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ORGANIZATION ISSUES MONEY/POLITICS NEWS INDEX |
School finance bill highlights rivalry inside the GOP |
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by Sandy Theis COLUMBUS - Along with enabling the state to build schools more cheaply, passage of State Issue 1 has heightened a political rivalry between two of Ohio's rising Republican Party stars. The players: Auditor Jim Petro of Cleveland and Treasurer Joseph Deters of Cincinnati. The stakes: Control over millions of dollars in bond contracts and the campaign contributions they traditionally have spawned. Both Petro and Deters are vying for such control, or at least trying to prevent the other from receiving it. A bill that the Ohio Senate passed unanimously this week would allow the state to implement Issue 1, a constitutional amendment that puts the full faith and credit of the state behind bonds sold to finance school repairs and construction. Given Ohio's recent emphasis on school construction, millions of dollars in state contracts are at stake. Rather than side with Petro or Deters, Senate Bill 206 gives Deters authority over an already-scheduled bond sale this month but postpones any decisions on how bond sales for school buildings are handled after that. Lawmakers said that before making a final decision, they plan a thorough review of the existing processes and will examine suggestions by both officeholders. "The most important thing is getting the best deal for Ohio," said Senate President Richard Finan, a suburban Cincinnati Republican. "Forget about any side issues." One side issue is the race for attorney general. Petro and Deters have both signaled an interest, with Petro actively raising money for the 2002 contest. Deters and Petro have put forth rival proposals on future sales. Under Petro's plan, which he outlined in a Nov. 18 letter to the governor, future school-building debt would be issued by the Sinking Fund Commission, a powerful but obscure state panel that Petro notes has a solid record of performance dating to 1851. As the state auditor, Petro chairs the commission, which issues general obligation bonds. The panel includes the governor, secretary of state, treasurer and attorney general. "This would allow us to make a collective decision," said Petro, who noted that the fund awards contracts to the low bidder, rather than negotiating a deal with would-be donors. Deters has his own ideas. "Jim's letter is a good starting point for discussion but simply dumping this in the Sinking Fund may be a bit simplistic," Deters said in an interview. Instead, Deters wants the state to end its uneven practice of allowing the Sinking Fund and 15 other agencies, each with varying levels of expertise, to issue debt. Ohio should look to Kentucky or other states, he said, that have created commissions to oversee and monitor all bond sales. Deters said his office could serve as the gatekeeper for debt consolidation. He also said he is preparing his own letter to the governor - complete with charts and graphs - that shows so-called negotiated deals have served the state well. "Your knee-jerk reaction is to say competitive [bidding- is better," Deters said, because it leaves less room for political shenanigans. "The data shows otherwise." Under the current setup, when the state or a state agency wants to borrow money for highways, parks, prisons, sports facilities, state buildings and schools, it hires an underwriter to sell bonds to the public to raise the money. The government is responsible for paying the principal and interest. In return for guaranteeing to sell the bonds and even buying them if necessary, the underwriters traditionally get a fee that varies depending on the size of the issuance. For decades, major bond firms served as a reliable source of campaign contributions for politicians. Amid persistent scandals linking campaign donations to government contracts, the industry - with encouragement from the Securities and Exchange Commission - adopted a rule designed to curb political giving. Known as G-37 and enforced by the SEC, it limits the amount that bond dealers, executives and their firms can give to state and local officials with the power to grant underwriting business. Like most other campaign finance reforms, it has a series of loopholes, and while the flow of money from bond houses to politicians has slowed, it certainly hasn't stopped, according to a recent analysis by Citizen Action, a political and consumer advocacy group. The limits do not apply to money donated from law firms and lobbyists that represent securities firms, nor do they apply to political parties. Of the $1.6 million Deters raised for the treasurer's race, he received $255,533 from the finance, insurance and real estate industries, with an additional $224,120 from lawyers and lobbyists, many of whom represent securities firms and businesses linked to bond sales, according to Citizen Action. For example, he collected $8,300 from lawyers at Peck Shaffer & Williams, a Cincinnati law firm noted for its bond work, and $6,400 from Squire, Sanders & Dempsey, a Cleveland-based firm with a well-established bond practice. Petro raised $1.2 million. Although his bankroll relies heavily on accounting firms that do business with his office, finance firms, lawyers and lobbyists were among his biggest donors. Despite efforts to curb giving by bond firms, Citizen Action Research Director Laura Yeomans said she remains troubled by the continued giving. "There's simply a conflict of interest when government decisions that directly affect business are being made at the same time thousands of dollars in campaign donations are being received from businesses that benefit from those decisions," she said. Both Petro and Deters downplayed the role of campaign contributions in their quest for the bonding authority. "The reality is, they give heavily to both sides so it really doesn't matter," Deters said. Petro's take on the money: "I haven't even thought of it in that regard." Plain Dealer Reporter Thomas Suddes contributed to this report. |