A July 24, 2024, Freedom Foundation press release reveals the organization filed three complaints against the Pennsylvania State Education Association (PSEA) for allegedly laundering member dues to "bankroll Josh Shapiro's 2022 candidacy." The complaints allege the "Pennsylvania State Education Association (PSEA) and the Democratic Governors Association (DGA) executed an illegal scheme during the 2022 Pennsylvania general election to surreptitiously use nearly $1.5 million in teachers' union dues to back then-candidate Josh Shapiro's gubernatorial campaign." The allegations are of particular interest given that Shapiro may well be the chosen running mate for Kamala Harris in the upcoming presidential election.
PSEA describes itself as "the largest public sector union in the state." According to Freedom Foundation documents, "The U.S. Department of Labor Form LM-2, PSEA had 137,087 active members and nearly $110 million in total receipts in the 2022-23 academic year." PSEA maintains two political committees: PSEA-PACE and the Fund for Student Success (FSS).
There is plenty of evidence pointing to PSEA's support of Shapiro. According to the Freedom Foundation, PSEA endorsed Shapiro in December 2021. A page on the website appealed for contributions to a PSEA political committee to help "a pro-public education governor." PSEA also urged members to vote for Shapiro against Mastriano in the September and November 2022 issues of the union's member newsletter, PSEA Voice.
The Freedom Foundation's complaints show that PSEA appears to have made two large contributions to FSS totaling $1,475,000 from the union's general treasury without the knowledge of its members. FSS is a relatively new political fund established in 2018, according to Maxford Nelsen, the Freedom Foundation's Director of Research and Government Affairs. According to Mr. Nelsen, FSS is much less visible to its members than PACE is. PACE is a long-standing political fund properly registered in the state. "The only reference to the FSS on PSEA's website is found in a brief article from the September 2018 edition of the union's membership newsletter, which notes that 'The Fund for Student Success will not—and legally cannot—provide campaign contributions to candidates, elected officials, or campaign committees," according to the Freedom Foundation.
Notably, FSS is "not registered as a political committee in Pennsylvania," says Nelsen. FSS does not file campaign finance disclosures in the state, and it is "funded entirely by the general fund of PSEA," Nelsen told UncoverDC. He also explained that while "there is nothing illegal about it existing, it too should have been registered as a political committee within the state." He also believes PSEA members "would be surprised to learn that the union operates this fund for the purpose of direct candidate campaign work."
According to Nelsen, political committees can fund things like independent advertising that supports or opposes a candidate. That is legal because "Federal courts and the Supreme Court have acknowledged that corporations and labor unions have a First Amendment right to spend their own funds on political advertising." However, states can still prohibit direct corporate contributions to a campaign. The prohibition, says Nelsen, is an "anti-corruption measure to discourage or at least minimize the appearance of quid pro quo transactions."
The Freedom Foundation believes it has the paper trail to prove FSS engaged in the latter. And, the way FSS went about it flew way under the radar. Concerning the obscured money trail, Nelsen notes in his press release email that FSS allegedly "attempted to mask the illegal contributions":
"While the transactions do not appear anywhere in Pennsylvania campaign finance records, both the FSS and the Democratic Governor's Association (DGA)acknowledged they occurred on obscure disclosures filed with the Internal Revenue Service. However, in an additional attempt to mask the illegal contributions, the FSS fraudulently claimed on its 2022 federal tax return that its contributions went to Put Pennsylvania First—an independent expenditure political committee to which it could have legally contributed—not the DGA. However, Put Pennsylvania First did not disclose receiving any funds from the FSS."
When asked how the Freedom Foundation found the contributions when FSS was not registered in the state, Nelsen said he had to dig through "some fairly obscure IRS records to recreate the money trail here. If you had set out to document the union influence in Pennsylvania elections and you had gone to the campaign finance reports that were filed in Pennsylvania, you wouldn't be able to recreate the money trail because they were not reported. It was only after we went to other federally filed reports that we were able to piece it together." According to Nelsen, the DGA didn't even report the contributions. DGA makes contributions directly to candidate campaigns." Things," Nelsen added, "Weren't adding up."
Nelsen began to dig when a PSEA "teacher came to him with some unrelated questions about Pennsylvania law when it comes to unions." While researching PA laws, Nelsen noted, "Pennsylvania public sector collective bargaining law that prohibits government unions in the state from using member dues to make political donations. Many other states have no restrictions on political advocacy. They can use member dues for politics all day long, and they frequently do."
Three Complaints to Address the Issues and Enforce the Laws
Freedom Foundation filed three different complaints because there are "various laws at issue and different authorities that enforce those laws." As a result, the foundation filed its first complaint alleging violations of the Election Code and specific criminal statutes by the PSEA, FSS, and DGA with the Pennsylvania Department of State, the Pennsylvania Office of Attorney General, and the Dauphin County District Attorney. The second was filed with the Pennsylvania Labor Relations Board and alleges violations of the Public Employee Relations Act by PSEA. The third complaint, alleging the Fund for Student Success submitted a fraudulent 2022 tax return, was filed with the Internal Revenue Service, the U.S. Attorney for the Middle District of Pennsylvania, and the Federal Bureau of Investigation's Philadelphia field office.
The press release stated that the alleged violations could result in fines or criminal prosecutions. It states, "Under both applicable Pennsylvania law and the Internal Revenue Code, some of the alleged violations may result in civil fines, while most of the alleged violations, if done willfully, are treated as criminal misdemeanors or even felonies punishable with financial penalties and imprisonment."
Because of the covert and muddied money trail, Freedom Foundation created a graphic mapping the way member's dues were allegedly laundered, pictured below:
PSEA Members Led to Believe Their Dues Would Not Be Used for Campaign Contributions
The most disturbing part of the laundering scheme is that PSEA members have been correctly led to believe that their dues are not being used for campaign contributions when it looks as though they have been. According to Nelsen, PSEA has been "insistent with its members that it doesn't use member dues for political activity because it is legally prohibited from doing so." Moreover, the Freedom Foundation alleges the union has been willfully deceptive with its members. Complaint number two highlights PSEA's actions as "willful" in the excerpted paragraph below:
"Because the PSEA repeatedly and correctly stated in writing to its members that it may not legally use members' dues to make contributions to political candidates or parties, and because PSEA was respondent to a previous complaint in which the Pennsylvania Labor Relations Board (PLRB) determined, and the PSEA acknowledged, that the PERA prohibits employee organizations like PSEA from contributing general treasury funds to a political candidate or party, the decision(s) of the PSEA Officers, and potentially others, to do so anyway demonstrates that their violations of the PERA were willful."
The Freedom Foundation is unaware of any other illicit activity by PSEA. When asked whether he has found anything else, Nelsen responded that he has not "had the time or the energy to go check on every public employee union in Pennsylvania to see if they're complying or working around these statutes, not to mention other states." Given how the FSS money trail seems to have been conveniently sheltered deep in IRS documents where few would care to look, this may not be the only example of a public union improperly using member dues to bankroll favored candidates.
