There are concerns that officeholders may seek to use their political power and influence to enrich themselves. And to that extent, personal financial disclosures can identify what an elected official’s direct financial interests are. Whether personal financial disclosures are effective at identifying corruption is a different question. Unfortunately, this issue has not been studied closely.
The academic literature on personal financial disclosures tends to focus on the federal level, but it does show that members of Congress tend to increase their personal wealth while in office.
There is, to the best of my knowledge, just a single academic paper on the relationship between personal financial disclosure requirements at the state level and corruption. It is part of a dissertation from a Harvard Business School doctoral candidate who found that state disclosures did not affect referrals for and prosecutions of corruption.[13] Author Alexandra Scherf suggested that state officials control disclosure rules, so they may write them in order to avoid their use in corruption referrals and prosecutions.[14] She did, however, find that local government official disclosures resulted in more referrals and prosecutions when they were available in publicly accessible, online databases rather than only through specific requests.[15]
Perhaps the best evidence Scherf uses in the paper to demonstrate that personal financial disclosures help people identify corruption is that federal prosecutors said so. She interviewed 47 federal prosecutors and 32 of them said that they were “very useful” for supporting corruption investigations, and only three said that they were not at all useful.[16]
She also notes that there is a difference among states based on the reasons that compelled them to put disclosure data online. States that do so in an attempt to improve services and transparency for the public had more corruption referrals than states that did the same in response to corruption scandals. Proposal 1 could be seen as a desire to improve services rather than a response to a scandal and may then be more likely to result in more referrals.
As Scherf’s research suggests, having an accessible, online database for these disclosures could help people identify potential corruption or conflicts of interests in legislator activities.
Proposal 1’s financial disclosure requirements may also improve compliance with existing rules that prevent legislators from voting on issues that present a conflict of interest. For instance, Article IV, Section 10 of the Michigan Constitution prohibits legislators and state officers from being “interested directly or indirectly in any contract with the state or any political subdivision thereof,” and state statutes define the rules to enforce this standard.[17] Personal financial disclosures may help identify these conflicts of interest.
Still, most legislators are not going to be subject to corruption allegations. While corruption is always a possibility, it seems rare. The only allegation of corruption in recent memory was when a state legislator allegedly sought a bribe from unions to change his vote on a labor issue, though this case was dismissed in court.[18] It is unlikely that personal financial disclosures would have been useful in identifying corruption in that case. The allegation was that he was raising money for his campaign, and campaign finance is already subject to different disclosure rules.
Personal financial disclosures would only be beneficial to help identify one kind of corruption: when elected officials take action that benefits their own personal, pecuniary interests. There are many other types of corruption, however. Elected officials can pass legislation or take executive action in exchange for cash, gifts or campaign contributions, for example. They can give friends and family privileged and compensated positions in public office. Or they can use their position and status to avoid or minimize penalties if they violate the law or obtain other special favors or privileges in the legal system.
In fact, these other types of legislator impropriety seem more common. One legislator was pulled over for drunk driving and attempted (unsuccessfully) to use his status as an elected official to avoid arrest and charges.[19] There have been scandals involving inappropriate sexual relationships between legislative members and their misuse of public resources.[20] In short, there are a number of ways that legislators can misbehave that have nothing to do with using their office for personal financial gain.
Proposal 1’s disclosure requirements are unlikely to prevent these forms of corruption. Personal financial disclosures would only be a piece of a puzzle to help identify positions where lawmakers pass laws or encourage executive actions that give them direct financial benefits.
As Bradley Smith, Mackinac Center Board of Scholars member and former commissioner to the Federal Election Commission, observed, “[Personal financial disclosure requirements’] main function is to create a vague appearance of corruption where it doesn’t exist.” That is, disclosing financial sources imply that a candidate has loyalties elsewhere and will legislate to his or her narrow self-interest, regardless of their actual motivations.
Personal financial disclosures stem from a desire to expose and reduce corruption. Whether they do so is an open question. There may be additional consequences besides their intended effect. People generally want to keep their personal finances secret. The disclosures may then be an unattractive feature of holding office that repels some people from running. However, it’s not as if states have a dearth of open government offices without candidates running for them.