How special interest groups get their money's worth in the Indiana General Assembly
In every case there are variables. Perhaps the exchange happens in a dark alley. Maybe it takes place by U.S. mail. Probably it goes down in an office. Most likely behind closed doors. Perhaps the exchange includes a few words. Maybe there's a wink. Probably there's a handshake. Most definitely there's an implicit understanding.
In every case there are certainties.
The amount of money exchanged is substantial.
The giver of the money has a vested, let's say "special," interest.
The taker of the money is a member of the Indiana General Assembly.
In other professions it's known as graft.
In other states it's considered a felony.
But in Indiana it's standard operating procedure - and it's perfectly legal.
That's because, with very few exceptions, Indiana law allows any group or individual to give an unlimited amount of money to any candidate running for a seat in the Senate or House of Representatives.
"Influencing an election"
Campaign finance rules? There are very few.
In Indiana, a contribution to a lawmaker is defined as "any donation given with the purpose of influencing an election." Donations include cash, checks, gifts of property, loans, in-kind contributions or any other item of value received by a candidate.
Any individual, non-profit corporation, for-profit corporation, trade association, labor organization, political party, other candidate or any other type of organization may make contributions to the candidate(s) of their choice. The only prohibited contributors are gambling interests, foreign nationals and federal banks.
To see an enlarged version of this graph, please click here.
And with very few exceptions, there are no limits on the amount of contributions any individual or group can make. Of all allowable contributors, only corporations and labor organizations have legal limits on campaign giving.
Both of these groups are limited to spending $2,000 in total contributions to candidates of the Senate and another $2,000 in total contributions to candidates of the House of Representatives.
However, because corporations and labor organizations can form their own Political Action Committees (PAC), and because there is no limit on the amount of contributions a PAC can give, corporations and labor organizations also have the ability to legally contribute an unlimited amount to any candidate in Indiana elections.
For example, the law restricts Eli Lilly and Co. to a contribution total of $2,000 among all 100 members of the House of Representatives.
But in last year's election, Eli Lilly PAC gave more than $20,000 to House candidates, including $2,000 to Brian Bosma (R), speaker of the House; $2,000 to Charlie Brown (D), former chair and current ranking minority member of the House Insurance and Public Health Committee; $1,000 to Jeff Espich (R), chair of the House Ways and Means Committee; and $1,000 to William Crawford (D), ranking minority member of the House Ways and Means Committee.
By simply forming a PAC, Lilly is able to legally donate 10 times the spending limit for corporations.
Likewise, the Indiana State Teachers Association (ISTA) could only contribute a total of $2,000 to House candidates in 2004.
But because the ISTA has formed the Indiana Political Action Committee for Education (I-PACE), the same group was able to give $70,000 to Rep. Phillip Pflum (D), who sits on the House Education Committee, as part of nearly $300,000 they contributed throughout the House of Representatives last year.
And while any one insurance company would only be allowed to contribute $2,000 to all House candidates, the generic "Insurance PAC" legally wrote one check for $20,000 to one member of the House Insurance Committee, Rep. Bruce Borders (R), and contributed to dozens of other campaigns as well.
So who is influencing the elections and the policy of the Indiana General Assembly?
A sample of the 2004 campaign contributions received by candidates of both parties running for office in the House and Senate (see sidebar on methodology) demonstrates the overwhelming imbalance between the influence of special interest groups and individuals.
Combined, the campaigns of the 15 Republicans reviewed received a total of $760,761 in contributions. Of that amount, 92 percent of their funding came from special interest groups - primarily lobbyists on behalf of health care providers, health insurance companies and drug companies whose campaign donations account for the largest segment of total outside contributions.
The numbers are strikingly similar for the sampled 15 Democratic lawmakers who received $914,761 in total contributions. Of that amount, 86 percent came from special interest groups and, like Republicans, they collected more money from health care lobbyists than any other group.
Together, these Republican and Democratic lawmakers had less than 10 percent of their candidacies and bank accounts financed by the interests and concerns of individuals, while money and influence of special interest groups dominated the campaigns.
The campaigns of Sens. John Waterman (R) and Vi Simpson (D) were financed 100 percent by special interest groups and had no financial support from individuals.
