In the hole: Report finds states hiding $1.3 trillion in debt

Tuesday, September 29th, 2015

FranklinSlider Capitols

Much is made of the federal government’s debt, but what about debt at the state level? It may not have reached such eye-poppingly high figures, but it’s still a matter of concern. In its sixth annual Financial State of the States report, the nonpartisan accounting group Truth in Accounting (TIA) took a full account of government assets and liabilities. It found that even though many states claim to have balanced budgets, state governments have in fact accumulated a combined debt of $1.3 trillion.

“As a CPA looking at government finances, I found they were not being truthful and transparent about their financial condition,” Sheila Weinberg, founder of TIA, told “For years, citizens have been told that their home state budgets have been balanced. If that were true, state debt would be zero and Taxpayer Burden would simply not exist.”

She argues the generally accepted accounting standards the government uses are flawed for two reasons. First, she suggests that Government Accounting Standards Board that controls how the standards are set is not as independent as it sounds. Second, she notes that the government always has the power to tax, which reduces the incentive for sound fiscal policy – because if and when it comes up against a wall, it can always tax its way out.

Watchdog reporters covered the report and looked at the ramifications for their states. Here’s a state-by-state snapshot of what they found:

Seeing red in the Green Mountain State

Vermont’s $3.2 billion in debt may not seem huge compared to many of its counterparts, but with its relatively small population, Vermont’s budget shortfall works out to $14,300 for every taxpayer.

“The most common budget trick involves excluding pension benefits from annual budgets, according to the report,” wrote Watchdog reporter Bruce Parker. “Financial officers keep those liabilities off their balance sheets because the expenses don’t have to be paid until state employees retire. By ignoring expenses incurred in the present but paid in the future, states can claim to be balancing their budgets. In reality, the costs are being shifted to future taxpayers.”

These accounting tricks mean states like Vermont are in for a rude awakening next year. Weinberg said 2015 will be the last year they are used nationally, as standards have changed. Next year, states will have to add their pension liabilities to their balance sheets, and in 2017, retiree health care liabilities will also be added to state balance sheets.

A fuzzy picture

In Mississippi, Watchdog reporter Steve Wilson found that his state’s taxpayers weren’t getting the entire picture of Mississippi’s financial health. The law requires the state legislature to send the governor a balanced budget, so in order to eke out more spending, the proposed budget uses certain accounting principles to show only $139 million of the pension fund’s liability.

In reality, however, the Public Employees’ Retirement System of Mississippi, the state’s defined benefit pension plan for most state, county and municipal employees, has $4.6 billion in liabilities.

shutterstock_68403097More trouble in the Northeast

Ranking just below Vermont and well below Mississippi in debt-per-taxpayer is Pennsylvania. The state neglected to list $53 billion on its balance sheets, ranking third among the 10 Northeast states in hidden debt. In total, the Keystone State’s debt works out to $15,600 per taxpayer, the 11th highest in the nation.

Watchdog reporter Andrew Staub explains how spending can get out of control but still remain largely hidden: “Much of that debt can be traced to retirement benefits, which represent more than 50 percent of state bills. The unfunded liabilities have accumulated, as the state promised billions of dollars in benefits to retirees without adequately funding them, according to Truth in Accounting.”

The New York exodus

New York State was another hefty spender with $77 billion in unfunded liabilities for an average of $20,700 per taxpayer – second highest in the Northeast. Watchdog Arena writer Nicholas Fondacaro noted that each taxpayer’s share could grow even larger if New York’s exodus of workers continues.

Not so sunny in Sacramento

When California Governor Jerry Brown released his spending proposal last June, the Los Angeles Times wrote that California’s budget was “flush with cash.” The state claimed it had cut spending by $6.6 billion from 2013 to 2014, but due to obfuscating by the aforementioned accounting methods, TIA found that California’s hidden debt actually amounts to $111 billion.

From bad to worst

At the bottom of the pack is New Jersey, which TIA ranks as the worst spender with $160 billion in debt, or $52,300 per taxpayer. Upon further investigation by New Jersey Watchdog, however, reporter Mark Lagerkvist noted that the report actually understates the debt, and the proper figure is actually $10 billion higher. The discrepancy stemmed from a new valuation in State Treasury records that found New Jersey’s responsibility for unfunded retiree and employee health benefits has increased to $65 billion.

Local governments in New Jersey have troubles of their own. “The $170 billion hole does not include the debts of New Jersey’s local government units, which face a collective shortfall of $50 billion for pensions and health benefits,” wrote Lagerkvist. “Nor does it encompass the bond debts and other liabilities of the state’s 21 counties, 565 municipalities and 610 school districts.”

Not all doom and gloom

Though the overall picture is bleak, the debt situation isn’t quite as troubling in some states. Nebraska’s financials, for example, are actually in decent shape. The state has $5 billion in liquid assets and $3 billion in bills, for a “surplus” of $2 billion — or $2,800 per taxpayer. Even though Nebraska’s pension funds are mostly funded, the report found that it still hides some debt, but it’s in a much more manageable position than any of the aforementioned states.

Is there any hope?

