September 6, 2016

Players and Money Behind Penny Sales Tax Campaigns

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Polling shows a large majority of voters have chosen sides on State Question 779, the proposed 1 percent sales tax increase for education. But millions of dollars will be spent in the coming months in an effort to lock up their votes.

What voters don’t know is where the money being spent on that campaign is coming from. That’s because the groups on both sides have yet to disclose their donors, and some groups may never disclose them.

Supporting the proposal, which would generate funds for teacher raises and other educational initiatives, is Oklahoma’s Children Our Future, a “social welfare” nonprofit affiliated with the Portland-based charitable nonprofit Stand for Children.

Oklahoma’s Children Our Future, a 501(c)(4) group, expects to spend $6.8 million this election season, according to tax documents filed with the IRS. It has received $4 million in contributions so far, a campaign spokesman said.

Opposed to the proposal are the charitable nonprofit Ignite Oklahoma and the social-welfare nonprofit OCPA Impact, though the latter said it has no plans to buy ads advocating against the proposal. Another social-welfare group, however – Catalyst Oklahoma – has already bought advertising against the state question. Catalyst Oklahoma is related to the think tank Oklahoma Council of Public Affairs, according to tax records.

Social-welfare nonprofits are often called “dark money” groups because they don’t have to disclose their donors.

City leaders, including the Edmond City Council, have also urged citizens to vote against the measure.

Recent polling shows 60 percent of voters favor the proposal, with only 6.2 percent undecided — the fewest undecided voters of any state question, said Bill Shapard, founder of Sooner Poll. The poll of nearly 400 voters was conducted in late July and had a margin of error of plus or minus 4.9 percentage points.

The penny sales tax, championed by University of Oklahoma President David Boren, is one of seven statewide ballot measures to be decided by voters on Nov. 8. If approved, it would generate about $550 million annually, according to the latest estimates by the Office of Management and Enterprise Services. About 70 percent is earmarked for common education, and most would be used to give classroom teachers a $5,000 salary boost. Higher education and career tech would also receive a portion.

In Support

With the ballot now finalized, spending and other efforts to sway voters are starting to pick up.

Beginning in late August, Oklahoma’s Children Our Future began purchasing television ads, the first publicly available record of the group’s spending. The group also created a second political arm with the same name—a so-called “super PAC,” a type of political action committee that can raise and spend unlimited sums on campaigns. By contrast, dark-money nonprofits can spend no more than 49.9 percent of their funds on political activities.

Federal Communications Commission records show that on Aug. 23 and Sept. 1 Oklahoma’s Children Our Future purchased more than $276,000 in television ads to run in October and November leading up to the election. Ads will run in both the Oklahoma City and Tulsa markets.

IRS records show the nonprofit plans to spend an estimated $5 million on communications, which includes ads and mailers. It also budgeted about $1.5 million for personnel, $224,000 for administration and $100,000 on polling.

As a dark-money nonprofit, Oklahoma’s Children Our Future won’t have to divulge its total fundraising and spending amounts until next year. It won’t have to disclose donors at all. In contrast, PACs, including the group’s super PAC, are required to disclose names of donors of more than $50 and itemize expenditures of more than $200.

Often, social welfare groups are used to funnel money to an associated super PAC in order to mask donors’ identities, and most of the time the nonprofit groups do not report how much money they acquired or spent until after an election is over.

Ward Curtin, a spokesman for the Yes for 779 campaign, said expenditures and contributions for the Oklahoma’s Children super PAC will be disclosed in its third quarter report to the Oklahoma Ethics Commission. The report details activity through Sept. 30 and the deadline to file is Oct. 31.

To date, the campaign has raised over $4 million from hundreds of donors, Curtain said.

“Oklahomans from all walks of life, including school board members, small business owners, teachers, fast food workers and parents of public school children, have stepped up to the plate to donate to make sure this campaign has the funds necessary to get our message to as many voters as possible between now and Election Day,” he said.

In IRS documents filed in February, Oklahoma’s Children Our Future reported having raised $725,148 by Dec. 31, with an additional $6.2 million in contributions expected in 2016.

All the group’s financial support comes from private donations and Stand for Children is expected to be a major contributor. Oklahoma’s Children Our Future plans to dissolve following the election on Nov. 8, according to tax records.

Stand for Children has contributed millions to political races in other states, including in Tennessee and Washington.

