Big Idea: Government Hand Out

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When he took his whack at the city budget in November, Mayor Bloomberg spoke of lots of ways to raise revenue, from tax increases to productivity gains. But there’s one budget-filler the mayor failed to mention: City officials are also looking to raise serious cash from corporate, foundation and individual donors.

The Conflicts of Interest Board, the mayorally appointed body that interprets and enforces City Charter ethics laws, is revisiting rules restricting the ability of city officials to raise private money for nonprofit organizations–including nonprofits founded by public agencies or city officials expressly to raise money for their own offices’ operations. This winter, the board is aiming to issue what it calls a “major, major advisory opinion” that will likely give government workers expanded license to drum up cash from private benefactors.

“In tough economic times, the city reaches out to the private sector,” says Wayne Hawley, general counsel for the board. “Like the mayor says about finances, everything’s on the table, within reason.”

The conflicts board is already reconsidering a series of its own opinions, issued throughout the 1990s, that bar elected officials from what it calls “active fundraising”–making calls and sending letters. Such solicitations, the board wrote in 1993, “could easily create a perception…that those who seek to do business with the official are expected, or would be well-advised, to make a contribution in order to secure access or favorable treatment.” In a 1998 opinion, it clarified that “elected officials and high-level public servants may not write to local merchants or individuals asking them to contribute to a not-for-profit organization.”

Yet that’s exactly what Brooklyn Borough President Marty Markowitz did recently, following a consultation with the conflicts board. In an October 30 letter to members of the Brooklyn Chamber of Commerce, Markowitz asked merchants to make a financial contribution or run a toy drive on behalf of Best of Brooklyn, Inc., a new nonprofit established by the borough president “supporting culture, social services, health education and tourism, and most important, our youth.”

According Markowitz’ office, an early draft of the letter included a disclaimer that “supporting this event will have no impact whatsoever on any business you may have before my office”–language frequently recommended by the conflicts board and the city’s Law Department in these kinds of circumstances.

But no such words appear in the version that was mailed to nearly 1,200 Brooklyn businesses. The beep’s office decided to delete the words, says spokesperson Andy Ross, because “we thought it would be insulting to the people who received it.”

Ross says the borough president has little choice but to seek private funding. “The bottom line is, during the foreseeable future, we will be dealing with budgets cut to the bone,” says Ross, “and public-private partnerships are essential.”

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Best of Brooklyn may be no Wedtech, and bringing toys to tots is always a mitzvah. But Markowitz’ letter opens a new chapter in private fundraising by public officials. In the face of a soon-to-be-$6-billion budget hole, city leaders are looking to every form of revenue known to finance–and compared with wildly unpopular tax hikes, a few nips and tucks in obscure ethics rules surely look like a political no-brainer.

New Yorkers are already familiar with private financing for public services. Each year hundreds of millions of private dollars go into nonprofit organizations that are closely tied to local public agencies. Some of these nonprofits are serious moneymakers, and certain city agencies have come to depend on their revenues. Combined, the Central Park Conservancy and the City Parks Foundation raise the equivalent of 18 percent of the entire official Parks Department budget. Most recently, the Department of Education hired Caroline Kennedy Schlossberg to increase the volume of corporate and other private contributions to schools–including via the Department of Education’s own nonprofit, the Fund for Public Schools.

The success of these nonprofits has encouraged smaller funds to follow in their trail. The Fund for Public Advocacy, set up by Betsy Gotbaum, has raised more than $200,000 in grants and donations in its first 10 months of operation, replacing some of the millions axed from that agency’s budget during the Giuliani years. Gotbaum, whose legendary fundraising skills helped win her the office, is among the city officials eager to see a change. “It doesn’t make sense for public officials to set up not-for-profits and then not allow them to fundraise,” says her general counsel, Suzanne Lynn. “A lot of people will be upset if they don’t allow it.”

Yet the stakes may be higher than City Hall is willing to admit. (Deputy Mayor Carol Robles-Roman, who is leading the conflicts law review initiative for the Bloomberg administration, did not respond to requests for an interview.) No matter how the conflicts board rewrites the rules, there will be no such thing as free money. Even at their most innocuous, sales pitches like Markowitz’ could coerce some who seek to do business with a public office into making a donation. And disclaimers won’t dissuade those who seek special access to public officials from doing whatever it takes to make an impression.

Fundraisers for the major quasi-public groups are already big stops on the charity circuit. Some double as a guide to who is doing business with the city: New Yorkers For Children, for example, was created by Giuliani friend Nicholas Scoppetta to fund new initiatives at the Administration for Children’s Services. Among recent contributors are the American Stock Exchange, which got a $200 million incentive deal in 1998 to build a new trading floor, and News Corporation, which received $45 million in breaks to keep operations in New York City. Two other major donors, Paul Kanavos and Jonathan Stern, are less well known for their passion for reforming foster care than for their franchise to develop a golf course, now mired in environmental troubles, in the Bronx.

“Do you want a procurement environment where you have to buy a raffle ticket, or a turkey? Where a decision is made because you gave a gift to a museum?” asked Gene Russianoff of the New York Public Interest Research Group at a May forum at New York Law School on the ethics of private fundraising by public officials.

“I don’t know what the board is contemplating,” adds Russianoff now, “but ‘Times are hard–go for it’ would be a mistake.”

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Even good private money is never the same as public. Board meetings of nonprofits typically take place behind closed doors. Private groups are also not subject to laws that require city agencies to make their records publicly available, procure goods and services competitively, and follow labor contracts.

It’s for those very reasons that affiliated nonprofits have proved so appealing for city officials, who are eager not only to keep down costs but to break the regulatory shackles that make even the simplest purchase order a lengthy bureaucratic ordeal. “Political life is so constrained by rules designed to make sure people are honest, that politicians learn to work around these rules so they can do what they have to do,” says Ken Sherrill, a professor of political science at Hunter College who studies city government. “A lot of these rules go overboard.”

In the end, the legacy of private fundraising by public officials may not be a return to Koch era–style fraud but a decisive push of government into a subordinate relationship to the private sector. “I worry more about a growing sense that it’s not government’s responsibility to provide certain services, or that the public isn’t responsible for doing certain things,” says Sherrill. “It changes expectations drastically for public services.”

Fundraising in office promises to amplify the already staggering conflicts posed by campaign contributions and contributors’ expectations of political rewards in exchange. It institutionalizes private players as dominant stakeholders in the public power structure, whose influence counts for more than any voter’s, or even group of voters. And the public, in turn, comes to understand government as little more than a resource to support private business.

Government already has a mighty fundraising tool: the legal power to tax its citizens. If that power has waned in recent years, it’s only because elected officials themselves have deliberately kept it on the sidelines. “It’s kind of funny that you cut taxes,” observes Sherrill, “and then you try to run the government on the basis of tax-deductible contributions.”