Disclosure: What the Law Does & Doesn’t Require

LAST YEAR’S DISCLOSURE LAW LEAVES OUT A LOT – A LOT THAT YOU CAN ASK FOR

Last month, we launched Project Income Disclosure with the aim of giving citizens a way to ask for voluntary transparency on matters of income. Taxpayers have a right to know about the financial relationships existing between their elected officials and the government and private-sector entities, especially lobbyist principals, that benefit from their policymaking. If a company or industry is paying a lawmaker as a “consultant,” say, and that lawmaker promotes legislation advocated by the company or industry, taxpayers have every right to know it.

The idea behind Project Income Disclosure is simply to enable citizens, in the absence of any law requiring the disclosure of this information, to ask for it. In other words: Rather than wait for lawmakers to pass a law requiring full transparency, citizens can simply ask their elected representatives to be transparent of their own free will.

Participants received many responses from lawmakers, and virtually all of them ran along these lines: I already disclose this on my statements of economic interest. Check with the Ethics Commission for this information. And so on.

As a result, many citizens – and, we suspect, many lawmakers – are confused about what kinds of disclosure the law actually requires. On the one hand, the law passed last year does require slightly more information about lawmakers’ private income. On the other, Sen. Brad Hutto’s characterization of the law is still largely true: “Next year,” he remarked on the Senate floor, “regardless of what version we pass, you won’t know anything more about me than what you know now.”

Below we explain exactly what the differences are between our model income disclosure form and what the law currently requires. The difference is a large one.

What the law currently requires

Government and elected officials are required to disclose a lot of information that, while not necessarily irrelevant, does not get to the heart of the issue. Disclosing direct sources of income, business securities, gifts, etc., does not fully show the many indirect benefits afforded public officials who want to take advantage of them. Here, in essence, is what the law requires right now:

Personal income sources and business interests. Lawmakers have to disclose the legal entity from which they draw income. The problem, as Sen. Hutto anticipated, is that they can simply form an LLC, have their clients pay the LLC, and “disclose” the name of the LLC. That tells their constituents very little.

Direct government income. Lawmakers have to disclose “the source, type, and amount or value of income . . . of substantial monetary value received from a governmental entity by the filer or a member of the filer’s immediate family during the reporting period.” Thus for example if a lawmaker works as a consultant for a local government agency, that income – including the amount – must be disclosed.

They also have to report the amount of any compensation they may receive from a company that contracts with the government entity with which they serve. While both of these provisions are a good start, they don’t capture indirect economic benefit. For instance, the law doesn’t require disclosure of income earned from subcontracts, and that is how many lawmakers earn large undisclosed sums.

Speaking engagements and gifts. Lawmakers have to disclose the amounts they are paid for speaking engagements and the value of gifts they receive. While this information is helpful in identifying potential quid pro quo, it does not expose government influence and it is not where the main conflicts of interest can occur. Much like campaign donations, lists of speaking fees will usually reveal the lawmaker’s supporters – which was already obvious.

What we’re asking

What’s asked by SCPC’s Project Income Disclosure, by contrast, goes significantly farther:

Lobbyist income sources. Lawmakers should disclose any type of income or economic benefit received from lobbyists or lobbyist principals, whether direct or indirect. If it started out in the bank account of an entity that lobbies government and ended up in the bank account of a state lawmaker – regardless of whether it got there through a contract, subcontract, consulting fee, or family member – the public has a right to know. This quite different from knowing the legal name of the LLC that makes deposits to a lawmaker’s bank account.

Government income sources. Similarly, any direct or indirect income or economic benefit derived from a government source – whether federal, state, or local – should be disclosed to the taxpayers. Many lawmakers draw far more government income than the $10,400 to $32,000 they are salaried as legislators. For instance, if a lawmaker owns a company that subcontracts with another company that does work directly for the state, he currently does not have to disclose it as government income, even though it’s a clear case of potential conflict.

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The currently required statements of economic interest do not capture the many economic benefits lawmakers may indirectly receive from government. Hence the reason for Project Income Disclosure.

We have provided the form. You can download it, send it to your lawmakers, and ask them to fill it out, and send it back to you. If they do – and if they don’t – forward their responses on to us. We will post the forms online and take a look at them ourselves as well.

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