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The Honolulu Advertiser
Posted on: Monday, December 24, 2007

Hawaii House grants job a lucrative post

 •  Who's getting the money
StoryChat: Comment on this story

By Rob Perez
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Rep. Michael Magaoay, D-46th (Kahuku, North Shore, Schofield)

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GOOD CAUSES, FLAWED PROCESS

A series on How taxpayer money is used to help some nonprofits but not others

Sunday: Secretive process run by a few lawmakers determines who gets taxpayer money.

Today: Nonprofits' supporters give a lot to campaign fund of Rep. Magaoay, who helps pick grants.

Tomorrow: In other states, process is more open and aimed at achieving public goals.

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Hawaii news photo - The Honolulu Advertiser

Rep. Michael Magaoay, D-46th (Kahuku, North Shore, Schofield), holds a key role in the House as the chairman and sole member of its grants-in-aid subcommittee, which helps select nonprofits for grants.

ANDREW SHIMABUKU | The Honolulu Advertiser

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Hawaii news photo - The Honolulu Advertiser

Bill Paty

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Hawaii news photo - The Honolulu Advertiser

Fred Trotter

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Over the past two elections, no one in the House has raised more money to bankroll a campaign than Rep. Michael Magaoay.

The low-profile North Shore legislator jumped from the bottom third of fundraising to the top spot even though he has no House leadership position or major committee chairmanship, two roles that typically come with money-raising muscle.

His meteoric rise came after he got the job of managing the House process that helps determine which nonprofits get millions of dollars in grants from the Legislature each year.

It also came as his campaign team began targeting people in the charitable community to raise money, hoping to capitalize on Magaoay's influential role in the grants process, two of his key election leaders said.

The strategy seemed to work wonders.

Based on campaign records for the 2004 and 2006 elections, an Advertiser computer-assisted analysis found that:

  • Since getting the grants job after the 2002 election, Magaoay was the only House member to raise more than $100,000 in each of the two following election cycles. The amounts included money from individuals, businesses and political action groups.

  • Of the roughly $85,000 he collected from individuals who gave at least $100 in one or both cycles, more than 70 percent of that support came from people with ties to the nonprofit community. By contrast, Rep. Blake Oshiro, the only other House Democrat first elected in 2000 and still holding a seat, received only 43 percent of his nearly $27,000 in individual support from people with links to the nonprofit sector.

  • Roughly 90 percent of Magaoay's nonprofit supporters started contributing to his campaign only after he got the grants job. Viewed another way, only 12 of the 105 nonprofit supporters contributed to his 2000 or 2002 election bids before he got the grants job. The rest started giving only after he was in a position to influence who made the grants list.

  • People with ties to six of the 10 nonprofit groups that have most benefited from the grants system since Magaoay became a key player have contributed to his campaign. By contrast, Oshiro in the same four-year period did not receive any contributions from people associated with those 10 charities. Among the top 75 organizations (based on appropriation amounts), Magaoay received contributions from individuals with ties to 25 of those groups; Oshiro got support from people linked to three. In some cases, Magaoay received donations from three, four and five people with ties to the same organization, mostly board members.

    Magaoay's ability to rake in significant amounts from supporters in the nonprofit world has raised questions about a grants-in-aid system that already is considered flawed by charity executives, lobbyists, legislators and others. No formal criteria are used to decide who gets money and who doesn't, critical decisions happen behind closed doors and only a select few legislators make those calls, leaving many of their colleagues out of the debate.

    Because the system is discretionary and the key decisions are made outside of public view, it also has fostered suspicions that campaign contributions can help a charity stand out among the dozens and sometimes hundreds vying for the grants a notion that even one of Magaoay's key campaign strategists agreed with.

    Although many organizations get grants without their supporters making political donations, some nonprofit executives, lobbyists and others say the common perception is that contributions can influence the process, especially in helping gain access to the key decision-makers.

    "The impression you get is it's all juice so little is meritorious," said Sid Rosen, president emeritus of Adult Friends for Youth, which has received some grants but also had other requests rejected.

    "I think local politics in general everybody has to pay to play," added Debbie Shimizu, executive director of the Hawai'i chapter of the National Association of Social Workers, which doesn't seek grants-in-aid. "I don't think it's any different with this."

    Magaoay and others involved in the decision-making refuted the notion that campaign contributions influence the process.

    "Absolutely not true," he said.

    "I would never condone anything like that," added House Speaker Calvin Say.

    Magaoay also denied using his grants position to raise campaign money from people in the nonprofit world, saying he would never condone such a practice.

    "I'm doing what is right as a legislator," he said.

