Overlapping structure of non-profits and PACs fuel education reform support for legislative candidates
(From The Capitol, July 27th, 2010)
by Chris Bragg
At a small Spanish restaurant in midtown, then-Assembly Member José Peralta was peppered with questions by a group of about a dozen hedge fund managers.
What was his battle plan to defeat recently expelled State Sen. Hiram Monserrate, whom Peralta was taking on in a special election? What were his specific positions on the issues surrounding charter schools, the hedge funders’ pet cause?
Peralta’s answers apparently left a good impression: between March 1 and March 15, Peralta received at least a dozen checks from hedge fund managers ranging between $5,000 and $9,000, helping provide the fuel for Peralta’s landslide victory.
“A good first date always helps,” explained Joe Williams, executive director for the pro-charter umbrella group Democrats for Education Reform (DFER) and a former Daily News education reporter, who helps coordinate efforts among the donors. “If they like the guy, they contribute. If they don’t, they don’t.”
In Manhattan restaurants, penthouses or in the boardroom of DFER, such meetings with supportive lawmakers and potential candidates have become increasingly frequent as charter backers gear up for the 2010 elections. And though such meetings between interest groups and candidates are common, these efforts are striking for how much cash they can inject, and how quickly, into a campaign they support, despite their relatively small numbers. Many of the donors also serve on the boards of charter schools, and say they are ideologically attracted to the cause because the schools promote the type of entrepreneurial spirit with which they built their own businesses.
Though charter advocates had been testifying at hearings and trying to sway policy for years, the decision to wade into electoral politics began to crystallize with the election of Eliot Spitzer in 2006 and the special-election victory of State Sen. Craig Johnson several months later.
The effort has since gained momentum and become more professional, with the election of Barack Obama, a pro-charter Democrat, and the Race to the Top program giving credence to the charter school movement in Democratic circles. What was initially a small circle of about five dedicated donors has grown to 25 or 30 regular contributors, according to Williams, with efforts spreading to state legislatures across the country.
In New York, these donors are focusing on bundling money for three Senate primary challengers against perceived anti-charter incumbents: Lynn Nunes, who is running against Shirley Huntley in Queens; Mark Pollard, running against Velmanette Montgomery in Brooklyn; and Basil Smikle, challenging Harlem’s Bill Perkins, a vocal charter critic.
Assembly Member Sam Hoyt, who is facing a tough primary challenge in Buffalo, is also getting support from the group, along with a number of other pro-charter incumbents, such as Johnson and State Sen. Darrel Aubertine.
Candidates are chosen for screening in several ways. Michael Tobman, a consultant and lobbyist who specializes in education issues on the city and state level, serves as consultant and is seen as the key player in helping connect pro-charter candidates with the hedge fund donors. Nunes said that Tobman was the primary person who connected them.
“He’s someone who is able to open some doors to people in politics and has been prominent in the charter school movement,” Nunes said. “He’s able to blend the players from both sides and be the point person.”
After the meetings between candidates and elected officials, either Tobman or John Petry, a partner at Gotham Capital and a member of the board of trustees at Harlem Success Academies, often try to line up more contributions from likeminded (and deep-pocketed) charter supporters, according to people close to the group.
At other times, candidates are felt out about their positions in races where opportunities may be available but their positions are unclear. Steve Behar, a Queens Assembly candidate who is running for an open seat against a staffer for Assembly Speaker Sheldon Silver, a staunch teacher’s union ally, was approached at a political conference earlier this year by a fundraiser with ties to the charter backers. Behar was told that meeting with the hedge fund managers could net him $50,000 to $100,000, depending on how his interview went. Behar also said he was later approached with the same offer by another charter backer, but turned down both offers to potentially interview, since he does not support charter school expansion.
Finally, there are the times when the hedge fund giants say they are literally compelled to donate money to a race: Williams said that the New York Post’s early coverage of the Smikle-Perkins race so clearly defined the contest as one between pro- and anti-charter forces that they had no choice but to jump in, despite reservations about taking on and potentially losing to a strong incumbent.
“They basically delivered us this war and we inherited it,” he said.
Meanwhile, Williams said, there had been no agreement struck with charter champion Mayor Michael Bloomberg to join in giving to the group’s supported candidates, though he has already endorsed Assembly Member Jonathan Bing, an education reform advocate, and is planning to host a fundraiser for Bing in August much like the one he hosted for Craig Johnson in July. Bloomberg and DFER are likely to run on officially separate tracks, though the mayor’s 2009 campaign manager, Bradley Tusk, is a consultant to DFER and helped devise the political strategy around charters.
Bundling money is not the only way charter backers support their cause. They have also created an overlapping structure of non-profits and political organizations with at least four branches that all have differing tax structures.
Take Williams’ role: until late last year, he was the executive director of Education Reform Now, a 501(c)3 that can only engage in the most limited, non-partisan of political activities. He is also the executive director of the Democrats for Education Reform PAC, which gives money directly to candidates. Until last year, the organizations also worked out of the same office, 24 W. 46th St., and shared largely the same staff.
Williams said careful records delineating his work between the two are kept. He also acknowledged that he ceded the role of executive director of Education Reform Now–he remains the group’s treasurer–partially over concerns about potential conflicts between the roles. A desire to expand the scope of Education Reform Now’s work across the country by hiring a separate, expanded staff also played a role, he said.
Meanwhile, there is also a 527 group, also called Democrats for Education Reform, which is registered at a different address to Charlie Ledley of Cornwall Capital, perhaps best known as a protagonist in the Michael Lewis’ bestseller, The Big Short, who bet against the sub-prime mortgage market. Lastly, there is a 501(c)4 group, Democrats for Education Reform Advocacy, which Williams said he will likely be involved with later in this election cycle, precipitating a need to keep a safe distance from campaigns to avoid coordination issues, he said.
Charter school advocates reportedly have poured more money into legislative races this year than the teachers’ unions: some $600,000 to about $500,000 since January, according to a Wall Street Journal analysis. But union officials say their pace will pick up after they make their endorsements in August, and after they can see which lawmakers voted to block education cuts, said Andrew Pallotta, executive vice president of the New York State United Teachers, said that the focus of the teachers was on broader education issues, such as the budget, rather than the narrow focus of the charter supporters on building more charters.
“I think the concern at NYSUT and other teachers’ unions is on the bigger picture,” he said.
Pallotta noted that that NYSUT has 600,000 members to serve as ground troops, which the charter backers do not have. And he suggested many charter supporters have some sort of financial stake in charter schools, though he did not offer any evidence to back up the charge.
The charter proponents, meanwhile, say such allegations are merely indicative of the transactional thinking of teachers’ unions, and say that charter backers are motivated by more idealistic purposes. Williams said this difference also accounts for very different types of interactions with candidates.
“We’re looking to make friends and we don’t punish them the way that unions do,” Williams said. “If they disagree with us, we don’t think they’re evil. Unions corral power in a different way. What we try to do is give them incentives.”