Campaign Finance : Background, Regulation and Reform [1 ed.] 9781608766246, 9781606928363

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Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

CAMPAIGN FINANCE: BACKGROUND, REGULATION AND REFORM

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

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CAMPAIGN FINANCE: BACKGROUND, REGULATION AND REFORM

THOMAS P. KALLEN

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EDITOR

Nova Science Publishers, Inc. New York

Copyright © 2009 by Nova Science Publishers, Inc. All rights reserved. No part of this book may be reproduced, stored in a retrieval system or transmitted in any form or by any means: electronic, electrostatic, magnetic, tape, mechanical photocopying, recording or otherwise without the written permission of the Publisher. For permission to use material from this book please contact us: Telephone 631-231-7269; Fax 631-231-8175 Web Site: http://www.novapublishers.com NOTICE TO THE READER The Publisher has taken reasonable care in the preparation of this book, but makes no expressed or implied warranty of any kind and assumes no responsibility for any errors or omissions. No liability is assumed for incidental or consequential damages in connection with or arising out of information contained in this book. The Publisher shall not be liable for any special, consequential, or exemplary damages resulting, in whole or in part, from the readers’ use of, or reliance upon, this material.

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Independent verification should be sought for any data, advice or recommendations contained in this book. In addition, no responsibility is assumed by the publisher for any injury and/or damage to persons or property arising from any methods, products, instructions, ideas or otherwise contained in this publication. This publication is designed to provide accurate and authoritative information with regard to the subject matter covered herein. It is sold with the clear understanding that the Publisher is not engaged in rendering legal or any other professional services. If legal or any other expert assistance is required, the services of a competent person should be sought. FROM A DECLARATION OF PARTICIPANTS JOINTLY ADOPTED BY A COMMITTEE OF THE AMERICAN BAR ASSOCIATION AND A COMMITTEE OF PUBLISHERS. LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA Available upon request ISBN: 978-1-60876-624-6 (E-Book)

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CONTENTS Preface Chapter 1

Chapter 2

Public Financing of Presidential Campaigns: Overview and Analysis R. Sam Garrett The Constitutionality of Campaign Finance Regulation: Buckley v. Valeo and Its Supreme Court Progeny L. Paige Whitaker

Chapter 3

Campaign Finance: An Overview Joseph E. Cantor

Chapter 4

Federal Funding of Presidential Nominating Conventions: Overview and Policy Options R. Sam Garrett and Shawn Reese

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vii

Chapter 6

Campaign Finance: Legislative Developments and Policy Issues in the 110th Congress R. Sam Garrett Campaign Finance Law and the Constitutionality of the “Millionaire’s Amendment”: An Analysis of Davis v. Federal Election Commission L. Paige Whitaker

1

51 107

131

151

171

vi Chapter 7

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Index

Contents Campaign Finance: Regulating Political Communications on the Internet L. Paige Whitaker and R. Sam Garrett

179 187

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PREFACE As the recently ended U.S.presidential campaign made clear (once again), money talks and ...Therefore, should funding of political campaigns be regulated or just go to the highest bidder or those who can raise the largest amount of funds on the internet or from private sources? This new book examines these issues. Chapter 1 - The presidential public campaign financing program is funded through “checkoff” designations on individual income tax returns. Choosing to participate (or not) in the checkoff does not affect one’s tax liability or refund. Candidates who choose to participate may receive taxpayer-funded matches of privately raised funds during primary campaigns, and grants during the generalelection contest. Public funds also subsidize nominating conventions. The public financing system has remained largely unchanged since the 1970s. However, there is general agreement that, if the program is to be maintained, updates are necessary to provide greater financial resources and higher spending limits to participants. This article discusses current controversies and arguments for and against public financing of presidential campaigns, legislative history, elements of the program, taxpayer and candidate participation, financial status of the program, current legislation, and analysis of various policy proposals. If Congress chooses to alter the program, consensus will be necessary in what has historically been a particularly complex and contentious area of campaign finance policy. Four bills introduced in the 110th Congress (H.R. 776, S. 436, H.R. 4294, and S. 2412) would update the program. Those bills, which are substantially similar, would greatly increase the financial resources available to candidates, particularly through “escape hatch” provisions designed to allow candidates to respond to highspending opponents. That feature does not currently exist. Overall, under the proposed increases, publicly financed candidates could spend as much as $450 million, compared with approximately $126 million today (plus approximately $14

