October 12, 1998

LIBERAL POLICY GROUPS ARE GOING WHERE THE ACTION IS OUTSIDE THE BELTWAY.

State Think Tanks on the Move

David Callahan

In the new era of devolving federal authority and growing state responsibilities, Frank Mauro is a liberal crusader whose moment has arrived. Mauro is executive director of the Fiscal Policy Institute in Albany, New York, a tiny think tank with only two full-time staffers but a large presence in the capital. On a cold morning earlier this year some 200 people --- including legislators, staffers and reporters --- jammed a room in the legislature to hear Mauro cut to ribbons the new budget submitted by New York's Republican governor George Pataki. For three years, Mauro was the secretary of the Ways and Means Committee in the State Assembly and few in Albany can match his command of state fiscal policy, Yet Mauro is no bloodless policy wonk, and his chief complaint with Pataki's budget was not simply that the numbers don't add up in the long run: it was that the Pataki administration was doing nothing to address widening inequality in New York but instead was worsening this problem.

Mauro is a compact, hyper-articulate man, and his attack was both relentless and methodical. He pointed out that New York's taxes have become ever more regressive in recent years, that job growth has slowed, that New York's poverty rate is 22 percent higher than the national average and climbing, that the state's Safety net has more holes than ever, that federal money meant for moving welfare recipients into jobs has instead been wasted on general fiscal relief and that when a new recession hits the state things will get even worse because of poor fiscal planning. "This guy's a communist," muttered one audience member, stalking out as Mauro continued his assault. But most of the crowd stayed to the end of the presentation. Democratic staff in the legislature can't get enough of FPI's stuff: nor can their bosses. "They put out the economic and fiscal facts better than anyone," says Senator Franz Leichter, who has been in the legislature for twenty-four years and remembers a time when the governor's budget went virtually unchallenged by independent experts. In the weeks and months to come, the analysis presented by FPI would help to frame many aspects of the battle in Albany over Pataki's budget. And while Mauro and FPI aren't likely to end up on the winning side of this battle, one thing is clear: They are definitely players.
 

The nineties have not been a happy decade for liberals in Washington. However, in the past few years, liberals and progressives at the state level have become a force to be reckoned with even while being outgunned by business interests and conservative foundations which have invested heavily to influence state policies. "We are actually starting to win some," says Jim St. George, with an edge of wonder in his voice. St. George is a veteran of the Washington policy wars who now works in New England.
 

If there is any upside to the conservative "devolution revolution" it is that the left has been forced to put new energy into building a truly national policy infrastructure. State activists have also stumbled onto new issues and in a few places, have even recaptured that most indispensable of all political advantages: the feel of a genuine movement. Since 1992, progressive groups have helped lead fights rebutting in the passage of campaign finance reform in twenty-three states. The most dramatic of these measures was in Maine where a coalition of progressive groups helped win approval for a 1996 law that provides for voluntary public financing of state elections. Reform plans modeled on the Maine law are now being pushed across the country. In Minnesota, progressive policy activists have successfully attacked corporate welfare, helping in 1995 to secure passage of a law requiring businesses that receive tax abatements to prove that these breaks actually create or preserve jobs. On the West Coast, the California Budget Project, only three years old has already emerged as a major player on several state issues, most notably influencing the evolution of Ca1ifornia's welfare reform plan. In Massachusetts, the Tax Equity Alliance tor Massachusetts played an important role during the mid-nineties in beating back proposals for large tax cuts that would primarily have benefitted the wealthy, and in getting Massachusetts, in 1997, to become the eighth state to adopt an earned-income tax credit.

Elsewhere around the country, many other small but agile liberal policy organizations have challenged the way that local policy debates have traditionally unfolded. Most of these groups have been around for less than a decade and employ only a handful of staff members, operating on a shoestring to try to trip up much more powerful opponents. In state capitals, where the expertise of government is limited, business lobbyists often wield enormous influence. They relentlessly shadow legislators and play a major role in shaping law --- twisting it to their own benefit. To these private-sector players, the emergence of sophisticated independent policy experts has not been a welcome sight. In Texas, for example, tax giveaways to the oil industry have long been the norm and rarely were seriously challenged. But when a state agency put out a report several years ago justifying one huge tax abatement for oil drilling by showing that a number of communities would reap major benefits, analysts from the Center for Public Policy Priorities in Austin noticed a problem with the report's math. The supposed benefits, it turned out, exceeded the entire per capita income of the communities affected. After a CPP staffer gave public testimony to this effect, tearing apart the case for the tax abatement, he was confronted by a well-known lobbyist for the oil industry, who jabbed a finger hard into his chest. "Who do think you are?" the lobbyist snarled, "Nobody does this."
 