The campaigns of Reps. Bruce Borders (R) and Phillip Pflum (D) were 99 percent financed by special interest groups, leaving just 1 percent of the contributions attributable to individuals. Sens. Brent Waltz (R) and Robert Young (D) aren't far behind with less than 2 percent in individual contributions.
Of the 30 lawmakers surveyed, nearly half received more than 90 percent of their campaign funds from special interest groups.
Rep. David Frizzell took the largest amount of individual contributions among the Republicans with 23 percent, while Rep. David Orentlicher was the Democrat with the largest total individual contributions at 42 percent.
Some Indiana lawmakers in both parties received a large segment of their campaign contributions from out of state donors.
Rep. Russ Stilwell (D) received more than 50 percent of his contributions from labor unions and organizations. This is not surprising considering the fact that Stilwell is both a member of the Indiana AFL-CIO Executive Board and a lobbyist for the United Mine Workers of America outside of Indiana.
But of the nearly $55,000 Stilwell received from labor organizations, more than half came from outside of Indiana - including organizations in Colorado, Georgia, Kentucky, Illinois, Ohio and Washington, D.C.
To see an enlarged version of this graph, please click here.
Sen. Brandt Hershman (R) also has generous friends out of state.
Jack Overstreet lives in Colorado, but he is one of the largest private contributors to the Republican Party - donating more than $100,000 to help cover President Bush's inauguration costs this year, as well as $4,000 to Hershman's campaign here in Indiana.
In every case, and no matter what the amount, none of the senators or representatives did anything illegal when accepting these contributions.
This might change, however, if lawmakers choose to include themselves under the restrictions placed upon state employees by pending House Bill 1009 - aka the governor's "Ethics Bill."
Sponsored by Speaker Bosma, HB 1009 prohibits any officer, appointee or employee of the state from accepting money, gifts, favors, services, entertainment, food, drink in any amount from lobbyists.
The only branch of government covered by the Ethics Bill, however, would be the executive branch.
Should this bill pass, and it is expected to do so, the 150 members of the Senate and House of Representative would be banning one branch of government from the very activities that put them in office and continue to get them re-elected term after term.
With virtually no limits or regulation of campaign contributions, Indiana lawmakers have the ability to amass quite a lot of money, but perhaps they also incur a certain amount of debt.
It stands to reason that if campaign contributions are given with the express purpose of "influencing the outcome of an election" (Indiana Code 3-5-2-15), those making the contributions are spending their money to buy influence.
It also stands to reason that those same consumers expect the influence of their money to not only affect who gets elected, but they have certain expectations as to how those elected officials will repay them once they take office.
Quid pro quo
Because the acceptance of special interest funds from nearly any group in any amount is legal, Indiana lawmakers can be accused of neither criminal actions nor disloyalty.
And if money equals influence in the Statehouse, there should be an obvious correlation between who is buying and who is benefiting from the legislation.
And if such a correlation did exist, it might look something like this:
Sen. Patricia Miller (R) has been a member of the Indiana General Assembly since 1982. For much of that time she has served on the Senate Health and Provider Services Committee, and she is currently the chairperson of the Provider Services Sub-Committee.
Miller collected nearly $35,000 in campaign contributions last year, with more than 48 percent of her campaign funding from lobbyists representing the health care industry.
So far this session she has authored or sponsored nearly 30 bills concerning health and provider services. In many cases, the laws most definitely favor the health care provider over the individual needing medical attention.
Miller's SB 0269 allows an insurer or a health maintenance organization (HMO) to provide a policy or contract without complying with all health benefit mandates as long as policy exclusions are provided in writing.
SB 0592 requires the state to offer long-term care insurance policies to state employees and requires the state to contribute $25 per state employee per year.
The bill also requires Medicaid to consider the value of household goods and personal effects over $2,000 in considering an individual's eligibility, reduces the limitations on Medicaid's ability to collect from the estate of a surviving spouse and makes provisions for certain illnesses and medications to be excluded from Medicaid coverage.
Additionally, the same bill provides that certain Medicaid providers (doctors, hospitals, medical corporations) who have been overpaid or been paid in error by the state do not owe the state interest or owe a reduced amount when repaying the erroneous funds.