Even though 49 out of 50 states have balanced budget requirements (Vermont being the exception), TIA identifies 39 states that have dug “financial holes” for themselves, while only a handful currently run true budget surpluses. The first step in reforms of any kind is transparency, which TIA and have focused on providing in our coverage of state debt. Government has proven more responsive to the electorate and much more capable of reform at the state level, so there’s still an opportunity for many of these states to turn their financial situations around.

Regulating community: Local government cracks down on Little Free Libraries

Wednesday, September 23rd, 2015

Little Free library1

In the age of The Shallows and Bowling Alone, which raise concerns over Americans’ tendency toward isolation and distraction, many citizens are pushing back through the Little Free Library movement. The idea is simple: foster community and literacy by sharing books, usually presented in a crate or small structure in one’s front yard where neighbors can access them at their leisure.

It’s hard to image such a movement stirring up controversy, but that hasn’t stopped local governments from using every technicality and clause in their ordinances to crack down on the popular book-sharing system. In a recent piece for The Atlantic covering the travails of Little Free Libraries, Conor Friedersdorf summarizes the problem in a scathing indictment of the governing class.

“Alas, a subset of Americans are determined to regulate every last aspect of community life,” he wrote. “Due to selection bias, they are overrepresented among local politicians and bureaucrats. And so they have power, despite their small-mindedness, inflexibility, and lack of common sense so extreme that they’ve taken to cracking down on Little Free Libraries, of all things.”

Friedersdorf goes on to quote an L.A. Times column by Michael Schaub that calls out local governments for their misplaced priorities in targeting the libraries.

“Crime, homelessness and crumbling infrastructure are still a problem in almost every part of America,” Schaub wrote, “but two cities have recently cracked down on one of the country’s biggest problems: small-community libraries where residents can share books.”

As Watchdog reporters have found over the past year, however, the abuse hasn’t been limited to just two cities, but many – everywhere from Wisconsin to Los Angeles. Last summer in Nebraska, for example, Watchdog reporter Deena Winter wrote about how city officials in Lincoln ordered a church to remove a library on the curb of its front lawn just two weeks after it was built – or face a potential fine of up to $500.

IMG_1490Members of the Indian Village Neighborhood Association, which erected the library, were quick to voice outrage. Director Barbara Arendt looked up the city code referenced in the letter to the church. It talks about an “immediate public hazard” and “public nuisance.”

“A library? Excuse me?” she said. “Does our city have its priorities messed up or what?”

Earlier this year in Shreveport, Louisiana, resident Ricky Edgarton received a cease-and-desist letter from Caddo Parish officials after he built a Little Free Library to share some of his many books. The parish, apparently, considered it a commercial enterprise, even though Edgarton wasn’t making any money off the venture. And even though a number of other Shreveport residents have similar libraries in their front yards, the Metropolitan Planning Commission singled out Edgarton because an anonymous caller complained about it.

Edgarton said it would cost him $500 to appeal the MPC’s decision, so in symbolic protest, he responded by putting a padlock around the structure (rather than moving the books back into his house). Eventually parish officials decided to temporarily suspend the rules on his structure.

Perhaps the most high-profile incident took place in the city of Leawood, Kansas, where 9-year-old Spencer Collins faced city citations after he worked with his dad and grandpa to build a Little Free Library as a Mother’s Day gift. To comply with the code, the Collins would have had to attach the storage box to their house – which largely defeats the purpose of having the library in the first place, as it reduces curbside visibility and makes it less accessible to potential users.

The city, in a massive lack of foresight, was blindsided by the backlash. Many of those who heard about the situation exhorted the city council to amend its code to permit the Collins family to keep their library in place. Bolstered by widespread support online and national media coverage, Spencer made his case to city officials in Leawood.

“I think Little Free Libraries are good for Leawood, and I hope you will change the code,” he said.

In response, the city granted him a temporary stay against their municipality ordinance until they could decide what to do about it.

Kansas’ Poet Laureate Wyatt Townley, who spoke out in support of Collins, made perhaps the most eloquent case for the homemade libraries.

“There’s something about a little free library, the intimacy of it … that as a small home for books, and as neighbor reaching out to neighbor, gives us something that a large library cannot,” she said. “And so, I think we need more, not less, community in this day and age. I think we need more, not fewer, readers and thinkers in this day and age, and I think that the Little Free Library addresses both these needs in a single, graceful gesture.”

Showdown in the Show-Me State: Missouri unions vs. right-to-work

Tuesday, September 15th, 2015


It’s been years in the making, but the right-to-work wave that swept into the statehouses of Michigan and Wisconsin crashed into Missouri this year, when state lawmakers voted to pass legislation that would ban unions from making membership a condition for employment.

Right now, half of the Union’s 50 states have right-to-work laws, but that figure will rise if Missouri lawmakers can gather enough votes to override Democratic Governor Jay Nixon’s veto. The first time around, 92 state representatives and 21 state senators supported the right-to-work bill. They will need 109 and 23 votes, respectively, to overcome the veto. But it’s not as large of a jump as it might seem. The statehouse has already overridden Governor Jay Nixon about two dozen times. Democrats are staunchly united against right-to-work, but a number of Republicans also opposed it.

What’s in a name?

