March 13, 2019 at 4:10 p.m.
Taxpayer funded lobbying group not subject to open records laws
WCA, other taxpayer funded groups lobby to weaken open government statutes
Taxpayer funded lobbying group not subject to open records laws
In a narrowly drawn 2014 decision that was not appealed to the Supreme Court, the state court of appeals rejected a claim by the Wisconsin Professional Police Association (WPPA) that the Wisconsin Counties Association (WCA), whose members are county governments, was a quasi-governmental corporation as defined by the open-records statutes and thus subject to those laws.
The ruling is important for two reasons: It would apply to any unincorporated and taxpayer funded lobbying association, and it shines a light on the activities of taxpayer-funded lobbying organizations, both incorporated and unincorporated, that engage in government-to-government lobbying.
Among other things, the WPPA argued, the WCA is supported by public funds and uses those funds to serve a public function, namely, to engage in lobbying on behalf of member county governments and to provide a variety of services that contribute to decisions made by both the Legislature and WCA's member counties, including providing its members with legislative information, representing and advocating for them before the Legislature, and making recommendations to them about improvements and efficiencies.
Those arguments notwithstanding, the appeals court, in a decision written by judge JoAnne Kloppenburg, said the case turned on a simple fact: The WCA could not be a quasi-governmental corporation because it is not a corporation but an unincorporated not-for-profit association.
The appeals court also declined to consider a second argument proffered by the WPPA, that the law applied because the WCA was otherwise a "governmental body" as defined in the open-meetings statutes.
Organizations such as the WCA have come under increasing scrutiny in recent years as they use tax dollars to engage in advocacy.
Here's how Cory Fish, the Wisconsin Manufacturers and Commerce's director of tax, transportation and legal affairs, put it in a recent column: "Taxpayer-funded lobbyists are spending your tax dollars pushing to loosen property tax caps, the creation of new local taxes and fees, and changes to property tax assessment laws that will result in higher property assessments. In other words, your tax dollars are being spent on lobbyists in Madison to encourage lawmakers to raise your taxes."
Even more ironically, despite being declared exempt from the open-records statutes and using public funds, the WCA has lobbied to weaken the public records statutes. So have taxpayer-funded organizations such as the League of Wisconsin Municipalities (LWM) and the Wisconsin Towns Association (WTA), the latter of which is incorporated.
For instance, under the open records law, an authority cannot charge fees for the cost of redacting confidential information from records. An unsuccessful 2013 bill pushed mostly by Republicans would have allowed such costs to be charged, increasing the costs to records requesters.
The bill was opposed not only by various media associations but by such groups as the Sierra Club, the Wisconsin Democracy Campaign, and the ACLU. However, the WCA, the WTA, and the LWM all lobbied for the change.
In addition, the WCA and LWM both supported an effort to eliminate required newspaper publication of local government meeting minutes, and, after a court decision in which the Appleton school district lost an open meetings ruling, the WCA board sought legislation that would have made it easier to create government bodies exempt from the open meetings law.
The 2014 case
According to the court documents, on Feb. 13, 2013, the WPPA submitted an open records request to the WCA for a variety of financial records. It submitted a second request on March 4, 2013.
That same day, the WCA emailed a short reply, the court decision states: "[t]hank you for your note of March 4, 2013. Wisconsin's open records law does not apply to the Wisconsin Counties Association. Take care."
The WPPA went to court, contending that the WCA was a "quasi-governmental corporation" and as such was an "authority" as defined by, and subject to, the open records law.
To make its case, the WPPA pointed to a 2008 state Supreme Court decision, State v. Beaver Dam Area Dev. Corp., in which the court laid out the criteria by which a corporation was considered a quasi-governmental corporation.
Those factors fell into five categories, the WPPA argued in its brief: the extent to which the entity is supported by public funds; whether the entity serves a public function and, if so, whether it also has other, private functions; whether the entity appears in its public presentations to be a governmental entity; the extent to which the entity is subject to governmental control; and the degree of access that government bodies have to the entity's records.
The WCA met all five criteria, the WPPA contended.
First, the WPPA argued, virtually all of its funds are public funds.
County members fees, for instance, comprised 18.1 percent of its revenues in 2011 and 16.3 percent of its revenues in 2012. In addition, the union argued, WCA maintained several "strategic relationships" with the Wisconsin County Mutual Insurance Corporation, WCA Group Health Trust, and WCA Services, Inc.
"From these relationships, WCA generates 60 percent of its revenues in the form of corporate management fees," the WPPA brief states. "Virtually all of the money WCA receives from these management fees originates from taxpayer dollars."
