The Koch Brothers Are Using This State as Their Right-Wing Laboratory

The state of Arizona will shell out at least $5 million per year to free-market academic centers established with funding from billionaire industrialist and Republican political donor Charles Koch at two of its public universities. Part of a series of budget bills that passed the Republican-dominated state House and Senate, the funding decision met the ire of professors and students concerned that the state had earmarked funds for ideological centers tied to big business and a partisan political figure. Still, GOP Gov. Doug Ducey signed the budget on May 10.

Charles and David Kochs’ political influence is no secret to many Americans after the brothers led a massive, $407 million political fundraising effort in 2012. Less well known is the huge investment Charles Koch has made in higher education, giving nearly $108 million to 366 colleges and universities from 2005 to 2014, often funding free-market focused programs. The Kochs’ “Structure of Social Change,” a three-step plan devised in the 1970s to mold America into a libertarian land free from taxes and regulation, begins with funding free-market academic programs. Next, think tanks financed with Koch money take the laissez-faire academic work and package it into easily digestible policy proposals, which, in step three, “citizen activist” groups (Koch-funded “social welfare” nonprofits such as Americans for Prosperity) pressure lawmakers and the public to support.

Based on Koch’s massive contributions to political campaigns and schools, state funding for university centers they helped found that preach their free-market economic philosophies may not come as a surprise. But especially in the state that slashed its higher education budget more than any other from 2008 to 2015, $5 million per year earmarked for Koch-backed, ideological think tanks is alarming.

Arizona’s new education budget gives $2 million to the University of Arizona’s Center for the Philosophy of Freedom, to which the Charles Koch Foundation (CKF) gave $1 million when it was founded in 2011 and at least $1.3 million total. Arizona State University will get $3 million to establish a new school by combining the existing Center for Political Thought and Leadership, to which the Charles Koch Foundation gave $1 million to help found, and Center for the Study of Economic Liberty, which the Charles Koch Foundation helped launch in 2014 with $3.5 million in donations.

So just how indebted to the Koch political network are Arizona’s governor and legislature? This is about to get complicated, so here’s a helpful chart:

Ducey, elected governor in 2014, is the most obvious Koch devotee in Arizona elected office, and a web of Koch-funded, secret-money nonprofits has helped him get there.

As state treasurer in 2012, he led a successful campaign opposing a new tax to fund the state’s schools, and Americans for Responsible Leadership, bankrolled almost entirely by a Koch-funded group, a “social welfare” nonprofit called the Center to Protect Patient Rights, pitched in $925,000 to Ducey’s effort (over 50 percent of the money raised). The president of Americans for Responsible Leadership at the time, Kirk Adams, the former Republican speaker of the Arizona state house, is now Ducey’s chief of staff.

The governor has attended numerous donor summits hosted by the Freedom Partners Chamber of Commerce, the Koch political network’s immense “central bank.” At one such event in June 2014, hoping to score points with the donors as he ran for governor, Ducey said, “I can’t emphasize enough the power of organizations like this and engagement from those in the business community.”

The Kochs and their network responded, spending millions to help elect him. American Encore, the rebranded Center to Protect Patient Rights, spent nearly $700,000 supporting him and even more attacking his main opponent, according to data from the National Institute on Money in State Politics. The Koch-linked 60 Plus Association, to which American Encore gave close to $2.4 million from 2013 to 2014 and which also received funds from Freedom Partners and other Koch groups, spent close to $1.4 million against Ducey’s primary and general election opponents.

American Encore donated large amounts to a series of other Koch-connected groups from 2013 to 2014, some that added more election spending that benefited Ducey’s gubernatorial campaign while violating campaign finance disclosure laws. American Encore gave $905,000 from 2013 to 2014 to an Iowa-based group called the Legacy Foundation Action Fund, providing most of its income that year, and the fund spent at least $275,000 on ads attacking one of Ducey’s 2014 primary opponents and was fined for not disclosing its spending. It also gave $275,000 to South Dakota-based Veterans for a Strong America in 2014, which spent at least $50,000 attacking another of Ducey’s primary opponents and also violated disclosure requirements.

From 2013 to 2014, American Encore gave $265,000 to Americans for Prosperity, the Kochs’ biggest-spending “social welfare” nonprofit. And American Encore continued funding Americans for Responsible Leadership, which in 2012 illegally hid its donors and was fined by the state of California, by donating over $2.4 million in 2013.