Not surprisingly, union opposition to right-to-work has been staunch, but it has also been subtle and potentially deceptive at times. One of the groups fighting against the state’s right-to-work bill, for example, is The Committee to Protect MO Families. On paper, the group has a lot going for it – a name that resonates with voters, the support of Gov. Nixon, and a “broad-based coalition” that it says includes hundreds of supporting businesses and individuals.

In reality, however, Watchdog reporter Jason Hart found that 98 percent of the funding for The Committee to Protect MO Families last year came from just one source, Carpenters Help In the Political Process. CHIPP is a political action committee run by the Carpenters’ District Council of St. Louis & Vicinity and operates out of the union’s St. Louis headquarters. So, essentially, Hart explains, the group is a carpenters’ union front.

Hart found a similar case in a group called Preserve Middle Class Missouri. Like The Committee to Protect MO Families, its name doesn’t suggest union involvement,and it is the state-focused branch of Preserve Middle Class America, a nonprofit that bills itself as “a grassroots coalition of citizens and organizations.” What it doesn’t advertise, however, is that it is run by the Teamsters union.

Yet another organization, We Are Missouri, is even more shadowy about the groups behind it. Its website lists no union affiliation, no leaders’ names and no mailing address, but Hart found leads that point to its union backing. In 2013, for example, Missouri AFL-CIO president Hugh McVey was quoted in a news story as one of several spokespeople for We Are Missouri. Furthermore, in 2012 the group was paid $45,861 by AFL-CIO headquarters in Washington, D.C. for “state legislative advocacy,” and the AFL-CIO hosts a number of call-to-action forms on We Are Missouri’s website.

The “solidarity” of the bosses

It’s popular to harp on the problem of inequality these days (a concern often raised by opponents of right-to-work), but there’s still one place where huge pay gaps are apparently acceptable: in organized labor. As Hart found in his investigations into Missouri unions, executives and staffers of the state’s carpenters union earn nearly twice as much, on average, as the workers they represent. The average employee of the Carpenters’ District Council of Greater St. Louis & Vicinity earns $88,680 (50 of whom earned more than $125,000), compared to $50,120 for the average Missouri carpenter.

The trend holds true for many other Missouri union leaders. For example, Jim Kabell, the primary Missouri contact for the aforementioned Preserve Middle Class America, was paid a total of $177,081 by Teamsters headquarters and Teamsters affiliates in 2014 – that’s more than three times as much as the average Missouri family.

The hypocrisy also extends to the national level. AFL-CIO president Richard Trumka, for instance, is a fiery critic of CEO salaries, but Trumka himself earned $322,000 last year – all taken from union dues.

Union supporters argue workers shouldn’t care that union bosses are paid six figures because, they claim, executives at huge corporations are paid more. But according to data from the U.S. Bureau of Labor Statistics, average corporate CEO pay last year was $216,100. Not only does Trumka’s hefty salary top that by more than $100,000, but he is not even one of the 100 highest-paid union bosses in America.

The political reality

Regardless of how the votes in Jefferson City pan out, the fact remains that unions are on the decline nationally, having dropped from around 30 percent of all workers in the 1960s to around 11 percent last year. Missouri itself has seen a drop in union membership from 27 percent to 8 percent of workers in that span. But the most recent right-to-work progress has happened in union-heavy states like Wisconsin and Michigan.

In his report on how labor unions’ dwindling muscle in Missouri mirrors their national decline, Watchdog reporter Eric Boehm sums it up like this: “Right-to-work laws aren’t causing this trend, they’re a result of it.”

What opponents seem to fail to grasp is that right-to-work is not inherently destructive to unions. All it says is that workers in any given industry should have a choice whether they want to join a union or not. If the worker believes the cost of their dues outweighs the benefits of being part of a union, he or she should not be compelled to join. There’s even an argument to be made that right-to-work will help strengthen unions because it will foster competition, forcing them to improve their services. As Jason Hart found, it turns out that a majority of Missourians (and a majority of Americans, more broadly) do not believe that union membership should be a condition for employment.

As a result, it has become a losing issue politically. The fact that a veto-proof majority in favor of right-to-work is even a possibility speaks for itself. In the long run, it likely won’t matter whether the state legislature can pull together the two-thirds majority. Come 2016, Missouri politicians who threw their hat in with the unions are going to face a tough battle.

Meet Jillian Melchior: Franklin Center journalism fellow

Tuesday, September 8th, 2015

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For the past three years, Jillian Melchior has been honing her reporting skills as the Thomas L. Rhodes journalism fellow at the Franklin Center. She is housed at National Review, where her investigative reports and frequent appearances in national media outlets like Fox News have been critical in propelling Watchdog stories to national prominence.

Jillian’s investigative reporting focuses on domestic issues like government waste, fraud and abuse; energy and environmental issues; and organized labor. In special reports for Watchdog this year, Jillian has exposed Senator Elizabeth Warren’s real estate profiteering before the 2008 financial crisis, investigated massive taxpayer-backed loans to “green” supporters of President Obama, and reported how the Obama administration’s fracking regulations hurt Native Americans.

Jillian recently took a break from covering the next big story to answer a few questions about her path to journalism and the state of today’s media:

Franklin Center: How did you first become interested in journalism, and what led you to where you are today?

