(June 2013) Three decades before Congress voted to defund1 a welfare lobby founded in Arkansas, congressional auditors found the group disregarded federal guidelines by using trainees in a taxpayer-funded program for political activity. The episode illustrates the peril of legislators creating bias in the policy arena by subsidizing pet groups with tax dollars.

Originally Relied on Private Funds

The irony is that Arkansas Community Organizations for Reform Now (ACORN) originally relied on private donations, while avoiding taxpayer funding after it was established in Pulaski County in 1970.  Steven Wade Rathke, then a 21-year-old organizer for the National Welfare Rights Organization (NWRO), arrived in Arkansas in 1970 to organize new chapters to aid welfare recipients.  Rathke, a New Orleans native, decided to form ACORN, “an agency that would serve as a catalyst for the operation of all of the chapters.” ACORN “served as coordinating body” for NWRO chapters until April 1971,” when it severed ties with the group.2

ACORN originally relied on private funds. The Arkansas Gazette noted:

“ACORN is funded almost solely from membership dues.  A family is counted as one member, and pays $1 to join and $1 a month for dues.  “We get a couple of dollars here and there from churches and individuals, but we don’t get any money from foundations and the government,” Rathke said.  The (ACORN) Board refuses to accept federal funds.  “They are 100 percent against it because it doesn’t want our flexibility curtailed,” Rathke said.  “We have the right to do what we want.”3

But the group’s approach to fundraising later devolved.

Government as Community Activist, Not Umpire

Legislators create bias in the public policy arena when they use tax dollars to subsidize pet groups whose policies they support.  Government, in such circumstances, devolves from neutral umpire to partisan community activist.

ACORN is an example. The group evolved from Rathke’s 1973 proclamation of independence to a 2011 Government Accountability Office (GAO) report illustrating the group’s state of dependence on government.  The GAO found ACORN received more than $48 million in taxpayer-funding in fiscal years 2005 through 2009 alone.  According to the report:

GAO identified awards to ACORN or potentially related organizations by 31 federal agencies and audits of such awards; documentation of related investigations and cases; and actions to implement funding restrictions by the 27 agencies in our review subject to them. Seventeen of the 31 agencies identified more than $48 million–$44.6 million in federal grants and at least $3.8 million in subawards (grants and contracts awarded by federal grantees)–to ACORN or potentially related organizations, primarily for housing-related purposes, during fiscal years 2005 through 2009. Agencies were not required to collect data on subawards; consequently, agencies were limited in their ability to identify all funding they provided to ACORN or potentially related organizations through subawards.”4

The GAO report was not the first to note taxpayer funding for ACORN. Government auditors told a 1979 House panel the group “violated federal guidelines for the Volunteers in Service to America contract by using VISTA trainees in political activity in 1977 and 1978.”  Auditors said officials canceled the federal grant to ACORN after Rathke “refused to change political language in manuals used to train Vista workers.”5

Conclusion: The Cost of Selling Out

The lesson for policymakers is that pet groups of the left and right should never be subsidized with tax dollars.  The lesson for welfare lobbies and their camp followers is that playing the insiders’ game also exacts a cost.6

1  Congress voted to eliminate federal funding to ACORN after undercover videos produced by youth activist James O’Keefe received widespread media coverage.  O’Keefe’s 2013 book, Breakthrough (Threshold Editions) discusses the episode.

2  Arkansas Gazette, July 22, 1973

3  Ibid.

4  GAO, “ACORN-Federal Funding and Monitoring,” June 17, 2011, http://gao.gov/products/GAO-11-484

5  Arkansas Gazette, June 22, 1979

6  ACORN filed for Chapter 7 bankruptcy in November 2010