News: CJ Exclusives

Union Probe Could Include NCAE

Public-interest law firm shifts focus from NEA to state, local affiliates

Landmark Legal Foundation may be looking for new targets in its campaign to bring federal heat on teachers unions that illegally use member dues to fund political activities. Having investigated the powerful National Education Association since the mid-1990s, Landmark may soon be shifting its focus to some of the NEA’s local and state affiliates.

The NEA is spending at least $75 million a year on its national network of political operatives, Landmark contends. The fact that the NEA consistently backs liberal candidates is immaterial. Landmark simply wants the union to report its political activity as required by law, and segregate all its political money into its political action committee. The abuse would be just as bad if NEA was backing Republicans, Landmark says.

Landmark is a conservative public-interest law firm that has offices in Kansas City, Mo., and Herndon, Va.

After sifting through thousands of pages of NEA tax returns and other documents, Landmark’s efforts paid off last year when the Internal Revenue Service launched an audit of the union’s returns. The IRS was slow to act, Landmark having filed its first complaint in 2000.

A parallel investigation by the U.S. Department of Labor started in 2002, soon after Landmark filed a complaint. The Labor Department has not yet ruled on the NEA’s culpability. But Landmark efforts helped push the Labor Department to tighten its financial disclosure requirements on the nation’s largest unions. The new policy was supposed to go into effect at the first of this year, but the AFL-CIO sued, arguing that Secretary of Labor Elaine Chao didn’t have rule-making authority. A federal judge rejected the lawsuit and the new rules go into effect in July, affecting about the top 20 percent of unions.

At 2.7 million members, the NEA is not only the nation’s largest public employees union but the largest union of any kind. With all resources directed toward its probe of the national union, there’s been little left over to investigate problems on the state and local levels, Landmark spokesman Eric Christensen said. But Landmark is satisfied with its case against the NEA and now is basically waiting to see what action will be taken by the federal agencies. The investigations could take months or years. Therefore, a shift in focus toward NEA affiliates such as the North Carolina Association of Educators seems logical.

“That’s sort of where we’re going next,” Christensen said. “We don’t want to go into too much detail yet, but we feel that as more pressure is put on the national union, a lot of what had been done on the national level will be franchised out to the affiliates.”

The NCAE has been mentioned in several of Landmark’s federal complaints. In particular, Landmark has referenced a 1999 conference in which then-NEA President Bob Chase congratulated the NCAE for helping to unseat former Republican Sen. Lauch Faircloth and elect Democrat John Edwards. Landmark noted these remarks would have been appropriate had Chase made them before NEA’s political action committee. But in a general membership meeting, they serve as more proof of Landmark’s contention that NEA has never bothered to separate its political and membership activities.

Landmark argues that the NEA has for many years abused its tax-exempt status by using membership dues to pay for political campaign efforts, mainly on behalf of Democratic candidates.

Landmark’s investigation revealed that the NEA’s federal tax returns going back to 1994 reported zero dollars spent on lobbying and campaign contributions. NEA contends that all of its political activities have been paid for legally by its affiliated political action committee.

Under the Internal Revenue Code, unions have to report and pay taxes on money that’s used in lobbying or on the political campaigns of specific candidates. The law takes a fairly broad view of what might constitute a political contribution. In-kind contributions for example, if a union were to donate staff time or advertising to a campaign, are treated the same as cash. Non-partisan activities, such as voter registration drives, are allowed, as long as they are not affiliated with a particular party or candidate.
If a union wants to get involved in partisan politics, it must set up a political action committee and pay taxes on any money it uses. Failing this, the union would be liable for taxes on any general fund money it spends on political activities.

Therefore, Landmark’s view is that the existence of an NEA PAC is a smokescreen. Landmark argues that NEA’s political efforts far outstrip the budget of its PAC. The union is constantly stumping for mainly liberal causes and candidates, and thousands of teacher members have no idea of how their dues money is being used.
Likewise, the NEA’s failure to pay taxes on political money is tantamount to having all taxpayers subsidize the NEA to the tune of at least $75 million a year.

Much of the NEA’s grassroots political activity is carried out by its UniServ network, which consists of about 1,800 local affiliate employees. Although NEA says that the UniServ staff performs a variety of members services, Landmark argues that they are essentially the largest group of paid political organizers in the country, outnumbering both the combined staffs of the Democratic and Republican national committees.

Based on its review of NEA budgets, Landmark estimated that the NEA spends about $75 million a year on UniServ, mainly for salaries. But none of this expenditure has been acknowledged as political on its annual Form 990 tax returns.

NEA spokesman Michael Pons said that UniServ personnel serve a variety of functions, most of which don’t have anything to do with political organization. He said their main focus is on collective bargaining and member services. For example, UniServ staff might arrange classroom management training and related professional development opportunities for teachers. Their political activities are limited to providing information to members about different candidates positions on issues affecting education, Pons said.

Overall, the NEA views Landmark’s campaign against it mainly as a nuisance, and expects to be fully vindicated by the IRS and Labor Department.

“They’ve been raising money by telling lies about us,” Pons said. “They have an interest in trashing us, we don’t have an interest in trashing them.”

Already, Landmark has made one move that suggests it will be giving more scrutiny to state and local union activities. Although not directly related to its efforts against the NEA, Landmark last year urged the IRS to revoke the tax-exempt status of the United Teachers of Dade County, in Florida, and the Washington Teachers Union, in the District of Columbia.

Officers of both local unions have been investigated for misappropriating money for their personal use. Both unions are affiliates of the American Federation of Teachers, which ranks behind the NEA with about 1 million members.

“Bear in mind that the affiliates are often the front-line players in state and local and congressional elections. It’s not like they’re unimportant. They’re important and likely to become more so,” Christensen said.

Christensen said Landmark’s efforts seem to be pushing the NEA to tone down some of its partisan rhetoric, of which Chase’s comments about the Edwards-Faircloth Senate race were just one among many examples cited in the various complaints.

“Indirectly, our complaints against the union have changed some of the ways it operates in the sense that it doesn’t allow some of the more flagrant things we found and reported. They have to do more to cover up their activities, and so it is costing them more,” Christensen said.

Landmark can also share credit in the Labor Department’s decision last year to revise the LM-2 union financial disclosure form, which had not been changed significantly since its inception in 1959.

As revised, the LM-2 affects all unions having revenues of more than $250,000 a year. Unions will have to detail expenditures of more than $5,000 for politics, gifts, administration, member representation activities, and benefits. For the first time, unions will also have to disclose the finances of any affiliated trusts.

The AFL-CIO and many unions have complained that the reporting requirements are burdensome. The Labor Department’s position, which Landmark fully endorses, is that the old LM-2 didn’t provide enough detail so that rank-and-file members could see how their dues were being spent.

Bob Fliss is a contributing writer of Carolina Journal.