    As chairman of the House's grants-in-aid subcommittee a subcommittee of one, with Magaoay the sole member he has been a critical player in determining which of the nonprofits get a coveted spot on a grants list that surfaces toward the end of each legislative session.

    The Legislature this year approved roughly $43 million in grants to more than 130 organizations, underwriting everything from feeding the poor to bringing drama coaches into Hawai'i schools.

    Besides Magaoay, only a few other House members and senators determine which groups actually go on the grants list, though the job of drafting it formally rests with the Legislature's two money committees. The key decision-makers rely on feedback from their colleagues, administration officials, nonprofit executives and others to sift through the applications.

    Because the requested amounts tend to be far greater than the money set aside for grants, scores of organizations usually don't make the cut. The competition is so stiff that some nonprofits use paid lobbyists to pitch their requests.

    HUGE FUNDRAISING SURGE

    Among the key decision-makers, no one over the past several years has had such a huge surge in fundraising as Magaoay.

    Before he got the grants job, the North Shore legislator raised about $30,000 in a tight 2002 re-election bid, ranking him No. 33 in fundraising prowess in the House, according to the Advertiser analysis. Magaoay, 54, an engineer first elected to the House in 2000, won his 2002 race by less than 300 votes.

    Once he was named the grants point man, Magaoay became the House's most prolific fundraiser, collecting more than $100,000 a 234 percent increase for his 2004 race, according to the analysis. Magaoay, who won the race by roughly 300 votes, was the only House member to raise six figures in that two-year cycle. For his 2006 race, which he won by less than 200 votes, Magaoay collected nearly $120,000.

    Only Rep. Dwight Takamine, the finance chairman until this past session, came close to matching Magaoay's fundraising might over the past two election cycles: Takamine took in $213,560, compared with Magaoay's $220,343, the records show. House Speaker Calvin Say, by contrast, raised $124,359.

    Even though Takamine also had a key role as finance chairman in selecting the charities, he didn't come close to matching Magaoay's level of support from people linked to the nonprofit sector, the Advertiser's analysis shows.

    Of the nearly $59,000 that Takamine raised from individual donors who contributed at least $100, about half came from people with ties to the nonprofit community, compared with Magaoay's 71 percent, the newspaper found.

    The majority of people with nonprofit ties were charity board members. But nonprofit executives, attorneys representing such groups and others also were among the nonprofit-linked contributors. The Advertiser used a database of corporate directorships in Hawai'i and Web searches of tax returns, business registrations and other records to find the links.

    ATTRIBUTING SUCCESS

    Magaoay attributed his fundraising success to the relationships he's built over nearly 30 years as an engineer and to two well-known Democrats, Bill Paty and Fred Trotter, who served as co-chairmen of his campaign fundraising. "They basically know everybody in town," he said.

    Magaoay also said he told Paty and Trotter specifically not to use his grants position to raise money. But he said he has no control over what they say to prospective donors. "They're icons," Magaoay said. "People look up to them."

    Paty and Trotter, in separate interviews, said the campaign committee decided to solicit people in the nonprofit community because such individuals might be inclined to support Magaoay, given his role in deciding which groups get grant money. Paty said Magaoay was there when the decision was made but the legislator didn't say anything in response.

    In the world of politics, Paty said, people trying to tap government funds commonly support the "gatekeepers" of those funds. Because Magaoay didn't have a leadership position or head a major committee, his campaign group determined that soliciting individuals linked to the nonprofit community would be effective, according to Paty. Those people were added to the campaign's fundraising list and would receive solicitation letters signed by Paty and Trotter, the two men said.

    Paty said targeting people who have a "natural inclination" to support a particular candidate is common in politics.

    "That's the way the game is played," he said. "You go where you think you can get some financial help."

    Trotter said people in the nonprofit community support Magaoay because he has been a strong advocate for nonprofits, especially given the huge role such organizations play on the North Shore.

    Trotter said he believes campaign contributions can help a charity seeking a grant, but the contributors look beyond financial interests when giving to Magaoay, wanting to see him re-elected so he can continue as an effective legislator and advocate.

    "This guy in my opinion has a big-time future," Trotter said.

    The grants-in-aid system gives legislators who influence the decision-making an extra measure of clout because that system generally is the only way they can earmark money for a specific private entity. Normally, state appropriations are made to a government agency, and if that agency intends to use the money to purchase services from a vendor, such as a nonprofit, it seeks competitive bids. But with the grants process, legislators control who gets money.

    A KEY GATEKEEPER

    In that context, Magaoay is considered a key gatekeeper by many in the nonprofit community. In interviews with charity executives and others, his name was mentioned more than any other legislator. Often, Magaoay was the only legislator mentioned.

