previous year's threshold.* An organization that engages in political advocacy and receives a federal grant must prove "by clear and convincing evidence" that it has complied with the provisions in the bill. This standard is not traditional accounting terminology and raises two concerns: (a) why the burden of proof is on the nonprofit organization; and (b) what evidence is needed to prove it.* The definition of "political advocacy" includes attempts (both direct and grassroots) to influence legislation, agency actions, litigation (including amicus curiae), or political campaigns at the local, state, or federal level. The definition of "agency action" includes involvement in the regulatory process at the local, state, or federal level and may include other attempts to influence agency decisions. (It is ironic that commenting on the activities of our government -- a process that is central to our democratic way of life -- would be considered political advocacy. Congress should be finding ways to encourage participation in the regulatory process, not limiting it.) The bill does not clearly define each term; instead of stating that a word "means" something, the bill is written to say that a word "includes" something. Thus, agency implementation and court interpretation is left wide open.
Political advocacy also includes providing any resources (including in-kind) to any entity (e.g., coalitions) that uses 15% or more of its total expenditures for political advocacy.
Political advocacy does not include making available nonpartisan research or providing technical advice to government in response to a written request. Communications with bona fide members would not be considered political advocacy unless the communication directly encouraged the member to take action either directly or through grassroots initiatives to influence a legislative or agency action.* Those not in compliance with the bill may be fined $5,000 to $10,000 plus three times the value of the grant. A lawsuit against the grantee can be brought up to ten year after the violation. As described above bounty hunters can sue and collect a share of the fine.* State and local governments, but not tribal organizations, are excluded from these requirements. Organizations representing state and local governments, such as the National Governors' Association, U.S. Conference of Mayors, the National League of Cities, the National Association of Counties, and the National Association of State Legislatures, are excluded from these requirements. Federal grants that pass through state and local governments are covered by these requirements, including block grants.* All federal grantees must complete a new annual report. If a federal grantee engages in advocacy, it must discloses information about the grant and about the organization's political advocacy activities. Federal grantees will be required to provide a "brief description" on how non-federal money is used for political advocacy and a "good faith estimate" of the amount spent.
Nonprofit organizations already report significant amounts of information to the government. Federal grantees submit narrative and financial reports that are used to substantiate that federal reimbursement is for allowable expenses only. Nonprofit organizations also disclose lobbying expenses to the IRS through the Form 990. This bill will add yet another reporting requirement on nonprofit organizations, forcing nonprofits to keep another set of books -- one for the IRS definition of lobbying and one for this bill's definition of "political advocacy."* Agencies are required to send these new advocacy reports to the Census Bureau, which is required "to make this database available to the public through the Internet." There is no provision for making the information available through print media or through other electronic means, such as CD-ROM or through direct modem dial-up for those who do not have Internet access.* The grant applications, audits, and the new annual report will now be subject to Freedom of Information Act requests. The amendment also requires agencies to expedite these FOIA request, putting them "ahead of any requests for other information." Furthermore, there will be no fees for searching for or copying these documents.
Defunding Congressionally Authorized Advocacy
The Istook bill provides a devious back door approach to defund activities authorized under the Legal Services Corporation, the Developmental Disabilities Act's protection and advocacy services, and other advocacy provisions under current law. The Istook bill states that "Notwithstanding any other provision of law [the provisions in this amendment prevail] until Congress provides specific exceptions [to this bill] in subsequent Acts." Thus, conducting required advocacy with federal funds would result in being debarred from federal grants, unless Congress passed new laws permitting such action. Istook's staff indicated that this provision would be dropped, but it never was.
Ed Schwartz, Institute for the Study of Civic Values, 1218 Chestnut St., Rm. 702, Philadelphia, Pa. 19107 215-238-1434 edcivic@libertynet.org
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