Jillian Melchior: I’ve loved journalism ever since high school, when I used to sign out of classes to go hang out at the local TV news channel. I helped pay my way through college freelancing, writing mostly about state-level health-care and education policy—an experience that’s been directly relatable to my Franklin Center work. Good mentors, both in academia and in the professional world, have helped me stay focused and make good career choices. And reporting in the U.S. and also abroad, I’ve gotten a better sense of the baser natures of people in political power—something that’s definitely fueled the fire for investigative reporting.

FC: What has your fellowship with Franklin Center enabled you to accomplish as a journalist?

JM: Partnering with National Review, I’ve had an incredible opportunity to grow as an investigative reporter. From corrupt unions to Obamacare problems, I’ve been encouraged to spend the time to really dig into records and statistics and develop high-impact stories. And thanks to a great PR team, I’ve had the chance to become better at TV and radio reporting, too.

FC: What is the most important story you’ve covered this year?

JM: I’ve done an investigative series on Al Sharpton and his questionable financial and political dealings, from millions in back-taxes owed to two suspicious fires that burnt down his offices amid his campaigns.

FC: What is one issue or story you wish more Americans were paying attention to?

JM: Domestically, I wish people were paying more attention to the pervasive waste, fraud and abuse in government. Some stories tend to get little focus, either because they’re a relatively small-dollar amount, or because they’re a small percentage of a big number. But such misappropriation adds up, at significant cost to taxpayers—and it’s often indicative of a bigger, more expensive problem.

Internationally, I’m sad to see few people following the crisis in Ukraine anymore. The U.S. committed to protecting Ukraine’s territorial integrity when we convinced Kiev to give up its nuclear weapons, and our lack of follow-through will have major repercussions for denuclearization. Also, there are a lot of brave young people there who want Western-style liberal democracy, and their plight is being largely ignored.

FC: What is the biggest challenge facing journalists today?

JM: The editorial tendency to judge a story’s value only by the number of clicks it receives, combined with the incredible deadline pressure of the Web. Together, these two forces undermine the value of quality in-depth reporting and encourage a focus on sensational stories that are actually pretty trivial. Thankfully, Watchdog balances content demands with an emphasis on good reporting, which is largely why it has managed to succeed in the digital era without succumbing to such a short-sighted strategy!

The EPA created a disaster in Colorado: who will hold the agency to account?

Tuesday, September 1st, 2015


The hypocrisy of “sovereign immunity”

“Exxon had its Valdez, BP had its Deepwater Horizon and now the U.S. Environmental Protection Agency has its Animas River disaster with which to contend.”

That’s how Watchdog energy reporter Rob Nikolewski summed up the aftermath of the disastrous EPA-caused spill in Colorado’s abandoned Gold King Mine, which last month released 3 million gallons of toxic waste into the Animas River. The accident occurred when an EPA backhoe punched a hole into a waste pit during a clean-up effort, turning the Animas bright orange and threatening water sources as far as New Mexico, Utah, and Arizona as the waste dispersed downriver.

Charges of hypocrisy soon began flowing in.

“Nobody is going to take the attention away from EPA’s incompetence on this,” said Colorado Senator Cory Gardner. “If this was a private company, all hell would be breaking loose.”

“In their case, it seems that ‘we’re sorry’ is all that we the people are going to get,” wrote Lindsay Boyd for Watchdog Opinion. “What else can we do? The EPA is an unelected body of bureaucrats. But we all know what happens to private industry when they make mistakes… that lead to environmental disasters and contamination.”

If past spills by private companies are anything to judge by, Gardner and Boyd are right. Nikolewski compared the government’s reaction to the Animas spill to the huge fines issued by the Department of Jusice to Exxon and BP in the aftermath of their disasters. Unlike those companies, the EPA is protected from fines thanks to the common law rule of “sovereign immunity.”

EPA administrator Gina McCarthy said the agency “takes full responsibility” for the accident, but when Nikolewski reached out to EPA headquarters in Washington, D.C. asking for a response to charges that the agency uses a double standard for private companies and for itself, he did not receive a reply.

Signs of trouble

As Watchdog reporter Tori Richards found in a series of bombshell investigations, the story actually goes back ten years. She spoke with the mine owner, Todd Hennis, who said the EPA has a record of releasing toxic runoff from mines that dates back to 2005.

“I have been battling the EPA for 10 years and they have done nothing but create pollution,” he said, suggesting that the activity was intentional so that the agency could declare the area a Superfund site.

gold king mine_EPA imageIn 2010, the EPA asked Hennis for access to his Gold King Mine so they could investigate hazardous runoff from other mines in the area. He refused, fearing that the EPA would create additional pollution, but Hennis said the agency countered with a threat – give us access within four days, or we will fine you $35,000 a day – so he “waved the white flag.”

The story garnered national attention on and a number of other prominent media outlets, but it was not the only troubling testimony Richards uncovered. Just five months before the Animas River disaster, leaders from the nearby mining town of Silverton reportedly begged EPA officials not to perform tests that would declare the area a Superfund site. Even though no problems were found when the town was tested five years earlier, the EPA pressed back in.

Five days before the breach, another warning was sounded in the Silverton Standard, which published a letter to the editor from a man who identified himself as a professional geologist with 47 years of experience. It warned of a scenario where “the water will find a way out and exfiltrate uncontrollably through connected abandoned shafts, drifts, raises, fractures… contamination may actually increase due to the disturbance and flushing action within the workings.”

