Campaign Finance Disclosure: The Laws States Need To Shine Light On Dark Money In Politics
New Jersey Gov. Chris Christie speaks at the Republican Jewish Coalition, Saturday, March 29, 2014, in Las Vegas. Several possible GOP presidential candidates gathered in Las Vegas as Sheldon Adelson, a billionaire casino magnate, looks for a new favorite to help on the 2016 race for the White House.
MINNEAPOLIS — As the influence of money expands in the nation’s political sphere, 2014 is going down as the most expensive year in midterm elections — with the largest portions of dark money funneling through the shadows of big corporations, nonprofits, labor unions and super PACs.
Last year’s elections cost an estimated $3.7 billion, according to the Center for Responsive Politics (CRP). Although this total is not dramatically higher than recent elections, the biggest concerns center around three specific unknowns: where the money in politics is coming from; who it is going to; and how much of it is publicly disclosed.
For many American voters, that money trail is a tough one to follow.
In its 2014 Corruption Perceptions Index (CPI), Transparency International, a global civil society organization, states there is a “murky nexus” between all levels of money and politics in the U.S. government, which lags behind other developed countries in the world, such as the United Kingdom, Germany, New Zealand, Japan and Canada.
The CPI concludes that the 2014 midterm elections confirmed “the ever-increasing role that wealthy individuals, corporations, and organizations play in financing political campaigns. Much of this money [is] funneled through and to various groups that are not obligated to publically (sic) report the sources of their funding, thereby making it impossible for the public to know who is financing various campaigns.” Thus, the question arises of whether transparency of elections is important to democracy.
Disclosure and campaign finance laws vary from state to state. According to the CRP, the nearly $4 billion election cost last year only accounts for funds reported to the Federal Exchange Commission (FEC). The CRP projects that there is still an estimated $100 million in campaign funds that have gone undisclosed due to loopholes in transparency laws that allow those undisclosed funds to come in legally.
“There are some states that require a lot of detail in the disclosure of campaign contributions,” Dale Eisman, acting director of communications for the national advocacy organization Common Cause, told MintPress News. “There are others that require disclosure that don’t necessarily audit the records to see that they’re getting accurate information, and then there are some that don’t require much disclosure at all.”
The loopholes in disclosure laws exist primarily in the form of independent expenditures for political advertisements purchased by social welfare nonprofit groups, which are exempt from donor disclosure rules. Tax coded 501(c)(4) and 501(c)(6) nonprofits have become pathways for dark money transfers, in which super PACs will sometimes report a nonprofit group as their donor, while the nonprofit’s donors remain a secret.
“These are people who have formed a nonprofit organization and contributed money to it,“ said Eisman. “So while you have an organization name on that money, you wouldn’t really know who provided it.”
An estimated $25 million was spent on political television ads in the 2014 state-level elections through independent expenditures by secret nonprofit groups. That’s nearly double the amount spent in 2010, according to a Center for Public Integrity data analysis. The political participation of these groups seems significant, in that 63 percent of the races in which they sponsored ads they had either supported a winning candidate or criticized one who lost.
But it’s not just disclosure exemptions and cleverly promoted television ads that have prompted public concern. Since the Supreme Court’s Citizens United decision in 2010, the unlimited contribution and outside spending amounts have prompted various advocacy groups and legislators to push for remodeling campaign finance and disclosure policies in their states.
“Most do not have great disclosure laws or conflict of interest laws,” Mansur Gidfar, communications director for anti-corruption group Represent.Us, told MintPress. “In a lot of cases, every situation around the laws that govern how money interacts with the political process is actually a lot worse at the state level than it is at the federal level.”
Twisted loopholes and the murky nexus
With the truth about dark money coming out on both the state and federal levels, some states are shining the spotlight on reform.
Minnesota state Rep. Ryan Winkler is preparing to introduce a bill to promote electoral transparency in the North Star State.
On the heels of the Citizens United decision, Winkler has worked on bills since 2011 to close loopholes, create more campaign oversight and accountability, and eliminate the need for third party donors. Although some changes have been enacted, provisions pertaining to closing disclosure loopholes were stripped in 2013 — loopholes he tried to close again in 2014 and will continue to fight to close this year.
Winkler’s major issue with the loopholes concerns how political communications and advertising are legally implemented without disclosure through slightly altered political language.
Under current law, regardless of how biased the endless amounts of political ads are in support of or are against a specific candidate, the source of funding for an ad does not have to be disclosed if the ad does not explicitly use the phrases “vote for” or “vote against.”
“You can spend an unlimited amount of money sending out mail in a legislator’s district saying that Legislator X … has done a terrible job for you,” Winkler told MintPress.
But despite any insinuations, the nonprofit organizations can claim their ads are educating voters on an issue, not politicking, as long as they don’t employ those “magic” words.
“We would like to change the law to clarify that if you are spending money targeting an individual state candidate in their area and it’s 60 days before an election, that’s not issue advocacy,” said Winkler. “That is trying to promote or defeat a candidate for office, and you should have to disclose who paid for the ad.”
Susan Tucker, the executive director for the Minnesota chapter of the League of Women Voters, told MintPress that the local group is an advocate for Winkler’s bill.
“We were seeking reforms in really simple disclosure — that the electioneering communication would be disclosed,” Tucker said. “We weren’t even asking in terms of limitations of money being spent at this point, but just really about disclosure.”
Although seemingly in opposition to Citizens United, Winkler’s 2013 bill actually increased the contribution limits that candidates in Minnesota could accept and spend “in order to try to balance some of the big money that’s spent from outside parties,” Winkler said.
Winkler’s proposal for his transparency bill last year received opposition from two large state groups. Both Minnesota Citizens Concerned for Life (MCCL), the largest anti-abortion group in the state, and the Minnesota chapter for the National Rifle Association (NRA), did not support the spending and donor disclosure requirements of outside groups and nonprofits.
