Big Sable Point lighthouse in Michigan, the state ranked 44th in 2012's State Integrity investigation. Shutterstock
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The campaign finance system here has more holes than I-94 after a spring thaw. Big spenders and special interests can easily shovel millions of dollars into election activities — secretly if they choose. The lobby law is so weak that it was nearly impossible to determine which companies were spending millions to oppose construction of a new bridge. And the financial disclosure system for state elected officials?

Well actually, there isn’t one.

Welcome to Michigan, the “Trust Us” State when it comes to transparency. Reform efforts are frequently launched, sometimes debated, always shelved. Meanwhile, special interests continue to make greater use of loopholes that allow them to influence the system without leaving fingerprints on the money spent doing it.

“It appears we’re living with an honor system in an environment where there isn’t much honor,” said Rich Robinson, executive director of the Michigan Campaign Finance Network, a nonpartisan watchdog group that tracks campaign spending and lobbying records.

All those factors help explain why the state earns a grade of 58 — an “F” — from the State Integrity Investigation, a collaborative project of the Center for Public Integrity, Global Integrity and Public Radio International. Overall, Michigan ranks 43rd among the 50 states.

The analysis of 330 indicators of state accountability measures shows that this state of almost 9.9 million residents has major flaws in tracking money spent to elect officials and shape policy. The set of laws regulating campaign spending, lobbyist activity, and financial disclosure guarantee essentially says to the public: Mind your own business.

Even so, Michigan’s state government is not known for scandal. It gets many things right.

It is not plagued by pay-to-play allegations in procurement, or by nepotism or cronyism in the civil service system. Its Freedom of Information Act usually, if not always, works to give journalists and others the information they request at a reasonable cost. The sort of corruption that is common in Detroit rarely finds its way 90 miles north to Lansing. And Gov. Rick Snyder’s new push for transparency is giving residents greater online access to information about how the state spends billions of dollars annually than ever before.

But there are glaring holes, especially when it comes to the millions of dollars spent to wine and dine lawmakers, elect or defeat candidates and pass or kill legislation. Efforts at reform are frequent; and they almost uniformly fail.

Following the money: Good luck with that

The Michigan Campaign Finance Act was enacted as a post-Watergate reform in 1976 to limit the impact a few rich individuals or well-heeled special-interest groups can have on elections, as well as to shine light on who is spending how much.

More than thirty-five years later, the law misses the mark in at least three ways. In the real world of politics, individuals and groups can spend as much as they want to elect or defeat a candidate, or ballot issue. A growing share of the money goes, legally, unreported. Enforcement efforts are modest at best.

Campaign finance law does limit how much individuals, political action committees, and political parties can contribute to candidates’ campaign committees. For instance, individuals can give no more than $3,400 to a candidate for governor; political action committees can give no more than $34,000 and political parties are limited to $68,000.

But for political high-rollers, these restrictions are nothing more than speed bumps. They can make unlimited contributions to political parties and political action committees, which turn around and make unlimited independent expenditures on television ads and other communications to support or defeat a candidate.

The only restriction is that the independent expenditures cannot be under the control of the candidate committee.

In practice, this has allowed wealthy individuals and powerful PACs to funnel huge amounts of money into campaigns.

In 2006, Republican businessman Dick DeVos contributed nearly $35 million to his own unsuccessful campaign for governor. That same year, Kalamazoo philanthropist Jon Stryker and his wife contributed more than $5 million to the new Coalition for Progress political action committee, which spent more than $3 million supporting Democrats or opposing Republicans. Democrats captured numerous swing seats to take control of the Michigan House of Representatives. Some Republicans think Stryker’s money was the difference.

Stealthy issue ads

At least those contributions were reported, and journalists and voters could track the money on the Secretary of State’s website. That can’t be said for issue-advocacy ads, which have emerged as the loophole of choice in the 21st century.