The liberal awakening at the state level has been slow in coming, and the left's organizational capacity in this area still doesn't rival that of conservatives. For decades, Washington was the center of the liberal solar system and the federal government was the sun around which all liberal hopes revolved. State politics were widely seen as a backwater dominated by private interests and small-minded public officials. During the late fifties and early sixties the civil rights movement produced searing images of state leaders defending bigotry and inequality. Afterwards, the liberal game plan was simple: Bypass the yokels and focus on federal efforts to give new rights and economic assistance to the poor and disadvantaged.

This plan worked, at least for a while. Despite much talk about devolution during the Reagan years, Washington remained at the center of the action during the eighties and into the early nineties, and it was there that liberal fortunes rose or fell (usually the latter ). For policy wonks of any ambition, fighting the good fight meant joining the fray inside the Beltway. With a few exceptions, top liberal strategists in the nonprofit world paid scant attention to the states during the eighties. The big left-of-center foundations like Ford, MacArthur and Rockefeller lavished money on various grassroots organizations, but these groups seldom focused on influencing policy outcomes at the state level. To the degree that the big foundations invested in building a policy infrastructure, grants usually went to finger-in-the-dike groups in Washington that aimed their work at Congress and the executive branch.
 

Conservative strategists and funders had a longer-range vision. Even as they flocked to Washington, right-wingers dreamed of turning that city back into a sleepy Southern town. Conservatives sought to transfer federal responsibilities to the states because of an ideological distrust of the federal government, and out of simple expediency: Once government programs were under the purview of the states, where business interests have historically been stronger, they would be easier to eliminate --- -divide and downsize, in effect. If the Reagan revolution had actually come off, the war for the states would have swung into high gear during the eighties. Instead, conservatives spent that decade building a state policy infrastructure and waiting patiently.
 

A centerpiece of this infrastructure is the American Legislative Exchange Council, generally known as ALEC. A Washington-based public policy organization that supports conservative legislators, ALEC was founded in 1973 by Paul Weyrich --- a major New Right figure who also helped to start the Heritage Foundation --- and has expanded rapidly over the past decade. Its 56 million annual budget and some thirty staffers make it a small fish compared with big right-wing think tanks like Heritage and the American Enterprise Institute. Yet given its impact in state capitals, ALEC may get more bang for the buck than any policy outfit in Washington. Of the more than 7.000 state legislators in the United States, nearly 3,000 are members of ALEC, including scores who hold key leadership positions. In 1995-96, model legislation crafted by ALEC and introduced in state legislatures totaled 1,647 bills. Of these, 365 were enacted into law, a 22 percent success rate. All this legislation emerged from task forces that included representatives from the private sector. Business not only foots much of ALEC's operating budget, it directly shapes its political agenda as well through its participation in these policy groups.

 During their long wait for devolution, conservatives also built a network of more than fifty state policy institutes and legal foundations. One architect of this effort was Heritage Foundation trustee Thomas Roe, who declared to his colleagues at a board meeting in the mid-eighties, "You capture the Soviet Union -- I'm going to capture the states." Roe helped build up Heritage's Resource Bank, which provides institutional support and networking opportunities to state-level policy activists. Many of the conservative state think tanks have been explicitly patterned after the Heritage Foundation, offering slick briefing materials rather than in-depth scholarly analysis. Conservative funders have also poured money into another networking forum, the State Policy Network. Meanwhile, conservative policy intellectuals have been hard at work during the nineties refining and updating their ideas for devolving federal power back to state and local government. Through its Project on Federalism and the States, Heritage worked to refine both the broad philosophical case for devolution and the tactics that are needed to make the shift happen. For example, the project sponsored a conference that brought together state officials to discuss concrete steps to take back power from the federal government. Other conservative groups like the Family Research Council, the Free Congress Foundation and Citizens for a Sound Economy have also moved state issues to the front burner in recent years.
 

The influence of conservative think tanks like the Manhattan Institute in New York City and the California-based Pacific Research Institute tor Public Policy has been considerable. The former has provided a steady stream of ideas to Mayor Rudolph Giuliani, most recently supplying the arguments that Giuliani used earlier this year in his assault on the City University system. The latter has played a key role in attacking affirmative action in California. Perhaps the single greatest success of conservative state policy institutes overall has been to make privatization fashionable. Whether in the area of garbage collection or school voucher programs, it was not until the early nineties that liberal foundations looked seriously at policy battles beyond the Beltway. This shift came after years of evidence that state legislatures were tacking rightward -- a development accelerated by conservative crusading but, ultimately, one rooted in the suburbanization of the electorate. Suburbanites finally grew to a majority of voters in 1992, and, as political scientist Karen Paget has observed, this "increased the fiscally conservative nature of most legislatures, regardless of party control." Numerous states passed legislation that slapped il1-considered restrictions on taxation and spending, and, overall tax policy at the state level moved in a regressive direction. Between 1990 and 1993, sales and excise tax levies that have traditionally hit low-income people hardest, were raised by more than $10 billion in the states. Meanwhile, efforts to reduce state income taxes, a more progressive form of taxation, were gathering steam across the country.
 

