WASHINGTON, September 24, 2004 — State legislators directly influence the lives of all Americans. The 7,400 lawmakers in state capitals across the country passed more than 42,000 laws in 2003 alone and spent more than $1 trillion in taxpayer money in fiscal 2002.

But state representatives are also often uniquely positioned to influence their personal financial fortunes or those of their employers while in office. In fact, more than 28 percent of state legislators who reported their finances sat on a committee with authority over at least one of their personal interests in 2001, according to a recent Center for Public Integrity report. Eighteen percent disclosed ties to organizations registered to lobby state government. And 10 percent were employed by other government agencies, including public schools and universities. See Who's the Boss: Legislators with other government jobs.

Although state legislators frequently have jurisdiction over areas in which they hold personal interests, many states have weak mechanisms for disclosing those ties, a companion Center report notes. In fact, 24 states received failing scores on making basic information about the outside interests of their legislators available to the public.

The two analyses update previous reports by the Center on outside influences that can affect the crucial policy decisions state legislators make.

The Center has been studying the financial disclosure statements filed by 6,516 legislators during 2002—which covered legislators' financial interests in 2001—in the 47 states that require them. Lawmakers in Idaho, Michigan and Vermont do not file such reports. The study considered four categories of personal interests: employers, business interests, stock holdings and directorships.

The 5.4 percent of legislators in the 47 states with mandatory financial disclosure who did not file statements were excluded when the Center calculated percentages of legislators with each type of connection.

Not surprisingly, the most commonly listed occupations were law, education and retirement. More than 12 percent of legislators reported that they were employed by a law firm, and an overlapping group of 9.6 percent had a business interest in one. Over ten percent of legislators said they were retired and 7.5 percent reported employment in the education field, including public schools.

Many legislators found other means of supplementing their incomes: 13.7 percent of them reported income from rental property and 8.5 percent from other real estate endeavors. Seven percent had a business interest in farming. The most common stock holding was in commercial banks, which almost 10 percent had a stake in. Just over 8.5 percent were invested in computer equipment and services, followed by over 6.5 percent each in pharmaceuticals and in telecommunications.

Also, 5.3 percent of the legislators reported that they were officers or directors of a non-profit organization. Real estate businesses, commercial banks and law firms each accounted for well over three percent of the state legislators among their officers and directors.

Applying themselves

In Kentucky, at least 57 percent of lawmakers were on committees with oversight of a personal interest in 2001. In North Carolina, Virginia and Kansas, that figure was at least 45 percent. Ten states in all had rates of more than 40 percent. Most of the committee members overseeing an industry they had ties to were involved as employees or business owners.

Although some argue that conflicts of interest are an inevitable consequence of running a part-time legislature, as 39 states do, the Center's data suggests that full-time assemblies are no less likely to have potential conflicts of interest.

New York and California, for example, ranked ninth and 19th in the proportion of members serving on committees with oversight of their personal interests.

The rankings are far from reliable, however, because some states may have scored high for potential conflicts of interest only because legislators are required to disclose more personal information than their colleagues elsewhere.

L. Alma "Al" Mansell, the president of the Utah Senate, says he routinely entertains pleas from senators to land on committees related to their professions.

"They request to be on those committees because that's the area they have the most expertise in and probably where they serve best in," he said.

Other legislators say that some overlapping of public service and private interests is inevitable and often beneficial, especially when they are not paid a full-time salary for their service and must deal with topics that require particular expertise.

But complaints frequently do surface about individual legislators using their offices to benefit themselves, their families, their clients or their employers.

• A former Minnesota legislator amended his financial disclosures retroactively after the Minneapolis Star Tribune asked him why he voted on legislation authorizing highway improvements without reporting a stake in land that stood to gain in value as a result.
• A Maryland state senator was advised by the Joint Committee on Legislative Ethics – of which he is a member – that he should abandon his sponsorship of a bill that would have made zoning approval of cell phone towers easier for big telecom companies that his law firm has represented.
• An Alabama state senator directed $35,000 in tax dollars to a tutoring program operated by her sister and brother, according to the state Ethics Commission, which referred the case to the attorney general in early August.
• In Georgia, a federal grand jury indicted a former Senate majority leader on 137 counts, alleging in one case that he made "official decisions based on his own self-interest in receiving undisclosed business favors and remuneration" from a hospital.

Those cases may have been exceptional, but most states allow legislators to cast votes that benefit themselves if the effect is not too narrow.

