Thursday, July 09, 2009

Criminal Spending of Public Money

by Andrew Gillen

The papers are abuzz with the news that Philip Day, the head of the National Association of Student Financial Aid Administrators (NASFAA), is being charged with eight felonies. All I really know is what I've read in the papers, so I'll hold off on trying to comment on or prematurely make judgments, because really, who does that?

I would like to focus on the alleged crime, as a way of pointing out a bigger problem.
[Day is] accused of eight felonies for directing a conspiracy in which college money was diverted into campaigns promoting local and state bond measures to benefit community colleges.

State law bars spending public funds on political campaigns, and it also is illegal to "launder" political donations by concealing their true source.
Why is spending public funds on political campaigns wrong? Presumably, because we don't want the corrupt situation of public money being used to influence the decision of how much and where to spend public money, or how those who spend public money should be overseen.

Here's my question: If using public money in political campaigns is wrong, then shouldn't lobbying by institutions that receive public funds be wrong too? Many public universities have extensive lobbying operations (though they try to call it something else), which are essentially using public money to say that more public funds should be spent on themselves, and that they should be subject to less oversight in their spending of public money.

We only had to spend hundreds of billions of dollars in bailing out Fannie Mae and Freddie Mac to see the folly in allowing public money to be used for lobbying (much of their advantage came from their implicit, now explicit, guarantee, and they lobbied extensively and successfully to resist regulation, with disastrous consequences for the rest of us).

If I tried, I could come up with some differences between what Day allegedly did and what many public universities do (the whole laundering thing jumps to mind). But when you look at the big picture, both are basically spending public money to influence the political process with the goal of getting even more public money. Despite the similarities, the outcomes are dramatically different. If convicted Day faces "nine years in prison and fines of more than $300,000", while successful university lobbying is rewarded with bigger budgets, and likely raises for those involved.

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