Lawsuit could open books of government lobbying groups

Nov. 29--A lawsuit filed in Dane County Circuit Court could lead to more openness by local government associations that spend hundreds of thousands of tax dollars each year to lobby for changes in state and federal laws.

But Wisconsin Counties Association general counsel Andrew Phillips said a union victory in court would hurt because it would let competing interest groups know too much.

"If we had to open our books so that people could really look at our legislative strategy, take a look at where we are spending our money in terms of our lobbying effort, that would jeopardize county interests as it relates to the Legislature, and in the federal government, the Congress," Phillips said.

The Wisconsin Professional Police Association union is suing under the state open records law for access to the county association's books.

"They want to be governmental for the purpose of evading taxes, but they don't want to be quasi-governmental for the purposes of the open records act," said police union executive director Jim Palmer. "We don't believe they should be able to have their cake and eat it, too."

Phillips counters that just because the association's members are local governments and the group has a federal tax exemption doesn't mean it is itself a public body.

Palmer said the activities of Phillips and the association in helping counties pull jailers out of their unions made him curious about how much county taxpayer money the association has spent on extending the implementation of the state's controversial 2011 rollback of public sector union rights. So he sought association records on its finances, payroll, legal expenses and political activities under the records law.

The lawsuit contends the association is a public agency subject to the law because it has a board of elected officials, employees who have state pensions, a federal tax exemption based on its performance of government functions and a revenue stream of local taxpayer money.

"It's not just the dues money that the member counties pay," Palmer said. "They set up all these entities that also collect money from municipalities. That, too, is taxpayer money, and it's not a small amount."

Only about 16 percent of the association's roughly $3.7 million in 2012 revenue came from dues paid by 71 member counties, according to a financial statement submitted by the association as part of the lawsuit.

Management fees

More than $2.2 million of the remaining $3 million in annual WCA revenue comes from management fees paid to the counties association by two insurance companies. An annual dividend of about $100,000 is paid to WCA by a for-profit corporation it owns, said Josh Bindl, counties association chief operations officer for insurance and health benefits programs. And a portion of WCA's payroll is covered by the for-profit corporation, another insurance company and a finance authority, Bindl said.

The counties association was involved in setting up all five enterprises, and it has a hand in appointing their board members, said WCA program and service director Mike Blaska. All five share the WCA's Mifflin Street address.

The authority has a national mission, but the other four sell or arrange the sales of services to local governments and their employees. All five provide revenue streams that allow the association to keep membership dues from rising, Blaska said.

Blaska declined to provide detailed financial information about the enterprises, but at least two of them dwarf the WCA, which is primarily a lobbying group that also does research and stages conferences for members.

For example, the WCA Group Health Trust, which in 2012 pulled in $206 million in revenue -- mostly insurance premiums from member counties -- paid the counties association $1.04 million for corporate management services, IRS records show. The trust provides health insurance to member county employees.

The rest of the management fees come from the not-for-profit Wisconsin County Mutual Insurance Corp., which sells liability insurance to counties, Bindl said.

Phillips said Mutual can pay counties a portion of his fees when they hire him personally to represent them in cases such as those surrounding the jailers' union status.

Mutual has a for-profit subsidiary, Community Insurance Corp., which sells liability insurance to municipalities.

Community Insurance Corp. and the Public Finance Authority, which arranges financing for construction projects in Wisconsin and 30 other states, pay management fees to the association's for-profit corporation, WCA Services, which negotiates contracts with vendors who do business with local governments and their employees, Bindl said. Also, at least some of the vendors pay the counties association for its endorsement, he said.

The complicated arrangements evolved as each new enterprise was created, Bindl said.

"IRS rules and the need to keep the entities separate for business and liability reasons are the reasons for the unusual structure," Bindl said.

'Bene

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cial services'

Palmer said one reason opening WCA's books to the public is important is because the income of the satellite companies ultimately comes from taxpayers.

Local government tax dollars pay the bills for the products purchased through WCA Services and for the premiums that go to the insurance companies. The authority issues mostly tax-exempt bonds, which means investors receive a tax subsidy.

Phillips said that while much of the association's income originates as tax money, the association is no different from other private entities -- including unions -- that receive revenue from government or government employees.

Blaska said the enterprises provide beneficial services to local governments and their employees.

The counties association spent about $789,000 lobbying the state in 2011 and 2012, and during the first six months of this year it expended $292,206, more than all but three other lobbyists in Wisconsin, according to the Government Accountability Board. It hires another firm to lobby in Washington, D.C.

There also are lobbying associations for Wisconsin towns, municipalities and school officials that could be affected if the counties association prevails in court, said Beth Bennett, executive director of the Wisconsin Newspaper Association and a member of the Wisconsin Freedom of Information Council.

"Depending on how this comes out, it could have a lot of bearing on a lot of discussions about entities that use taxpayer-generated dollars to join organizations," Bennett said. "What are they doing with all the money that's going in? ... If it's all public money, why shouldn't it be transparent?"

The association and the union have a Dec. 8 deadline for filing briefs seeking summary judgment in the case.

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