Supporters of Last Year’s Massachusetts Charter School Ballot Issue Caught Laundering Dark Money

For quite a while it has been clear that big money dominates our politics and too frequently overrides the will of citizens. In public education policy, the priorities of the One Percent have driven the laws and policy that shape the public schools serving 50 million children—the schools serving the 99 Percent.

Last year, however, in a heartening development, the voters of one state rejected a big-money effort to expand charter schools. In November 2016, in Massachusetts, voters rejected Question 2, a ballot issue that would have raised the cap on the number of charter schools that could be opened in the state. But new evidence now proves conclusively that hidden, big-moneyed interests certainly tried to sway Massachusetts voters.

We learned last week that Families for Excellent Schools-Advocacy, a group that raised 70 percent of the dollars contributed to the ballot committee behind Question 2, was not really a grassroots fundraising effort.  It was what is known these days as a Dark Money, Astroturf (fake-grassroots) organization.  The Massachusetts Office of Campaign and Political Finance just fined Families for Excellent Schools-Advocacy $426,500 for failing to disclose the donors of $15 million the group poured into political advocacy for Question 2 last November.

The nuances of campaign finance law and its enforcement from state to state are complicated, but in perfectly clear explanations from three different Massachusetts newspapers, it’s possible to parse out exactly what was illegal about the activities of Families for Excellent Schools-Advocacy:

From an editorial in the Gloucester Times: “It’s no surprise that Alice Walton, daughter of late Wal-Mart founder Sam Walton, gave a lot of cash to push a ballot question in Massachusetts that aimed to expand charter schools. Education generally, and charter schools in particular, are key interests of the Walton Family Foundation… It’s not surprising, either that Seth Klarman, the billionaire head of a Boston hedge fund and well-known GOP donor kicked in $3.3 million for the pro-charter question… Unfortunately it isn’t surprising either, that the public had no way to know about these contributions at the time, veiled as they were behind a nonprofit group funneling money into the campaign for Question 2…  Families for Excellent Schools-Advocacy gave $15 million to the unsuccessful question that would have allowed up to a dozen new charter schools in the state each year. The group was working with the New York-based Families for Excellent Schools, which lobbies for charters nationwide.  State campaign regulators deemed the group essentially worked as an unregistered ballot committee, passing donations from individuals to the campaign.  That arrangement meant donors’ identities were not disclosed….”

The Bay State Banner adds: “In general, nonprofits are not required to reveal donors so long as the nonprofit does not engage in political activity.  However, OCPF officials assert that during the 2016 ballot season, FESA specifically fundraised in order to donate to the political campaign committee—which would then only have to state FESA as its donor and not the original source of the money.”

And from the Boston Globe: “Families for Excellent Schools has promoted charter schools across the country. In New York, it spent $9.4 million on lobbying in 2014 and ran ads blasting Mayor Bill DeBlasio for his opposition to charters, while praising Governor Andrew Cuomo for supporting them.  The group was chaired last year by Paul Appelbaum, principal of Rock Ventures LLC, a New York investment firm.  Its vice chairman was Bryan Lawrence of Yorktown Partners, another New York investment firm.”

The Boston Globe adds that Massachusetts Governor Charlie Baker, a strong promoter of the now-defeated ballot issue to raise the cap on charter schools, defended the donors themselves and blamed Families for Excellent Schools-Advocacy: “But that’s on the group… Paul Sagan and Mark Nunnelly both complied with all state laws with respect to this.”

Maurice Cunningham, a political science professor at the University of Massachusetts, Boston, will have none of that explanation: “Are they kidding?  The entire reason to give to FESA was to keep their identities secret… And why, you ask, is it important for the donors to keep their identities secret?  It’s because, as political science research shows, if voters know that the real folks behind this idea are not poor families eager to improve their children’s schooling but billionaire financiers, the voters apply a deep discount to the message.”

Here is the substance of the agreement reached on September 11 between the Massachusetts Office of Campaign and Political Finance and Families for Excellent Schools-Advocacy: “FESA filed a statement of organization as a ballot question committee with OCPF, and then e-filed a campaign finance report disclosing all contributions and expenditures from July 1 to Dec. 31, 2016… FESA also agreed to dissolve as a 501(C)(4) social welfare organization with the IRS.  Families for Excellent Schools (FES), a 501(C)(3) tax exempt organization, agreed not to fundraise or solicit in Massachusetts, or engage in any election-related activity in the state for four years.”  Additionally Families for Excellent Schools-Advocacy paid the fine of $426,500.

The case may have longer term implications for organizations intending to skirt campaign finance laws to launder so-called dark money. Education writer, Rachel Cohen reported on Tuesday that, as part of the Massachusetts investigation into Families for Excellent Schools-Advocacy, evidence has emerged that $2.5 million of the $15 million Families for Excellent Schools-Advocacy raised to support Question 2 came directly from the New York nonprofit, Families for Excellent Schools: “A New York-based education reform nonprofit funneled nearly $2.5 million to a related group in Massachusetts, according to new disclosures unearthed as part of a legal settlement… FESA is a 501(C)(4) offshoot of the New York-based Families for Excellent Schools, a 501(C)(3). That connection raises the stakes for New York Attorney General Eric Schneiderman, who has jurisdiction over Families for Excellent Schools in New York and has made clean campaigns a centerpiece of his agenda. In exchange for their tax-exempt status, federal law bars 501(C)(3) organizations from engaging in political activity, and some are calling on Schneiderman to investigate why Families for Excellent Schools made a multimillion-dollar contribution, now that the Massachusetts Office of Campaign and Political Finance has acted.”  Schneiderman declined to comment on Cohen’s story.

Cohen quotes Adam Smith from the campaign finance advocacy group, Every Voice: “With so much shady money sloshing around politics these days, it’s critical that watchdogs have what they need to defend election and campaign finance laws and hold violators accountable.”

Maurice Cunningham believes last week’s ruling by the Massachusetts Office of Campaign and Political Finance will have a chilling effect on the solicitation of dark money political contributions at least in Massachusetts: “Now imagine the phone calls from donors to other Massachusetts dark money fronts like Massachusetts Fiscal Alliance and Democrats for Education Reform Massachusetts. Can their donors be sure their names will remain hidden?”