Nonprofit Braun transition group follows former governors’ model

After Braun takes office, HOPE will stay involved. The filing says it’ll support him by promoting his agenda and through “various activities and financial assistance” that “lessen the burdens of government.”

Hoosier political scientists and others were skeptical of HOPE, asserting that it is operating in a gray area between politics and governance.

But HOPE and those involved in past administrative changeovers defended the group’s activities as by-the-book, critical to day-one readiness and a boon for taxpayers.

Board President Ryan Black said the group would operate “similar(ly) to other 501(c)(4) organizations developed by supporters of previous Indiana Governors” and would stick to its mission throughout Braun’s transition and tenure as governor.

“HOPE, Inc in partnership with Governor Elect Mike Braun will continue to focus on rigorous research, thoughtful analysis, and respectful discourse,” he continued. “HOPE, Inc. seeks to shape public policy that elevates Indiana as a beacon of freedom and opportunity where all Hoosiers can thrive.”

Who’s who
HOPE’s six-person board is led by Black, who works for philanthropic organization Stand Together and was previously at advocacy group Americans for Prosperity. Both organizations have ties to the Koch family — super-funders of Republican causes.

Scott Schneider, a former Indianapolis city-county councilor and former Indiana state senator, serves as the board’s vice president. Prominent Republican attorney Jim Bopp serves as secretary and treasurer.

Other members include “school choice” advocate Betsy Wiley, retired tax attorney and former Indiana state representative Dan Dumezich, and career lobbyist Jim Purucker. The latter has worked in the gambling, alcohol and transportation policy areas, among others.

Bopp, Dumezich, Purucker and Wiley are also on the transition team Braun announced roughly 12 hours after his victory.

That team additionally includes former Commerce Secretary Victor Smith, Braun’s U.S. Senate Chief of Staff Josh Kelley, GOP Chair Randy Head, former GOP Chair Anne Hathaway, consultant Emily Daniels Spaulding, former Office of Management and Budget leader Ryan Kitchell, consultant Brad Rateike and prominent lobbyist Matt Bell.

The team expanded earlier this month when Braun announced a dozen transition councils focused on key areas. About 150 names are listed in the news release, which brands the councils as “a project of” HOPE.

Defining HOPE
Indiana’s last three governors – outgoing Gov. Eric Holcomb, and former Govs. Mike Pence and Mitch Daniels – all used “social welfare” organizations to pay for their transitions and inaugurations.

Bopp said he “kind of pioneered” this model for Daniels’ transition in 2004, which occurred after 16 years of Democrat rule. The result was Aiming Higher.

“Every successful governor since then has done it this way,” Bopp noted. All have been Republicans.

He described advising Pence’s team on how to set up its 501(c)(4), Indiana Works, during a 2012 transition. Now, he’s set up HOPE.

All are 501(c)(4) nonprofit organizations regulated by the Internal Revenue Service (IRS). As HOPE states in its filings, such groups operate “exclusively for the promotion of social welfare.”

To qualify for this tax-exempt status, an organization can’t aim for profits and must operate to benefit the public. And it can engage in lobbying related to its social welfare goals.

Political activity on behalf of or in opposition to candidates is allowed as long as that’s not the group’s primary activity, per the IRS.

Bopp maintained that HOPE’s primary purpose is advocating for public policies.

“It’s an education and lobby group, and the purpose has, you know, nothing to do with political intervention,” he said. “I mean, we can do it, but it’s a minority of our activity.”

Some are skeptical.

Marjorie Hershey, an emeritus political science professor at Indiana University, said groups have increasingly used 501(c)(4) status as a “loophole” into the political sphere.

“You could just say, “Okay, well, my main activity is something else, and I’m lobbying for something or another,” Hershey said. “And lobbying, essentially, is defined as trying to influence some particular organization to do what you want, which is basically politics.”

The definition of a 501(c)(4), she added, “was just broad and vague enough to allow groups to use that number for trying to get money into elections and, apparently, into government. Money finds a way.”

Others critiqued Braun’s decision to use a 501(c)(4) at all.

Liane Groth Hulka, a bankruptcy attorney active in Indiana Democratic politics, said she purposefully founded two organizations as political action committees (PACs): Hoosier Women Forward — which trains only Democrats — and Our Choice Coalition, which advocates for abortion rights.

“We could have been a 501(c)(4), but we knew we wanted to be intimately involved in the political process,” Groth Hulka said. “And this really feels like (HOPE’s) primary activity is political, to me.”

“There’s no reason they couldn’t do this work — without worrying about the primary purpose being political or not — through a political entity,” she added. “… But I think they’re doing this to hide their donors and who’s behind this next administration.”

Bopp rejected that interpretation.

“A transition would not qualify as being for the purpose of influencing an election,” he said. “We could not – it would be illegal – for us to register as a PAC.”