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Thomas P. Kallen

million in exempt fundraising, legal, and accounting costs). Part of the increased benefits to participants would be funded by increasing the checkoff designation from $3 for individuals to $10, and from $6 to $20 for married couples filing jointly. It is unclear how taxpayers would respond to this change, particularly because the effects of a proposed public education program cannot be predicted. Taxpayer participation in public financing declined the only previous time that Congress increased the checkoff amount, but the higher designation amounts nonetheless substantially raised the balance in the Presidential Election Campaign Fund, at least in the short term. Finally, two bills (H.R. 72 and H.R. 484) would curtail part or all of the public financing program. These approaches are likely to be attractive to those who believe that public financing is unnecessary, an improper use of taxpayer resources, or both. However, removing the option of public subsidies would leave presidential candidates entirely dependent upon private donations or personal resources. As this article discusses, various options, each with potential strengths and weaknesses, exist for revisiting the presidential public financing system. Chapter 2 - Political expression is at the heart of First Amendment activity and the Supreme Court has granted it great deference and protection. However, according to the Court in its landmark 1976 decision, Buckley v. Valeo, an absolutely free political marketplace is not required by the First Amendment — nor is it desirable — because without reasonable regulation, corruption will result. Most notably, the Buckley Court ruled that the spending of money in campaigns, whether as a contribution or an expenditure, is a form of “speech” protected by the First Amendment. The Court upheld some infringements on free speech, however, in order to further the governmental interests of protecting the electoral process from corruption or the appearance of corruption. In Buckley, the Supreme Court considered the constitutionality of the Federal Election Campaign Act of 1971 (FECA), requiring political committees to disclose campaign contributions and expenditures and limiting, to various degrees, the ability of persons and organizations to make contributions and expenditures. While First Amendment freedoms and campaign finance regulation present conflicting means of attempting to preserve the integrity of the political process, the Court resolved this conflict in favor of the First Amendment interests and subjected any regulation burdening free speech and free association to “exacting scrutiny.” Under this standard of review, a court will evaluate whether the government’s interests in regulating are compelling, examine whether the regulation burdens and outweighs First Amendment liberties, and inquire as to whether the regulation is narrowly tailored to serve the government’s interests. If a regulation meets all three criteria, a court will uphold it.

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Preface

ix

This article first discusses the key holdings enunciated by the Supreme Court in Buckley, including those upholding reasonable contribution limits, striking down expenditure limits, upholding disclosure reporting requirements, and upholding the system of voluntary presidential election expenditure limitations linked with public financing. It then examines the Court’s extension of Buckley in several subsequent cases, evaluating them in various regulatory contexts: contribution limits (California Medical Association v. FEC; Citizens Against Rent Control v. Berkeley; Nixon v. Shrink Missouri Government PAC; FEC v. Beaumont); expenditure limits (First National Bank of Boston v. Bellotti; FEC v. Massachusetts Citizens for Life; Austin v. Michigan Chamber of Commerce; FEC v. National Right to Work; Colorado Republican Federal Campaign Committee (Colorado I) v. FEC; FEC v. Colorado Republican Federal Campaign Committee (Colorado II); FEC v. Democratic Senatorial Campaign Committee; FEC v. National Conservative Political Action Committee); disclosure requirements (Buckley v. American Constitutional Law Foundation; Brown v. Socialist Workers ‘74 Campaign Committee; FEC v. Akins; McIntyre v. Ohio Elections Commission); and political party soft money and electioneering communication restrictions (McConnell v. FEC; Wisconsin Right to Life, Inc. v. FEC (WRTL II)). Chapter 3 - Concerns over financing federal elections have become a seemingly perennial aspect of our political system, long centered on the enduring issues of high campaign costs and reliance on interest groups for needed campaign funds. Rising election costs had long fostered a sense in some quarters that spending was out of control, with too much time spent raising funds and elections “bought and sold.” Debate had also focused on the role of interest groups in campaign funding, especially through political action committees (PACs). Differences in perceptions of the campaign finance system were compounded by the major parties’ different approaches. Democrats tended to favor more regulation, with spending limits and public funding or benefits a part of past proposals. Republicans generally opposed such limits and public funding. The 1996 elections marked a turning point in the debate’s focus, as it shifted from whether to further restrict already regulated spending and funding sources to addressing election-related activities largely or entirely outside federal election law regulation and disclosure requirements (i.e., soft money). While concerns had long been rising over soft money in federal elections, its widespread and growing use for so-called issue advocacy since 1996 raised questions over the integrity of existing regulations and the feasibility of any limits at all. Following 1996, reform supporters offered legislation whose primary goals were to prohibit use of soft money in ways that could affect federal elections and to bring election-related issue advocacy communications under federal regulation. In both the 105th and