SB 0292 allows the governor to limit or exclude an optional Medicaid service from the state Medicaid plan by executive order if the governor determines that the state's fiscal situation requires the cuts in Medicaid.
Presumably, Miller's authorization for the governor to cut Medicaid due to a state fiscal crisis would come after taxpayers provide a long-term health care policy for every state employee and contributes $25 each year for every state employee.
All in all, Miller's legislation reflects the best interest of those who provided nearly 50 percent of her campaign financing - doctors, hospitals, drug companies and other medical corporations - while reducing benefits for individuals who don't work for the state.
The committee appointment and legislative record of Rep. Jack Lutz (R) also seems to favor the interest of his largest contributors over those of individuals.
As chair of the House Utilities and Energy Commission, Lutz wields tremendous power over the legislation that governs utility companies and communication service providers in Indiana.
Perhaps that explains why nearly 40 percent of his campaign contributions come from those with a vested interest in the legislation his committee passes, and the bills he sponsors tend to favor those who contribute the most.
He is the author of House Bill 1150, which states that if an energy company is found to be in violation of federal, local or state law and that violation incurs a fine, the utility company can pass the cost of that fine on to its ratepayers by raising their monthly bills. This practice is currently illegal.
Lutz is also the author of HB 1148 that makes it illegal for small towns like Anderson, Mooresville or Lawrence to establish their own broadband or cable services, even if no private company provides the service to residents. Lutz's bill allows only private firms to offer fiber optics services and keeps the cities from competing with private firms. His campaign contributors include a variety of communications companies lobbying to keep control of their market.
And just in case there is any question as to where Lutz's loyalty lies, on the first day of committee hearings this past January, business came to a halt as Lutz had one of his aides bring out a birthday cake and rallied all those present to sing "Happy Birthday" to a utility company lobbyist seated in the front row.
These are only two of the cases where the amount of money contributed and the business interests of the contributors have a direct correlation to the legislation introduced - legislation that provides far greater benefits to the special interest of those donating the most money than to the constituents the lawmakers are elected to serve.
Sharing the wealth
While the term "special interest group" applies to a variety of organizations and businesses with much to gain or lose as a result of last fall's elections, perhaps the two groups with the most at stake were the two political parties themselves.
For the first time in nearly four decades, Republicans gained a majority of seats in both the Senate and the House of Representatives. With so few competitive seats open and available to tip the balance of power in one of two directions, the political parties were the contributors with the greatest special interest in the outcome of the elections.
With a total of $1,675,522 collected by the campaigns reviewed, party affiliated contributions accounted for 18 percent of all campaign financing.
For Republican candidates, more than 25 percent of contributions are attributable to party money. For Democrats the total was 12 percent.
Hoosiers themselves unwittingly provide a significant portion of campaign funds to the two political parties via the Bureau of Motor Vehicles.
For every "vanity" license plate sold at $48 in the state, $15 goes to the Republican Party and $15 goes to the Democratic Party.
In total, nearly $1.5 million of taxpayer money went to the campaign process via the BMV in 2004, and a total $5 million has been distributed in the last five years.
The parties are free to spend that money as they deem appropriate, and in an election year the re-election of senators and representatives ranks highest on the list of priorities.
In addition to state party funding, the House of Representatives also has a House Democratic Caucus account and a Republican Campaign Committee account where members who raise a lot of money in contributions can deposit funds, while those whose campaigns are struggling financially can make withdrawals.
In all, the two House accounts each contributed nearly $1 million to candidates seeking election to the House of Representatives.
Of the Democrats, Rep. Patrick Bauer provided the most substantial party contributions.
Though he ran for re-election last year, Bauer ran unopposed, and with victory a foregone conclusion his campaign had little use for the more than $180,000 in contributions he received, 89 percent of which came from special interest groups.
Therefore, Bauer deposited more than $80,000 in the House Democratic Caucus account, which in turn wrote checks to the campaigns of other Democrats running for re-election.
He also wrote checks directly to other candidates in excess of an additional $30,000, including one check for $20,000 to Rep. Phil Hinkle's campaign.
Many other representatives also participated in the community cash pool.
Like Bauer, Rep. William Crawford also ran unopposed. Because he took in more than $110,000 in contributions and was guaranteed to win, Crawford could afford to transfer $15,000 to the caucus account and give another $4,000 to individual Democratic candidates.