The ads look, sound and feel like standard candidate ads, but because they don’t directly ask voters to vote for or against a candidate, they don’t fall under the campaign finance act, according to the Secretary of State’s interpretation of the law.

Over the past several election cycles, the amount of money pumped into campaigns through issue-advocacy ads has grown enormously. Between 2000 and 2010, nearly $70 million in campaign advertisements for state office were not disclosed under the Michigan Campaign Finance Act. The figure comes from the Michigan Campaign Finance Network, which inspects the public files at television stations. There is no information available on money spent on radio ads, robo-calls or other issue-advocacy communication.

The Michigan Democratic Party spent $4.3 million on issue ads supporting Democratic candidate Virg Bernero in the 2010 gubernatorial election, and voters don’t know who gave the money to the party. Because these ads aren’t regulated by the campaign finance act, the donors aren’t disclosed. The Republican Governors Association pitched in $3.6 million for ads to elect Rick Snyder.

The Secretary of State’s Office is charged with enforcing the Campaign Finance Act but has relatively little power and little history of aggressive enforcement. The law directs elections officials to try to resolve disputes rather than prosecute. When Baxter Machine & Tool Inc. made an illegal contribution of $25,000 to a political action committee (state law prohibits corporate contributions to PACs) in 2004, the Secretary of State dismissed the complaint against the company “because this matter occurred in error,” and imposed a $1,000 fine, while allowing the political action committee to keep half the money.

Conciliation over punishment

The lack of subpoena power is a barrier to investigation of violations.

In 2010, the state was prepared to reach a $10,000 conciliation agreement with former Detroit Mayor Kwame Kilpatrick, who spent nearly $1 million of his campaign funds on legal services. The agreement fell through. In 2011, new Secretary of State Ruth Johnson took a tougher stand, citing Kilpatrick’s testimony in a civil suit that he paid his lawyers to defend himself against perjury charges related to an affair. Armed with information it could not get on its own, the secretary of state then filed suit seeking fines totaling $976,000.

In a state slowly pulling out of a decade-long recession, lobbying is a big and thriving business. In the first seven months of 2010, lobbyists spent nearly $20 million, up 12 percent from 2010, according to an analysis by the Michigan Campaign Finance Network.

Enacted in 1978, the Michigan Lobbyists Registration Act was designed to let the public know who is lobbying legislators and top administration officials, and how much they are spending to wine, dine and otherwise influence decision-makers. But the disclosure requirements are so weak that linking spending to political outcomes is virtually impossible.

“Frankly, lobbying reports themselves are almost meaningless,” said Robert LaBrant, general counsel for the Michigan Chamber of Commerce and one of the state’s leading authorities on the lobbying law.

The law requires lobbyists to list their clients, but not a whole lot more. Michigan’s major lobbying firms represent many clients with a variety of interests. From the reports, you can’t tell whether lobbyist expenditures are intended to shape business taxes, teacher tenure laws, movie industry incentives or a new bridge to Canada, all of which came up during the 2011 legislative session.

The Michigan Campaign Finance Network reported that the Detroit International Bridge Company spent $4.7 million on advertising opposing a second bridge that would present competition to the one it owns. But MCFN Executive Director Rich Robinson said he couldn’t find any evidence that the DIBC had registered to lobby, or paid a firm to lobby on its behalf.

Gift loophole

And then there’s the gift loophole. Lobbyists are barred from giving gifts to legislators or other officials. But what is a gift? According to the lobby law, it is something that cost more than $57 in 2012. (The threshold is adjusted annually for inflation.) So if a lobbyist gives a senator a ticket to a Michigan State University basketball game, it isn’t a gift after all.

A few years ago, several lobbyists attempted to enhance their generosity by pooling their money to give theater tickets to legislators and spouses without exceeding the threshold. The Secretary of State said no, in response to a ruling request from LaBrant, of the Michigan Chamber, and Robinson, of the Michigan Campaign Finance Network, two of the state’s leading experts on campaign finance and lobby regulation.