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106th Congresses, the House passed the Shays-Meehan bill, but the Senate failed to invoke cloture to allow a vote on the companion McCain-Feingold bill. The 106th Congress did, however, agree on an aspect of campaign reform, in passing P.L. 106230, to require disclosure by certain tax-exempt political organizations organized under Section 527 of the Internal Revenue Code. Such groups exist to influence elections, but many had not been required to disclose financial activity (to the FEC or IRS). In the 107th Congress, the Senate passed McCain-Feingold, as amended, and the House passed the companion Shays-Meehan bill, as amended. The Senate then passed the House bill, which was signed into law by President Bush as the Bipartisan Campaign Reform Act of 2002 — BCRA (P.L. 107-155) — constituting the first major change to the nation’s campaign finance laws since 1979. In the 2004 elections, some $435 million was raised and spent by “political organizations” organized under Section 527 of the Internal Revenue Code but outside of federal election law regulation. In response to this perceived circumvention of election law regulation, the 109th Congress examined the role of 527 groups in federal elections; while the House passed legislation to address it, no Senate bill was passed. Similar bills — H.R. 420 and S. 463 — have been introduced in the 110th Congress. This article provides an overview of campaign finance law governing federal elections, issues raised in recent years by campaign finance practices, and recent legislative activity and proposals in Congress. Chapter 4 - This article provides an overview and analysis of two recurring questions surrounding the federal government’s role in financing presidential nominating conventions. First, how much public funding supports presidential nominating conventions? Second, what options exist for changing that amount if Congress chooses to do so? Both issues have generated controversy in the past and continue to be the subject of legislative debate. Four bills introduced in the 110th Congress propose changes to the structure or amounts of federal funds for presidential nominating conventions. Those bills (H.R. 72, H.R. 484, S. 436, and S. 2412) would affect Presidential Election Campaign Fund (PECF) convention grants. (Two other bills, H.R. 776 and H.R. 4294, would affect nonfederal convention funds.) Congress enacted one law (P.L. 110-161) in FY2008 that affected convention security funding with the appropriation of $100 million for the Democratic and Republican nominating conventions (each were allocated $50 million). This security funding is not provided to party convention committees but to the state and local law enforcement entities assisting in securing the convention sites. A total of approximately $133.6 million in federal funds has supported, or will support, the 2008 Democratic and Republican conventions. Such funding is provided

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Preface

xi

through separate federal programs that support public financing of presidential campaigns and convention security. Some Members of Congress and others have objected to federal convention funding and have argued that the events should be entirely self-supporting. Others, however, contend that public funding is necessary to avoid real or apparent corruption in this aspect of the presidential nominating process. If Congress decides to revisit convention financing, a variety of policy options discussed in this article might present alternatives to current funding arrangements. Additional discussion of public financing of presidential campaigns appears in CRS Report RL34534, Public Financing of Presidential Campaigns, by R. Sam Garrett. For additional information on National Special Security Events, which include presidential nominating conventions, see CRS Report RS22754, National Special Security Events, by Shawn Reese. Chapter 5 - During the 110th Congress, the House and Senate’s campaign finance work has overlapped in three areas. First and most significantly, a lobbying and ethics law enacted in September 2007, the Honest Leadership and Open Government Act (HLOGA; P.L. 110-81, which was S. 1), contains some campaign finance provisions. Second, the House and Senate have both passed H.R. 6296, which would extend the Federal Election Commission’s (FEC) Administrative Fine Program (AFP) until 2013. (As of this writing, there is no indication that President Bush will veto the bill.) Third, the Committee on House Administration and the Senate Rules and Administration Committee have held hearings on automated political telephone calls (also known as “robo calls” or “auto calls”), a subject that is related to campaign finance. Otherwise, the House and Senate have largely focused on different campaign finance issues. Specifically, the House has passed three bills, not passed by the Senate, containing campaign finance provisions. First, H.R. 3032 would allow candidates to designate an individual to disburse remaining campaign funds if the candidate dies. Second, H.R. 2630 would restrict campaign and leadership political action committee (PAC) payments to candidate spouses. Third, , a provision in the House-passed version of an appropriations bill (H.R. 3093) would have prohibited spending Justice Department funds on criminal enforcement of the Bipartisan Campaign Reform Act (BCRA) “electioneering communication” provision. However, the language was not included in the FY2008 consolidated appropriations law (P.L. 110-161). Similarly, the Senate has largely considered legislation not considered in the House. The Senate’s campaign finance activity has also been confined largely to hearings. S. 223, which would require electronic filing of campaign disclosure reports was reported from the Rules and Administration Committee but has not

