Window closing on legislators’ financial disclosure reform

Majority Democrats in the Michigan Legislature are working behind closed doors on legislation to implement Proposal 1, which set broad disclosure requirements designed to expose potential conflicts of interest.

The clock is ticking: Last year’s voter-approved constitutional amendment requires lawmakers to finish by year’s end. If they don’t, any resident will have the right to sue the state to force action.

Ten months into their new majorities, Democrats have yet to introduce the required personal financial disclosure legislation. But they will “very soon,” said Senate Elections and Ethics Chair Jeremy Moss, D-Southfield.

“You’re going to see legislation that both meets the requirements of the ballot proposal and is stronger in many areas,” he told Bridge.

Whatever form it takes, the legislation will end Michigan’s dubious reign as one of only two states that does not require officials to disclose finances in any form. In the other state, Idaho, lawmakers last year killed reform legislation.

 “It’s very hard to get lawmakers to pass very good ethics laws that apply to themselves,” said Delaney Masco, senior legal counsel for ethics at the national nonprofit Campaign Legal Center.

“Once you have power, you want power, you don’t want to be limited.”

Here are some potential loopholes to watch for in the pending legislation:

Are income and asset values disclosed?

Proposal 1 will require lawmakers and officials including the governor to disclose each year a “description of assets” and sources of both earned and unearned income.

But the constitutional amendment does not require officials to specify how much money they earned from each source, or how much their assets are worth. That matters, said Masco, the Campaign Legal Center attorney.

“Somebody who’s working part-time for a consulting firm and maybe does it ad hoc and is making $20,000 a year is very different than somebody who makes $450,000 working for a big consulting firm,” she said.

Are spouses included?

Proposal 1 is also silent on whether officials must disclose income sources and assets held by their spouses or dependent children. That’s a requirement at the federal level and many states.

Michigan officials will have to decide whether to follow suit to require disclosure from spouses like the husband of state Sen. Lana Theis, R-Brighton, who in 2017 ran a nonprofit fund that received payments from an industry group with bills before a committee that his wife chaired.

“The best practice is to have at least some disclosure for spousal income,” Masco said. “If my husband has stock in Nike, that’s the same as me having stock in Nike — and same with dependent children.”

But lawmakers have already expressed hesitation.

State Rep. Mike Harris, a Waterford Township Republican who introduced personal financial disclosure legislation in March, did not include spousal income in his proposal but said he is “open to a conversation.”

“Our spouses (and kids) are not the ones who ran for office,” he said. “The scrutiny is on us. The public attention is on us. So I think our focus was to make sure we keep the attention off of the people that are not elected.”

What are penalties?

Michigan Secretary of State Jocelyn Benson, a Democrat whose office will be tasked with collecting and publishing the disclosure reports, has spent months urging legislators to build strong enforcement penalties into the law.

The ballot proposal itself did not specify how or if officials should be penalized if they lie on a financial disclosure report or fail to file one. The amendment says only that they “must” file by April 15, 2024, and every year thereafter.

If there are violations, there needs to be “clarity to how we can hold folks accountable,” Benson told Bridge this summer.

“Proposal 1 didn’t go far enough …,” she said. “We need to do more to take our state from worst to first in our ethics policy.”

Benson has cited federal rules as a model, but experts say members of Congress often skip periodic transaction reports because the penalty is so minimal: A $200 fine once lawmakers miss the filing deadline by 30 days.

All gifts, or just some gifts?

The summary of Proposal 1 that greeted voters on the ballot last fall promised that the amendment would require officials to disclose “gifts” each year.

There’s a catch in the fine print: The full text of the amendment only requires lawmakers to report “gifts received and required to be reported by a lobbyist or lobbyist agent, as prescribed by state law.”

In other words, unless lawmakers toughen those rules through the pending legislation, officials would only be required to disclose gifts that lobbyists are already required to disclose under state law.

They wouldn’t be required to disclose gifts from other sources, and they would not be required to disclose the kind of secret junkets taken by former House Speaker Lee Chatfield, a Levering Republican who is now under criminal investigation for alleged financial impropriety and sexual assault.

“The public should know that there are people out there who are maybe giving expensive gifts to a lawmaker, and then the public can decide if they think that’s appropriate or not,” said Masco, the Campaign Legal Center attorney.