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C.L. "Butch" Otter

Idaho Gov. C.L. “Butch” Otter speaks at the State Capitol building in Boise.

BOISE — Gov. Butch Otter ran down the list of his accomplishments, after more than a decade in office, in a November farewell speech to the Boise Metro Chamber of Commerce.

On his list: the annual Governor’s Cup tournament — a multi-day golf and sporting affair that alternates annually between resorts in Coeur d’Alene and Sun Valley — which raises money for Idaho college and trade-school scholarships. The event, created in 1974 by then-Gov. Cecil Andrus as a “small golf tournament,” is hosted by the governor and first lady. It is attended by Idaho’s political and business movers and shakers.

The event raised $1.3 million in 2018, Otter told the chamber to applause. What he didn’t say was how much of that money will go toward scholarships — less than half, if history is an indication.

Almost every year of the past decade, the nonprofit that runs the tournament has spent at least twice as much money on throwing the annual event than it has awarded in financial aid.

Students received $2.1 million in scholarship awards in the time that the Idaho Governor’s Cup nonprofit spent $6.1 million on the annual event. That doesn’t include the nonprofit’s other operating expenses.

That has raised concerns about the purpose of the event. But some nonprofit experts and the Governor’s Cup chairman argue that the scholarships would not exist without the annual fundraiser.

What does the Cup achieve?

The Statesman was not granted interviews with Gov. Butch Otter, first lady Lori Otter or Gov.-elect Brad Little for this story. First lady Lori Otter has been on the board of directors since at least 2007. Their media representatives said their schedules were too tight during the holidays and in the days leading up to the administration changeover this week to accommodate even a short interview.

“Miss Lori and I are profoundly proud and humbled to have played a small part in the ongoing success this program has achieved,” Gov. Otter said in a statement provided by the nonprofit’s executive director. “In our 12 years hosting the event, the First Lady and I have watched more than 300 Idaho students begin their journey at an Idaho school. That keeps our kids at home, while supporting Idaho post-secondary higher education. With the recent expansion of the program to include not only community colleges and universities, but also career technical scholarship students, the program is poised once again to grow.”

Hundreds of people attend the Governor’s Cup every year, the nonprofit says. The event last year drew sponsorships from well-known Idaho companies such as Albertsons, Blue Cross of Idaho, Idaho Power, Micron, Simplot and St. Luke’s.

The tournament raised $1.3 million in 2017, but it cost more than $827,000 for resort rental, food and drink, entertainment and other expenses, according to federal tax filings. The nonprofit gave out $399,000 in financial aid to students that year.

While the cost of the fundraising event has grown, so has the amount of money the Governor’s Cup gives out in scholarships. Since 2010, its financial aid to Idaho students has grown an average of 23 percent a year. (The event cost grew an average of 9 percent a year in that time.)

A former federal regulator says the event’s cost calls into question the event’s primary purpose. Is it to raise funds for students by attracting donors with three days of fun at an exclusive getaway? Or is it to give lobbyists and businesspeople an opportunity to curry favor with government officials, with the benefit of supporting a scholarship program?

“It sure sounds like this is an opportunity for lobbyists to do what lobbyists do outside the eyes of reporters or the general public,” said Marcus Owens, a partner at Loeb & Loeb LLP in Washington, D.C., and former director of the Internal Revenue Service’s division for tax-exempt organizations.

But the Governor’s Cup board chairman says the event is philanthropic and its expense is necessary. Idaho has only two resorts with all the amenities people expect at the Governor’s Cup, he said, and they’re pricey.

“All those costs are important, because that’s what makes the event what it is,” said the board chairman, eastern Idaho businessman Doug Sayer. “Without those costs, I just don’t think we would have an event at all.”

Sayer, who didn’t know when asked how much the event has cost in recent years, took issue with the Statesman asking questions.

“Before someone wants to take a shot at being critical of our event, I think you should attend and see the philanthropy,” he said. “It’s about changing those kids’ lives.”

The Statesman and any other observers would have to buy tickets, he said.

“I encourage them to sign up and to join the event and participate ... and that includes paying your own way,” he said. “That’s what puts the kids in school.”

Hundreds of students sent to college

The event has helped more than 250 students pay for their schooling in the Otter administration alone, Sayer said. Many of them are high-achieving but disadvantaged students. Some are the first in their families to attend college. They’re staying in Idaho for school and told the board they dream of careers in medicine, engineering and other industries where Idaho is short of home-grown professionals.

The Governor’s Cup offers Idaho students between $3,000 and $12,000 toward their college education. (The $3,000 scholarship is renewable for up to four years for academic students, or three years for career-technical students.)

It also created a special scholarship in 2017, named for Andrus, for a student planning to become an educator.