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received floor consideration. During the spring and summer of 2007, the committee also held hearings on coordinated party expenditures (S. 1091) and congressional public financing legislation (S. 1285). Non-legislative items are also noteworthy. Following a Senate impasse over four nominees to the Federal Election Commission (FEC) during the first session of the 110th Congress, the Commission lacked the quorum necessary to make major policy decisions between January and June 2008. Senate confirmations of five nominees on June 24, 2008, restored the FEC to full capacity. FEC rulemakings are ongoing or expected in response to legislative activity, and Supreme Court rulings addressing electioneering communications (Federal Election Commission v. Wisconsin Right to Life, Inc.) and the “Millionaire’s Amendment” (Davis v. Federal Election Commission). Chapter 6 - In a 5-to-4 decision, the Supreme Court struck down a provision of the Bipartisan Campaign Reform Act of 2002 (BCRA), also known as the McCain-Feingold law, establishing increased contribution limits for congressional candidates whose opponents significantly self-finance their campaigns. This provision is frequently referred to as the “Millionaire’s Amendment.” The Court found that the burden imposed on expenditures of personal funds is not justified by the compelling governmental interest of lessening corruption or the appearance of corruption and, therefore, held that the law is unconstitutional in violation of the First Amendment. Chapter 7 - The Federal Election Campaign Act (FECA) regulates “federal election activity,” which is defined to include a “public communication” (i.e., a broadcast, cable, satellite, newspaper, magazine, outdoor advertising facility, mass mailing, or telephone bank communication made to the general public) or “any other form of general public political advertising.” In 2006, in response to a federal district court decision, the FEC promulgated regulations amending the definition of “public communication” to include paid Internet advertisements placed on another individual or entity’s website. As result, a key element of online political activity — paid political advertising — subject to federal campaign finance law and regulations. During the 110th Congress, the regulation of political communications on the Internet has not been the subject of major legislative action. H.R. 894 (Price, NC) would extend “stand by your ad” disclaimer requirements to Internet communications, among others. H.R. 5699 (Hensarling) would exempt from treatment as a contribution or expenditure any uncompensated Internet services by individuals and certain corporations.

In: Campaign Finance… Editor: Thomas P. Kallen, pp. 1-50

ISBN: 978-1-60692-836-3 © 2009 Nova Science Publishers, Inc.

Chapter 1

PUBLIC FINANCING OF PRESIDENTIAL CAMPAIGNS: OVERVIEW AND ANALYSIS

*

R. Sam Garrett

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ABSTRACT The presidential public campaign financing program is funded through “checkoff” designations on individual income tax returns. Choosing to participate (or not) in the checkoff does not affect one’s tax liability or refund. Candidates who choose to participate may receive taxpayer-funded matches of privately raised funds during primary campaigns, and grants during the general-election contest. Public funds also subsidize nominating conventions. The public financing system has remained largely unchanged since the 1970s. However, there is general agreement that, if the program is to be maintained, updates are necessary to provide greater financial resources and higher spending limits to participants. This article discusses current controversies and arguments for and against public financing of presidential campaigns, legislative history, elements of the program, taxpayer and candidate participation, financial status of the program, current legislation, and analysis of various policy proposals. If Congress chooses to alter the program, consensus will be necessary in what has historically been a particularly complex and contentious area of campaign finance policy.

*

This is an edited, excerpted and augmented edition of CRS Report RL34534, dated September 16, 2008.

2

R. Sam Garrett Four bills introduced in the 110th Congress (H.R. 776, S. 436, H.R. 4294, and S. 2412) would update the program. Those bills, which are substantially similar, would greatly increase the financial resources available to candidates, particularly through “escape hatch” provisions designed to allow candidates to respond to high- spending opponents. That feature does not currently exist. Overall, under the proposed increases, publicly financed candidates could spend as much as $450 million, compared with approximately $126 million today (plus approximately $14 million in exempt fundraising, legal, and accounting costs). Part of the increased benefits to participants would be funded by increasing the checkoff designation from $3 for individuals to $10, and from $6 to $20 for married couples filing jointly. It is unclear how taxpayers would respond to this change, particularly because the effects of a proposed public education program cannot be predicted. Taxpayer participation in public financing declined the only previous time that Congress increased the checkoff amount, but the higher designation amounts nonetheless substantially raised the balance in the Presidential Election Campaign Fund, at least in the short term. Finally, two bills (H.R. 72 and H.R. 484) would curtail part or all of the public financing program. These approaches are likely to be attractive to those who believe that public financing is unnecessary, an improper use of taxpayer resources, or both. However, removing the option of public subsidies would leave presidential candidates entirely dependent upon private donations or personal resources. As this article discusses, various options, each with potential strengths and weaknesses, exist for revisiting the presidential public financing system.

