In This Issue Busy Week for Disclosure Legislation   Commentary: Disclosure of Nonprofit Political Activities   New E-Gov Initiatives   Cost-Benefit Analysis Bill Sent to House Floor   Tax Bill Updates   Supplemental Spending Bill   Labor-HHS Spending Update   Surplus Lockboxes Grow   New Debate on Growing Number of Poor    OMB's Web Site Difficulties   Tech Help: Navigating the Web    Notes and Sidebars   Busy Week for Disclosure Legislation In an early-morning vote on June 28, a pared-down version of legislation requiring disclosure of contributors and expenditures by 527 organizations passed the House overwhelmingly (385-39). Last Thursday, June 29, the Senate took up the House bill, which passed 92-6. It will now be sent to the President, who is expected to sign the bill. This caps off a very busy 10 days in which a hearing on nonprofit disclosure was held, a bill was written, a markup was held, and a bill was passed. The initial bill that resulted from the hearing, H.R. 4717, applied to Section 527 political organizations as well as 501(c)(4), 501(c)(5) and 501(c)(6) organizations (social welfare, unions, and trade associations, respectively). This raised serious concerns from many sides, and had little support (read the OMB Watch analysis of H.R. 4717). Just hours before the House vote, a new bill was introduced, H.R. 4762, that requires disclosure only from 527 political groups. This bill is almost identical to one sponsored by Sens. John McCain (R-AZ) and Joseph Lieberman (D-CT), which passed the Senate as an amendment to the 2001 Defense appropriations bill. This bill requires 527 groups that have annual receipts of $25,000 or more to register with the IRS and disclose of contributions over $200 and expenditures over $500. This information will be available to the public through the IRS, and upon request from the organization. This legislation takes effect immediately after it is signed into law, so it is likely that disclosure will begin in advance of the November election.

• Read the OMB Watch analysis.

Back to Top Commentary on Nonprofit Disclosure At the end of last week, disclosure of nonprofit political activities made front page national news with passage of a new law requiring donor and expenditure disclosure for tax-exempt 527 groups (see story above). The bill passed with overwhelming margins in the House and Senate and seemed to have few critics. Nonetheless, the new law raises four issues for us: (1) Most nonprofits (and probably the public) are very confused about nonprofits being engaged in "political activities;" (2) The type of disclosure being required may be unconstitutional but there is a legal way to achieve disclosure; (3) The new law may create a dangerous slippery slope of regulating other nonprofit issue advocacy; and (4) There is still a need for laws to address the corrupting influence of money in politics. OMB Watch began sending information about legislation moving in Congress on nonprofit political activity a few weeks ago. In response to one of the first emails, we received a scathing reaction from someone saying that we don't understand the tax code, that nonprofits are not permitted to engage in political activities, and that we better go back and bone up on the tax code before we send messages out to the field. This response is typical: most people do not know the differences between organizations formed under 501(c)(3) (charities), 501(c)(4) (social welfare), 501(c)(5) (unions), 501(c)(6) (trade associations), or 527 (primarily to influence elections) of the tax code -- all (plus others) considered nonprofits. All of these groups can lobby, all can work on referenda, and all can work on nominations. But charities cannot engage in electioneering; yet they can do voter education and other activities relating to elections. The distinctions between a 501(c)(4) and a 527 group when it comes to electioneering are mostly related to amounts of activity: a 527 is organized with the primary purpose of influencing elections; a 501(c)(4) cannot have that as its primary purpose. But the bottom line is that all of these nonprofits can engage in "issue advocacy," which, at times, can be called political activities. This sense of confusion about what nonprofits can and cannot do is quite pervasive and grounded in the complexity of the laws and rules. Moreover, the choice of words – political activities – is reminiscent of recent attacks on nonprofit advocacy launched by Reps. Ernest Istook (R-OK) and David McIntosh (R-IN). The Istook amendments focused on "political" activities of nonprofits, but really dealt with communications concerning public policy matters and mostly by charities. The current discussion in Congress of "political" activities is primarily about electioneering, but also includes other types of issue advocacy which may be conducted by most nonprofits. So, depending on who is speaking, they can have vastly different meaning when they talk about nonprofit political activities. OMB Watch understands the potentially corrupting influence of money in politics, and recognizes the urgent need to revitalize public confidence in our democracy. We recognize the benefits of public disclosure for communications that fall just short of the "express advocacy," yet are closely tied to candidates and elections. That is why we strongly support disclosure in a manner that does not