Patriotic Philanthropy? Financing the State with Gifts to Government

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Patriotic Philanthropy? Financing the State with Gifts to Government Patriotic Philanthropy? Financing the State with Gifts to Government Margaret H. Lemos* & Guy-Uriel Charles** ABSTRACT This Article offers a positive and normative account of an important and growing trend: wealthy individuals are increasingly giving their money to the government to encourage the government to fund particular projects that these individuals want the government to pursue. Such gifts—dubbed “patriotic philanthropy” by one prominent donor—raise fundamental questions about the role that private money plays and ought to play in public policy-making. Legal academics have addressed these types of questions in other contexts, such as campaign financing, privatization of government, and private philanthropy. However, patriotic philanthropy, which presents a new and perhaps more effective way for wealthy individuals to influence the government, has generally escaped the attention of the legal literature. We aim to remedy that lacuna with this Article. Although we do not question the enormous good that patriotic philanthropy can do, this Article argues that gifts to government raise significant concerns about democratic process, equality, and state capacity. DOI: https://doi.org/10.15779/Z38N87303D Copyright © 2018 California Law Review, Inc. California Law Review, Inc. (CLR) is a California nonprofit corporation. CLR and the authors are solely responsible for the content of their publications. * Robert G. Seaks LL.B. ‘34 Professor of Law, Duke University. ** Edward and Ellen Marie Schwarzman Professor of Law, Duke University. Thanks to Matt Adler, Joseph Blocher, Curtis Bradley, Charlie Clofelter, Cary Coglianese, Deborah DeMott, Ofer Eldar, Joel Fleischman, Barry Friedman, Peter Frumkin, Kristin Goss, Mitu Gulati, Kim Krawiec, Rich Schmalbeck, and Larry Zelenak, as well as workshop and colloquium participants at Duke University School of Law, New York University School of Law, and William & Mary Law School, for helpful conversations and comments on earlier drafts. We are grateful to Miata Eggerly, Carly Penner, Brandon Rice, and the Duke Law Library for invaluable research assistance. 1129 1130 CALIFORNIA LAW REVIEW [Vol. 106:1129 Abstract ................................................................................................ 1129 Introduction .......................................................................................... 1130 I. Money for Government: Public and Private Sources of Financing ... 1136 A. Taxes ................................................................................. 1136 B. Intergovernmental Grants .................................................. 1138 C. Fees.................................................................................... 1140 D. Bonds ................................................................................. 1142 E. Public-Private Partnerships ............................................... 1143 II. Money as Influence: Spending Options for Policy Entrepreneurs ... 1148 A. Campaign Spending and Lobbying ................................... 1148 B. Private Philanthropy .......................................................... 1155 C. Gifts to Government .......................................................... 1159 III. The Trouble With Gifts .................................................................. 1170 A. The Almighty Dollar ......................................................... 1171 B. Objections.......................................................................... 1177 1. The Benevolent Dictator Objection ............................. 1177 2. The Equality Objection ............................................... 1181 3. The Hollow State Objection ........................................ 1185 C. Implications ....................................................................... 1188 Conclusion ............................................................................................ 1193 INTRODUCTION On June 18, 2015, the public radio program Radiolab aired a segment called “Eye in the Sky,” which focused on a new brand of surveillance that watches over an entire city by continuously collecting images from a plane-mounted camera array.1 An Air Force engineer named Ross McNutt developed the technology during the Iraq War to help the military figure out who was planting roadside bombs.2 The idea was tantalizingly simple, as was the pitch: “Imagine Google Earth with TiVo capacity.”3 In short, the cameras would serve as unblinking eyes in the sky that recorded everything they saw. Because the cameras captured such a wide area, the images were tiny; pedestrians, for example, would appear as mere dots.4 But the point was tracking, not recognition.5 Using the recorded images, analysts could work backward from an event—such as a roadside explosion—to pinpoint any vehicle that stopped at the 1. Eye in the Sky, RADIOLAB (June 18, 2015), http://www.radiolab.org/story/eye-sky [https://perma.cc/7RR2-CC9E]. 