By ROBERT J. DWORAK
Coordinator of the Management Program at Sangamon State University, he is a member of the American Society for Public Administration National Committee on Professional Standards. He holds a doctorate in public administration from the University of Southern California.
Financial disclosure: How it came about and how it works
The governor's executive order establishing a Board of Ethics and requiring financial disclosure by over 12,000 state employees has been sustained in the courts. Statements have been filed and are now available for inspection at the board's Springfield office
"The people of the state are entitled to a high standard of candor from their public servants. The public's right to know must take precedence over the citizen's right to privacy for purely personal affairs when the citizen becomes a public official."
WITH THESE words as a preamble, Gov. Dan Walker established the Board of Ethics on February 26, 1973, for the purpose of carrying out the financial disclosure requirements contained in Executive Order No. 4. The executive order requires financial disclosure in the form of a statement of economic interest by a variety of persons occupying appointed positions, earning in excess of $20,000 per year, or whose position is subject to "undue influence" as determined by the board. Within three months, class action suits were filed against the governor and the board on the basis of invasion of the right to privacy and violation of the due process and equal protection guarantees of the Illinois and United States Constitutions. In July 1974, the Illinois Supreme Court upheld the executive order and the administrative actions that the board had taken in implementing the border.
The decision of the Illinois Supreme Court enabled the Board of Ethics to begin implementing the governor's order. As a background for the discussion of the specific requirements of the executive order and of the issues raised in litigation, it is helpful to understand the general arguments which are made in favor of, and in opposition to, the idea of financial disclosure on the part of public officials, whether elected, appointed, or civil service.
The case for disclosure
The thrust of the argument is as follows: Full disclosure of all income and property holdings by public officials who make economic decisions is necessary for the maintenance of honest government and for the recovery of confidence in governmental institutions. Financial disclosure lends itself to the maintenance of honest government because the power and influence of high government office has a tendency to corrupt. The publication of persona assets will, in most cases, discourage corrupt behavior. It will help keep good people honest and keep dishonest people from dipping into the public till. Watergate and other government scandals have eroded the public's faith in honest government. Government can restore public confidence by requiring a public accounting of the income, assets, and affiliations of officials who make economic decisions which effect the public welfare. Access to financial information regarding public officials, it is argued, will result in a higher level of confidence in those officials' integrity and, consequently, government will become more effective and responsible to the will of the citizenry.
The case against disclosure
Arguments against financial disclosure by public officials center around two major contentions: Disclosure will prevent good people from seeking and remaining in public office, and disclosure is an invasion of privacy. Many honest people who are public officials or who may become public officials object to having their finances disclosed. This is especially true for public offices in a small community or where there is little or no compensation involved and public service is the act of a civic-minded individual. Financial disclosure cannot insure honest government, but it may drive good people out. The requirement implies that public officials are worse than criminals, by making finan-
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It is obvious that the scope of Illinois' requirements is extremely comprehensive and goes far beyond what is ordinarily proposed for financial disclosure
cial privacy a crime rather than a right. Some critics of full disclosure suggest that the financial statements of officials be placed in sealed envelopes to be opened only when criminal charges are initiated.
What is required?
The financial disclosure requirements of the executive order as implemented by the Board of Ethics are best described as the answers to three basic questions: (1) What kind of financial disclosure is required? (2) Who must file a Financial Disclosure Statement? and (3) Who has access to the statements?
Two sets of documents are required to be filed with the Board of Ethics. The first is the Financial Disclosure Statement. The statement requires information on income which covers salary from the state, investments, other salaries, net amount of realized capital gains and losses, and income from all other sources. If income from investments, capital gains, and/or other sources exceeds $1,000 from any one source, these sources must be itemized on a separate sheet (Schedule A, parts III, IV & V). If a salary is received from other than the employing state agency, the sources of this salary must also be itemized (Schedule A, part II). Additionally, the statement requires a listing of all assets and liabilities. If assets or liabilities exceed specific amounts, they must be itemized (Schedule B). For example, all non- residential real estate owned within the state with a value in excess of $10,000 must be listed by address and location.
The final two sections of the statement deal with the receipt of gifts or honoraria and with possible conflict of interest situations. Gifts or honoraria received from organizations having dealings with or which are regulated by the employing state agency must be listed. Also, any gift or honoraria over $50 in value from a non-family source must be reported. Four questions dealing with conflict of interest situations are asked:
(1) Has the employee or spouse received any special considerations from an individual or organization having dealings with the employing agency?
(2) Does the employee or spouse have a contract or a direct financial interest in a contract with the employing agency?
(3)Does he employee or spouse hold another state position?
(4) Does a member of the employee's immediate family have an economic interest related to the employing agency?
Each of these possible conflict of interest situations must be reported on a separate form (Schedule C, part II). Schedule C also calls for releases to enable disclosure to the board of information pertaining to real estate held by the employee or spouse in a land trust or assets held in any "blind" trust for the benefit of the employee. (A blind trust is one administered by the trustee without knowledge of his acts by the beneficiary, so that the beneficiary cannot be charged with acting to his own benefit.) Finally, the employee must verify that the information provided is true, correct and complete.
The second set of documents required for financial disclosure are copies of the employee's federal and state income tax returns for the period covered by the disclosure.
It is obvious that the scope of Illinois' requirements is extremely comprehensive and goes far beyond what is ordinarily proposed for financial disclosure. This is true particularly of the requirement to disclose the economic associations of the employee's spouse. The complexity and extent of these statements has caused more than a few complaints from officials.
Who must file?