Most Koch-backed groups are 501(c)(4) “social welfare” nonprofits, which means they get to devote a portion of their resources toward political activities without disclosing their donors; however, they are required to report their charitable contributions to other entities to the Internal Revenue Service on their annual tax returns.

Electing “Free Enterprise” Legislators

Another mysterious money group plays a big role in both the legislative and gubernatorial elections Arizona. This group, the Arizona Free Enterprise Club,lobbied heavily for the budget provision that gives $5 million each year to the Koch-funded academic centers. As it turns out, one of the group’s directors put in millions to help found one of these free-market centers. AFEC is a “social welfare” nonprofit so few know its funders’ identities, though some hypothesizethat the state’s largest electric utility, Arizona Public Service Company, is a big donor.

But according to IRS records, AFEC gave hundreds of thousands to Koch-backed groups American Encore and 60 Plus Association, so it’s probable the group is yet another link in the Koch money chain through which the billionaire brothers and their henchmen distribute their hefty donations. In 2014, AFEC gave $710,000 to American Encore and $200,000 to the 60 Plus Association.

The money flowed both ways between AFEC and American Encore in 2014; the latter group gave $450,000 to AFEC that year. AFEC also gave over $2.7 million to a group called Save Our Future Now, which spent over $50,000 on independent expenditures in state House and Senate races in 2014 but spent the bulk of its funds supporting anti-solar energy candidates for Arizona’s Corporation Commission, which regulates public utilities. As it turns out, the foundation of the Arizona Public Service Company, which benefits from anti-solar policies, gave the Arizona State University foundation $181,000, and the university foundation donated $100,000 to Save Our Future Now, its only gift to a 501(c)(4) “social welfare” group in 2013.

According to data from the National Institute on Money in State Politics, AFEC since 2010 spent almost $350,000 on independent expenditures for the state legislature (mostly in 2014), gave over $80,000 to GOP state House and Senate victory funds, and also spent $150,000 opposing Ducey’s primary opponent that year. In 2014 alone, AFEC spent over $490,000 on lobbying, presumably interacting with many of the legislators its political spending helped elect. The group also spent $260,000 on Ducey’s effort opposing the state tax to fund education in 2012.

A founding director of AFEC is Randy Kendrick, wife of Arizona Diamondbacks owner Ken Kendrick. Ms. Kendrick, “a leading Koch donor,” left AFEC’s board in July 2014, according to the Arizona Republic. In 2008, she helped found the Center for the Philosophy of Freedom at the University of Arizona with a $2.5 million donation and by rounding up more cash from Charles Koch and other wealthy conservatives. She met the center’s brainchild, David Schmidtz, at an award ceremony at the Institute for Humane Studies, one of the free-market centers at George Mason University that’s taken in tens of millions of dollars from the Charles Koch Foundation.

Randy Kendrick is the ultimate Koch network insider. She helped introduce Sean Noble, the founder of the Center to Protect Patient Rights, to the Koch donor world, and she has reportedly given millions to Noble’s group. Noble is now president of American Encore. As of 2014, Kendrick sat on the board of the Goldwater Institute, an Arizona-based think tank that has received funding from the Charles Koch Foundation and Koch-related groups, known for pushing conservative policies of the controversial big business bill mill, the American Legislative Exchange Council. The Institute is named after former Arizona senator and 1964 Republican presidential nominee Barry Goldwater, who famously opposed the Civil Rights Act.

The Goldwater Institute went to bat for the Legacy Foundation Action Fund after the state’s Clean Elections Commission fined the fund $95,000 for failing to disclose its spending that benefited Ducey’s 2014 gubernatorial run. Listed as a donor to the Goldwater Institute, Americans for Prosperity Arizona chapter director Tom Jenney is quoted as saying, “I rely heavily on the intellectual ammunition supplied by the Goldwater Institute.”

Supporting Ducey’s Agenda

From 2013 to 2014, American Encore funded a group called Prosper, Inc. to the tune of over $1.5 million. Prosper, Inc. is the sister group to the Prosper Foundation, and both were founded by Ducey chief of staff Kirk Adams.

The Prosper Foundation teamed up with the Arizona Chamber of Commerce to publish a 2016 report supporting Ducey’s plan to nix a national monument in the Grand Canyon, opening neighboring areas up for uranium mining. The report also illustrates the groups’ support for another of Ducey’s proposals, Proposition 123, which would raid Arizona’s land trust to fund education although Arizonans have already paid for it. The Prosper, Inc. website displays two issues it supports: mining near the Grand Canyon and raiding the land trust. Prop. 123 was on the ballot on May 17 and squeaked out a narrow victory.

