It's Time for Local Campaign Finance Reform

Nearly five years after the Supreme Court decision in Citizens United altered the landscape for money in politics, Congress has done nothing to reverse the ruling's adverse side effects for disclosure and collaboration between independent groups and the candidates they support and the degradation of campaign finance rules in many states.

While reform remains unlikely in Congress, it's possible in some states, where extreme polarization on the issue of money in politics is less evident than in Washington.

Numerous states and municipalities have already enacted new disclosure laws and rules governing candidates' coordination with independent groups.  Still others have pushed for small-donor matching fund systems to dilute the power of big money, or have passed conflict of interest restrictions on gifts from lobbyists and contractors.

In some cases, these reforms included raising campaign finance limits.  In Maryland and Massachusetts, disclosure legislation was matched with higher limits for campaign contributions.  This pattern played out across in other states.  But in Minnesota and Florida, disclosure provisions were cut from bills that wound up increasing the contribution limits.

Over the next two years, there are possibilities for more reforms in states and municipalities.

Here's where action is likely:

Arkansas
Voters this year passed a ballot initiative with significant campaign finance and ethics reforms, including a total ban on direct corporate contributions to candidate campaigns.  The state-level reform group Regnat Populus hopes to build on this success with an initiative in 2016 to expand these reforms and enact new disclosure rules for independent groups.

Arkansas is one of a few states that does not require disclosures for independent spending (known as independent expenditures) and does not recognize issue advertising close to an election (known as electioneering communications) as subject to disclosure.  State laws also allow nonprofit groups to spend freely without disclosing their donors.

Regnat Populus’ initiative would expand disclosures for independent expenditure and electioneering communication spending, and require donor disclosure of certain nonprofits engaged in electoral activity.  The initiative also would tweak the 2014 ballot proposal’s ethics reforms.

Connecticut
Legislators are expected to update their public financing systems to adjust to changes in campaign funding.  This means lawmakers would be allotted public funds in an amount appropriate to counteract the dramatic increase in independent spending since Citizens United.  Groups involved in reform efforts, hope to work to get an initiative on the ballot in the next election.

New Mexico
One of the worst-prepared states for the altered campaign finance landscape wrought by the Citizens United decision.  The state’s laws had no legal definition or standard for either independent expenditures or coordination between an independent group and a candidate or party committee.  And, like every other state, New Mexico did not require disclosure of donors to nonprofits active in electoral politics.

State Sen. Peter Wirth (D-Santa Fe) will introduce two bills in the next legislative session on campaign finance reform.  One will establish clear rules for independent expenditure disclosure and coordination.  The other will seek to update the state’s public financing system by allowing candidates who are outspent to receive matching funds for small donations.

Both bills have had bipartisan success in previous legislative sessions.  The public financing bill passed both houses with substantial support in 2013, only to be vetoed by Gov. Susana Martinez (R).  The disclosure bill passed the state Senate by voice vote in the most recent session, only to die in the House.

The state’s legislative makeup is different this year, after Republicans won control of the state House for the first time in 60 years.  But the campaign finance issue is not as polarized in New Mexico as it is in Washington.  Republican state Rep. Jason Smith will introduce the House version of Wirth’s bill.  Harrison said she has had conversations with supportive Republican members.

Maine
Likely to update their public financing systems to adjust to changes in campaign funding.  This means lawmakers would be allotted public funds in an amount appropriate to counteract the dramatic increase in independent spending since Citizens United.  Maine Citizens for Clean Elections is working to get an initiative on the ballot in the next election.

Missouri
On Dec. 8, local newspapers reported that Missouri mega-donor Rex Sinquefield contributed $1 million to the Lieutenant Governor campaign of Republican Bev Randles.  It was billed as the largest donation to a single candidate in state history, and an example of Sinquefield’s growing influence.  In recent months, the St. Louis financier made six-figure donations to other statewide candidates, including a $750,000 donation to Republican Gubernatorial candidate Catherine Hanaway.

These outsized contributions that came after Missouri ended its campaign contribution limits are sparking action.

Democratic lawyer Brad Ketcher said he will propose a constitutional amendment for the ballot that would re-establish contribution limits for legislative candidates, place limits on lobbyist gifts and impose strong coordination rules on independent spending.

The issue is gaining attention from Republicans as well.  Republican state Rep. Caleb Rowden (R-Jefferson City) introduced legislation to require disclosure of dark money spent by nonprofit groups on elections, ban lobbyist gifts and increase campaign finance disclosure.

Missouri Roundtable for Life, an anti-abortion organization, is behind another ballot initiative that would reinstate campaign contribution limits.

The issue is also drawing attention from U.S. Sen. Claire McCaskill (D-Mo.) who has said she's increasingly worried about the large contributions flowing into state-level campaigns.

Other states and municipalities:

Legislation related to the disclosure of donors to independent groups like nonprofits is likely to be considered in California, Minnesota and Nebraska.  Legislators from both parties in Arizona also have shown interest in disclosure legislation, which may translate into action, considering the outsized role dark money played in the 2014 election.

Dark money disclosure is also likely to be up for debate in Texas after the state’s ethics commission put new disclosure rules in place in 2014.  These will certainly face a court challenge from disclosure opponents.

Philadelphia City Council members are looking to pass legislation requiring similar donor disclosure rules, as well as stricter coordination language.

Public financing systems will be considered by municipal lawmakers in Buffalo, New York; Howard County, Maryland; and Seattle.