Robert Stern, president of the Center for Governmental Studies, a research and reform-advocacy group in California, says the most common conflict-of-interest problem is that legislators operate with a bias toward their industries.

"The question in my mind is, 'Who's your boss? Who are you serving?'" Stern said. He added that legislators should avoid leading committees that oversee their industries and introducing legislation that directly affects them.

Mansell said that, at least in Utah, committees are balanced with people from diverse backgrounds. He added that in part-time legislatures, the system works because politicians feel the impact of what they do.

"I believe that when you pass laws and then you have to go out and live with them day in and day out – in your life and in your business – you come to realize the unintended consequences of bad lawmaking, and you're not insulated from it later on," he told the Center.

Where they sit, where they stand

Most states require at least some information about the earnings of legislators' spouses. Including their spouses raised the proportion of legislators with ties to interests before their committees to 31 percent and of those with ties to lobbying entities to 20.5 percent. Legal services, education, farming, and oil and gas, in that order, were the four top fields with ties to committees.

Most legislatures define conflicts of interest in rather narrow terms and, the Center found in a survey of voting procedures, several states actively discourage legislators from abstaining on any vote.

Generally, the law sees no conflict of interest when legislators work on bills from which they would not benefit any more than other members of their industries or other relevant groups of people.

In at least one state—Arizona—the group benefiting can legally be as small as 10 people.

James Browning, the executive director of Common Cause in Maryland, recently co-authored a study that found dozens of cases in which legislators sponsored or co-sponsored bills that appeared to benefit their own employers or interests. Browning said most of the overlaps were "benign," and often genuine efforts to do good, but that they troubled him nonetheless.

"The precedent allows someone in a less beneficent enterprise to do the same sort of thing," he said.

In such an environment, some say, full disclosure of legislators' financial interests can stave off the temptation to be self-serving—and allow constituents to decide when somebody has crossed a line.

Virginia Delegate Bob McDonnell, a Virginia Beach Republican, was the sponsor of a bill passed last year that requires legislators to report their financial connections to lobbyists.

"It really needed to be disclosed to the public," he said. "Not necessarily banned, but disclosed."

Critics of financial disclosure argue that it is unnecessary and may scare off potential candidates for public office.

Big blind spots

In the survey, which graded mechanisms for revealing basic information about legislators' personal financial interests, the Center found that 24 states failed, 21 were found to be satisfactory or good, and five were excellent.

Washington State came out on top with 93.5 out of 100 possible points. Among the 47 states with some kind of financial disclosure law, Utah finished last with 6.5 points. As indicated earlier, Idaho, Michigan and Vermont were failed because they have no mandatory financial disclosure at all.

The 43-question survey measured access to information Center researchers determined to be essential to monitoring whether legislators stand to gain personally from actions they take in office.

The survey found huge blind spots in the disclosure mirror that constituents, watchdog groups and journalists rely on to assess the judgment their legislators exercise.

• Eight states define reportable employment so narrowly that lawmakers could avoid disclosing huge sources of salaries and wages. Louisiana, for example, requires only reporting salaries earned from another government agency or from a gambling interest.
• A dozen states don't require legislators to report any of their real estate holdings.
• And in some states, spouses are virtually invisible: Twelve do not even require legislators to say where their spouses are employed. Fifteen don't ask for information about their investments, and 20 exclude their real property holdings from disclosure.

Those problems mostly afflicted failing states. But even in states that performed better in the survey, the Center found significant gaps that allow entire categories of personal interests to fly under the public radar.

Survey findings

The 24 states with total scores below 60 points were failed. Thirteen of them scored below 50. Of the passing states, nine scored below 70 and five above 80. Only Hawaii and Washington cracked the 90-point mark.

With Texas, Alaska and Arizona, they showed up as the nation's champions of disclosure. Even in some of these states, however, loopholes kept the picture incomplete. Texas, for example, requires legislators who provide professional services to identify their business clients—but only if they are paid for more than what they actually deliver.

The survey found similar results as a previous Center study conducted in 1999, when 24 states also scored fewer than 60 points. The surveys are not directly comparable, however, because questions and point values were adjusted.

Both surveys graded states on how much they disclose about legislators' employment, personal business activities, clients, investments, real property holdings and organizational leadership positions. They also studied the accessibility of the disclosure statements, the enforcement of the disclosure laws, and the rules defining who must file disclosures and how often.

