Activist group brings money, draws concern

Citizens for a Sound Economy, a little-known national group, emerged in Oregon during the 1999 legislative session, when it lobbied for a telephone deregulation bill sought by phone monopoly US West.

Months later, leaked internal documents revealed the self-described “grass roots” group received $1.25 million from US West in 1998.

Investigative reports also showed Citizens for a Sound Economy:

•Got $1 million from Philip Morris while opposing cigarette tax hikes.

•Took money from Microsoft and lobbied Congress to curtail federal antitrust enforcement.

•Secured money from the Florida sugar industry while opposing an environmental restoration plan for the Everglades.

•Received oil and gas industry money while opposing a potential energy tax.

Now, Citizens for a Sound Economy is turning its sights on Oregon’s tax system.

The Washington, D.C.-based group is the dominant player in a referendum drive to overturn a $1.2 billion tax increase approved by the 2003 Legislature to balance the state budget. Its platform: cut taxes, reduce the size of government and prune business regulations.

“Our aim is to be the voice of the right like Ralph Nader is the voice of the green movement,” said Russ Walker, who directs the Oregon chapter of Citizens for a Sound Economy.

“Oregon is their No. 1 target right now,” said Rep. Jeff Kropf, R-Sublimity, who recruited the group to help craft an alternate state budget plan if the referendum succeeds. “Are they going to make a difference? Absolutely.”

For starters, Citizens for a Sound Economy is filling a vacuum in Oregon’s tax-reduction movement, caused by ballot-measure king Bill Sizemore’s legal and funding setbacks, and the demise of his group, Oregon Taxpayers United.

Replacing Sizemore?

“It’s always been Bill Sizemore that’s been the engine that made it happen,” said James Moore, a Portland political analyst. “With Sizemore out of action, we’re seeing this group play exactly that role.”

Citizens for a Sound Economy is better-funded and more sophisticated than Sizemore’s group, said Chuck Sheketoff, a Silverton policy analyst who monitors the group.

“These guys are big-time,” he said, citing the national group’s multimillion-dollar budget. “Compared to any Oregon organization, they’re a bottomless pit.”

Walker said he would have been content riding in the “passenger’s seat” if Sizemore had taken charge of the referendum. But Citizens for a Sound Economy was ready to assume an expanded role in Oregon politics, he said.

Citizens for a Sound Economy targeted a dozen state legislative races in 2002, helping unseat incumbent House Republicans Ralph Brown of Cornelius and Cherryl Walker of Murphy in favor of more-conservative GOP candidates.

The group’s star rose in Oregon’s conservative movement when it helped defeat Ballot Measure 28 last January. That was a temporary tax increase placed on the ballot by the Legislature during a 2002 special session to balance the budget and forestall spending cuts.

During the 2003 legislative session, Walker laid the groundwork for the group to run its own ballot measure campaign in 2004. The group’s initiative measure, since dropped, would have replaced the state pension system with a corporate-style 401(k) plan.

Sizemore never really built a grass-roots group as Citizens for a Sound Economy has done, Walker said. He cited annual lobby days, in which busloads of activists wearing Citizens for a Sound Economy T-shirts fan out throughout the Capitol.

“I think we’re the only organization on the right that can do an event like that at the Capitol, and it’s because we have real members,” Walker said.

Allied with Sizemore

Sizemore is on the ropes after losing a court judgement for racketeering. He renamed his group Oregon Taxpayers Union, and wants to rebound by overturning the court ruling.

Meanwhile, he is providing advice to Walker for the referendum campaign, and depicted Citizens for a Sound Economy as a solid ally.

“I don’t know how this will end up, whether Citizens for a Sound Economy will replace the Oregon Taxpayers Union or if we’ll end up working together if we win our appeal,” Sizemore said.

Don McIntire, who co-authored Oregon’s first successful tax-cutting initiative in 1990, ceded leadership of Oregon’s tax revolt to Sizemore in the early-1990s. The two men now operate rival taxpayer organizations and are openly critical of each other.

Rather than leave a vacuum, Sizemore created a vacuum by introducing so many poorly crafted initiatives, McIntire said. “Sizemore subsumed every conservative issue through the initiative process. There wasn’t any breathing room for any of the rest of us.”

McIntire has been active in Oregon’s tax limitation movement longer than Walker. But McIntire’s Taxpayer Association of Oregon is a junior partner to Citizens for a Sound Economy in the referendum campaign. Walker is calling the shots because his group is supplying the money.

“If they have the horsepower, then I’ll keep my fingers crossed that they know what to do,” McIntire said. “If they believe in limited government and lower taxes and less government intervention in our lives, then they’re an ally.”

Signatures crucial

Walker’s group needs 50,420 petition signatures by Nov. 25 to get on the ballot. An election would be held Feb. 3, 2004.

Supporters of the tax increase say their best shot at thwarting the referendum is in the signature-gathering stage.

“It’s a mountain to climb” if it makes the ballot, conceded Chip Terhune, who expects to manage the campaign against the referendum.

Oregonians haven’t approved a general tax increase since 1930, when they voted to retain the income tax enacted by lawmakers. Since then, voters have soundly rejected a series of sales and income tax proposals.

Opponents of the referendum want to sway voters by branding Citizens for a Sound Economy as an out-of-state behemoth meddling in Oregon politics.

“That is distressing because Oregon needs to decide its own fate within its own borders,” Terhune said.

“The initiative and referendum system is supposed to be direct democracy by Oregonians,” Sheketoff said.

The three leaders of the political action committee controlling the campaign are Walker and two colleagues from Citizens for a Sound Economy’s national office, said Janice Thompson, coordinator of the Money in Politics Research Action Project. “That stood out to me, and raised some questions about who’s really calling the shots.”

