Nytes' community development corporation receives at least 95% of its funding from government grants. It has received its largest grants from the federal Housing and Urban Development's Community Development Block Grant and HOME programs. The Ballard administration allocated tens of millions of dollars in grant monies it received as part of the Obama administration's federal stimulus spending over the past couple of years, including close to $2 million to Nytes' CDC. According to the OSC, it will not subject a nonprofit employee to the Hatch Act prohibitions on political activities unless the federal program from which a grant recipient derives its funding statutorily deems the recipient to be a state or local agency. The OSC finds only two federal statutes, which authorize the Head Start program and Community Service Block Grant program, deem nonprofit recipients to be covered by the Little Hatch Act restrictions. This narrow interpretation of the Little Hatch Act restrictions means most of the people working for organizations that received the unprecedented expenditure of federal stimulus dollars are free to engage in partisan political activities.
What I find unfortunate in this interpretation is the categorical treatment of nonprofits for purposes of this interpretation. Let's face it, not all nonprofits are similarly-situated. Many nonprofits derive the bulk of their funding from non-government sources, while others, including Nytes' CDC, depend almost exclusively on government funding for their existence. Community development corporations are specifically recognized by state statute and are authorized to receive government funds and perform a number of government-related functions. For all practical purposes, they are government instrumentalities but for their nonprofit designation.
In Indianapolis, we have other similar nonprofits, including the Indianapolis Convention and Visitors Association, Indianapolis Downtown, Inc. and the Greater Indianapolis Progress Committee, for example, that are primarily funded and controlled by our city-county government. Indeed, the Indianapolis Star once sued the ICVA to have it deemed a public agency for purposes of reviewing its records under Indiana's Access to Public Records law. The Star maintained the ICVA, a private, nonprofit corporation, was a public agency under the Access to Public Records law because "the monies received from the CIB by ICVA were in the nature of a grant" which made the ICVA "maintained and supported at public expense." The Indiana Supreme Court agreed the ICVA was a public agency subject to the public records law.
In the case of the grants awarded to Nytes' CDC, the money flows down from HUD to the City of Indianapolis and distributed to various agencies by Mayor Ballard's administration, subject to appropriation by the City-County Council. Nytes sits as a partisan elected member of that council carrying out a legislative function over a whole host of budgetary and substantive issues on which the partisan elected executive is dependent on her action. No sooner had Nytes crossed party lines and voted for Ballard's controversial bailout plan for the Capital Improvement Board than Ballard announced he was awarding her CDC a $1 million grant from funds the city received under HUD's Neighorhood Stabilization Program. If Nytes worked for a housing authority instead of a CDC, the OSC would have subjected her to the Little Hatch Act restrictions and barred her from seeking partisan elected office. It seems to me to be a distinction without a difference. Both entities are public agencies receiving government grants and, thereby, being maintained and supported at public expense. Am I missing something here?
UPDATE: The Star's "Behind Closed Doors" takes up the issue in this week's column. Nytes tells the Star her decision not to seek re-election had nothing to do with a potential primary challenge or Hatch Act prohibition. On the Hatct Act, the item reads:
Nytes provided an opinion she sought from the U.S. Office of Special Counsel in October. It says she isn't restricted from running for office because the Mapleton-Fall Creek organization's federal grants don't include the only two sources that specifically invoke the Hatch Act for nonprofit employees.The lawyer from whom Nytes sought advice, Ed DeLaney, challenged Terre Haute Mayor Duke Bennett's election as mayor when he upset incumbent Mayor Kevin Burke. Bennett had worked for the Hamilton Center, a nonprofit which received money from the Headstart program. Even though Bennett had no control over those Headstart funds, he was still found to be in violation of the Hatch Act; however, because the complaint was not brought until after he resigned his nonprofit job to become mayor, no action was taken against him. DeLaney's efforts to overturn Bennett's election through a post-election contest for violating the Act was eventually decided in Bennett's favor by the Indiana Supreme Court.
"I sought the official opinion on the Hatch Act because there had ben persistent remarks over the last year, by folks who do not like my votes, that I was breaking the law because of my full-time job," Nytes said . . .
Gary Welsh, a Republican attorney who publishes Advance Indiana blog, had speculated that the Hatch Act was the reason for Nytes' decision not to run.
Last week, Welsh said that even if the law doesn't apply to Nytes, her participation in politics still doesn't look right.
He argued that community development nonprofits should be considered quasi-governmental entities, akin to housing authorities, which have been found to fall under broader Hatch Act restrictions.
"This simply points up the absurdity of it all," Welsh wrote in an e-mail. "She had control over the expenditure of public funds no differently than the housing authority employee. In her role as a councilor, she gets to vote on important matters the mayor seeks in terms of the budget and a whole host of issues."