He wasn’t too far off.

With such warnings and suspicious activity prior to the spill, and a PR debacle in its wake, is it any wonder that the EPA withheld mine spill documents from Congress? As Richards reported several weeks after the spill, the agency failed to meet its deadline set by the House Science Committee, which requested documents pertaining to the Gold King Mine spill as part of an ongoing investigation into the incident.

The delay came on the heels of weeks of foot-dragging by the EPA, which took several days to notify Utah, New Mexico, and the Navajo Nation that the spill was coming their way via the San Juan River. It took McCarthy a week to visit Colorado. The EPA did not give out the name of the contractor working on the project, along with other details generally considered public knowledge. And the Navajo Nation, which uses the San Juan for drinking water and farming, was given an emergency supply of water in oil-contaminated containers.

A voice on the ground

Watchdog Arena writer Marjorie Haun, a Colorado resident, meticulously covered the spill and ensuing debacle. She was one of the first to seize on the agency’s hypocrisy, noting that according to the EPA’s own “Waters of the United States” rule, the disaster warrants millions of dollars in fines.

After criticizing the agency for its tight-lipped response and low-information answers to questions from the press and local residents, Haun raised the deeper question that has begun to dog the agency: is the EPA even relevant anymore?

“From spill to clean up to compensation the EPA has bumbled its way through its responsibilities, beginning into question its own ability,” she wrote, citing a laundry list of mistakes. Navajo Nation President Russel Begaye for example, claimed the EPA “endangered our people” and called for the removal of all contaminated sediment from the San Juan River. Elsewhere, Haun noted, the EPA has proven little help in assessing the impact of its actions or funding cleanup efforts, while Colorado and New Mexico acted quickly to divert millions in state funds to help cleanup efforts in affected areas. And it was information provided by the Colorado Department of Public Health and Environment that led Sheriff Sean Smith to declare the Animas River safe for recreational use after the waste was washed downstream.

The contrast between the state and federal responses has given traction to proposals that would bring environmental regulation under state control. In his coverage of the story, Nikolewski quoted Nicolas Loris, an economist who covers energy, environmental and regulatory issues for the Heritage Foundation. Loris questioned the 45-year-old agency’s reason for existing:

“That’s really what’s at the heart of the matter – transitioning away from the federal government and devolving most of those decisions down to the states,” Loris said. “The states have shown they do care about their own backyards. People don’t want to pollute their own property. States don’t want to do so either.”

From Watchdog to Politico: How the Rural Utilities Service boondoggled broadband

Wednesday, August 19th, 2015


The best of intentions; the worst of plans

The stimulus package that Congress and President Obama passed in 2009 was supposed to be the gift that kept on giving, but too often it has proved to the gift that keeps on taking.

That is the conclusion, at least, of a recent Politico investigation into stimulus money that was intended to expand broadband coverage to America’s rural communities, which sorely lack quality Internet access. The story goes back to the creation of the Rural Utilities Service during the Great Depression. Originally the agency was tasked with bringing electricity to rural areas that weren’t being serviced by private companies. Through the stimulus package and in response to the “Great Recession,” the agency has attempted to pull off a similar feat in the digital age by bringing the modern advances of high-speed Internet access to America’s countryside.

A key part of President Barack Obama’s blueprint of recovery involved bringing quality broadband to farmers and remote businesses so that they could compete in a global, digital economy. In 2011 RUS was awarded $3.5 billion in aid to service sparsely populated, hard-to-reach areas.

Four years and four directors later, however, Politico concluded that “RUS never found its footing in the digital age.” The report points to misfires and cronyism at every turn: the agency funded networks in well-wired population centers, poor management led to project stumbles and failures, borrowers defaulted on loans, and all along lawmakers suppressed their doubts and gave the agency political cover.

The agency initially projected in 2011 that its “investments in broadband will connect nearly 7 million rural Americans.” It boasted of accomplishing this through nearly 300 projects that it approved through the stimulus package.

Many of those projects, however, have not come to fruition. RUS has quietly killed 42 of them, and with the agency required to “substantially complete” construction on the remaining projects before the end of September, 2015, it finds itself in a race against the clock. Politico found that about half of the infrastructure projects given the green light by RUS have not drawn their full funding. As a result, $277 million in potential investments could end up being returned to the Treasury, representing at best a huge waste of time for the stimulus funds. RUS gradually lowered its original estimate of how many homes will benefit from its projects from 7 million down to 728,000 in March of 2014, and now won’t even list a figure. Even worse, it is unclear how many people have received improved Internet access, because the agency can’t tell exactly who its stimulus dollars have served.

In short, the government’s attempts to invest in services in places neglected by private companies have been nothing short of a boondoggle.

Problems in the Land of 10,000 Lakes

shutterstock_270238202To drive this point home, the Politico report highlights the plight of Lake County, Minnesota, a story that had been covered by Minnesota Watchdog several months earlier. RUS’ attempts to bring greater broadband coverage to the rural county have turned out to be one of the most egregious examples of how federally-backed loans and grants, with inept management and all of their red tape, can suck the vitality out of a community rather than invigorating it.

