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Approps Lobbyists Nervous

Lobbyists, like Congressional staff and reporters, thrive on what-if’s, worst-case scenarios and heated rhetoric.

So you can bet that the ears of every appropriations lobbyist in the city perked up last week as Members, aides and reporters puzzled over the future of Congressional earmarks amid a spiraling federal spending crunch.

Some Members, such as Sen. John McCain (R-Ariz.) and House Minority Leader Nancy Pelosi (D-Calif.), have said they would be willing to give up funds earmarked for their home turf. And fiscal conservatives have in their sights all earmarks — those specified pots of money set aside to fund projects in Members’ districts.

Earmarks provide the bread and butter of K Street, meaning that the recovery after Hurricane Katrina and the mounting expenditures for the war in Iraq could cut right to the heart of the lobbying business.

But because of the way appropriations lobbying is structured, a tight federal purse does not inevitably mean pain for advocates on K Street. And in some cases, it can even help boost business.

Michael Fulton, a lobbyist with GolinHarris, said that while “it’s not business as usual, you have to separate the talk from reality. There are a lot of ideas and trial balloons that are being floated out there. We are keeping the stethoscope on the pulse of the earmarking process.”

Paul Hirsch, president of Madison Government Affairs, said he has sent out an e-mail to clients explaining the current dynamic.

“We just wanted to alert them that there will be a move afoot to curtail spending” due to the hurricane recovery, Hirsch said. “Additionally, you’ve got another Iraq supplemental” that could come next month with a $45 billion price tag.

Every appropriations cycle is about managing clients’ expectations, but this year, lobbyists are taking it to an extreme.

“We’ve got some catastrophic financial situations with two major hurricanes, two conflicts oversees, domestic needs that we haven’t seen before in terms of homeland security, transportation, the space program, energy crisis, so a lot of things that have been warned about over the years are starting to pile up,” said Fulton, whose appropriations clients include the Home Safety Council and Community Memorial Hospital in Illinois.

“We cautioned our clients at the beginning of this year that it was going to be a difficult year. Now we have told our clients to pare back their requests,” he added.

Of course, what no lobbyist will say publicly — and most won’t even admit privately — is that the headlines about budget crunches and threatened earmarks can be a boost to their business and, as a last resort, provide a ready-made excuse when explaining themselves to clients who don’t get the funds they wanted.

As the earmarking process gets tighter, lobbyists can make the argument that their services merit an even greater premium.

One lobbyist admitted privately that if clients end up empty-handed, or without full funding, “Rita and Katrina” as well as other costly measures will be ready to take the fall — even if they played little or no direct role.

Few appropriations lobbyists have success bonuses tied into their contracts. For starters, it’s illegal to receive a success fee out of the appropriation itself, and most lobbyists work for flat retainers. So the lobbyist gets paid whether the client gets all, or even some, of the money they are looking for.

Still, happy clients often translate into strong word-of-mouth advertising and growth potential. At a time when Congressional matters are in flux, lobbyists have to keep the lines of communication open.

Roger Gwinn, president of the Ferguson Group, said he and his colleagues are encouraging clients to continue to tout the projects they want funded and to highlight the need for federal earmarks.

In other words, in situations like this, the lobbying just intensifies.

“What we’re hearing is certainly a lot of concern about the impact of Katrina and the disaster on earmarks in general and spending overall,” Gwinn said. “Clients are very concerned because on the macro level there is the whole effort to find offsets. They are certainly perceiving that support for their requests may be at risk.”

But, Gwinn added, “personally I don’t think that an effort to remove all the earmarks or set-asides would be successful.”

In some cases, earmarks actually do increase federal spending, but in other instances they simply serve to funnel the money into a specific use.

Even if you took all the Member allocations, said Gregg Hartley, chief operation officer of Cassidy & Associates, “it probably makes up less than 5 or 10 percent of what we’re going to be spending on disaster relief.”

One appropriations lobbyist speculated that earmarks will remain in place this year, but not at the level they might otherwise have been. And the process of determining which ones survive and which ones don’t could smell of partisanship.

In the words of this appropriations lobbyist: “Democrats are going to get hosed.” And some government agencies, NASA for one, have put the word out that programs that receive earmarks will simply take cuts in other areas of their budget to compensate.

Not only are lobbyists managing client expectations, but they also are reworking their messages for Capitol Hill.

Fulton said one university client from Ohio came to town recently to push for earmarks opened meetings with a briefing on what the school was doing to help victims of Hurricane Katrina.

“We don’t want to seem like we’re being greedy during a time when Congress is spending billions to help the victims of Katrina,” Fulton said. “We opened every meeting talking about the impact of the hurricane and the toll it’s taken on our country and what this university and its community have done to provide support.” The university, for example, gave Gulf Coast students who are from Ohio full tuition.

One appropriations aide said that for lobbyists, “the bottom line is the budget is lean, so it’s going to be a lean year for earmarks,” which isn’t something that suddenly emerged since the hurricane season. This aide also said that lawmakers’ pledges to forgo their earmarks “are hollow.”