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CURRENT ISSUES AND ARGUMENTS IN BRIEF The principal justification behind presidential public financing has been to reduce the need for private money in politics.[1] Public financing proponents argue that the program has increased competition in presidential elections by permitting those without personal wealth or substantial private fundraising resources to seek the office.[2] Public financing therefore relieves candidates from at least some of the burdens of time-consuming private fundraising. Finally, public financing is attractive to some because it can encourage candidates to limit their campaign spending in exchange for public subsidies. Nonetheless, even those who support the presidential public financing program generally agree that it needs to be updated before the 2012 elections.[3] Except for increasing the checkoff amount in 1993, Congress has essentially left the program unchanged since its enactment in 1971. Many of the concerns surrounding public financing highlight financial competitiveness among candidates. As this article discusses, publicly financed candidates must adhere to spending limits, unlike their

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Public Financing of Presidential Campaigns: Overview and Analysis

3

privately financed opponents. Those limits, however, are increasingly regarded as too low to permit effective campaigning. Since 2000, some major candidates have chosen to forgo public financing during the primary campaign. The 2008 campaign cycle is regarded as perhaps the final one in which the program, as it currently stands, will remain a viable option for the most competitive candidates. As one scholar has noted, “By 2008, it was clear that the public financing system, with its relatively paltry spending limits, was a luxury no serious candidate could afford, at least in the primary season.”[4] Nonetheless, and despite that sentiment, several candidates chose to participate in public financing during the 2008 election cycle. The eventual Republican nominee, Senator John McCain, initially applied for public funds in the primary, but later withdrew from the system. Senator McCain will, however, receive public funds for the general election.[5] The Democratic nominee, Senator Barack Obama, announced in June 2008 that he would not participate in public financing for the general election; he also did not accept public funds during the primary.[6] Senator Obama is the first major-party nominee since the program’s 1976 inception to decline public financing for the general election. Although much of the recent debate over public financing has focused on how to save the system, some suggest that Congress should end the program. For those who oppose presidential public financing, the declining taxpayer participation rate (discussed later in this article) provides evidence that the program lacks public support. Opponents also contend that the program has failed to improve competition.[7] Some also object in principle to government-funded campaign subsidies, question whether truly competitive candidates need public financing, or both.[8] Finally, the Federal Election Commission (FEC) was unable to administer parts of the public financing program between January and June 2008.[9] Due to a Senate stalemate over nominations to the Commission, in January 2008 the agency lost the quorum required to make most policy decisions. That included certifying candidates’ eligibility to receive primary matching funds or general-election grants. (Convention grants were certified before the Commission lost its quorum.) The Commission was also unable to consider enforcement actions or advisory-opinion requests related to public financing. On June 24, 2008, however, the Senate confirmed five nominees to the FEC.[10] Those five will join a sixth commissioner who had remained in office. The Commission now stands at full operating strength.

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BRIEF LEGISLATIVE HISTORY Despite calls for publicly financed presidential campaigns early in the 20th Century, Congress did not actively consider the idea until the 1950s. In 1966, Congress first enacted legislation authorizing taxpayer support for presidential and vice-presidential candidates and political parties. However, legislation enacted the following year essentially terminated the original program before it took effect.[11] The current presidential public financing system was established in the 1971 Revenue Act, which permitted individual taxpayers (except nonresident aliens) to designate $1 ($2 for married couples filing jointly) to the Presidential Election Campaign Fund (PECF).[12] Amounts in the PECF are diverted from the Treasury’s general fund for use by qualified presidential candidates (or party nominating conventions). Although Congress enacted the program in 1971, due to objections from President Richard Nixon, the statute called for a delay in beginning checkoff designations.[13] Candidates did not begin receiving funds until the 1976 election cycle. The Federal Election Campaign Act (FECA), enacted in 1971 and amended throughout the 1970s, expanded the scope of the public financing program and set various criteria for participation.[14] In particular, the 1974 FECA amendments extended public financing, originally reserved only for general-election candidates, to presidential primaries and nominating conventions. The 1974 amendments also established the FEC and charged the agency with certifying eligible candidates, authorizing payments from the PECF, and conducting audits related to public financing. Despite relatively minor changes, the presidential public financing program has essentially remained unchanged since the 1974 FECA amendments.[15] Congress most recently altered the program in 1993, when it tripled the checkoff designation from $1 to $3 for individuals and from $2 to $6 for married couples filing jointly.[16] The 2002 Bipartisan Campaign Reform Act (BCRA), the most recent major change to the nation’s campaign finance laws, did not affect public financing.[17]

Buckley v. Valeo[18] The U.S. Supreme Court addressed public financing in its landmark 1976 Buckley v. Valeo decision, which considered various constitutional challenges to FECA. The Court upheld spending limits associated with public financing because candidates voluntarily accept the limitations in exchange for receiving

Public Financing of Presidential Campaigns: Overview and Analysis

5

taxpayer support. Those who are not publicly financed candidates, however, may spend unlimited amounts, provided that their campaign funds come from lawful sources. Under Buckley’s reasoning, spending of non-public campaign funds is generally considered protected political speech.

