Reforms Haven’t Kept the Money From Flowing
By Tania Valdemoro
Sheila Krumholz and
Edwin Bender
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One of the unintended consequences of recently enacted campaign finance reform that banned soft money contributions is that donors now have the opportunity to put their contributions in new places, even if they decide to give an unlimited amount of money to support federal candidates.
Sheila Krumholz, research director at the Center for Responsive Politics, told a gathering of journalists at a Western Knight Center seminar on covering campaign finance that the Bipartisan Campaign Reform Act of 2002 (BCRA) banned federal elected officials and candidates from raising soft money (money not subject to contribution limits, disclosure or source restrictions) in federal elections.
The reform act, commonly known as McCain-Feingold, also bans national parties from soliciting, receiving or spending soft money, and restricts federal elected officials or candidates from raising soft money for state and local races that occur in conjunction with federal races. The law further increases contribution limits for individuals to $2,000 from $1,000 and defines a campaign ad subject to contribution limits as one that is broadcast on TV or radio within 30 days of a primary election and 60 days of a general election that refers to a federal candidate and is broadcast in the district the candidate is campaigning. The new advertising rules are designed to prevent so called “sham” issue ads that are thinly disguised campaign ads not subject to the campaign contribution limits.
With these and other new regulations in place, the unregulated, unlimited money earmarked as soft-money donations in previous elections for national parties is heading to state parties because there is less regulation at that level, said Edwin Bender, executive director of the Institute of Money in State Politics, who also spoke at the seminar.
For example, Bender noted, the so called Levin Amendment to BCRA allows local and state parties to spend up to $10,000 of soft money contributions (donated in accordance with state law) per year for generic federal election activities like get-out-the-vote and voter registration efforts, as long as the activities do not mention a federal candidate.
The tax and election laws provide plenty of other opportunities for large contributors to give unlimited sums of money without disclosure , Krumholz said. “A lot of former soft money donors are showing up in 527 organizations,” she said. These groups - so named because they are regulated under Section 527 of the Internal Revenue Code - by definition exist with “the purpose of directly or indirectly influencing or attempting to influence the selection, nomination, election or appointment of any individual to public office.” As long as their primary purpose is not to influence the outcome of federal elections they are not required to disclose their activities with the Federal Election Commission (FEC) and donors to them are not subject to contribution limits or FEC disclosure requirements.
Some 527 organizations, like MoveOn.org, in recent months have been raising unlimited amounts of soft money to run candidate issue ads and voter-mobilization campaigns in 17 so-called battleground states, like Florida, Iowa and Pennsylvania, where many people believe the presidential election is likely to be decided.
Yet, not all 527s are involved in electioneering, said Krumholz, and not all of them are new. She added that donors are also giving money to Internal Revenue Code Section 501 c nonprofit organizations instead of candidates or 527s.
Despite these changes in campaign finance laws and practices, some donors are sticking to tried-and-true donation patterns, Bender said. Corporate and union Political Action Committees (PAC) for example, still give money to incumbents “because these veterans win elections; to them, it’s a logical business decision” said Bender.
Krumholz said the financial sector leads other industries in campaign donations with $127 million so far, and 61 percent of that has gone to Republicans.
The seminar speakers said journalists covering the elections should pay close attention to the following:
- Who are the top contributors in your state? Who are the top bundlers - Rangers, Mavericks and Pioneers for Bush and co-chairs for Kerry?
- Pay attention to dates of donations on disclosure forms. Are donations coincident with legislative policymaking? Is there any quid pro quo going on?
- What jobs do these contributors really hold when they identify themselves on disclosure forms as “homemaker” or “retired,” or leave the employment question blank? Are they telling the truth?
- Learn where to find the disclosure of Levin funds on the FEC reporting forms.
Trends for journalists to watch for in the 2004 elections:
- Donor fatigue. Have some donors stopped giving because they’re tired of it?
- First-time donors. Are some people contributing for the first time? Why?
- Switching parties. If this happens, find out what the donor is after.
- Children of donors giving to campaigns. This is a new technique in “bundling,” or aggregating small hard-money donations because of the new contribution limits. Interview the children. Are they aware they are contributing to politicians?
- Anyone who isn’t giving money while the rest of the family is giving to the same politicians and causes. Why have they strayed?
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