A Reporters' Guide to the Koch-funded Rich States, Poor States Report

WASHINGTON - The American Legislative Exchange Council (ALEC) is slated to roll out its annual "Rich States, Poor States" publication this week. The document, whose lead author is economist Arthur Laffer, is sold to the press as an objective, academic measure of state economic performance, but should instead be viewed more as a lobby scorecard ranking states on the adoption of extreme ALEC policies that have little or nothing to do with economic outcomes. This year, leaked documents revealed that the report is directly funded by the Kochs, on top of longstanding Koch support for ALEC itself.

Until recently, little information was available about the funders of Rich States, Poor States, but tucked in a cache of ALEC internal documents obtained by the Guardian in December was a spreadsheet (PDF pg. 40) that showed for the first time that Rich States, Poor States is funded by the Kochs' Claude Lambe Foundation, as well as the Searle Freedom Trust.

The Claude R. Lambe Charitable Foundation, is one of three Koch Family Foundation controlled and run by the billionaire industrialists Charles and David Koch. The Searle Freedom Trust, was founded by David Searle, who made millions from aspartame marketed as Nutrasweet. Both foundations are major funders of a national right-wing infrastructure that includes ALEC and the State Policy Network, 64 state-based think tanks that produce academic reports, talking points and more to advance ALEC’s agenda of tax breaks for corporations, steep budget cuts and attacks on unionized workers.

A spokeswoman for Koch Companies Public Sector confirmed the Koch funding to the Milwaukee Journal Sentinel. "We can confirm that the Claude R. Lambe Foundation provided a grant of $150,000 to the Center for State Fiscal Reform that was paid out in November 2012" said Melissa Cohlmia, director of corporate communications. Cohlmia claimed the aid was for general support, but it is clearly listed as funding Rich State, Poor States in the leaked documents. The Center for State Fiscal Reform is an arm of ALEC that lists the Laffer study as its signature publication.

ALEC brings together corporate lobbyists and state legislators to vote on "model" legislation behind closed doors which are then introduced by ALEC legislators across the country. ALEC is almost entirely funded by industry, including Koch Industries, which has long served on the ALEC board along with Altria/Phllip Morris and Exxon Mobil. ALEC task force meetings where model bills are discussed are closed to the press and the public, as Dana Milbank from the Washington Post reports.  Under fire for its role in promoting extreme policies including anti-union bills, voter suppression bills, "Stand Your Ground" laws and more, ALEC has lost 70 corporate sponsors in the last few years, including some of the nation’s largest firms including GE, General Motors, Amazon, Wal-Mart and more. ALEC's funding has dropped by one-third, it has lost some 400 legislators, and is the subject of an IRS complaint for illegal lobbying activity.

So how does Mississippi's economy outrank New York's? It doesn’t. By any standard measure of economic development, states ranked highest in the ALEC scorecard actually have worse economic outcomes, say experts.

Greg LeRoy, executive director of Good Jobs First in Washington, D.C., told the Milwaukee Journal Sentinel that Laffer's report evaluates and rewards states that are suppressing wages and moving their tax burden from the rich to the poor. "This is all about regressivity," LeRoy said. The non-partisan, non-profit resource centers Good Jobs First and the Iowa Policy Project issued a report in 2013 which took apart Rich States, Poor States on methodological grounds. Their analysis criticized Rich States, Poor States for its "primitive approaches" and for ignoring decades of academic peer-reviewed studies on economic development.

Moreover, the 2013 Rich States Poor States appeared highly politicized, ranking Scott Walker's Wisconsin 15th in the nation at a time the state was ranked 44th for new job creation by the Bureau of Labor Statistics. Laffer and his colleagues, which included Stephen Moore (formerly of the Wall Street Journal, now at the Heritage Foundation), seem intent on rewarding Republican governors who pursue austerity agendas even if that agenda hurts economic growth. Wisconsin’s Governor Scott Walker is a former ALEC member who signed 19 ALEC bills into law in his first two years in office, slashed government spending and eviscerated state unions prompting mass protests in February 2011.

Laffer told the Milwaukee Journal Sentinel that his report was not "rocket surgery," mixing metaphors. Indeed, from the perspective of the Center for Media and Democracy, publishers of PRWatch.org and ALECexposed.org the document can been seen more as a highly politicized, lobbyist scorecard for the ALEC agenda than objective economic analysis. Although Wisconsin still has one of the worst job creation records in the country, ranking 32nd nationally or 9 out of 10 in upper Midwest, it will not be surprising if Scott Walker’s state moves up in the Laffer rankings given his aspirations for higher office.