violate core constitutional principles. During the congressional debate on 527 groups, two topics kept emerging. First, that there is no way to find out about the existence of 527 groups. Second, that the public cannot find out who is bankrolling the group. Republicans for Clean Air, a 527 group created during this year's Republican presidential primary, is often cited as an example. Two wealthy Texans provided millions of dollars to develop ads that attacked John McCain. But they never said to vote for George W. Bush. As a result, they were not express advocacy and the group was not required to disclose anything. We believe a reporting scheme similar to that imposed on other nonprofit organizations would meet much of the legitimate public need for information about these entities. First, the 527 groups, as required by the new law, should register, and that information should be publicly available. Second, unlike the new law, we do not think that the names of all donors and those receiving expenditures should be subject to disclosure. This is likely to raise constitutional issues concerning the right to anonymously associate with groups that are conducting issue advocacy. We will see what the courts decide. Instead of potentially trampling on constitutional rights, a Form 990-type reporting should be done, possibly revised to be submitted more often than the annual filing currently required of other nonprofits, and to reflect expenditure categories more appropriate to influencing elections. Additionally, just as charities need to demonstrate public support, the 527 should be required to demonstrate public support on its filings. If it fails in being publicly supported, then donor disclosure might kick in. Thus, in the case of the Republicans for Clean Air, the group would have been required to disclose since only two wealthy individuals provided funding. Read a more detailed description of OMB Watch's position. We are also concerned, as Sen. Mitch McConnell (R-KY) has already voiced, that 527 activities are also carried out by other nonprofits. For example, like 527 groups, charities may also engage in supporting or opposing referenda (which would be considered lobbying for charities). So, why does a 527 group have to disclose its donors but not the charity? The public will increasingly be confused that the same activity may force some nonprofits to disclose and not others, and may call for disclosure by all nonprofits, even if they never intend to influence an election. This is the slippery slope that occurs when you do not have a bright line test of the almost-express advocacy activity that is being regulated. While disclosure is a worthy initiative, we believe that "soft money" issues, including the problems raised by unlimited contributions to political parties and taxable entities, need to be addressed as part of a comprehensive approach to campaign finance reform. Focusing only on the advocacy activities of nonprofit organizations or just 527 groups fails to address substantial problems throughout the existing campaign finance system. We invite your reactions. Back to Top New E-Gov Initiatives The President announced on June 24 three new initiatives to strengthen e-government –- the idea of making government more accessible through high-speed, high-tech means.

• Within 90 days, the government will create a new web site, firstgov.gov, that will serve as a portal to government information. The web site is based on web.gov, a project conceived of by the General Services Administration (GSA). To complement the portal, Eric Brewer, the co-founder of Inktomi Corporation, which provides the search engines behind such sites as Yahoo, AOL, Microsoft MSN, and HotBot, will lead a team to provide an in-depth, fast search engine for the portal. Brewer intends to extend his knowledge of search engines to provide a free service to the public -– i.e., with no cost and no banners ads. Users will also be able to use the site anonymously unless they opt-in to specialized services in the future. Brewer's first step will be to provide massive indices of all government information currently on the web. As a result, according to the White House, firstgov.gov will be able to search one billion documents in less than one-quarter of a second and will be able to handle at 100 million searches a day. The service will not have context-sensitive search capability -- which would enable the public to get the specific information sought. Additionally, it will not provide direct access to databases; nor will it serve as a tool for compliance with EFOIA since most of the records (as opposed to the publications) of government are not available through the Internet today. But the search engine will provide more depth than current commercial services such as Google. Overall, firstgov.gov is likely to be a powerful new tool to search government's more than 20,000 web sites in an efficient, economical manner. OMB Watch has long advocated for a free government portal.
• The administration plans to expand the services offered through the firstgov.gov so that the public can conduct transactions with the government online. For example, over the next year they plan on creating mechanisms to apply for grants and contracts online. Although it was not announced, the work is likely to be done by GSA with oversight from the President's Management Council.