The executive order provides that three classes of persons must file Financial Disclosure Statements: (1) each person appointed by the governor; (2) each person who receives $20,000 or more per year from the state; and (3) each person whose position is subject to undue influence (as determined from time to time by the Board of Ethics). The board originally had jurisdiction over only those agencies whose vouchers are subject to approval of the Department of Finance, but the governor amended his executive order on February 13, 1975, to cover also the Illinois Building Authority, Health Facilities Authority, Law Enforcement Commission, Industrial Development Authority, Industrial Pollution Control Financing Authority, Toll Highway Authority, Housing Development Authority, and the governor's appointees to the State Board of Education, State Board of Elections, Judicial Inquiry Board, Board of Trustees of State Employees Retirement System, State Investment Board, Board of Governors of State Colleges and Universities, Board of Regents, Southern Illinois University Board of Trustees, and Board of Trustees of Teachers' Retirement System; a further amendment on April 11 extended the order to the Illinois Education Facilities Authority. But the governor at that time also made it clear that the order "does not cover any boards and commissions whose members serve without pay and whose duties are solely advisory."
Who decides?
In its Rules for Disclosure of Financial Interest, the Board of Ethics provides a process for the identification of those persons who must file a financial disclosure statement. Each official having supervisory control over agencies subject to the jurisdiction of the board must, by March 15 of each year, provide the board a list of the names and titles of employees who in that official's judgment are required to submit financial disclosure statements. The board will review these lists of names and positions, and persons who are required to file are notified. The board requires these statements to be filed between April 1 and 30. Employees who feel that they are not subject to the disclosure requirement may object in
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Those opposing the executive order contended that it was vague, invalid, unconstitutional, violated due process and constituted an invasion of privacy. The Illinois Supreme Court rejected these arguments and upheld all major provisions of the governor's order
writing to the board giving the reasons for their objection. The board reviews each case individually and then notifies the employee in writing of its decision.
The nature of a position "subject to undue influence" was defined in amended Rule 17 filed on May 19 as ". . . position whose holder, in the course of his or her work, makes findings, recommendations, or decisions, or has access to confidential information which would be of sufficient interest to a person, inside or outside State government, that such person would have a substantial inducement to influence the actions of the position holder by creating a conflict of interest." Examples cited in the rule are those who award contracts or grants, enforce laws, or determine, investigate, or enforce compliance with administrative rules or orders. The initial responsibility for determining which positions fall in this category rests with the employing agency. A person so classified may file an objection in writing with the board, which has the final administrative authority to decide the validity of the classification.
Who has access?
Generally speaking, two groups have access to the financial disclosure statements: the members and staff of the Board of Ethics and the public. The board has access to all materials that are submitted including copies of the federal and state income tax returns. No tax return nor portion of a tax return is open to public inspection except where the person required to file has specifically made the return or a part thereof an answer to an item in the disclosure statement. In this case, the tax return, or portion thereof, is subject to public inspection. Also, the financial disclosure statements of unsalaried or part-time members of state boards or commissions are not open to the public scrutiny. The exception of non-salaried and part-time members of state boards and commissions from the public disclosure requirements would seem to go a long way in satisfying the arguments of those who oppose financial disclosure on the grounds that it will discourage honest people from accepting public service assignments.
The board is also charged with the review of the material that it collects and files. This is an affirmative action which is aimed at insuring the honesty and integrity of public officials. It is the responsibility of the governor to see to it that the board has sufficient resources to carry out this review in an effective manner.
Anyone who wishes to inspect a financial disclosure statement must submit a formal, signed request, made under oath, containing the following information: (1) the name and agency of each person whose statement is to be inspected; (2) the name, occupation, and address of the individual making the request; (3) the name of each organization the individual making the request represents, if any; (4) a statement that the person making the request is not acting for a commercial or private purpose unrelated to the public function of the individual or his agency; and (5) a statement that the person requesting understands that notice of the inspection, including the inspector's identity, will be given the person whose disclosure statement was inspected. The person making the request must provide adequate identification and may inspect the statements only in the offices of the board. An individual whose statement has been inspected is notified in writing by the staff of the board.
The court decides
The current operating procedures of the board have been opposed in several quarters. Shortly after the executive order was issued, a class action suit was filed against Gov. Walker and the board by the Illinois State Employees Association, the Illinois Association of Highway Engineers, and Trooper Lodge No. 41, Fraternal Order of Police. The order was attacked on five grounds: (1) the order was an unconstitutional usurpation of legislative power; (2) the order was invalid because it was not submitted to the General Assembly; (3) that part of the order which made its requirements applicable only to certain agencies constituted denial of "equal protection" in violation of the Fourteenth Amendment of the U.S. Constitution; (4) the classification of persons subject to the order was vague and indefinite, thereby violating the rights to due process of the law and equal protection of the law; and (5) that disclosure of economic interest as provided for in the order constituted invasion of privacy as protected under the Illinois and U. S. Constitution
Open for business
The trial court issued a preliminary injunction restraining the bed from carrying out its function. With qualifications, the circuit court upheld the executive order on the major issues in August 1973. Both sides appealed directly to the Illinois Supreme Court which filed its decision on July 1, 1974, upholding all major provisions of the executive order. The Troopers Lodge then appealed to the U.S. Supreme Court, but the latter, by denying the petition for a writ of certiorari, in effect refused to review the Illinois decision. Finally, on February 24, 1975, the trial court's preliminary injunction was lifted and the board was able to begin to enforce compliance with the order filed by the governor almost exactly two years earlier, February 26, 1973.
After the filings were complete on April 30, the small staff of the board found itself swamped with some 12,000 forms. These include approximately 500 gubernatorial appointees, 8,000 persons in positions of "undue influence," and 3,500 persons paid $20,000 per year or more and who represent almost 100 state agencies and offices. The board's office is at Room 522, State Office Building, Springfield. Disclosure statements may be inspected during office hours, 8:30 a.m. to 5 p.m. No photocopies are allowed to be made.
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