Here’s what some of the 2018 scholars said in thank-you notes to the nonprofit:

  • “I have lived without my family for about three years. It has been really hard to be here on my own, having to worry about things a teenager my age shouldn’t even have to think about.”
  • “My parents were not able to attend college or even finish high school due to not having sufficient funds.”
  • “Since losing my father to a heart attack, money has been tight, and it’s so important for me to have this financial support.”
  • “My parents’ income made me ineligible for a Pell Grant, but my family’s ongoing extensive medical expenses make it practically impossible for my parents to help with my education. ... This scholarship is an answer to my prayers!”
  • “I honestly didn’t know how I was going to pay for college ...”
  • “I have had many medical expenses since being diagnosed with [a rare autoimmune disease] and since we had to travel to [the East Coast] twice a year for treatment, my parents were not able to save as much as they wanted to help me with college.”

There’s more need than ever for scholarships, as colleges raise tuition and fees and students amass debt to pay for school.

The Governor’s Cup had more than 1,000 applicants in 2018, competing for 36 scholarships. That’s up from just four years ago, when the program had more than 500 applicants competing for 23 scholarships.

Money flows at the Cup

The Governor’s Cup ticket prices range from $125 for an evening ticket to $35,000 for a top-tier sponsor like Simplot to send 16 people for the full event.

The tickets pay for activities such as golf and shooting competitions, cooking classes, bicycle rides, wine tastings, spa time and horseback rides. The event also raises money through auctions, such as a car donated by Sayer in 2017.

The tickets are to help fund the scholarships. Still, no more than 38 percent of the gross receipts from the event has ever been distributed to students the following year, according to the past decade’s federal tax filings. On average, less than 25 percent of the gross is converted into scholarships.

“From an IRS perspective, the issue would be whether the organization is operating primarily to make scholarships or whether it’s operating primarily as a social club that has fundraising [for] scholarships on the side,” Owens said.

Fundraising experts recommend that nonprofits keep event costs low so they can retain as much of the charitable donations as possible. There’s no hard and fast rule, but fundraising guides recommend spending less than you make from an event.

One reason nonprofits sometimes offer high-cost events is “friend-raising.” This is viewed as more of an investment — converting participants into year-round, loyal donors. Sayer told the Statesman that there have been donations outside of the big Governor’s Cup event, but the organization’s tax filings don’t show any significant year-round giving.

Other events keep more money

The Statesman compared the fund’s tax records with those of other Idaho nonprofits that host fundraising events for a specific purpose. Three of those events were golf tournaments, which tend to be expensive but high-yield fundraisers, according to one nonprofit expert.

The golf events cost 24 cents to 58 cents to throw per $1 of charitable donations collected.

The annual Killebrew-Thompson Memorial golf tournament takes place in Sun Valley, over multiple days, and attracts high-profile attendees including politicians. It costs about 50 cents for every dollar of charitable contributions it keeps, according to tax records.

In contrast, the Governor’s Cup spends more than $1 to raise $1, based on its past decade of tax filings. At its most, it spent $2.53 for every dollar of donations made in 2013, the filings show.

Sayer said the Governor’s Cup is a one-of-a-kind event and shouldn’t be compared to other fundraisers.

The Killebrew-Thompson tournament does not offer as many activities as the Governor’s Cup. It does have non-golf events such as shooting, a concert and an auction gala.

The nonprofit that runs that tournament says it leverages the funds raised from the event to get matching donations. The money supports cancer research, including grants to the St. Luke’s Mountain States Tumor Institute.

The Killebrew-Thompson Memorial event in 2016 cost about $288,000 and reported about $572,000 in charitable donations. It awarded $860,000 that year in grants, according to federal tax records.

‘The inevitable happens’

Critics of the Governor’s Cup, such as Wayne Hoffman of the Idaho Freedom Foundation, have raised concerns in the past that the Cup is a networking event, where a monied few can hobnob with the governor and other dignitaries.

“The premise is, you’ve got to go kiss the ring, you’ve got to attend, you’ve got to sponsor,” Hoffman told the Statesman.

Owens, the former IRS official, wondered who is paying for government officials to attend — a question Hoffman also has raised.

Even if officials are paying their own way, the structure of the event can invite regulatory scrutiny because the nonprofit might be “providing the format — the opportunity — for the lobbying communication,” Owens said.

“You’re off at a resort with legislators and lobbyists, and the inevitable happens,” he said. “The organization doesn’t have to do anything more than put them all in the same room for a long weekend. The real possibility of pay-for-play sort of activity here is significant.”

Sayer argued that the organization is a laudable nonprofit whose all-volunteer board spends many hours reviewing scholarship applications and working to raise money for the scholarships.

“If people don’t want to go to the event, but they want to be involved with our organization and help put kids in college and trade schools, they can contribute year-round,” he said.

One hundred percent of those donations would go to scholarships, he said.

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