Veteran lobbyist Andy Kozak remembers times in the past when the lobbying business has gotten caught in the undertow of a bad economy. Kozak, the principal of North State Advisers, name-checks recessions of the 1980s and early 1990s as well as the dot-com bust at the beginning of the new century. But the last couple of years, he says, have been worse than any previous downturn for business.
“We always manage,” Kozak said, “because when you have troubles, that’s when people need help. But now people who have trouble don’t have money. This one has been particularly hard to ride out. The first part of last year was the worst.”
Predictably, the downturn has been hard on contract lobbyists who represent clients on real estate and construction matters.
Tom Lehman, a health care lobbyist who has his own firm, said the lobbying business these days is depressed in most sectors.
“Almost everyone I’ve talked to, business is down,” Lehman said.
The downturn is all the more painful because it was preceded by strong growth. In 2006, lobbyists spent $53 million, according to data maintained by the Minnesota Campaign Finance and Public Disclosure Board (CFPD). In the bull market year of 2007, spending to lobby state government soared to $61 million. Then in 2008, when the Wall Street financial collapse dominated the headlines in the fall, spending was flat. Last year, spending on lobbying was roughly the same as in 2007.
The list of lobbyists who have terminated client relations tells part of the story. But more often, contract lobbyists are scaling down their hourly rates or accepting smaller retainers.
One lobbyist who didn’t want to be identified said his firm has had at least four clients whose retainer fees have been reduced by 15 percent or 20 percent. That’s better than losing the client altogether.
“Now, if you have to compete, the low bidder gets more consideration than before,” the lobbyist said.
The cutbacks have hit contract lobbyists particularly hard in areas that have been socked by the ongoing economic turmoil. Another lobbyist who asked not to be named said he once shared a contract with another lobbyist doing work for a small construction association. The contract was cut in half and then eliminated.
“Companies are having a hard time,” the lobbyist said. “What do they cut back on? Government relations. As indispensable as we like to think we are, for most companies we’re overhead.”
Park Nicollet Health Services spent $260,000 on lobbying in the 2005 and 2007 budget sessions. In the 2009 session, when the last budget was enacted, Park Nicollet spent $140,000. Industrial companies like Manitoba Hydro and local phone service provider Qwest reported lower outlays for lobbying in 2009.
But the fact times are tough doesn’t mean that lobbying is a dying art. In fact, organizations like the Mayo Clinic and Medtronic reported spending more money on lobbying in their 2009 expenditure reports than they spent in 2008.
Nonprofits struggle to fund lobbying efforts
Contract lobbyists aren’t getting paid as much in part because many nonprofit associations are receiving less from dues-paying members. A number of affordable housing associations, for example, have had to scale back their lobbying efforts. That includes the Minnesota Housing Partnership, among others, according to executive director Chip Halbach.
“For ourselves, we’ve been forced to reduce our contract [lobbying] too. We’ve gone from less institutional fundraising to getting individual developers to give support for our lobbying effort,” Halbach said.
Housing groups affiliated with the Metro Consortium of Community Developers started pooling their lobbying resources last year. Halbach said the practice will continue next session.
He added that the amount of contract lobbying help the Minnesota Housing Partnership will be able to secure depends on the success of the group’s fundraising push. “We are going to try to do some fundraising this fall to support a strong lobbying effort,” Halbach said. “We don’t know how that fundraising effort will turn out.”
Health care lobbyists note that mergers and cutbacks in the pharmaceutical industry have had an impact on contract lobbyists. Among big players, Sanofi Pasteur terminated its contract on Dec. 31, 2009, after it merged with Aventis to become Sanofi-Aventis.
Wyeth Laboratories spent $40,000 on lobbying in Minnesota as recently as 2006. In 2009, the year in which Wyeth merged with Pfizer, the pharmaceutical firm’s spending dropped to $9,417. Pfizer, which didn’t spent any money on lobbying in Minnesota in 2008 and spent $68,500 in lobbying here in 2007, bumped up to $120,000 in 2009.
Even though the combined entity still pays lobbyists, it’s usually the case that fewer are employed.
“Anytime there is a merger or anything like that, somebody has to take a hit,” one Minnesota lobbyist said.
The buttoned-down cordiality of lobbyists in the Capitol halls is belied by the fury that occurs when a competitor tries to poach a client. Last November, Capitol Report’s sister publication Politics in Minnesota reported that lobbyists were complaining about the increasing incidence of lobbyists trying to steal each other’s clients. One gripe was that some former legislators new to lobbying were guilty of the “crime” of poaching.
One lobbyist noted that competition for clients has gotten more intense due to the tough economic circumstances. But the lobbyist corps, for the most part, is abiding by its traditions.
“Occasionally somebody will try to submarine an operation, but it’s not the rule,” the lobbyist said.