Republicans have the same system.
The House Republican Campaign Committee received nearly one-third of Rep. Bosma's $133,857 total campaign contributions, as he, too, had little use for them in his uncontested race.
And Rep. Bruce Borders was perhaps the biggest beneficiary of the brokering system, as he received more than $150,000 of his $200,000 in campaign contributions from the Republican Campaign Committee, the Indiana Republican Committee and various individual Republican lawmakers.
Borders received only one contribution from a constituent, making individual donations less than 1 percent of his campaign total.
But the cash isn't just lavished on fellow legislators from the same party.
With so little actual campaign costs for unopposed office seekers, many lawmakers were free to donate a portion of their campaign contributions to their favorite charities outside of the Statehouse and legally declare them campaign expenses.
Bosma donated more than $6,000 to the National Right to Life Campaign for their "Get Out the Vote Campaign."
Crawford gave away an excess of $3,000 to Indiana Black Expo.
In both cases, the monies are donated to groups that support the candidacy of the donor, thereby constituting a legal campaign expense.
While it's a little harder to explain, Sen. Robert Young's (D) campaign expense of $450 for the purchase of a lamb at a county fair also constitutes a campaign expense, as presumably his constituents were in attendance.
In all cases, the transferring of funds to political parties, individual candidates or favorite charities are declared legal campaign contributions and expenses.
A few surprises
On the whole, the 30 campaigns studied were strikingly similar.
Most candidates averaged less than 10 percent in individual donations and had a variety of large checks accepted from a variety of large special interest groups. Very few campaigns seemed strikingly different from one another.
The campaigns of Sen. Brent Waltz (R) and Rep. David Orentlicher (D) are surprising, however, for their uniqueness.
Freshman Sen. Waltz defeated a 40-year veteran of the Indiana House of Representatives, Larry Borst, in last year's primary. The 30-year-old Waltz had not even been born when Borst first took office.
He defeated the longtime senator with no political experience and very little traditional campaign financing.
A review of his campaign finance reports reveals that Waltz financed his campaign himself with very few outside contributions.
In total, Waltz spent nearly $150,000 of his own money to become a state senator, making him the single largest individual donor in the 2004 election.
His personal contributions to his own campaign exceed the total amount in contributions collected for 27 of the 30 campaigns reviewed.
But Waltz did not provide all his funding. In addition to his own money, he collected an additional $40,000 to finance his victory.
That $40,000, however, came from a few generous sources and several of those sources have significant ties to state and national Republican interests.
One of Waltz's benefactors was the former chair of the Indiana Republican Party, Rex Early. Of $5,000 in total contributions Early made last year, nearly half went to the campaign of Waltz and the majority of the remainder went to Mitch Daniels.
Waltz's campaign was also financed with $4,000 from J. Patrick Rooney, the former chairman of Golden Rule Insurance Co. and the founder of the Medical Savings Insurance Co.
Both firms specialize in medical savings accounts, created by Republican-backed 1996 legislation, and health savings accounts, which were created by President Bush's 2003 Medicare prescription drug legislation.
The campaign of Orentlicher stands in sharp contrast to Waltz's and most members of the Indiana General Assembly.
While the 30 campaigns reviewed received an average of 10 individual contributions each, Orentlicher collected 393 individual donations totaling nearly $56,000, or 42 percent of his total contributions - the largest number and largest amount of individual contributions received by any candidate.
The campaign with the next highest number of individual contributors was that of Rep. Ed Mahern (D), who collected 54 individual donations totaling just under $6,000.
To see an enlarged version of this graph, please click here.
While Orentlicher did accept special interest money from many of the same groups that contributed to other campaigns, his amount of individual contributions is four times greater than his next largest contributor - the Democratic Party and its affiliates.
None of Orentlicher's individual contributions came from out of state, and 97 percent were from constituents in the district he represents.
Understandably, candidates attempt to raise as much money as possible from whoever will contribute. Furthermore, the candidate who spends the most money usually wins an election.
This statistical reality reflects the advantage enjoyed by candidates who are wealthy or whose political platform appeals to wealthy campaign contributors in the form of big business and the political parties themselves.