Its political action fund, a 501(c)4, oversees state-level affiliated organizations. Stand for Children also has a 501(c)3 public charity, Stand for Children Leadership Center, which supports high school preparedness and other education initiatives.

Major donors to Stand for Children, include the Tulsa-based Charles & Lynn Schusterman Family Foundation, which has contributed more than $2.3 million.

In Opposition

 Opposing the measure is Catalyst Oklahoma and its subgroup, OK United. Catalyst Oklahoma, also a dark money group, has received an unknown amount of donations this year, but it has shown fundraising power in the past.

In 2014, the group, which participated in both state and municipal elections that year, raised nearly $1.4 million and spent nearly $1.2 million. Around $1.1 million of that amount came from a single donor, whose name was redacted from the document, the organization’s tax documents show.

After asking for a filing extension, the group submitted its 2013 financial report to the IRS four days after the November 4, 2014, election.

Catalyst Oklahoma has also made independent expenditures this year in state Senate races, spending more than $89,000 in support of four candidates, : Julie Daniels, Tim Downing, Bob Jack and Miguel Najera, according to Oklahoma Ethics Commission reports. It has also made around $58,000 in independent expenditures in federal elections, according to the FEC.

Former Oklahoma Secretary of State Glenn Coffee files the group’s paperwork with the Oklahoma Ethics Commission. Coffee did not respond to a message seeking comment.

An ad opposing State Question 779 was also published recently on, The Oklahoman’s website. The ad was paid for by Catalyst Oklahoma.

“A one-cent sales tax could hurt MAPS. Why should we have to choose?” a voice in the ad says. MAPS is Oklahoma City’s development program funded by a 1-cent sales tax.

Another political nonprofit group, OCPA Impact, also opposes the measure, noting it would raise Oklahoma’s combined state and local sales tax rate to 9.78 percent, the highest of any state.

OCPA Impact also advocates at the State Capitol on multiple policy issues, and participates in advocacy with other state and national groups.

David Bond, chief executive officer for OCPA Impact, said the group does not plan on buying ads opposing SQ 779 or telling people to vote a certain way.

“We do want to make sure that someone is proving the facts about the sales tax increase, what the effect of the sales tax will be on Oklahoma’s economy,” Bond said.

OCPA Impact is associated with the Oklahoma Council of Public Affairs think tank, with which it shares offices and has a shared services agreement. OCPA is listed in its 2014 tax filings as the direct controlling entity for the dark-money group Catalyst Oklahoma. But OCPA President Jonathan Small said his group doesn’t control or donate to Catalyst and the listing only refers to the fact that one of Catalyst’s two board members at the time – its executive director, Tulsa attorney Charles Sublett – was also an OCPA board member.

Sublett did not respond to messages seeking comment.

A third nonprofit group associated with OCPA is the Liberty Foundation of America, which is located in the same offices. The foundation is an associate member of the State Policy Network, which includes conservative groups whose mission is “to catalyze thriving, durable freedom movements in every state, anchored with high-performing, independent think tanks.”

Other Opponent

Another opponent of the penny sales tax is the Edmond-based 501(c)3 public charity Ignite Oklahoma Foundation, which touted the Edmond city council vote on its website and Facebook page. (The Edmond Public Schools Foundation, by contrast, came out in support of the question.)

Ignite Oklahoma, which has also advocated for business and economic development interests, was founded in June 2015 by David Lewis, vice president of an employment services company.

Under IRS rules, unlike 501(c)4 groups, 501(c)3 charities cannot make independent expenditures for or against political candidates. However, IRS rules do allow public charities to make some limited contributions to committees supporting or opposing ballot measures, as well as engage in some lobbying. These groups may be involved in public policymaking by providing educational materials or forums, however.

“We’ve primarily been focused on trying to provide an education-based approach on what we believe what the impact will be, as opposed to coming out and saying vote for it or don’t vote for it,” Lewis said.

Lewis declined to name donors to Ignite Oklahoma.

According to Oklahoma Secretary of State records, one of Ignite Oklahoma’s incorporators is A.J. Ferate, general counsel for the Oklahoma Republican Party.

Lewis said Ferate does some of the legal work for Ignite Oklahoma.

In late June, Ferate filed an amicus brief on behalf of Ignite Oklahoma in a state Supreme Court case brought by OCPA Impact challenging the gist of the initiative petition that led to State Question 779 being on the November ballot. The court eventually ruled that the gist was valid.