Scott Beaulier, executive director of ASU’s Center for the Study of Economic Liberty, published an 18-page report last October supporting Prop. 123. Beaulier is a prolific player in Koch-funded academics: Having earned his PhD from George Mason University, he is on the board of the school’s Institute for Humane Studies which, like the Mercatus Center, has received tens of millions from the Charles Koch Foundation; a scholar with the Mercatus Center; and former director of the Manuel H. Johnson Center for Political Economy at Troy University, which was founded in part with a $1.2 million donation from the Charles Koch Foundation.

The Center for the Study of Economic Liberty’s founding director, William Boyes, wants to abolish public schools.

A Plan to Milk the State

Agreements that establish Koch-funded, free-market academic centers often require a funding commitment from the university. But state budget items earmarked for the direct funding of Koch-backed centers are rare, if not unprecedented. Connor Gibson, who helps run the student activist group UnKoch My Campus, wrote in an email to me that he’d never seen a state do this before.

Ducey stated otherwise. “I think this is normal and customary for universities, especially public universities across the country,” he said.

The ideal scenario for donors like Charles Koch is this: Put down a large chunk to get a free-market center going, and once it’s established, let the state take it from there.

“This is a clear-cut case of crony capitalism,” wrote Gibson, “which is a bitter irony since Charles Koch has spent big to paint himself as a reformer of corporate welfare. Instead, we’re watching the Koch network fleece Arizona taxpayers to subsidize their private operations, even as the rest of the state’s universities lose tens of millions of dollars in public funding.”

Behold the recent 2016 conference of the Association of Private Enterprise Education, “an association of teachers and scholars from colleges and universities, public policy institutes, and industry with a common interest in studying and supporting the system of private enterprise.” The industry to which APEE refers is Koch Industries and the companies owned by other members of the Koch donor network. At APEE meetings, free-market academics collude with free-market think tanks and industry representatives on, for example, how to establish free-market centers or how to divert university resources into their programs.

APEE boasts that it is “instrumental in establishing Chairs and Centers of Private Enterprise in colleges and universities, which in turn develop courses and programs reaching tens of thousands of students each year.”

What’s more, APEE’s members “serve in advisory capacities to governmental bodies dealing with economic policy, taxation, and other issues on national, state, and local levels.”

Thanks to UnKoch My Campus’ #Kochileaks, we know that nine professors affiliated with the Koch-backed academic centers that will gain millions in funding from Arizona taxpayers made presentations:

• Scott Beaulier, director of the Center for the Study of Economic Liberty at ASU

• Robert Lawson, member of ASU’s Center for the Study of Economic Liberty’s network of scholars, director of the O’Neil Center for Global Markets and Freedom at the Southern Methodist University Cox School of Business

• Dwight Lee, member of ASU’s Center for the Study of Economic Liberty’s network of scholars, senior fellow at the O’Neil Center for Global Markets and Freedom at the Southern Methodist University Cox School of Business,Common Sense Economics author

• Benjamin Powell, member of ASU’s Center for the Study of Economic Liberty’s network of scholars and director of the Free Market Institute at Texas Tech University

• Vernon Smith, member of the academic advisory council of ASU’s Center for the Study of Economic Liberty and the George L. Argyros Endowed Chair in Finance and Economics at Chapman University

• Peter Boettke, member of the academic advisory council of ASU’s Center for the Study of Economic Liberty and director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University

• Joshua Hall, a member of the academic advisory council of ASU’s Center for the Study of Economic Liberty and professor of economics at West Virginia University

• Steve Slivinski, research fellow at ASU’s Center for the Study of Economic Liberty

• Virgil Storr, research professor at the University of Arizona’s Freedom Center, professor of economics at George Mason University and a senior research fellow at the Mercatus Center

Other Arizona professors to attend the 2016 APEE conference include Charity-Joy Acchiardo and Dirk Mateer of the University of Arizona, both of whom got their doctorates at Koch-funded schools.

George Crowley of Troy University spoke on a panel chaired by the Charles Koch Foundation’s Brennan Brown titled “Being an Intellectual Entrepreneur,” relating how he and Beaulier started the free-market center at Troy. “Our task really was, in a lot of ways, to kind of fundamentally change what Troy was doing … So, we’ve been very lucky at Troy. We had a big gift that let us hire a whole bunch of people all at once, and we kind of were able to take over…”

Joshua Hall spoke about state funds on the same Koch-directed panel. “I want to co-opt resources,” Hall said. The audience laughed.