Similarly, lobbyists don’t have to identify the legislators they are taking out to breakfast, lunch or dinner as long as the cost is less than $57 in a month or $350 in a reporting period. “Generally, only if you are going out for a real night on the town with the wine and hors d’oeuvres and a nice dessert do you get over the financial threshold,” said LaBrant.

And Michigan is one of only three states without asset disclosure laws for top elected officials.

Unlike members of Congress, and lawmakers in 47 states, they aren’t required to let the public in on their personal wealth or financial holdings, which leaves voters unable to detect potential conflicts of interest. Governors and candidates for governor often voluntarily release their tax returns or summaries of them, but those disclosures are not required.

Various proposals have been made dating back to at least the 1980s to establish financial disclosure laws, similar to those required for candidates for Congress. But none have been enacted into law, so the public can only hope that legislators will disclose any conflicts and abstain when there are conflicts.

Conflicted about conflict

But there are no clear guidelines about what constitutes a conflict, and in reality, lawmakers almost never abstain for ethical reasons. Former Attorney General Mike Cox, who supported financial disclosure in 2009 when he was preparing to run for governor, researched House and Senate records between 2003 and 2009 and found there wasn’t a single instance when a state senator abstained from voting because of a conflict of interest. There were only 33 abstentions in 6,495 votes in the House.

In May 2011, Democrats in the state Senate formally challenged whether senators who had direct interests in limited liability corporations (and stood to benefit under a tax reform plan) should be required to abstain from voting. Republican Lt. Gov. Brian Calley, who serves as president of the Senate, ruled that senators must decide for themselves whether there are conflicts of interest. Everyone voted.

Michigan state law establishes a state ethics board designed to investigate wrongdoing. The members of the seven-person panel are unpaid volunteers, many of whom are former politicians with allegiance to one party or the other. The board has no budget, and its only staff is a civil service official who serves as executive secretary, and an assistant attorney general who is assigned to the board.

Over the years, the board has had little impact. It cannot accept anonymous complaints, which creates a barrier for anyone to come forward who might fear reprisal. Its authority extends to the executive branch but not the judiciary or Legislature. Lynn Jondahl, a former state representative who chaired the ethics board during the administration of Gov. Jennifer Granholm, said lawmakers occasionally approached him in search of guidance, but he had to tell them they were not within the board’s purview.

Even with its executive branch investigations, the ethics board has no power to take action other than to make recommendations to the agency where the alleged violation occurred. “It [the board] is very limited both in terms of its coverage of the executive branch and in terms of the sanctions, or lack of sanctions,” Jondahl said.

Legislator to lobbyist

Ethics reform advocates frequently call for legislation to establish “cooling off periods” before legislators and top administration officials become lobbyists or work in industries they oversaw, usually between six months and two years. But Michigan lawmakers have not been inclined to limit their future career options.

In fact, it is commonplace for legislators and other leading state officials to become lobbyists after their terms expire. Term limits restrict legislators to three two-year terms in the House and two four-year terms in the Senate. Former House Speakers Rick Johnson, Chuck Perricone, Lewis Dodak and Gary Owen are just a few of the legislators who turned lobbyist.

Former Michigan Insurance Consumer Advocate Melvin Butch Hollowell said that most of the state’s insurance commissioners have taken jobs in the industry after leaving government service. It raises questions about whether some of their decisions as commissioner were influenced by the desire to please their future bosses, he said.

Gov. Snyder is a strong proponent of transparency in government, and he proposed an ethics package when he was running for governor in 2010. Among other things, he called for banning all gifts from lobbyists, cooling-off periods, and regulation of issue advertising.

But while Snyder achieved many of his campaign goals after taking office in 2011, these reforms were put on the back burner. Robinson said lawmakers are unlikely to take action unless the public demands it, and so far citizens have shown little interest.

“The Legislature fundamentally is a position between interest groups and the citizens,” Robinson said, “and it’s easier to just throw in your lot with the interest groups.”

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