As Minnesota Watchdog reported late last year, Lake County officials promised at the beginning of the project that it would not cost local taxpayers anything.

“Lake County is acting as a conduit to receive federal financing to build out the network. The taxpayers will not be responsible for any debt,” the county website said in a blurb that has since been scrubbed. An FAQ on the website was updated to say that the county has invested $3.5 million to bring greater broadband access, “a remarkably small amount given the scope of the project and benefits to the area.”

That $3.5 million represents the unexpected cost of RUS rejecting the project’s bond financing. Before the agency sent a single check to Lake County, it forced the county to pony up its own funds to keep the project on track.

But that was just the beginning. Minnesota Watchdog found that that figure soon ballooned to $6 million. And after RUS suspended payments amid concerns that the county could not pull off the project on time and on budget, local officials decided to authorize another $15 million in funding from local taxpayers to get the project back on track.

Just like that, the “remarkably small” amount covered by local taxpayers has become remarkably large for the sparsely populated county. It has left county officials feeling betrayed by the federal program, which originally approved and said it would fund Lake County’s proposal of $66 million for an ambitious plan to cover an area with about 16,000 residents.

Now time is running out. The broadband network is still under construction and behind schedule. At this point, Politico notes, the county probably won’t be able to draw all of its federal funding by the end of September and will thus end up losing another $6 million from RUS.

Perhaps the Lake County should have taken a cue from the private sector before throwing its hat in with the federal government and putting every resident on the hook for $1,400 (the per-person cost of $15 million).

Kirk Lehman, a manager for a competing broadband provider, can’t see how the government intends to make the Lake Communications broadband economically viable.

“A lot of folks have looked at the numbers, and there’s not enough customer base to support the Lake County debt,” he told Minnesota Watchdog. “I don’t care how you slice and dice it, there’s just not enough of a customer base there.”

Texas Watchdog’s “bullet-proof” coverage of the UT admissions scandal

Wednesday, August 12th, 2015

UT law TX WD story

It’s not often that a center-left news outlet calls out a major newspaper for misconstruing a story first reported by a nonprofit competitor, but that’s what happened recently when the Dallas Observer ran an article about the latest developments in the ongoing University of Texas admissions scandal. The day before, the Dallas Morning News had reported that influential Texans such as lawmakers, donors, and regents had written letters of recommendation that helped underqualified students gain admittance to UT. It pointed to the Kroll Report, an outside investigation into the admissions process that found that from 2009 to 2014, 73 students had been admitted to the premier school even though they had low high school GPAs (less than 2.9) and weak SAT scores (less than 1100).

“OK, this is one of those stop, do not pass go moments,” wrote Jim Schutze in The Observer. “That is not what this story is about. At the very least, even if you strip away all the larger implications, the UT admissions scandal involves 10 times that many students.”

Ten times as many? Yes, 764 to be exact, Schutze wrote, pointing to a recent report by Texas Watchdog bureau chief Jon Cassidy, who “has done most of the real digging on this story.”

The Morning News story went on to note that the students were specifically admitted by then-president Bill Powers, and said the Kroll report “suggested that political or personal connections may have influenced the decisions.” But as Schutze pointed out, it entirely ignored Cassidy’s reporting – dozens of stories that date back almost two years. Therein lay the problem.

“Doesn’t mean the News has to accept Cassidy’s reporting whole cloth,” Schutze wrote. “But I don’t see how they can get away with pretending it isn’t even there, especially given Cassidy’s bullet-proof record of accuracy on this story over almost two years of frequent reporting.”

Cassidy profile picIndeed, Cassidy’s (pictured) investigation paints a picture of relentless cover-ups and downplaying of the issue by school officials, lawmakers, and local media alike. He showed that the Kroll Report actually whitewashed the issue by exposing only “the thinnest veneer” of the problem in order to “shield UT and its partners in crime in the Legislature from any real or painful scrutiny.”

The admissions scandal, Schutze noted, is merely “one symptom of a larger institutional reality.” It transcends the admissions process and speaks for the state of the university itself. He quoted UT Regent Wallace Hall, the whistleblower responsible for exposing the admissions scandal (and a vital source in Cassidy’s reporting), from a previous interview. Here’s what Hall said about what spurred his interest in fixing mismanagement at UT:

“Listen, from 2003 to 2013 in-state tuition for the law school has gone from $7,100 to $31,000. The head count for the faculty, adjunct, tenure track and tenured, is up almost 40 percent in the same time. A third of our graduates do not get jobs. The average debt of a graduate is $150,000. And we teach 20 percent fewer kids… That’s a bad model.”

Is it any wonder, then, that the picture Cassidy’s stories paint of the school’s administration is one of “self-dealing lotus-eaters shielded by a wall of political thorns?”

Only Texas Watchdog took the first steps into UT’s “fast-and-loose, semi-secret, good-old-boy” world. Wallace Hall – and by extension Cassidy’s investigation into the admissions scandal – weathered the firestorm of opposition from the school’s president, lawmakers in the statehouse, and a skeptical media. Cassidy’s reporting has borne up under the intense scrutiny, and yet the News did not include a single mention of Cassidy or Texas Watchdog in its report on favoritism in the admissions process.