Walker said decisions are made by himself in consultation with his boss and other Citizens for a Sound Economy staff in Washington, D.C. He questions why other national organizations with Oregon branches aren’t subjected to the same criticism for being involved in politics here.

“What about the AARP (American Association of Retired Persons)? Are they carpetbaggers? What about the Sierra Club?”

Citizens for a Sound Economy counts 12,000 Oregonians as members and has seven local clubs in the state, he said.

Local funding?

Walker’s group has hired a California signature-gathering firm to collect signatures. Nevertheless, he is trying to get the bulk of his signatures by mailing blank petitions to sympathizers around the state. Walker predicts four out of every five signatures will be collected by volunteers, rather than paid signature-gatherers.

To fund the signature-gathering phase of the campaign, Walker said he has raised more than $300,000. “All of it” is from in-state sources, he said.

Walker won’t divulge who is supplying the money until he is required to file campaign finance forms with the state Elections Division. That’s not until Dec. 10, after the deadline for turning in signatures.

But those closely following the campaign say that they have a good idea.

Tim Nesbitt, Oregon AFL-CIO president, said he’s heard that large chunks of money came from a trio of secretive Oregon entrepreneurs who have amply funded Sizemore, McIntire and other conservatives in the past. Those are Dick Wendt, principal of Klamath Falls-based Jeld-Wen Inc.; Aaron Jones of Seneca Sawmills in Eugene; and Wes Lematta of Aurora-based Columbia Helicopters.

McIntire, who raised large sums from Jones and Lematta in the past, suspects Nesbitt’s list is accurate.

“We heard that’s where that money went,” he said. “If that’s the horse they’re riding, that’s the horse they’re riding.”

Medical equipment manufacturer Loren Parks, who donates heavily to Oregon conservative causes, donated $30,000 to Citizens for a Sound Economy in the past, through his foundation. But Parks’ future role in Oregon politics is unclear since his move to Nevada. He recently shifted his foundation registration from Oregon to Nevada-based entities.

National powerhouse

Citizens for a Sound Economy is widely considered one of the nation’s best-funded conservative pressure groups, along with the Heritage and Cato foundations, Americans for Tax Reform, and American Legislative Exchange Council. The groups have helped hone some of the initiatives of President Bush.

Americans for Tax Reform president Grover Norquist convenes leaders of the group weekly to coordinate their work, said Ann Beaudry, strategic planning director for People for the American Way. That liberal group tries to monitor and counteract some of the work of its conservative counterparts.

Citizens for a Sound Economy’s approach is to mobilize grass-roots activists in selected states to push an agenda set largely in Washington, D.C. The group actively worked to defeat a tax increase on the ballot in Alabama in September.

The group’s main lobbying arm, Citizens for a Sound Economy Inc., reported $3.6 million in income in 2002 and assets of $2.2 million, according to tax forms filed with the Internal Revenue Service. A companion group, Citizens for a Sound Economy Educational Foundation, reported income of $4 million in 2002, and assets of $5.6 million. In 2001, the foundation reported spending $2.3 million on its state chapter activities.

Such groups are allowed to delete names of funders before making the tax filings available to the public. The foundation’s 2001 tax filing listed nine large donations, ranging from $100,000 to $750,000, for a total of $3.1 million. The donors’ identities were whited-out.

“The majority of their money is not, in fact, coming in small donations from members,” Beaudry said.

Lobby for hire?

Past leaks to publications and interest groups have provided the most detail about the group’s financial backers, supplemented by publicly available reports of foundation grants.

A 2000 report by the Ralph Nader-affiliated group Public Citizen listed $7.2 million in corporate donations to Citizens for a Sound Economy in 1998, based on leaked internal documents. The oil and gas industry collectively contributed the largest sum: $2.3 million. US West was the single-largest donor, contributing $1.25 million.

Soon after, Citizens for a Sound Economy’s Oregon representative was lobbying for US West’s priority bill in Salem. In that period, US West was being routinely criticized by Oregon businesses and state utility regulators for poor customer service.

Yet Citizens for a Sound Economy literature described the group as “the voice of consumers for free enterprise.”

“I think it ends up being a marriage of convenience between radical right political forces and corporations who share that agenda,” Beaudry said. “You end up with thinly-veiled people lobbying on behalf of these corporations and you can’t follow the money trail.”

Because the organization is so secretive, it’s unknown, for example, if any tobacco industry money is going to the Oregon referendum campaign. If the campaign overturns the tax package passed by the 2003 Legislature, that automatically rescinds a longstanding 10-cents-per-pack cigarette tax.

Even McIntire is wary of the money behind the group.

“Money, in a way, is the corrupting influence in politics,” McIntire said. “When you’re doing work for the special interests, there’s always that possibility.”

Walker said he’s never pushed issues because a company gave the organization money.

The telecom deregulation bill supported by his group would aid competition in the market and help consumers, Walker said. He said the group is opposed to cigarette taxes because they unfairly hurt low-income smokers.

“For me, it doesn’t seem unusual that a company would look at us and say, ‘You guys are doing the hard work, maybe we should give money to them,’ ” Walker said. “We by no means ever turn away that kind of funding.”

Moore, the Portland political analyst, finds it distressing that national groups are playing a pivotal role in setting state spending and tax policy.

“It says we can’t trust the states to be the laboratories of democracy; we have to have a national group to keep all the states in line.”

Regardless of the messenger, Moore said, the message of cutting taxes and curbing government will remain appealing to many Oregonians. “These ideas,” he said, “are very powerful.”

Steve Law can be reached at (503) 399-6615.