2. See Monte Reel, Secret Cameras Record Baltimore’s Every Move from Above, BLOOMBERG BUSINESSWEEK (Aug. 23, 2016), https://www.bloomberg.com/features/2016-baltimore- secret-surveillance [https://perma.cc/76AA-KQVZ]. 3. Id. 4. See id. 5. See id. 2018] PATRIOTIC PHILANTHROPY? 1131 target location, and then trace the movements of that vehicle to identify any addresses it visited before and after the explosion.6 After retiring from the military in 2007, McNutt began to focus on commercial applications for the technology.7 He started a company called Persistent Surveillance and started attending security trade expos to market his product.8 His first client was the mayor of Ciudad Juárez, Mexico, which had earned the title of most dangerous city on earth thanks to warring drug cartels.9 The technology was a great success, helping the city secure dozens of arrests and confessions in a few months’ time.10 Soon, however, the city ran out of money to pay for the service, and McNutt returned to the United States and the search for clients.11 As it happened, the Radiolab program proved to be providential. Shortly after the “Eye in the Sky” segment aired, McNutt received an email from Texas billionaires John and Laura Arnold.12 John had been a trader at Enron and later ran a successful hedge fund; the Arnolds now manage an eponymous foundation with $1.8 billion in assets.13 The Arnolds told McNutt that if he could find a US city willing to try out the surveillance technology for several months, they would pick up the tab.14 “We settled in on Baltimore,” McNutt later told reporters, “because it was ready, it was willing, and it was just post-Freddie Gray.”15 Starting sometime in 2016, McNutt began conducting aerial surveillance for the Baltimore Police Department.16 Persistent Surveillance’s plane circled high above the city for as many as ten hours a day, capturing and storing images that the police used to investigate all manner of crimes.17 True to their word, the Arnolds donated $360,000 of their own money to foot the bill.18 Had taxpayer dollars been involved, the transaction would have required approval by the city’s five-member Board of Estimates.19 The private funding arrangement allowed 6. See id. 7. Id. 8. See id. 9. Id. 10. Id. 11. See id. 12. Id. 13. Doug Donovan, Billionaire Donors Laura and John Arnold Support Far More in Maryland Than Police Surveillance, BALTIMORE SUN (Aug. 26, 2016), http://www.baltimoresun.com/news/maryland/baltimore-city/bs-md-arnolds-20160826-story.html [https://perma.cc/MB6C-N3AU]. 14. Reel, supra note 2. 15. Id. 16. Id. 17. Id. 18. See Scott Calvert, Crime-Fighting Planes in Baltimore Funded by Houston Philanthropists, WALL ST. J. (Aug. 25, 2016), https://www.wsj.com/articles/crime-fighting-planes-in-baltimore-funded- by-houston-philanthropists-1472160951 [https://perma.cc/4M3H-FDJR]. 19. See Justin Fenton & Doug Donovan, Use of Local Foundation Allowed Baltimore Police Surveillance Project to Remain Secret, BALTIMORE SUN (Aug. 24, 2016), 1132 CALIFORNIA LAW REVIEW [Vol. 106:1129 McNutt and the police department to forego the formal approval process, and the program remained a secret until it was exposed in a Bloomberg article in August of 2016.20 The Arnolds’ gift to Baltimore is but one example of a growing phenomenon that features wealthy benefactors donating money to government, as opposed to private charities, to support particular governmental policies and projects.21 This Article explores this phenomenon, which one prominent philanthropist has dubbed “patriotic philanthropy,”22 situating gifts to government at the intersection of private philanthropy, political participation, and the privatization of government. Each of these subjects concerns the private actor’s role in public policy, and each has spawned a vast literature (much of it critical).23 To date, however, most of the relevant commentary has proceeded on http://www.baltimoresun.com/g00/news/maryland/baltimore-city/bs-md-ci-community-foundation- 20160824-story.html [https://perma.cc/Z4P6-96MF]. 20. See Reel, supra note 2. As it turns out, McNutt also convinced the city of Compton, California, to use his surveillance technology. See Connor Friedersdorf, Eyes over Compton: How Police Spied on a Whole City, ATLANTIC (Apr. 21, 2014), https://www.theatlantic.com/national/archive/2014/04/sheriffs-deputy-compares-drone-surveillance- of-compton-to-big-brother/360954/ [https://perma.cc/PPN7-ZPJR]. 21. See, e.g., Mike Allen, Bloomberg: Philanthropy Should ‘Embolden Government,’ POLITICO (Apr. 6, 2015), https://www.politico.com/story/2015/04/michael-bloomberg-philanthropy-government-
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