Most states struggled with specifics:

• The value of incomes, investments and real estate holdings are each exempt from reporting, either precisely or within ranges, in at least 35 states. Descriptions of the companies or organizations that legislators have invested in, hold leadership positions with, or work for are each left unreported in at least 25 states.
• In 24 states, legislators who provide client services—in professions such as law or accounting, for example—are not required to disclose anything about who has retained them.

The latest survey added new questions about enforcement and access.

It found that authorities do not have the power to audit financial disclosure statements for completeness and accuracy in six states—Arizona, Colorado, Delaware, Nevada, Oregon and Wyoming. A dozen states, including eight with auditing power, do not conduct even informal reviews to ensure that disclosure statements are complete.

Also, seven states make no provisions for penalizing legislators who fail to file disclosure statements.

Access policies vary widely across states, the survey found.

Massachusetts, Maryland, New Jersey, New York, Virginia and Wisconsin alert legislators when someone has inspected their financial disclosures, often including the person's name and address.

The practice is required by law in Massachusetts, Maryland and Wisconsin. In the others, it's an administrative policy.

On the other hand, sixteen states—including the two with scores above 90—make disclosure statements available electronically or online.

Incomplete disclosure

In Idaho, Michigan and Vermont, legislators file no financial disclosures at all. Repeated requests by the Center to each of the 433 legislators in these three states to file a voluntary disclosure form drew a tepid response of only 33.

Although much of these legislators' incomes are hidden, their professional backgrounds are generally widely known. That's enough to make it clear that these legislators are no less likely to work in the fields where they also earn their bread and butter.

• In Michigan, a set of bills that would have helped local pharmacies compete with mail-order operations was moved out of a committee chaired by Rep. Stephen Ehardt, a pharmacist who had vocally supported them. Ehardt told the committee that opponents of the bills had been raising questions about his self-interest rather than holding a debate on the merits, according to the Associated Press. The bills would have stopped insurers from rewarding patients who obtain prescription drugs through the mail instead of at a local pharmacy with higher reimbursement rates. Ehardt is the president and CEO of Ehardt's Pharmacy Inc.
• In Vermont, the chairwoman of the House Judiciary Committee and the vice chairman of the Senate committee are practicing attorneys. Of the House committee's 11 members, at least four are practicing attorneys. Rep. Margaret Flory, the House chair, said there's no reason to abstain in matters affecting her profession: "I'm an attorney; I'm also a mother and a grandmother. Does that mean I shouldn't deal with parenting?" Flory noted that she once considered abstaining from a vote on raising insurance benefits for the spouses of teachers. "I thought about recusing myself because my husband is a teacher, but I voted no on the bill anyway," she said.
• In Idaho, a legislator who burns the fields on his farm annually to improve crop yields in the next season backed legislation in 2003 that stalled a major lawsuit against him and dozens of other farmers. But Rep. Wayne Meyer recently lost a primary re-election bid to an opponent who had criticized him over the legislation. See Balancing Act: Without financial disclosure, Idaho legislators tackle conflicts on their own.

In interviews, Idaho legislators invoked their neighborly political culture and capacity for self-policing to explain why financial disclosure forms are unnecessary. Idaho was also the state with the highest response rate to the Center's voluntary disclosure survey—eleven legislators filed.

One Idaho representative, Maxine Bell (R), sent back a note declining the invitation. "I mean no disrespect to your efforts, but I feel comfortable with my activities that impact my integrity and feel no need to share any information with your organization," she wrote.

Researchers from the Center contacted each legislator in Idaho, Michigan and Vermont at least three times over the course of several months to request that they return the forms.

The "statement of economic interests form" designed by the Center reflected the basic level of disclosure required in most states. It was modeled after the forms required by law in Kansas and Indiana, which offer a simple presentation.

At least one lawmaker in each of the three states contacted the Center to express interest in passing a disclosure law in their state. The Center does not advocate legislation, but gave the callers more information and samples of laws that it has rated as strong.

Debating disclosure

Maryland Delegate John Cluster, a retired S.W.A.T. team leader from Baltimore County, acknowledges that sometimes, serving in the legislature is not so different from his old career.

Cluster was a co-sponsor of five bills that sought to cut some items from financial disclosures and require individuals who inspect the statements to present identification first.

The aim, Cluster said, was to eliminate information that was burdensome for legislators themselves to track and that ethics officials had agreed was unimportant, including some detailed investment and debt reports.

"Why should I be responsible for tracking all that information?" he told the Center.