HOW PUBLIC FINANCING WORKS Elements of the Program The presidential public financing program provides funds for three phases of the campaign: (1) grants to nominating conventions; (2) matching funds for qualified primary candidates; and (3) grants for general-election nominees. Convention funding goes to the Democratic and Republican parties’ (or qualifying third parties’) convention committees; funding for the primary and general elections goes directly to qualifying candidates’ campaigns.[19] Under federal law, convention funding receives priority, followed by general election grants and primary matching funds.[20] In other words, primary matching funds are distributed only if sufficient amounts remain after first providing convention grants and generalelection grants. Prorated amounts may be distributed in the event of shortfalls (insufficient balances in the fund), which have been of increasing concern in recent years.[21]

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The Role of Taxpayers Taxpayers determine how much money is available for presidential public financing through a “checkoff” provision on individual federal tax returns, as shown in Figure 1 below. Checkoff designations are the only revenue source for the public financing program, even if the Treasury Secretary projects that the fund will become insolvent.[22] Under current law, Congress makes no appropriation to the PECF.

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Source: CRS adaptation of IRS form 1040. Figure 1. The Checkoff Designation on IRS Form 1040.

Individuals may choose to designate $3 of their tax liability to the PECF, a separate fund maintained by the U.S. Treasury solely to fund publicly financed presidential campaigns and nominating conventions.[23] Married couples filing jointly may designate a total of $6 to the fund, although, as the figure shows, separate response options are listed for each spouse.[24] Although taxpayers may believe that how they answer the checkoff question affects the amount of tax they owe or the refund they receive, “[d]esignating the allowed amount does not affect the amount of an individual’s tax liability or tax refund; it simply directs the Treasury Department to allocate a specific amount from general revenues to the PECF.”[25] In short, participating (or not) in the checkoff designation does not affect a taxpayer’s liability or refund. Rather, it allows taxpayers to direct a small portion of the taxes they pay ($3 for individuals or $6 for married couples filing jointly) to the PECF instead of the Treasury’s general fund.[26]

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The Role of Federal Agencies The Treasury Department and the FEC share responsibility for administering presidential public financing, although the FEC is the lead agency shaping program policy. Based on FEC certifications of candidate eligibility, the Treasury Secretary has responsibility for disbursing public funds. The Internal Revenue Service (IRS) administers the checkoff designations through individual tax returns.

Public Financing of Presidential Campaigns: Overview and Analysis

7

Amounts Participants May Receive Public financing benefits (amounts) are set by statute and vary by type of candidate and phase of the campaign. •

•

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•

For their nominating conventions, each of the two major parties may qualify for grants of $4 million as adjusted for inflation (approximately $16.8 million each in 2008).[27] Based on their nominee’s performance in the preceding election, existing third parties may qualify for lesser amounts, although none has done so for the 2008 election cycle. New third parties may receive limited public financing retroactively if they receive at least 5% of the popular vote in the general election, meaning that they are ineligible for funds until after the campaign concludes. (Funds received after the election could be used to pay remaining debts.)[28] For the general election, the Democratic and Republican presidential nominees are eligible for $20 million grants, as adjusted for inflation (approximately $84.1 million each in 2008).[29] Third parties may qualify for lesser amounts. Publicly financed primary candidates may spend up to $42 million in 2008 (plus approximately $14 million in fundraising, legal, and accounting costs, which are exempt from the base spending limit), but the amount of funds participants receive depends on their ability to secure government matching payments based on private fundraising. Participating candidates’ individual contributions of up to $250 may be matched at a rate of 100% each. For example, a privately raised contribution of $200 would be matched for $200, bringing the candidate’s total receipt of funds to $400. On the other hand, contributions of more than $250 are matched only for the first $250.[30] For example, a contribution of $1,000 would only be eligible for $250 in matching funds.[31] The primary matching fund program, which was designed to magnify small donations, applies only to individual contributions. PAC or party contributions are ineligible for matching payments.

Qualifying for Public Financing Candidates who wish to receive public funds must meet various qualifying criteria and agree to certain conditions designed to decrease the need for large

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contributions while also demonstrating the candidates’ viability. To qualify for public financing in the primary, candidates must raise at least $100,000 in specific amounts and across various states. Specifically, candidates must raise at least $5,000, through individual contributions of no more than $250 each, in at least 20 states.[32] If they choose to participate, the Democratic and Republican nominees are automatically eligible for public financing in the general election. Nominees of third parties (called “minor parties” in FECA) whose candidates earned at least 5% of the popular vote in the previous general election are eligible for lesser amounts than major-party candidates.[33] However, third-party candidates rarely meet qualifying criteria.