The story of UT’s admissions scandal will continue to develop as more details surface about the extent of the corruption. But at this point the lesson is clear. Schutze’s commentary in The Observer helps draw attention to what Texas Watchdog has been saying all along. Namely, that there is a trove of public interest stories to be found in Texas’ premier university, that statements by those in power shouldn’t be taken at face value, and that the bright light of accountability, when founded on the truth, can and will persevere if journalists and whistleblowers are brave enough to hold their ground.

Franklin Center fellow Jillian Kay Melchior named Tony Blankley Chair for Steamboat Institute

Tuesday, August 4th, 2015

unnamed (2)We are proud to announce that Jillian Kay Melchior, the Thomas L. Rhodes journalism fellow at Franklin Center, has been selected as the 2015-2016 Fellow for the Steamboat Institute’s Tony Blankley Chair for Public Policy and American Exceptionalism.

Melchior writes for National Review as the Franklin Center’s Journalism Fellow and also covers energy and environmental issues for the Independent Women’s Forum. Her investigative reporting includes domestic issues, such as government waste, fraud and abuse, energy and environmental issues, and organized labor.

Most recently, she has reported on a class action lawsuit against the Trump Entrepreneur Initiative, an venture owned by businessman and GOP presidential candidate Donald Trump purporting to teach people how to do real estate deals. The lawsuit alleges that the program was a scam and raises concerns about Trump’s business record, which he has trumpeted in his bid for the White House.

“Jillian’s reporting exemplifies the watchdog journalism that our nation needs to hold government accountable,” said Franklin Center president Erik Telford. “I’m excited to see what she accomplishes through this fellowship in the coming year.”

“Jillian’s impressive work as a journalist is a fitting tribute to Tony Blankley’s legacy and we look forward to collaborating with her,” said Jennifer Schubert-Akin, Chairman and CEO of the Steamboat Institute. “Her reporting from around the globe exemplifies the determination, character and wit that made Tony so special.”

“I am honored to join the Steamboat Institute as its second Tony Blankley Chair,” Melchior said. “The fellowship’s namesake defended America’s most important values with nuance, verve and humor–a legacy that still thrives today at the Steamboat Institute. I’m deeply thankful for this opportunity and look forward to a productive year ahead.”

Melchior’s experience as a journalist is extensive and varied. She has lived in China, reporting on Christianity and persecution, and has also done foreign correspondence in Iraq, Ukraine, Hong Kong, Macau, Taiwan, and elsewhere. She has worked as an editorial writer for The Daily, an online editor for Commentary, a Robert Novak fellow, and a Bartley Fellow at the Wall Street Journal Asia. Her writings have been published in National Review, The Wall Street Journal, Cosmopolitan, The New York Post, The Weekly Standard, Commentary, TechCrunch, The Detroit News and other publications. She is a graduate of Hillsdale College and a native of Cheyenne, Wyoming.

The Steamboat Institute is a Colorado-based non-profit, non-partisan organization, whose mission is “to educate the public on the founding principles of the United States, and to inspire people to be actively involved in their implementation.”

Watchdog’s victory in Maine: Sometimes success takes time


For those who have been with us from the beginning, you might remember a story from nearly five years ago, when one of our reporters caught Rep. Chellie Pingree (D-Maine) engaging in the “do as I say, not as I do” behavior that too often comes naturally to our elected officials. In her previous work as president of the left-wing group Common Cause, Pingree had publicly and sharply criticized officials who accepted free trips on private planes from wealthy influencers.

At the time, she wrote: “Most Americans never have and never will fly on a chartered jet, much less a fancy corporate jet complete with wet bar and leather couches. So when members of Congress constantly fly around on corporate jets and pay only the cost of a commercial ticket, it contributes to the corrosive public perception that members of Congress are more like the fat cats of Wall Street than they are like the rest of us.”

Chellie_Pingree portraitOnce elected to Congress, she even introduced a bill to ban this kind of lavish travel from influence-buyers. So when one of our Watchdog reporters, Stephan Burklin, received a tip that the recently-elected Rep. Pingree (pictured, right) might be flying around on “a fancy corporate jet complete with wet bar and leather couches” (to use her words), he went digging.

What Burklin found was that Rep. Pingree was in fact frequently traveling in style on a plane owned by her billionaire boyfriend and hedge fund owner Donald Sussman. Burklin discovered flight manifests that indicated numerous trips, and he even staked out the Portland airport for photos of Pingree arriving on the jet. When the Watchdog story broke, it was a national embarrassment for Pingree and Democrats– especially when it transpired that then-Rep. Barney Frank had also traveled on the plane. News outlets across the country picked up the story, and one Maine political observer wrote that he hoped the work of the Franklin Center – then in our infancy – “inspires the old, tired media to get off their collective butts and do some digging.”

It’s been nearly five years since that story. In the years since then the Franklin Center has grown, changed, and racked up a record of accomplishment beyond what we ever imagined. But in a long-awaited and deeply satisfying conclusion to this story, news recently broke that Rep. Pingree would finally face sanctions, as the Federal Election Commission slapped her with a fine and also ordered her to pay back the cost of her flights.

Over the last five years, we’ve written stories that triggered immediate action. At other times, like in this case, results have come slower, reminding us that even though the fight to keep government accountable is often a long, arduous process, in the end it is worth the effort.