There also will be efforts by the anti-corruption group Represent.Us to push ballot initiatives packaging lobbying, ethics and campaign finance reforms together as they did to much success in Tallahassee, Florida in 2014.  The group will target multiple municipalities and states in 2016, but has not announced which ones yet.

Reforms are not the only thing on the docket in the coming years.  Those pushing for these changes are also paying attention to court cases and other legislative moves to rollback reforms and increase the amount of money in politics.










NYC Wins When Everyone Can Vote!

Michael H. Drucker
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Sen. Carl Levin to Grill the IRS Over Dark Money

First some history on Dark Money.

A former Illinois congressional candidate and a government watchdog organization have teamed up to sue the Internal Revenue Service, claiming the agency should bar dark money groups from funding political ads. The lawsuit, filed by David Gill, his campaign committee and Citizens for Responsibility and Ethics in Washington, or CREW, is the first to challenge how the IRS regulates political spending by social welfare nonprofits, campaign-finance experts say. These nonprofits, often called dark money groups because they don't have to identify their donors, have increasingly become major players in politics since the Supreme Court's Citizens United ruling in early 2010.

Gill, an emergency room doctor who has advocated for health-care reform, including a single-payer plan, was the Democratic candidate for the 13th district in Illinois. After a tight race, Gill ended up losing to the Republican candidate by 1,002 votes, a loss the lawsuit blames "largely, if not exclusively," on spending by the American Action Network, a social welfare nonprofit.

American Action Network, launched in 2010 by former Minnesota Republican Sen. Norm Coleman, reported spending almost $1.5 million on three TV commercials and Internet ads opposing Gill, mainly in the weeks right before the election. That was more than any other outside group spent on the race, and more than Gill's principal campaign committee spent on the entire election, according to Federal Election Commission records.

The Gill lawsuit, filed in US District Court in the District of Columbia, alleges the IRS failed to properly regulate the American Action Network, citing seemingly contradictory definitions the agency has applied to such groups for years.

The statute governing social welfare nonprofits says they should be operated "exclusively" for promoting social welfare. But the IRS paved the way for political spending by these groups by interpreting "exclusively" as meaning the groups had to only be "primarily" engaged in promoting the public good. Some groups have taken this to mean they can spend up to 49 percent of their money on election ads. The lawsuit claims the IRS' interpretation of the law "is arbitrary, capricious, and contrary to law," and asks for an injunction prohibiting the agency from using it.

Melanie Sloan, CREW's executive director, blamed the IRS for sitting on its hands as social welfare nonprofits have been formed specifically to run negative ads paid for by anonymous donors. "Now the IRS can explain its deplorable inaction in federal court," she said. In filings to the IRS, the group said it spent $25.7 million in its 2010 tax year. In separate filings to the Federal Election Commission, it reported spending about $19.4 million over the same period on political ads, or about 76 percent of the total expenditures reported to the IRS.

Senator Lisa Murkowski (R-Alaska) joined Sen. Ron Wyden (D-Ore.) in offering a new plan to unmask secretive political groups and their dark-money donors. In a Washington Post op-ed, Murkowski and Wyden write, "At minimum, the American people deserve to know before they cast their ballots who is behind massive spending, who is funding people and organizations, and what their agendas are." More than $400 million in dark money was spent during the 2012 elections, mostly by conservative organizations, a fourfold increase from 2008. Leading dark-money groups included Karl Rove's Crossroads GPS, the US Chamber of Commerce, Americans for Prosperity, and Americans for Tax Reform, the anti-tax outfit run by Grover Norquist.

The Murkowski-Wyden plan would try to force politically-active nonprofits, big business trade groups, labor unions, and shell corporations to reveal the true source of their funds. In spirit, it's not all that different from the DISCLOSE Act of 2012.

Today, if a donor gives $10,000 or a $1 million to Rove's Crossroads GPS, a nonprofit, to spend on political activities, that donor stays secret. Murkowski and Wyden's plan would make Crossroads disclose that donor. To use a real example, a board member for the tea party-affiliated group FreedomWorks reportedly funneled more than $12 million in donations from him and his family through a pair of Tennessee corporations and then to FreedomWorks' super-PAC. The donor's identity was one of the biggest mysteries of the 2012 campaign, and it remained unsolved until the Washington Post reported six weeks after Election Day, that FreedomWorks board member Richard Stephenson and his family were behind the big donations. Under Murkowski-Wyden, Stephenson's name would have come out right away.

The two senators, in their outline for new disclosure legislation, try to anticipate the landmines on the road to 60 votes. They suggest raising the limit for donor disclosure from more than $200 to more than $500 to focus on larger donors. They also carve out an exemption so that dues-paying members of, say, the NRA or the Sierra Club who aren't giving money for political activities aren't disclosed like donors giving strictly to influence elections are.

So, sometime in the next few months, Senator Carl Levin's permanent subcommittee plans to call the Internal Revenue Service to task for allowing the political super PACs to be classified as tax-exempt 501(c)(4)s. "Tax-exempt 501(c)(4)s are not supposed to be engaged in politics," he said. "It is against the law to do so." Then he added, with a certain undeniable relish, "We're going to go after them."

Finally, someone in power plans to grill the IRS on why it is allowing hundreds of millions of dollars in secret dark money to flow through supposedly nonpartisan "social welfare organizations" and into our elections. Levin's comments aren't a complete surprise. In his retirement announcement, he will not run in 2014, Levin said his investigative subcommittee will "look into the failure of the IRS to enforce our tax laws and stem the flood of hundreds of millions of secret dollars flowing into our elections, eroding public confidence in our democracy."










NYC Wins When Everyone Can Vote!

Michael H. Drucker
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