• The Council for Excellence in Government, a nonprofit organization, will provide a top award of $50,000 for the most creative idea for how government can serve and connect the public electronically. According to the Council's web site, the award is for an e-government proposal that is "user-friendly, accessible, cost-effective, secure, and protects the privacy of citizens' personal information." Other awards will be provided, but details on the number of awards, timing, and method for applying are sketchy. Send an email to nevans@excelgov.org with your name, organization and email address to receive an announcement when they have details. The Council has been co-convening (with several government agencies) a series of meetings on e-government and has announced that it will produce recommendations on future directions for e-government. These meetings are dominated by major businesses eager to provide services to the government and the meetings have taken on a decidedly strong orientation that focuses e-government on transactions with the public rather than access to information. The meetings have not significantly involved any organizations representing potential public users, such as labor unions, disability, civil rights, educational, environmental, religious, human services, or consumer groups. OMB Watch has participated in two of the Council's meetings; we skipped a meeting for which exorbitant attendance fees were charged. We believe the cost created an inappropriate exclusivity in a government-sponsored meeting, particularly where the subject of the meetings is making government more accessible and the intended outcome is recommendations to the government.

Back to Top Bill Requiring GAO Cost-Benefit Analysis Sent to Floor The House Government Reform Committee reported legislation (H.R. 4744) to the floor last week that would require the General Accounting Office (GAO) to conduct cost-benefit analysis of agency rules. H.R. 4744 was introduced only three days prior to the markup as a compromise between Reps. Sue Kelly (R-NY) and David McIntosh (R-IN) -- who had introduced separate versions of the legislation (analyses of href="/article/articleview/480/1/4/">H.R. 3669 & href="/article/articleview/482/1/4/">H.R. 3521) earlier in the year. This legislation is vastly different and far more problematic than the Senate version (S. 1198), which recently passed by unanimous consent. In reaching this bipartisan compromise, Citizens for Sensible Safeguards worked closely with the Senate Governmental Affairs Committee to make sure that (1) GAO is capable of conducting the work assigned to it; (2) that an extra-rulemaking process is not created; and (3) that cost considerations are not elevated above the benefit side of the equation. H.R. 4744 violates all of these principles. Rep. Dennis Kucinich (D-OH) urged the committee to adopt the Senate version -- which Rep. Gary Condit (D-CA) introduced June 27th as H.R. 4763 -- and offered it as a substitute amendment to H.R. 4744. But unfortunately, McIntosh objected and the substitute was defeated, 15-18, on a straight party-line vote.

• Read the full OMB Watch analysis of H.R. 4744.

Back to Top Tax Bill Updates The House passed H.R. 6 back in February -- a marriage tax penalty relief act amending the IRS code so that the income tax rate and standard deduction for joint returns are twice as much as those that apply to single filers. President Clinton has issued a veto threat due to the cost of the bill ($250 billion over 10 years). Since then, the President has hinted that he will sign a marriage “penalty” relief bill IF Congress will approve his Medicare prescription drug coverage plan. The Senate Finance Committee approved another marriage “penalty” tax cut bill, that will go before the Senate shortly after the Fourth of July recess. This bill is only effective through 2004, so the total cost is $55.6 billion over the next five years. (It would be politically difficult not to renew the tax cut when it expires, so the five year sunset provision doesn’t insure that the cut won’t be reinstated.) Unless a deal on the Medicare prescription drug coverage is brokered between Congress and the President, it is unlikely that a marriage penalty tax cut bill will go into effect. Back to Top Supplemental Spending Bill The good news about the $11.2 billion emergency supplemental (exempt from the spending caps), is the inclusion of $600 million for low-income heating assistance. The House approved the bill on June 29 (306-110), and the Senate approved it on June 30 (by a voice vote). The bill includes money for Colombian efforts against drugs, $6.4 billion for the military including efforts in Kosovo, relief for damages caused by Hurricane Floyd and the Los Alamos forest fire, and money for the Coast Guard. A provision lifting the food and medicine embargo to Cuba was omitted -— it will likely be attached as an amendment to one of the appropriations bills. The environmental bad news is the inclusion of language blocking the EPA from implementing rules designed to clean up waterways in the U.S.. Back to Top LABOR-HHS Spending Bill The Senate passed the Labor, Health and Human Services, Education and Related Agencies FY 2001 appropriations bill on June 29 by a vote of 52 to 43. The House and Senate must now meet in conference to reconcile the differences between the two versions of the bill. The Senate version increases spending over the current year's levels by $20 billion and is about $8 billion more than the House version, but it still falls short of the amount requested by the President. The President has already promised to veto the House version of the bill, citing the funding shortfall and questionable policies regarding worker's safety (see the article on the ergonomics amendment in the last issue of the Watcher), health