Recession impact mixed in lobbying community 

No matter how bad the economy gets, some goods and services are so vital that demand never drops. For some, apparently, lobbying is among the privileged few.

Circumstances vary among Arizona firms, and some say they are seeing fewer clients and less spending due to the recession, which has left few sectors of the economy untouched. But for other Arizona lobbyists, the downturn has left their businesses mostly unscathed, and thanks to an influx of billions of federal dollars, some are even finding new opportunities.

“In my world, it’s business as usual,” said Stan Barnes of the Copper State Consulting Group. “I’ve been waiting for the bad economic news to affect me directly in my business, but so far it really has not.”

As opposed to the loss of clients that some firms have seen, Barnes said Copper State has picked up new clients in 2009, and they are no less willing to spend money on things like special events than they were in the past. Even clients in industries that have been ravaged by the recession, such as homebuilding, have not curtailed their activities, Barnes said. Copper State, for example, represents the Southern Arizona Homebuilders Association, which Barnes said “is still going forward and remains a wonderful client.”

Kevin DeMenna, of DeMenna & Associates, said the economy has had a mixed effect on the industry, but overall he expects it to see a net loss of business in 2009.

“We’re a service business, not unlike every other professional service,” he said. “Overall, I would say that as the professional services sector goes, the lobbying business goes – off by a few points, nothing serious.”

John Kaites, of Public Policy Partners, said his firm is getting fewer calls from people seeking lobbying services. But due to the large number of calls the firm receives, he said, Public Policy Partners generally turns away two prospective clients for each one it accepts, leaving the firm with ample business.

“It hasn’t directly affected our business or any of our business units,” Kaites said, adding that the firm’s clients have left spending patterns unchanged. “In fact, a couple have actually raised our fees because of the additional work that needs to be done, both here at the Capitol, at the local level and even possibly at the federal level.”

Not everyone has managed to avoid getting caught in the economic downturn. Michael Green, of Fennemore Craig, said his firm has lost clients, and those who remain are spending less. Some have opted for in-house government relations, as opposed to hiring outside firms, he said. Others are still spending, but have cut back on things such as entertainment and meals.

“I’ve had some clients that, for example, used to provide me with a certain annualized amount for lobbying entertainment, that kind of thing, that either cut back on it or did away with it, just because times are tough,” Green said. “We’ve lost some (clients), because everybody has to use their resources to the best advantage.”

Not only are they spending less, but some clients are paying less as well. Green said some clients who have seen their own profits in the recession decline have asked the firm to lower their fees. Green and his firm have accommodated many of those requests.

“If you care about the client and if you care about their issues, it’s really not very tough,” he said. “You have a lot invested in them in the sense that you have learned their issues, their industry, and you’re able to do a good job for them, and so you don’t ever like to see those things go away, especially if you appreciate them, if they are good people, if they’re a good company.”

Ron Ober of Policy Development Group said his firm is taking a similar tack when it comes to clients who are feeling the pinch.

“When they go through some difficult times, we accommodate that because it’s not about getting a paycheck every month. It’s about a relationship that we have. We don’t look at it as a monthly check. We look at it as a long-term relationship,” he said.

But Policy Development Group has not seen a drop-off in the number of clients they serve, Ober said. Like Copper State, Ober’s firm has picked up new clients, and expects that Policy Development Group could see business increase by as much as 25 percent by the middle of 2009.

As the economy worsens, many businesses that have not traditionally been involved in lobbying start to look anew at government solutions, Ober said. That is especially true, he said, due to the influx of federal stimulus money into the state.

The American Recovery and Reinvestment Act, the $787 billion stimulus package approved by Congress and President Obama in February, includes about $4.2 billion for Arizona. Figuring out how to take advantage of the opportunities provided by the stimulus act, however, can be daunting for those who aren’t used to dealing with government.

“This stuff is complicated. It’s hard to track how this money is flowing. It’s hard to understand the opportunities, and the opportunities are changing,” Ober said. “Government can be intimidating to people that haven’t been active in it. A lot of the service that some of us can provide is giving companies the best opportunity to succeed, and also navigating them through the complications of getting from here to there in government. People in the private sector are not used to what government has to offer, and the challenges.”

Ober said many of the new clients his firm has attracted are people whose industries are eligible for stimulus money. One industry that is becoming noticeably more active due to the stimulus act is solar energy, Ober said. The ARRA included nearly $200 million for renewable energy programs in Arizona, and a bank bailout approved in 2008 included tax cuts for homeowners who want to install solar technology on their houses.

The stimulus may be providing balance for some firms, bringing in new clients to offset the ones that are leaving because of economic factors. Kaites said the details and nuances of the ARRA are a mystery to many in the corporate world, and understanding it fully without the help of professionals can be difficult. DeMenna said his firm has worked to develop a keen understanding of how the stimulus act works.

“I can directly attribute the addition of two clients to stimulus activity. I can also directly attribute the loss of one client to the economic downturn,” DeMenna said.

According to records at the Arizona Secretary of State’s Office, lobbyist spending doubled from 1997-2007. Fourth quarter reports from 2008 are still being compiled, and it remains to be seen whether the trend continued that year. Some Arizona lobbyists predicted that firms will show little impact from the economic downturn in 2008, but speculated that they would show a downturn in 2009.

Despite the steady business his firm and others have been seeing, Kaites said he expects that the recession is still taking its toll on the industry.

“We may not be a good indicator of current economic conditions as it relates to lobbying,” he said. “I think … if you were to take 100 people who are down at the Legislature and do what I do, you would probably get an average reduction in the overall dollars spent on the legislative process.”