What's more, the union brief continued, the Wisconsin County Mutual Insurance Corporation is owned by 53 of Wisconsin's counties and provides general, automobile, police professional, and errors and omissions insurance to counties.
"It is clear that any monies paid by the Mutual Insurance Corporation to WCA were originally public in nature," the brief stated. "The Wisconsin County Mutual Insurance Corporation is owned by a majority of the counties in the state, and it provides insurance products solely to local governments."
A shell game?
If that wasn't proof enough, the WPPA contended, the WCA Group Health Trust is organized as a tax-exempt employee welfare benefit trust under the Internal Revenue Code "to be a cost effective resource for assisting Wisconsin counties and other local units of government in fulfilling their employee healthcare insurance obligations in a fiscally responsible manner."
WCA Group Health Trust is governed by officials from participating units of government and school districts, the brief stated.
"In 2011 alone, WCA Group Health Trust paid WCA $860,728 for corporate management services, amounting to nearly 24 percent of WCA's gross revenues for that year," the brief asserted.
Those monies paid by WCA Group Health Trust to WCA were also public in nature, WPPA asserted.
"WCA Group Health Trust is governed by local officials to aid units of government alone in fulfilling their healthcare insurance obligations to their employees," the brief stated. "The WCA Group Health Trust does not provide insurance services to anything other than public entities."
The WCA constitution explicitly provides that its assets must be distributed to the counties upon its dissolution, and that "[n]o part of the Association's earnings may inure to the benefit of any private interest," the WPPA argued.
"Clearly then, under Beaver Dam, the requirement that WCA distribute its assets to counties upon its dissolution is a clear indication of the counties' reversionary interest in those assets," the brief asserted. "Additionally, since no part of WCA's earnings may inure to the benefit of any private interest, it must then be the case that WCA's earnings, regardless of the manner in which they are derived, are public funds. As such, the Beaver Dam ruling demands the conclusion that WCA receives a substantial degree of support from public funds."
In sum, WPPA argued, all of the ways the WCA receives public funds should be considered.
"To do otherwise would allow WCA and its 'strategic relationships' to shield their activities, and those of local units of government all across Wisconsin, through the use of a thinly veiled shell game which serves to undermine every citizen's right to the greatest possible information regarding the affairs of government, as afforded by Wisconsin's Open Records Law," the brief contended.
Whether WCA's revenues come from dues, or management contracts, or wholly government-owned subsidiaries, WPPA asserted, virtually all of the money originally derives from the pockets of taxpayers.
Decision-making
There is also no question that the WCA serves a public function, the WPPA argued, including not only lobbying on public policy but in influencing county decision-making.
"Furthermore, the Supreme Court has held that the governmental business to which this policy applies is not limited to formal or final decision-making, but rather comprises all stages of the decision-making process, including preliminary decisions, discussions, or simply information gathering," the WPPA brief argued. "WCA provides a variety of services to its members that fall within the Supreme Court's view of what constitutes governmental business."
Of particular interest, the WCA observed, is WCA's 1991 request to the IRS for a letter ruling that any income realized by it would be excludable from its gross income. In that request, the WPPA claimed, WCA observed that "[t]he State of Wisconsin has long recognized the Association as an instrumentality of the state," that "the Association is the only association of county boards," that "[t]he functions performed by the Association allow the member counties to receive the benefits of improved service and reduce costs through cooperative efforts," and that "the Association performs an essential governmental function."
"That same request represented that '[t]he State of Wisconsin has granted the Association privileges afforded only to political subdivisions of the State,'" the WPPA stated. "For example, the Association participates in the state of Wisconsin's retirement fund for local governments."
That fact remains true to this day, the brief stated.
"The foregoing facts reveal here, perhaps more than in any other regard before this court, how WCA desires to have its cake and eat it, too," the WPPA stated. "In order to maintain its tax-exempt status under federal law, WCA must perform essential governmental functions as a 'political subdivision.' Indeed, that was precisely how WCA represented itself to secure that tax exemption. The WCA ought not be permitted to have it both ways. It is contrary to the interests of logic and justice that WCA performs essential governmental functions for the purpose of avoiding income taxes, but not for the purpose of fulfilling obligations under Wisconsin's Open Records Law."
Third, the WPPA continued, the WCA represents and conducts itself to facilitate the reasonable perception among the public that it is a governmental entity, among other things publicly asserting in its marketing material and on its website that it was created by statute with a statutory obligation.
"Just as the Beaver Dam Court reckoned that the effect of such close ties between BDADC and the city of Beaver Dam made it difficult for the public to discern where one ended and the other began, so should this court find with respect to WCA," the brief stated.