care, and other areas. Back to Top Lockboxes Grow In addition to Congressional resolve not to use any of the so-called "Social Security surplus" for anything but paying down the national debt, the President has called for $400 billion over the next ten years to be set-aside as a "Medicare surplus," also to be reserved for paying down the debt (thus reducing the $1.9 trillion projected surplus over the next decade to $1.5 trillion). An amendment to the Senate Labor-HHS appropriations bill would establish a 60-vote point of order against spending of either the Social Security or Medicare surpluses for anything but paying down the debt. In addition to these efforts, various proposals keep coming up to devote some of the non-Social Security surplus to debt reduction. The House’s Supplemental Spending bill included a provision for $4 billion of the non-Social Security surplus in FY 2000 for debt reduction. An amendment was sponsored on the Senate’s FY 2001 Transportation appropriation to earmark $12.2 billion in FY 2000 funds for debt reduction. While Congress seems to think that debt reduction is the safest alternative to dealing with this new situation of budget surpluses (and, for the GOP, tax cuts the fairest use), there are a number of arguments for using the surplus for spending -— to improve the environment and the nation’s infrastructure, to provide better education and training to future workers, and to lift those people out of poverty who are not feeling the benefits of the extraordinary economy. Back to Top A Rising Tide May Not Be Lifting All Boats The Conference Board, a respected not-for-profit, non-advocacy business membership and research organization, released a report on June 29th finding that poverty among full-time workers in the US has increased, in spite of overall economic prosperity. Using 1998 Census Bureau figures (the latest available), the report found that since 1973, poverty in the US has increased in both overall number and percentage of people employed year-round at full-time work. This probably isn’t surprising to anyone trying to support a family on a minimum wage job. The Cato Institute, a conservative think-tank, disagreed with the findings. In 037">an interview on National Public Radio, Stephen Moore of Cato’s Fiscal Policy Studies argued that the Conference Board’s report presented an incomplete picture. He opined that since many people who are working today were formerly on welfare, thus starting at the bottom rung, they’ll be doing better soon. It’s hard to understand this argument -— do working people who were formerly welfare recipients not count when determining levels of poverty? Is the rising tide just a bit slow in lifting everyone’s boat, so low-income working folks just have to be patient? Back to Top OMB's Web Site The Office of Management and Budget's web site provides access to the federal budget, Circulars and Bulletins outlining Administration policy, Statements of Administration Policy, the Federal Register, Memoranda to Heads of Federal Departments and Agencies, information on the Government Performance and Results Act (GPRA) and management reform, Grants management guidance, and guidance on complying with the Administration's procurement, financial management, information, and regulatory policies. It is a valuable source of information. When you click on the search button, however, you are provided with the following message: "The OMB search engine will be available soon. Please try again in a few days." The message would probably lead you to believe that if you check back in a few days you will be able to search OMB's site, but that does not seem to be its intent -- the message has not changed in at least 7 months. Are they planning on providing a search engine? And who at OMB knows the answer? OMB's web site does not provide a phone number to call, or an e-mail address or even a name, so it is impossible to know whom to even ask. We tried to ask the White House Web Development Team, but they have a specific policy of not responding to questions or comments. It leaves us wondering why it is so difficult to find information from and about the agency responsible for the government's policies regarding access to information. Back to Top Tech Help: Caught Up in the Web? Hyperlinks are arguably the shortest paths between any two points on the World Wide Web. Nonprofit web sites, for the most part, rely upon links to provide visibility in search engines and traffic through word of mouth referrals. The sheer quantity of links, however raises questions not only about their quality, but also their effectiveness in directing people to the information they want and need to know. Are links the best way to navigate the web, or will they drive you in circles? Read NPTalk to see how tangled a web we really do weave... Subscribe to NPTalk Your comments are always welcomed! Notes and Sidebars Job Announcement OMB Watch is seeking a person to track federal budget and government performance issues, and coordinate a coalition to increase investments on domestic initiatives. If you have a commitment to social justice, government accountability, and civic participation; excellent written and verbal skills; demonstrated ability in coalition building; and an interest in domestic issues, please see the full announcement. Appropriations Update 10 out of the 13 appropriations bills were passed by the July 4 break -— however, many are under veto threat, so their passage doesn’t presage an easier final appropriations process. Freedom Briefing On Thursday, July 13th, The First Amendment Center will present the results of its third national survey of public attitudes about the First Amendment, "State of the First Amendment 2000," in Arlington, VA. To attend, please contact Kristina Hjelsand of The Freedom Forum at khjelsand@freedomforum.org