In 1993 the Ford Foundation joined with the Annie E. Casey Foundation and the Charles Stewart Mott Foundation to create the State Fiscal Analysis Initiative, a joint effort to strengthen state level policy institutes. Overcoming their usual skittishness about entering politically charged areas, these three foundations have now spent more than $12 million to strengthen more than a dozen liberal policy organizations. Coordinating this work has been the Center on Budget and Policy Priorities in Washington. In many cases the SFAI recipients have filled analytic vacuums of rather startling dimensions. Voices for Illinois Children produced the first program-by-program analysis of the state budget ever put out by a nongovernmental organization. The Michigan Budget and Ta-x Policy Project is the only independent source for comprehensive data on health and social welfare spending in each of that state's eighty-three counties.

Another important foray by foundations into state policy matters is a project on welfare reform spearheaded by the Center for Community Change in Washington. DC. With support from George Soros's Open Society Institute, this project has sought to build the capacity of state and local organizations to influence policy debates over welfare. It has funneled money into groups like the St. Paul Ecumenical Alliance of Congregations, the Philadelphia Unemployment Project and Baltimoreans United In Leadership Development. One goal of the project has been to strengthen collaboration between grassroots activists who are trying to organize the low-income people who are hurt most by welfare reform and nonprofits that work on welfare issues at the policy level. Finally, left-of-center foundations have given new attention to state politics through creation of a Funder Collaborative on State-Wide Coalitions. The goal here is to encourage one of the most positive trends now apparent at the state level: disparate progressive groups operating more strategically and banding together in large coalitions to press tor common objectives.
 

Progressive organizations have also tried to loosen ALEC's stranglehold on the state legislatures. The organizing group Northeast Action has played a key role in creating and supporting citizen coalitions in five states that have helped elect state officials --- including, in 1996, Democratic governor of New Hampshire Jeanne Shaheen. It has also been building an infrastructure to support these officials with policy advice.
 

In Washington, the Center for Policy Alternatives has started an Action Network that is supposed to function much like ALEC does, nurturing progressive legislators with policy and strategy advice. So far the network has 250 legislators, less than a tenth of ALEC's membership. Building the network won't be easy, according to a CPA staffer, since unlike conservative foundations, liberal funders "generally won't touch" projects aimed at influencing state legislators. This situation mirrors patterns of progressive philanthropy evident at the national level: Liberal funders not only spend their money far less strategically, many also have an allergy --- not shared by their right-wing counterparts --- to anything political.
 

Over the next few years, policy warfare in the states promises only to intensify. Debates over welfare reform are likely to be ongoing in many states as devolution moves forward through a process of trial and error. So far, welfare reform has been comparatively painless for states with the economy booming and states scoring early victories in cutting the easy cases from welfare rolls. But things could quickly turn nasty if --- or rather, when --- an economic downturn hits. "We don't know what's going to happen in the next recession," comments Iris Lav, associate director at the Center on Budget and Policy Priorities. With federal welfare funds fixed, she says "states will be largely on their own" in coping with any dramatic surge in poverty. Even without a recession, battles over welfare are sure to grow more heated as reform experiments in some states falter, producing dramatic stories of human misery. Moreover, the combination of time limits --- which vary from state to state --- and the immense difficulty of placing the least employable welfare recipients in jobs, have created time bombs that will begin exploding across the country within the next several years.
 

How to respond to this situation is sure to spark fierce debate in state governments. Combat over taxes may also escalate. Strong political pressures to cut state taxes have only increased as the economy has surged. Since 1994, states have passed income tax cuts totaling almost $10 billion, and additional tax cuts have recently been proposed in some states. Quite apart from the fact that these cuts typically grant most benefits to the wealthy, this trend is disturbing because it could hobble state governments in the future. The nightmare of liberal policy analysts is that states will spend the next few years slashing taxes and then an economic downturn will arrive. With state revenues down, welfare rolls rising and no supplementary federal aid forthcoming, the consequences for low-income people could be devastating. Long-term fiscal planning has never been a strength of the part-time citizen legislators who make law in most state governments, and there has been little talk in many capitals about planning for a rainy day. Of course, as Frank Mauro of FPI never tires of observing, it's already raining hard in the poor neighborhoods of New York and other states.