Conditions on Participation Publicly funded primary candidates must adhere to overall and statespecific spending limits. The aggregate limit is approximately $42 million in 2008 (plus approximately $14 million in fundraising, legal, and accounting costs, which are exempt from the base spending limit). State- specific limits in 2008 range from $841,000 in sparsely populated states and territories, to approximately $18.3 million in California. These amounts are determined by a formula established in FECA (the greater of 16¢ multiplied by the voting-age population (VAP) of the state, or $200,000, as adjusted for inflation).[34] Publicly financed candidates in the general election must agree not to raise private funds for their campaigns. In exchange for the taxpayer-funded grant, their spending is limited to approximately $84.1 million in 2008.[35] Finally, all publicly financed campaigns must: agree to various record-keeping requirements, submit to FEC audits, and limit spending from the candidate’s personal funds to no more than $50,000.[36]

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PARTICIPATION OVER TIME Participation in the public financing program can be considered on two fronts: (1) taxpayer participation; and (2) candidate participation in the program. This section discusses both in more detail.

Taxpayer Participation Taxpayer participation has never been particularly strong. Even at the height of the program’s popularity more than a quarter-century ago, less than one-third of

Public Financing of Presidential Campaigns: Overview and Analysis

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taxpayers chose to support presidential public financing. As Table 1 and Figure 2 (below) show, checkoff participation reached a high point in 1980, when 28.7% of filers designated funds for the PECF. With minor exceptions, participation has fallen steadily since that time. Fewer than 15% of taxpayers have made public financing designations every calendar year since 1993. Taxpayer participation reached a low of 9.1% in 2005. However, the checkoff rate increased slightly to 10.9% in 2006; this 1.8% change represented the largest one- year increase in the checkoff rate since 1979.[37] The “Analysis of Policy Options” section at the end of this article provides additional discussion. Table 1. Checkoff Designations, 1973-2006

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Yeara

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993b 1994 1995 1996 1997 1998 1999 2000 2001 2002

Percentage of Returns Containing Designations — — — 27.5% 28.6% 25.4% 27.4% 28.7% 27.0% 24.2% 23.7% 23.0% 23.0% 21.7% 21.0% 20.1% 19.8% 19.5% 17.7% 18.9% 14.5% 13.0% 12.9% 12.6% 12.5% 12.5% 11.8% 11.5% 11.0% 11.3%

Total Amount Designated (actual dollars in millions) $2.4 $27.6 $31.7 $33.7 $36.6 $39.2 $35.9 $38.8 $41.0 $39.0 $35.6 $35.0 $34.7 $35.8 $33.7 $33.0 $32.3 $32.5 $32.3 $29.6 $27.6 $71.3 $67.9 $66.9 $66.3 $63.3 $61.1 $60.7 $59.3 $62.0

Total Amount Designated (2007 dollars in millions) $11.2 $116.0 $122.2 $122.8 $125.2 $124.7 $102.5 $97.6 $93.5 $83.8 $74.1 $69.8 $66.9 $67.7 $61.5 $57.8 $54.0 $51.6 $49.1 $43.7 $39.6 $99.7 $92.4 $88.4 $85.7 $80.5 $76.0 $73.1 $69.4 $71.5

10

R. Sam Garrett Table 1. (Continued). Yeara

2003 2004 2005 2006 Totals

Percentage of Returns Containing Designations 10.1% 9.2% 9.1% 10.9% —

Total Amount Designated (actual dollars in millions) $59.4 $55.7 $53.3 $63.5 $1498.7

Total Amount Designated (2007 dollars in millions) $66.9 $61.1 $56.6 $65.3 $2609.3

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Source: Data for 1973-2005 calendar-year designations and checkoff amounts appear in Federal Election Commission, “Presidential Matching Fund Income Tax Check-Off Status, brochure, May 2007. The IRS Statistical Information Services office provided CRS with data for 2006. CRS calculated all inflation-adjusted dollars. a Refers to calendar year for which funds were designated. Designations occur on tax forms submitted the following year (e.g., 2006 returns were filed in 2007). b As discussed elsewhere in this article, Congress increased the checkoff designation from $1 to $3 ($2 to $6 for married couples filing jointly) in 1993. Notes: Data for 2007 are not yet available. Some figures in the table differ slightly from source data due to rounding. The FEC source data notes that checkoff participation figures “are not available for the years 1973-1975,” and that some 1973-1976 data cannot be verified.

Source: CRS graph based on IRS data cited in Federal Election Commission, “Presidential Matching Fund Income Tax Check-Off Status,” brochure, May 2007. The IRS Statistical Information Services office provided CRS with aggregate data for 2006, from which CRS calculated a percentage. Figure 2. Taxpayer Participation in Public Financing, 1976-2006.

