Koch group flexes conservative muscle in state fights

WASHINGTON — Tennessee's Republican Gov. Bill Haslam spent nearly two years crafting a deal to give his state $2.8 billion in federal money to provide health insurance for some 280,000 low-income residents.

It took just three days, however, for a committee of the GOP-controlled state Senate to kill the plan — urged on by Americans for Prosperity, a conservative group aligned with billionaires Charles and David Koch that dispatched hundreds of activists to the statehouse and sent out mailers targeting Republicans who voiced interest in the plan.

Americans for Prosperity's role in the swift demise of Haslam's plan to expand Medicaid in his state underscores how the group — the largest grass-roots group in the expansive Koch network — is leveraging its clout to shape policy coast-to-coast. Its aggressive moves come as the network gears up to spend a staggering $889 million over a two-year period to drive its free-market, small-government agenda.

Americans for Prosperity's tactics "changed the whole paradigm here in Tennessee," said Craig Becker, president of the Tennessee Hospital Association, whose members supported Haslam's plan and agreed to pick up the state's share of any Medicaid expansion costs.

"They threw in a lot of money," he said. "They threatened legislators. They scared the Legislature."

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The leaders of Americans for Prosperity (AFP) make no apologies and say they will not retreat from their principles — even if that means an increasing number of confrontations in red states such as Tennessee — one of nearly two dozen where Republicans now control the governorship and both legislative chambers. In all, sweeping GOP gains in recent elections have given Republicans a near-record 31 governor's seats and 68 of the nation's 98 partisan legislative chambers.

"Republicans have a once-in-a-generation opportunity to practice what they preach, which is limited government that can bring economic freedom and individual liberty to help Americans live prosperous lives," said Tim Phillips, AFP's president.

"For whatever reason this year, Republicans across the country are wavering on some important issues," he said. "We are here to keep both parties honest."

In nearly a dozen states, AFP is engaged in or preparing to do battle over tax policy and government spending. In Iowa and South Carolina, the group is opposing efforts by GOP governors and lawmakers to increase gas taxes to pay for road and bridge repairs. Its activists has taken aim at Medicaid expansion efforts in other states, including Montana.

In still others, it is trying to kill off taxpayer support for sports stadiums, including Wisconsin Gov. Scott Walker's plan to issue $220 million in state bonds to fund a new Milwaukee Bucks arena.

AFP is building a standing ground force of activists that it can mobilize quickly for legislative fights this year and to turn out voters ahead of 2016 presidential and congressional elections. It now employs more than 500 people in 33 states, up from fewer than 100 employees in 2010. In one gauge of its financial might, the group said it spent $70 million on advertising alone in key Senate races in the run-up to the 2014 midterm election.

Given low advertising costs at the state and local level, "they have the chance to be the big fish in a lot of little ponds," said Elizabeth Wilner, who tracks political advertising at Kantar's Campaign Media Analysis Group.

Locking horns with business

In state after state, Americans for Prosperity and its activists increasingly are locking horns with the Republican Party's business-friendly factions as they argue that many tax provisions and government subsidies amount to corporate "cronyism" for select industries.

It happened last year in Greenville County, S.C., where AFP activists opposed a proposed 1% sales tax to fund local road improvements. The measure failed by a nearly 2-to-1 margin in a low-turnout election.

A similar battle is shaping up in the state Capitol this year where several Republicans, including Gov. Nikki Haley, have proposed competing measures to raise the state's 16.75 cent-per gallon tax to fund road improvements. The tax, one of the lowest in the nation, has not been increased since 1987.

Several dozen AFP's supporters gathered recently at the Capitol to rally against any tax boost, arguing the state first needs to overhaul its transportation agency.

"Until you get the house in order and reform the government to spend our money more efficiently, don't dare ask us for more money," said David Schwartz, AFP's state director in South Carolina.

Business groups counter that the state has to find new revenue to fix and maintain roads and to address a projected $42.8 billion shortfall in long-term infrastructure needs.

"You have to have good roads to bring in new business," said Jason Zacher, the vice president of public policy for the Greenville Chamber of Commerce.

Medicaid expansion

The defeat of Haslam's plan is AFP's biggest political win so far this year.

Haslam, the billionaire heir to the Pilot Flying J truck stop chain, is a popular figure in the state and in national Republican circles. He easily won a second term last November and was elected chairman of the Republican Governors Association weeks later.

Political observers closely watched his negotiations with the federal government to devise his own version of a plan to expand Medicaid in the state. The two-year pilot plan, dubbed Insure Tennessee, was finalized last December and contained several conservative policy elements, such as requiring patients to pay premiums and co-pays.

Haslam, however, needed the approval of the GOP-controlled state Legislature, which he called into special session this month for the sole purpose of voting on the plan.

From the start, AFP officials argued that Insure Tennessee was little more than a dressed-up version of the Affordable Care Act, the 2010 health care law that authorized the expansion of Medicaid. The group, and many Republicans in the Legislature, also questioned whether the concessions Haslam won from the feds could be enforced.

AFP, which has nearly 40,000 activists in the state, mobilized quickly ahead of the special session — running radio ads, knocking on doors and hitting the talk-radio circuit to tie the plan closely to President Obama, an unpopular figure in this deep-red state, said Andrew Ogles, who runs AFP's Tennessee branch

As part of its campaign, AFP singled out Rep. Kevin Brooks, assistant majority leader in the Tennessee House after the Republican made positive statements about the plan. One of its mailers featured images of Brooks and Obama and said Brooks had "betrayed hard-working Tennessee families."

On the day a state Senate committee met to consider Haslam's plan earlier this month, AFP activists in bright red shirts crowded into the hearing room, taking up most of the seats. A day later, the committee voted 7-4 to kill Insure Tennessee.

'Hardball' tactics

Some top Republicans have criticized AFP's tactics.

"It was out of bounds," said Rep. Glen Casada, the Republican caucus chairman in the Tennessee House, who opposed Haslam's plan but defended Brooks from AFP's attacks. "We were in the middle of the debate. No votes had been taken."

Conservative Tennessee lawmakers "were vilified for even remotely considering support of Insure Tennessee," said Mark Luttrell, the Republican mayor of Shelby County, Tenn., the state's largest county. He now is weighing a 10% property-tax increase to make up the loss of future Medicaid payments at a local hospital that relies heavily on county funding and serves a high percentage of uninsured patients.

"Yes, we did play hardball," Ogles said. "With health care being one of the largest expenditures for any state, it was a significant issue for Tennessee. We went all in to make sure we defeated it."

With U.S. Senate and House of Representatives now in Republican hands, "we have a real opportunity to defund, dismantle and ultimately repeal Obamacare," Ogles added. "And every time one of these state governors goes for this quick money grab and becomes more dependent on Medicaid, it makes it harder for Congress to do its job."

Even the plan's supporters say the prospects of reviving Insure Tennessee this year are dim.

"Right now, it's hard to picture" a path forward, Haslam told USA TODAY this week between meetings of the National Governors Association. He said he stands by his plan as a good way to provide health care at low cost but said it has proved hard to overcome the stigma of Obamacare among Tennessee lawmakers.

Still, "something has to change," he said. "The problem hasn't gone away. We still have people who need insurance."