We’re proud to share with you this story from the Franklin Center’s earliest days that has finally borne fruit. Thank you for standing with us through both the wins that come quickly and the results that take longer to produce.

Watchdog investigation brings justice for Wisconsin conservatives targeted in John Doe probe

Free Speech Wins

It was nearly three years in coming, but justice finally prevailed in Wisconsin, as the state Supreme Court shut down a years-long politically motivated investigation, widely regarded as a witch hunt, targeting supporters of Governor Scott Walker and his landmark budget reforms.

Over the course of two harrowing years Wisconsin Watchdog bureau chief Matt Kittle, produced more than 200 news stories exposing this injustice. His groundbreaking investigative reporting chronicles the egregious civil rights abuses inflicted by Milwaukee County’s Democrat district attorney and his shadowy John Doe investigation against Governor Walker, his political supporters, and dozens of conservative groups.

Under Wisconsin’s unique John Doe procedure, a single judge vested with extraordinary power to compel witnesses to testify presides over the secret investigations. Targets and witnesses can go to jail for saying anything to anyone other than their attorneys about the John Doe. Several targets in this probe risked their freedom to tell their stories to Wisconsin Watchdog and make the investigation possible.

The ordeal goes back to May of 2010, when the Milwaukee County DA began investigating reports that money may have been stolen from a veterans’ fund in the Milwaukee County Executive’s office. Scott Walker was a county executive at the time, so democratic District Attorney John Chisholm used the discrepancy to launch a John Doe probe targeting a vast swath Walker aides, allies, and associates in his gubernatorial campaign. Even though Chisholm found nothing substantial beyond the financial discrepancy (which Walker reported himself anyways), the targeting would continue for five years.

“Wisconsin Watchdog first began hearing chatter about a possible probe into conservative groups in late September 2013,” says Kittle. “There was something big going down involving abuse of prosecutorial power, sources told us.” By late October, Wisconsin Watchdog had confirmed that the probe was targeting a number of conservative 501(c)(4) groups. The investigations were secret, however, and no one in official circles would confirm the existence of a John Doe. Many of those believed to be prosecuting the John Doe would not even return phone calls.

“At times it seemed almost impenetrable,” Kittle said. “One source would only meet at a fast-food restaurant 35 miles from his home. He would not talk on the phone.”

These sources had a lot of lose – they could have faced jail time for speaking in violation of the John Doe gag order – but they decided to trust Kittle, and that’s when the breakthrough happened. Wisconsin Watchdog reported on their accounts with the headline: “Sources: Secret probe targeting conservatives is abuse of prosecutorial powers.”

“This is not a question of what conservatives did wrong,” one source said in the report. “It’s a question of one party in this state using prosecutorial powers to conduct a one-sided investigation into conservatives.”

Soon news of the probe began garnering national attention. TheBlaze aired a feature segment on “For the Record,” which covered the D.A.’s investigation into conservative groups from the beginning, and drew directly from Wisconsin Watchdog’s extensive investigation. After a critical ruling by a judge quashed subpoenas into conservative groups, the Wall Street Journal Editorial Board broke a piece featuring previously unpublished, sealed court documents. National Review would also begin covering the probe.

The stories of those targeted in the John Doe are harrowing. We heard accounts of law enforcement engaged in predawn, paramilitary-style raids at the homes of citizens who found themselves treated like drug dealers and gang bangers for alleged campaign finance crimes. Children were locked in rooms while agents rooted through the family’s possessions, and targets were told that they could not contact their attorneys during the broad searches and seizures. A prosecutorial spying operation grabbed digital data from ISPs of untold numbers conservative citizens, some who had no idea they are or were targeted in the investigation.

This kind of thing should never happen in our country, and the Franklin Center’s Watchdog reporters put everything on the line to stop it.

Multiple courts have ruled the prosecutors did not have probable cause for launching the investigation. But finally the Wisconsin Supreme Court shut the investigation down for good, declaring that “the special prosecutor’s legal theory is unsupported in either reason or law,” and was motivated by a naked attempt to “investigate citizens who were wholly innocent of any wrongdoing.”

Wisconsin Watchdog’s exposure of the investigation, its tactics, and its politically-motivated origins provided the John Doe plaintiffs with the ammunition they needed to make their case and get the investigation shut down. Multiple courts on the way to the Supreme Court’s decision have cited Wisconsin Watchdog stories as they issued opinions to suspend the investigation and chastise prosecutors.

The case cannot be appealed further to Supreme Court on its merits because it is a state court ruling on a state law, said Rick Esenberg, president and general counsel at the Wisconsin Institute for Law and Liberty. John Doe prosecutors could appeal on the grounds that Wisconsin could not ethically and constitutionally rule on the case, but Esenberg says that is unlikely.

At long last, then, it appears the final nail has finally been pounded into John Doe’s coffin. “Wisconsin’s Secret War” is over.

The Franklin Center is proud to have been able to work with such courageous people to tell their stories and help them seek justice. But while we can take great pride in this victory, we know it’s only a matter of time until the next free speech battle. When that time comes, the Watchdog team has the experience and the expertise to prevail – provided citizens stand with us to make sure we are ready to fight again.