Such a system results in the over-representation of the political interests of an entrenched and wealthy minority.
While the proposed Ethics Bill could eliminate some of the dominance by special interest groups in the General Assembly, only real reform of the election process and campaign financing will put the influence and accountability into the hands of voters.
"Public campaign financing" is the term used to describe programs that provide public money or other support to qualified candidates seeking office, rather than the large and influential contributions of lobbying groups.
Proponents of public financing claim that by eliminating corporate and "special interest" funds, candidates are enabled to wage competitive campaigns even though they lack personal wealth or access to wealthy campaign contributors.
The process also reduces candidate reliance on special interest money and, consequently, may soften the public perception that government officials trade political favors for large campaign contributions.
The idea of public financing dates back to the early 20th century when Progressive Era reformers sought to curb the undue political influence wielded by multimillionaires created during the 19th century's industrial revolution.
In 1907, Congress responded to the need for campaign finance reform by enacting the Tillman Act that outlawed campaign contributions from corporations - something that Indiana has yet to do nearly 100 years later.
Public financing programs vary, but most share the same general features: contribution limits, spending limits, qualification thresholds, high spending opponent trigger provisions, limits on a candidate's use of personal funds and debate requirements.
Arizona, Florida, Rhode Island, Maine, Massachusetts, Hawaii, Minnesota and Wisconsin offer public financing to candidates for all state offices.
Kentucky, Maryland, Michigan and New Jersey have public financing systems for the election of governor.
In Arizona and Maine, a candidate must collect a pre-determined number of $5 contributions from individuals only. They can accept only one contribution from each individual, and may not accept contributions from any corporation or group.
Once the required number of donations has been turned in, the candidate qualifies for the ballot, and at that point public funds are used for campaign expenditures and candidates may not accept any funds from any other source.
Common Cause is one of many grass-roots organizations seeking to bring campaign finance reform via public financing to Indiana elections.
But Common Cause Indiana Director Julia Vaughn knows that reform cannot happen in Indiana unless the citizens of the state demand change. "I don't know why people don't get madder than hell when they see this stuff happening. I don't know why Hoosiers have such a high tolerance for political mischief," she says.
A large problem with campaign finance reform and ethics laws governing the Legislature in Indiana arises precisely because lawmakers themselves must write, pass and enact the legislation that would forbid them from accepting large special interest money and rely on public funds provided by individual donors.
Because Indiana citizens do not have the power to place binding legislation on the ballot, the closest thing to a citizen mandate are the non-binding referendums allowable as questions on a ballot that lawmakers can choose to abide by or simply reject.
Motivating individuals to create such a public referendum isn't easy, as Vaughn understands all too well.
"We ask people to suspend their common sense and participate in a process that by all outward appearances really doesn't put much meaning in their participation."
Editorial intern Lucas Klipsch assisted with the research for this article.
Methodology of this study
The 2004 Indiana General Assembly campaigns discussed in this article were chosen according to the following criteria:
*Equal number of Republicans (15) and Democrats (15)
*Leaders from both chambers
*Robert Garton (R), president pro tempore - not included: did not run for election in 2004
*Richard Young (D), minority leader
House of Representatives
*Brian Bosma (R), speaker of the House
*Patrick Bauer (D), minority leader
From and around Indianapolis metro area
*Sens. Luke Kenley, Patricia Miller, Brent Waltz (R)
*Sens. Billie Breaux, Glenn Howard (D)
*Reps. Robert Behning, Larry Buell, Woody Burton, David Frizzell, Phil Hinkle, Michael Murphy (R)
*Reps. Jeb Bardon, William Crawford, John Day, Ed Mahern, Carolene Mays, David Orentlicher, Gregory Porter (D)
From outside of the metro area
*Sens. Brandt Hershman, John Waterman (R)
*Sens. John Broden, Vi Simpson (D)
*Reps. Jeff Espich, Bruce Borders, Jack Lutz (R)
*Reps. Phillip Pflum, Russ Stilwell (D)
Campaign reports were filed between Jan. 1, 2004, and Oct. 31, 2004
Reports for the end of the year were not due until Jan. 19, 2005
All documents reviewed are available from the Indiana Election Division at indianacampaignfinance.com.