Democracy Alliance’s Dark Money Network Works to Retake States

The left’s leading donor club has pledged greater transparency, but its state-level political network keeps finances opaque

December 3, 2015

Through five dark money advocacy groups and tax-exempt sister organizations, the progressive Democracy Alliance and its high-dollar Democratic donors are hoping to turn back recent Republican gains in statehouses and governorships.

The Alliance discloses little about its activities, but the structure of the nonprofit network established last year to regain progressive power at the state level make the sources of their money even more opaque than most other Alliance-backed groups.

In documents handed out at its latest biannual conference, held last month in Washington, D.C., Alliance staff detailed the mission of each group and the progress they are making in winning key state-level elections and shifting policy to the left.

At the center of the effort are the Democracy Alliance’s five "2020 State Funds," named for the group’s central goal of retaking state legislatures ahead of the 2020 census and redistricting process.

Each of the funds has a 501(c)(4) and a 501(c)(3) component. Both tax structures permit the groups to keep donors confidential. However, their donors do not actually give money to the funds themselves; they give to "fiscal sponsor" organizations that then pass the money along to those funds.

That can make it difficult to trace the sources of money behind the Alliance’s state efforts, which, despite the nonprofit tax statuses of the groups involved, appear to conduct significant political and electoral advocacy.

"Winning Elections and Advancing Policy" are the overarching goals of the 2020 state funds, according to an Alliance briefing book on their activities this year.

"Control of state and local governance has proven to be a successful strategy for conservatives in winning elections and policy that has shifted the playing field," the documents state.

"States are increasingly the sites of our most important political and policy battles," the Alliance writes. "We need a broad coalition with strong community roots to engage successfully in these battles."

Three of the Democracy Alliance’s five state funds are focused on specific issues: the Climate Fund promotes environmentalism; the Democracy Fund battles voting laws that it deems restrictive; and the Inclusive Economy Fund works on minimum wage hikes and other progressive economic policies.

Two other state funds are focused on the logistical end.

The New American Majority Fund targets key Democratic constituencies such as the white working class, gay voters, and single women.

The State Engagement Initiative is the most politically active of the state funds. "The SEI strategy is to focus state and national resources in targeted states to increase progressive electoral power," promotional documents say. "SEI’s focus is to leverage national funder commitments for greater in-state resources for plans designed to advance the progressive agenda through winning critical elections."

The State Engagement Initiative will work to sway congressional elections in 12 target states: Arizona, Colorado, Florida, Georgia, Minnesota, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, Virginia, and Wisconsin.

"There is a potential of 24 to 34 congressional seats that could become competitive in our target states if we do our work successfully over the next three cycles," documents state.

The group hopes to raise $10 million "over each of the next three election cycles" to advance its efforts in those states. The money will be routed through SEI’s fiscal sponsor, the Committee on States, which is also a 501(c)(4), and therefore not required to disclose its donors.

While non-disclosing groups are common among the 33 organizations in the Alliance’s "investment portfolio"—and in the larger world of political spending on both sides—the state funds’ fiscal sponsorship arrangement provides another layer of opacity.

Many of the Alliance’s institutional "partners," as its donors are called, are required to disclose donations to other groups pursuant to regulations on labor unions and grant-making nonprofits. However, the fiscal sponsorship arrangement allows those disclosures to omit the names of the funds that they are actually supporting, and instead to report donations to the funds’ fiscal sponsors.

For example, the National Education Association, AFL-CIO, Service Employees International Union, and American Federation of State, County, and Municipal Employees have all given money to the Committee on States. Officials from all four unions have seats on State Engagement Initiative’s advisory board, which, documents indicate, are reserved for high-dollar SEI donors.

‪However, absent additional information, it is difficult to tell whether or not the unions’ donations to the Committee on States were passed along to SEI.

The Alliance is also working to build state-level funding apparatuses that it describes as "mini-Democracy Alliances."

"The dollars raised are used to help nurture and leverage more donor capacity in the states and thus dramatically multiply the number of donors across the country involved in the network," Alliance documents state.

At the conference where those documents were distributed, DA staff touted the organization’s efforts to increase transparency in their operations.

Alliance president Gara LaMarche acknowledged in an interview during the conference that the group has been fairly opaque in its work even as the DA and the groups it supports promote transparency in political spending.

"We’ve tried to narrow the zone between what we have confidential and what we disclose," LaMarche said. Citing prior Washington Free Beacon reporting that revealed some of the group’s internal workings, he said the group is taking steps to "be forthright in a way the Democracy Alliance for years was not."

However, he said that the group’s internal deliberations will remain confidential. "It’s not a violation of open society principles to have some private discussions," LaMarche said.

LaMarche did not immediately respond to questions about the state funds’ fiscal sponsorship arrangements and how they square with the group’s stated commitment to greater transparency.

The Alliance began discussing transparency steps in the wake of reporting by the Free Beacon and other outlets that revealed for the first time the full scope of its network of supported organizations.

It floated plans in closed-door meetings last year to reveal the names of some of its supporters. However, it assured partners who wished to remain anonymous that their identities would not be disclosed.

"The Democracy Alliance has assured its Partners from the beginning that their participation will not be made public by us, and our legal structure was designed, among other reasons, to protect that promise," the group said in internal documents.

"A number of partners, for various reasons … will wish to remain unidentified, and the DA will continue to respect these wishes."

A list of new Democracy Alliance partners published by the Free Beacon this week includes one new donor identified only as "Anonymous 3."