    "He's the go-to guy for anyone who has a grants-in-aid request," said Rep. Colleen Meyer, a Republican on the House Finance Committee.

    On the Senate side, Sens. Rosalyn Baker and Shan Tsutsui, the chair and vice chair, respectively, of the Ways & Means Committee, manage the grants process. But this past session was their first in those roles, helping explain why Magaoay has become more identified with the system.

    Another factor: The grants process in the House, with about double the number of members as the Senate, would be too unwieldy without a designated manager, and that role gives Magaoay added clout, according to nonprofit executives.

    "If you have Mike's support, you don't need anyone else," said Rosen of Adult Friends.

    When his organization received grants, Rosen said he gave Magaoay nominal campaign contributions no more than $25 to $50 each time as a way to thank the legislator, but he stressed that no one pressured or urged him to do that.

    "I've always resisted playing what I think is a dirty game," Rosen said.

    In a separate interview, he said: "You hope you get an honest review (of your application). More often than not, if you get the right legislator who supports your program, and it's one key person really, you'll get it."

    The link between contributions and the grants system is not considered unusual by some lobbyists, who say it reflects the reality of Hawai'i's political arena. They say it's not unlike the Legislature's judiciary chairmen being able to attract donations from people in the legal community or the health chairmen being able to draw financial support from those in the medical field.

    "There is a track or link to campaign contributions," said nonprofit executive Jonathan Won, who has 30 years of lobbying experience at the Legislature, most recently as head of Prevent Child Abuse Hawai'i. "I'm not saying that's good or bad. The only thing people can say is, 'That's politics.'"

    'IT'S INAPPROPRIATE'

    One national expert, however, was quick to criticize that link, saying nonprofit supporters who are solicited probably feel obligated to give.

    Several charity officials privately echoed such concerns.

    "I think it stinks," said Bob Stern, president of the Center for Governmental Studies in Los Angeles. "It's improper. It's inappropriate, particularly picking on nonprofits."

    Stern, who has followed campaign financing issues nationally for roughly 30 years, said such solicitations are not illegal on their face. What would be illegal, he said, is if the would-be contributors were told campaign donations were required to get grants.

    Still, just because something is legal doesn't make it right, according to Stern. In all the years he's tracked campaign financing issues, he said he has never heard of a system that targets supporters of charities. "That's especially distasteful."

    Federal law prohibits public charities, referred to as 501(c)3s based on the provision governing their tax-exempt status, from giving money to political campaigns. But their employees or board members are free to do so, as long as they aren't reimbursed by the charities.

    CONTRIBUTORS' REASONS

    Timothy Johns, a board member of the Honolulu Zoological Society (which has received grants) and a major Magaoay contributor the past two elections, said his donations totaling more than $2,200, according to campaign spending records had nothing to do with Magaoay's grants role.

    Johns said he started supporting Magaoay financially because Magaoay was an effective legislator and because Republicans were targeting his House seat.

    "I tried to help people who I felt were going to have the hardest races, and he was one of those," said Johns, who recently was named head of Bishop Museum, a frequent grant recipient.

    Paty, also a major contributor and a board member for Pacific Health Ministry, another grant recipient, likewise said his contributions had nothing to do with Magaoay's grants position. Paty and his wife contributed $3,900 to Magaoay's campaigns the past two elections, according to public records. He said he has supported Magaoay since the North Shore resident first ran for office in 2000.

    Magaoay, who is a member of the House Finance Committee and asked Say for the grants job after the 2002 election, downplayed his decision-making role. He said he can only make recommendations to the panel's chairman, Rep. Marcus Oshiro.

    "I have no control," Magaoay said. "Basically, it's left up to the money committee chairs."

    But even Say acknowledged that Magaoay has a key role. He said any changes to the House's proposed grants list are cleared through Magaoay and Oshiro.

    As well as Magaoay did in fundraising in his two previous election cycles, he's on pace in the current one to amass even more money.

    From November 2006, the beginning of the current election cycle, through June, Magaoay raised $31,000, compared with $23,400 in the same period in the previous cycle, his records show.

    The latest numbers put Magaoay second only to Rep. Josh Green, the Health Committee chairman, who raised nearly $49,000 and is planning to run for the state Senate.

    Magaoay's continued fundraising prowess adds to concerns people have about the grants system. As long as the process remains secretive and nonprofit supporters are solicited for campaign contributions, public confidence in the Legislature will suffer, nonprofit executives and others say.

    "The lack of transparency tends to foster suspicions of a pay-to-play system," said Sen. Les Ihara, an open-government advocate. "That's not good for public trust."

    Staff writer Diane S.W. Lee contributed to this report.

    Reach Rob Perez at rperez@honoluluadvertiser.com.

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