One student of financial disclosure laws at the federal level said they have been largely ineffective and that they scare off many potential public servants who do not want to disclose their finances.

"There just is very little evidence that financial disclosure is a very useful detection device for corruption," said G. Calvin Mackenzie, a Colby College professor of government who has written books on ethics laws and on presidential appointments.

Mackenzie, a former chairman of Maine's ethics commission, said that by keeping "good people" out of government, financial disclosure would be too costly "even if there were a problem" it would fix.

Being a state legislator "is often not an attractive job," he said. "If you add to that the requirement that they've got to file personal financial disclosures, it's gonna be impossible to get anyone to serve in the legislature." He added that Maine does demand disclosures but that they are not detailed.

But Cluster, the Maryland ex-cop, said financial disclosure was a valuable curb on wrongdoing.

In the rough and tumble of state politics, he said, there is potential for self-serving actions. "I think the opportunity is there if you are not ethical," he said. "And so I think it's important that a lot of information is disclosed."

Asked what was wrong with the honor system that is used to spot conflicts of interest in Idaho, Michigan and Vermont, Cluster laughed.

"You know, I'm a police officer," he said. "So everybody I look at is guilty."

Marilyn Canavan, who served as executive director of Maine's ethics commission while Mackenzie was the chair, said a crucial problem with financial disclosure statements is that they are not being used.

Canavan, who is now a legislator, said that Maine's statements should include real estate information and that the press needs to scrutinize them more carefully. But if that is not done, she said, it might be worth reconsidering the merits of financial disclosure. "It's one thing if a legislator reports their income and their holdings, and it is another thing to have someone go in there and actually try to make a connection between their income and their voting record" if it exists, she said.

Canavan recently sponsored legislation toughening the state's disclosure laws.

Still, she told the Center, "I think most of the people I serve with are very trustworthy. They are not in there to add to their wealth."

Michigan has a full-time legislature but no financial disclosure laws, and one Detroit representative said he plans to use his second term to change that.

Rep. Steven Tobocman said that many people's backgrounds are already widely known but that "at least putting [it] in black and white would help."

"I just remember how freaked out I was at first" over legislators taking actions that benefited themselves, he said. "And then it just became so regular."

Tobocman was one of the legislators who contacted the Center for more information about financial disclosure laws.

Scandal and reaction

Scores of bills relating to financial disclosure have been filed in state legislatures in the last two years.

The most ambitious new disclosure proposals would have legislators report their interests in government contracts or to identify business affiliates that might have political wish lists.

Many disclosure proposals fell by the wayside. In Georgia, they went down twice as ambitious ethics reform packages foundered in 2003 and 2004. In Louisiana, Governor Kathleen Blanco floated the idea of tougher disclosure for legislators this year but, according to the Baton Rouge Advocate, found no takers in the legislature. One opponent of the idea says the governor didn't really try. "It was a joke," Emile "Peppi" Bruneau, a New Orleans representative, told the Center. "It was designed to get her some publicity. Nobody was for it."

A few states did tighten the screws.

Maine passed Marilyn Canavan's bill, forcing legislators to disclose any contracts they have with the state and excluding them from no-bid deals. But provisions for disclosure of legislators' real estate holdings and organizational affiliations were stripped away in committee.

The Rhode Island General Assembly imposed new restrictions on lobbyists after two legislators resigned amid controversy over their failure to disclose business ties. Among the new rules is a requirement that lobbyists and their employers disclose any payments of more than $250 they make to legislators.

Virginia legislators voted to include their business ties to lobbyists on personal financial disclosure forms by passing McDonnell's bill in 2003. Connecticut did the same this year as it took up a flurry of ethics bills in the aftermath of the scandal that led to Gov. John Rowland's resignation.

Voters are getting a closer look inside their lawmakers' wallets in New Jersey, which passed a new financial disclosure law that will raise the state from failing to passing on the Center survey when it kicks in next year. It will require lawmakers to disclose liabilities and to indicate the value ranges of their assets and debts.

The law itself was part of a 23-point ethics plan the Legislature passed this year amid intense media attention to a series of corruption indictments against public officials, the use of government contracts to reward campaign donors, and alleged conflicts of interest.

Rep. Jeff Van Drew, a Cape May County Democrat who was a primary sponsor of the law, said it was not only a useful policing tool, but also a statement.

"I believe it's symbolic, to say, 'Look, we've run for state office for the right reasons,'" he told the Center. Legislators' lives and much of their finances, he added, "should really be an open book."