Divided government hits K Street

Divided government hasn’t been too great for K Street.

On Wednesday, lobby firms began to disclose their first quarterly revenue for 2011 as required under the Lobbying Disclosure Act (LDA). Records show that most firms’ earnings either flat-lined or fell off when compared to 2010’s first quarter.

One reason for the decline is that Capitol Hill has not been the legislative factory it was when Democrats controlled both chambers.

{mosads}President Obama and the new Republican House have spent more time battling over the budget than crafting the kind of mammoth bills that have a big impact on industry. At this point in 2010, Obama had just signed his signature healthcare reform law and Congress was gearing up for the final push on its Wall Street reform package.

K Street firms said regulatory work from the healthcare and Wall Street laws is beginning to dominate their days as clients grow concerned about how the measures are being implemented. Not all of that advocacy work has to be reported under the LDA law, since it often involves legal work that is exempt from disclosure. 

“The lobbying wars are moving from tectonic clashes impacting entire sectors to narrower clashes on policy and implementation,” said Alex Vogel, a partner at Mehlman Vogel Castagnetti. “The results are equally important, but the headlines are less hysterical.”

Vogel’s firm reported $2.9 million in lobbying fees in the first quarter, a 3 percent decline from 2010’s first quarter.

Some believe that conflict between the White House and Congress will eventually play well for K Street. The new Republican-controlled House will have a positive impact on many firms, according to Gregg Hartley, vice chairman for Cassidy & Associates. 

“Obviously when you have split control, you generally have conflict,” Hartley said. “And conflict is generally good for the lobbying business.”

Lobbying revenue for Cassidy in the first quarter was $5.5 million, about what it was during the same period last year.

Hartley said he doesn’t expect Cassidy’s earnings to change significantly in the divided Washington since the firm is bipartisan. But as a former aide to then-House Republican Majority Whip Roy Blunt (Mo.), Hartley said he hopes his GOP ties prove “beneficial.”

Others said the Republican House is good for clients because it can play defense against the administration or advocate for a cause.

Smith Davis, a partner at Akin Gump Strauss Hauer & Feld, said Speaker John Boehner’s (R-Ohio) majority is good for business. 

“It is a good thing to have at least one branch of government that has a different view,” Davis said. “It facilitates the tabling of issues that might not get tabled when … everyone is following the same approach.”

Akin Gump reported earning $8.7 million in 2011’s first quarter, about the same lobbying revenue they took during this time last year.

Kevin O’Neill, deputy chairman of public policy at Patton Boggs, said the switch to a new majority in the House is also a transition period for K Street. He said it takes time to make relationships with the “new players” on the scene in Congress.

“[You spend] a lot of time spent on the ground with those people in the first quarter, introducing your clients, and telling their stories about why they’re in Washington and what Washington does for and against those clients’ interest,” O’Neill said. “It takes time to build those relationships.”

Patton Boggs showed a strong increase of 18 percent from the first quarter of last year, with $12.3 million in earnings. That uptick includes revenue from the Breaux Lott Leadership Group, which Patton Boggs acquired in July of 2010.   

Some lobby firms that enjoyed robust growth during the first two years of the Obama administration showed signs of slowing this year. The Podesta Group, for example, reported $7 million in lobbying fees this quarter, about a 1 percent decline compared to 2010.

Tony Podesta said those figures don’t reflect his firm’s expanding work in international and grassroots advocacy.  

“With this diversification, we have been able to get smarter about the kind of work we want to do, the kind of work we excel at — and build a bipartisan team that continues to deliver results for our clients,” Podesta said in a statement.   

Some lobby firms did enjoy gains in the first quarter despite the overall trend. 

Robert Jones, a partner at Alston & Bird, said his firm’s increase in business — earning $2.9 million this year, a 6.6 percent jump over this time last year — came from increased government impact on the private sector and changes in the country’s economic profile. 

“Government is now in places in places that they weren’t before, and they’re impacting private entities in ways that they need to be participating in the legislative process,” Jones said.

The firm has increased their regulatory work, which isn’t always disclosed under the LDA.