While the bill was not related to either gun rights or abortion, both groups are nonprofits with social and political lobbying purposes. The NRA provides services to gun owners and lobbies for pro-gun legislation, while the MCCL supports pro-life enactments and has a 501(c)(4) general fund, as well as a state and federal PAC.
Winkler says that as election season rolled around, many rural politicians didn’t want the opposition of the lobbying NRA or pro-life groups, which ultimately caused the bill’s shutdown.
But that isn’t stopping his push for stronger disclosure requirements. Winkler also anticipates introducing legislation similar to the “Shareholders United” act proposed by Maryland Sen. Jamie Raskin. The act requires corporations to obtain approval from shareholders before spending money in politics. It also requires any spending to be disclosed online.
The Maryland Chamber of Commerce has come out against the proposal, claiming that gathering all shareholder input is an “unworkable scenario” and asserting that the act’s requirements have the effect of suppressing the First Amendment rights of corporations, as allowed by Citizens United.
The opposition from the Maryland Chamber may not come as a shock. The U.S. Chamber of Commerce oversees the state chambers, and according to “The Dark Side Of Citizens United,” a report by Public Citizen’s Congress Watch division, the U.S. Chamber of Commerce was one of largest dark money spenders in 2014, spending $31.8 million as of Oct. 24. It was the highest spender in 80 percent of the contests it tried to influence.
With dark spending exchanged on all levels of elections, Tucker confirms, “There’s a reluctance to lift the veil on where the money is coming from.”
A revolutionary step forward
Yet that veil has been lifted in Tallahassee, Florida.
A referendum imposing stronger ethics for transparency, implementing rules against conflicts of interest, stopping political bribery, and limiting campaign contributions to city candidates was backed by 67 percent of city voters in November.
“This is the first anti-corruption act passed using our model,” Gidfar, of Represent.Us, said of the tailored legislation generated by Represent.Us and the Tallahassee group Citizens For Ethics Reform.
By taking cues from the Federal Election Campaign Act, Represent.Us creates state and local versions that protect those localities from “the kind of ‘pay-to-play’ corrupt cronyism that we see on a huge scale at the national level,” Gidfar said.
Although the referendum was victorious in Tallahassee, clouds rolled in from bipartisan opposition.
“The city actually sued us to try to keep our referendum off the ballot,” said Gidfar. “The people that are least happy about what we’re doing tend to be local politicians, and that’s not really limited by party.”
Despite the vast amount of bipartisan opposition to disclosure, Gidfar has also seen support from a broad range of groups.
“What we see in practice is that regardless of political affiliation, huge majorities of Democrats, Republicans and Independents support the provisions of the anti-corruption act,“ Gidfar said.
Represent.Us plans to work with 12 other cities over the next year to establish similar anti-corruption laws and empower voters — in as much of a non-partisan way as possible.
“I think that’s kind of a misconception — that this is a party-lined issue and that Republicans are kind of pouring money into politics and Democrats are against it,“ said Gidfar.
The FEC House and Senate campaign finance reports show that the disclosed receipts (contributions, loans and total election revenue) and disbursements (spending totals) for the Republican and Democratic parties were nearly equivalent in 2014.
Contributions to the Republican party comprised about 56 percent of total receipts in the House elections and about 52 percent of total receipts in the Senate. Democratic Party contributions amounted to about 43 percent in the House and 47 percent in the Senate.
Combined, the Republican and Democratic parties reigned in $1,645,709,962 billion.
The disbursement breakdown almost mirrors the receipt percentages for both parties in each race. Though the total disclosed funds involved with the Republican Party are slightly higher, it’s apparent that both parties are raising and spending nearly equal amounts of money.
Meanwhile, when it comes to seeking reform, it’s a game that’s been going on too long.
“When you try and challenge the status quo and make it possible for people who aren’t playing the game to get involved in politics and win elected office, that’s sort of a threat to whoever happens to [currently] be in office,” Gidfar said.
2015: Will the web continue to tangle?
In 2013, the IRS proposed a draft of new guidelines for groups pouring dark money into politics, specifically targeting the contribution from and electioneering of tax and disclosure exempt social welfare nonprofit organizations.
The draft states:
“The proposed regulations provide that candidate-related political activity
includes activities that the IRS has traditionally considered to be political
campaign activity per se, such as contributions to candidates and
communications that expressly advocate for the election or defeat of a candidate.
“The proposed regulations also would treat as candidate-related political activity
certain activities that, because they occur close in time to an election or are
election-related, have a greater potential to affect the outcome of an election … such activities instead would be subject to a more definitive rule.”
After the original draft’s onset, sharp criticism drawn by right- and left-wing politicians caused the guidelines to be withdrawn. The IRS may not be ready to propose the updated revisions to these guidelines until later this year, potentially delaying any establishment of needed changes until after the 2016 presidential elections.
Changes that states make on a local level may have to be the next step forward. But according to a state-by-state grading by The National Institute of Money In State Politics of independent expenditure disclosure requirements, nearly half of the country had failing scores.
The grading took place in September and does not take into account the Tallahassee referendum. Yet it reports that of the 24 states with the lowest grades, many were due to two common disclosure flaws: Either the state did not require any electioneering communications disclosure at all, or the state’s disclosure law was was poorly executed and inaccurate in its data collection.
However, the report highlights an overall increase of disclosure throughout the states — with 31 states now requiring more financial transparency, up from 25 in 2013.
Is it possible there may be some light at the end of the tunnel?
“There’s a whole list of groups or individuals that provide dark money,” Common Cause’s Eisman said. “People or corporations … the public ought to know who is spending money to influence our votes.”
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