Finally, the WPPA argued, the WCA is subject to considerable governmental control.
"Its entire board of directors is composed of local elected officials whose counties all have a reversionary interest in WCA's assets and its constitution requires that none of its earnings be permitted to inure to a private interest," the brief stated. "Additionally, as an employer within the Wisconsin Retirement System, a status only afforded governmental entities, WCA must adhere to a wide variety of requirements as to what they must and must not do."
The decision
The circuit court and the appeals court both dismissed the union's complaint, based on its view that, as an unincorporated association, the WCA could not be a quasi-governmental corporation.
In particular, the appeals court rejected the WPPA's reliance on the Beaver Dam decision.
"We reject the Police Association's argument based on the decision in Beaver Dam because it is not supported by any language in that decision," the decision stated. "In Beaver Dam, the court held that 'a quasi-governmental corporation is a corporation that resembles a governmental corporation,' and applied the totality of circumstances test to determine whether the private Beaver Dam Area Development Corporation in that case was 'quasi-governmental.'"
Notably, the appeals court judges acknowledged, in some parts of that decision the court also referred to the issue as being whether an "entity is a quasi-governmental corporation." That may have provided an opening to apply the term "quasi-governmental corporation" to other entities besides corporations as defined by Wisconsin statutes, but the judges also observed that the WPPA pointed to no language in the decision that indicated that the court intended to extend the reach of the definition to embrace entities that are not corporations.
"As the Counties Association notes, 'to be a 'quasi-governmental corporation,' an entity must first be a 'corporation,' and the Counties Association is not a corporation," the judges wrote. "...The Police Association asserts that it is 'illogical to conclude that the Legislature intended to create a loop-hole' for associations like the Counties Association. However, to hold that the term 'governmental or quasi-governmental corporation' in [the open records statute] includes an entity that is not a corporation would effectively rewrite the statute to eliminate the Legislature's use of the word 'corporation.' That is the job of the Legislature, not the courts."
The court of appeals refused to consider the WPPA's alternative argument, namely, that the WCA constitutes a "governmental body," as used in the open-meetings statute. The judges agreed with the WCA that the WPPA forfeited the argument by not raising it in the trial court.
What's more, the decision stated, the court would not likely be persuaded by the argument in any event.
"In particular, the Police Association does not explain why a statute and informal opinions of the attorney general which address open meetings 'ought to be instructive' when the topic here is public records," the decision stated.
Undermining the law
Since the decision, the WCA has gone on to seek legislation that would weaken the public records law for its members. Most notably, after the Appleton school district lost an open records case in the state Supreme Court, the WCA board of directors voted to seek to change the law at issue in the lawsuit.
In the case the high court determined that the Appleton Area School District's Communications Arts 1 Materials Review Committee (CAMRC) was a governmental body subject to Wisconsin's open meetings law, because it was a government body created by "rule or order" under the open records law.
John Krueger, the parent of a child who attended school in the district, had sued CAMRC and the Appleton Area School District Board of Education, alleging that CAMRC failed to comply with the open meetings law. Over a period of six months, according to the Wisconsin Institute for Law & Liberty, which litigated the case, the committee, comprised of teachers and district administrators, reviewed potential works of fiction to include in a ninth grade reading curriculum.
However, none of its meetings were open to the public.
The committee had been created by district officials pursuant to a board of education rule that delegated the selection of educational materials to school personnel, with the board having final decision-making power over textbook selection. The rule gave authority to a curriculum department, which adopted a handbook for the curriculum process, by which the committee was created.
WILL argued that, as the state attorney general had concluded, any directive, formal or informal, that creates a body and assigns it duties is sufficient to trigger the law, and that was the case in the board rule.
But in a brief, the WCA argued otherwise, saying the open records law should not apply to the curriculum committee because it had not been formally created by the school board.
"This court should reject the attorney general's definition of 'rule or order' that includes informal directives," the WCA brief stated. "In its place, the court should hold that a 'rule or order' is a directive adopted or issued by an existing governmental body in the normal manner by which it does its work. In most, if not all, situations this will be adoption by a majority vote. And, such formal directives will be recorded in the minutes of the governmental body."
In other words, because the school board did not directly and formally create the committee at a board meeting with a recorded vote, the committee should not be subject to the open records law.
After the school district lost the case, the WCA board voted to seek legislative changes that would limit the definition of "rule or order" to require some sort of formality related to adoption, and that only a "governmental body" itself may create another "governmental body."
Richard Moore is the author of the forthcoming "Storyfinding: From the Journey to the Story" and can be reached at richardmoorebooks.com.
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