A 501(c)(4) can also undertake explicit advocacy for or against a candidate — an “independent expenditure” — as long as it doesn’t coordinate its efforts with the candidate it backs. That’s narrowly defined as paying for a “communication,” like a radio spot, that expressly pushes the election or defeat of a “clearly identified” candidate.

Donor concerns
Unlike other types of organizations, donors and donations to 501(c)(4) nonprofits like HOPE are confidential.

But with consent, such a group can voluntarily disclose its donors, like Daniels’ Aiming Higher did.

Black, HOPE’s president, said the group wouldn’t.

“HOPE, Inc is not a political organization and is not regulated by state or federal campaign finance laws. HOPE, Inc is governed by IRS code which states its donors remain private,” he said, in an emailed statement.

Disclosure is uncommon.

“Look, I’ve represented (c)(4)s since – my very first one was in 1976,” Bopp said. “No (c)(4) that I’ve ever represented, except for the Daniels transition, has ever released their donors.”

He confirmed that Aiming Higher required consent from its donors in order to disclose their identities, because legal precedent otherwise makes donors’ identities “highly confidential.”

“What I say (to critics) is: take that up with the United States Supreme Court and Congress,” Bopp added. “We are following Supreme Court precedent on the critical importance of confidentiality of donors to advocacy groups – and what Congress has provided, which is that confidentiality.”

Their identities are even confidential within HOPE.

Hershey said Hoosiers would be unaware of any pay-to-play schemes.

“There is some potential conflict of interest here. Suppose I want a cabinet position, or suppose I want a contract or something like that,” she said. “… If I were to give $100,000 to a 501(c)(4) that was specially designed to choose who was going to get that contract or who was going to head the department of whatever, it would be a little harder to ignore my contribution. It might give me a leg up on getting whatever it was that I wanted.”

There’s also potential for influence or money from specific, scandal-rocked industries. Casinos and gambling interests can donate freely to the HOPE board while they are banned by state law from giving to candidates. At least three of the board or transition team members – Bell, Dumezich and Purucker – have ties to gaming.

Corporations also have limits on what they can give to candidates or their PACs in a year.

Bopp highlighted HOPE’s “very strict ethical rules.”

He described how HOPE is voluntarily applying the state’s conflict-of-interest and other requirements to the people involved in the transition.

“Even though it’s not required at all by the law, (not) at all, we want to have the highest standards,” he said.

Infrastructure needed

Others note that a changing of the guard is a massive undertaking in a short timeframe — there’s just two months between General Election Day in November and Inauguration Day in January.

The turnaround time is so fast that “someone’s got to be in the weeds early,” releasing fleshed-out policy plans and more, said Mike O’Brien, a Republican consultant and lobbyist who did transition work for Daniels and Pence.

“For pragmatic reasons, that work just has to start sooner,” he added. “… So you’re not, the day you get elected, start thinking, ‘Okay, now what am I going to do?’ They’ve gotta be ready to start.”

Policy aside, there’s also the people.

“Think of any corporation that has like 50,000 employees and 80 divisions,” O’Brien said. “And … this is all going to change in 60 days. That’s a lot of work.”

Incoming governors often prefer to swap-out top-level appointees for their own trusted picks, even if their predecessors are from the same political party.

Some from the last administration may want to stay, and others may decide it’s time for a career change. Abruptly unemployed campaign staff could take on government roles, but where in the behemoth state apparatus should they go?

“It’s a human resource exercise as much as it’s anything,” O’Brien said.

HOPE’s Black said there’s another big advantage to the organization’s work: “sav(ing) Indiana taxpayers from the burden of funding the transition and inauguration.”

Indiana allows the governor-elect access to office space, office equipment and telephone service, according to statute. It doesn’t mention public money.

That’s in contrast to entities like the federal government.

The General Services Agency pays presidential transition expenses with taxpayer dollars under legislation from 1963 and 2015. Anyone can give to the fund, per the Federal Election Commission — but the donation source will be disclosed within 30 days of the inauguration.

Hershey said that Indiana should stop its current “outsourcing.”

“The fact that it’s not included in the state budget means that, you know, apparently, some folks want to maintain the advantage of keeping the funding private and unknown to the public,” she said.

Bopp said this model is in line with Braun’s goal of keeping government lean.

“We should be glad the taxpayers aren’t bearing this burden, and if people are willing to spend private money on it, then, great!” he said. “Braun is all for reducing the cost of government and this is one way to do it. He’s not looking for … the government to pay (for) what he’s doing.”

Olivia Ground with Mirror Indy, as well as The Indiana Citizen, contributed reporting to this article.

The Indiana Capital Chronicle is an independent, nonprofit news organization that covers state government, policy and elections.