Public Financing of Presidential Campaigns: Overview and Analysis

11

Candidate Participation Almost every major presidential candidate since 1976 has participated in the public financing program. Exceptions were rare until the 2000 election cycle. Democrats and Republicans have participated in the public financing program on a roughly equal basis. Until 2008, every major-party nominee since 1976 had accepted public financing for the general election. Historically, only a few wealthy, self-financed candidates have declined to participate in public financing.[38] Beginning during the 2000 election cycle, however, some major candidates began to opt out of primary matching funds, apparently believing that bypassing required spending limits would be strategically advantageous. That year, George W. Bush participated in public financing during the general election but not during the primary. Then-candidate Bush was the first person elected president without having participated in public financing during both the primary and general phases of the campaign. In 2004, President Bush and Democratic nominee Senator John Kerry both declined public financing during the primary campaign.[39] Both accepted public funds for the general-election campaign.

Participation in 2008 The FEC certified eight candidates as being eligible for matching funds in the 2008 primary campaign, as shown in Table 2 below. The Democratic and Republican parties also received approximately $16.8 million each in convention grants.[40] As noted previously, Senator Obama has announced that his campaign will not participate in public financing during the general election; Senator McCain will accept public funds for the general election.

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Table 2. Primary Matching Funds Certified by the FEC for the 2008 Election Cycle as of August 31, 2008 Candidate

Amount Certified by FEC

Joseph Biden

$1,996,349.83

Christopher Dodd

$1,961,741.71

John Edwards

$12,882,877.42

Duncan Hunter

$453,527.32

Dennis Kucinich

$1,070,521.05

John McCain

$5,812,197.35*

Ralph Nader

$753,535.32

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R. Sam Garrett Table 2. (Continued). Candidate

Amount Certified by FEC

Thomas Tancredo

$2,145,125.50

Total for Those Receiving Funds

$21,263,678.15*

Source: Individual certifications appear in Federal Election Commission, “FEC Approves Matching Funds for 2008 Candidates,” press release, July 16, 2008, at [http://www.fec.gov/ press/press2007/2007 1207cert.shtml]; Federal Election Commission, “FEC Approves Matching Funds for 2008 Presidential Candidates,” press release, July 16, 2008, at [http://www.fec.gov/press/press2008/200807 14matching.shtml]; and in U.S. Treasury Department, Financial Management Service, “Disbursements from the Presidential Election Campaign Fund and Related Payments, P.L. 94-283,” August 31, 2008, provided to CRS by Thomas Santaniello, office of legislative and public affairs, Financial Management Service (e-mail correspondence with author, September 11, 2008). CRS calculated the total amount certified. Notes: The approximately $21.3 million total in the table does not include $5.8 million certified for Senator McCain, who initially applied for primary matching funds but later withdrew from public financing during the primary campaign. The McCain campaign never received primary matching funds. The McCain campaign’s status with respect to the public financing program during the primary is beyond the scope of this article. Candidates who do not appear in the table either did not apply for public funds or did not qualify.

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FINANCIAL STATUS OF THE PRESIDENTIAL ELECTION CAMPAIGN FUND The amount of money in the PECF depends on taxpayer designations and candidate use. As Table 3 and Figure 3 below show, and as would be expected, the balance in the fund typically builds during off years and then drops sharply during presidential election years. For the past several years, as taxpayer designations have declined and campaigns have become more expensive, there has been widespread concern that the amount of money available in the fund — and spending limits for participants — were too low to make the program attractive to candidates.

Public Financing of Presidential Campaigns: Overview and Analysis

13

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Table 3. Presidential Election Campaign Fund Balances Calendar Year 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Fund Balance (actual dollars in millions) $2.4 $27.6 $59.6 $23.8 $60.9 $100.3 $135.2 $73.8 $114.4 $153.5 $177.3 $92.7 $125.9 $161.7 $177.9 $52.5 $82.9 $115.4 $127.1 $4.1 $30.8 $101.7 $146.9 $3.7 $69.9 $133.2 $165.5 $16.2 $75.0 $137.0 $167.3 $45.0 $98.0 $144.5 $166.3

Fund Balance (2007 dollars in millions) $11.2 $116.1 $229.7 $86.7 $208.4 $319.0 $386.1 $185.7 $260.9 $329.8 $369.1 $185.0 $242.6 $305.9 $324.7 $92.0 $138.6 $183.1 $193.5 $6.1 $44.2 $142.3 $199.9 $4.9 $90.3 $169.4 $206.0 $19.5 $87.8 $157.9 $188.5 $49.4 $104.0 $153.6 $166.3

Source: Federal Election Commission, “Presidential Matching Fund Income Tax CheckOff Status,” brochure, May 2007. The FEC provided 2007 data to CRS. CRS calculated all inflation-adjusted dollars. Note: Figures in the table are rounded.

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Source: CRS graph based on IRS data cited in Federal Election Commission, “Presidential Matching Fund Income Tax Check-Off Status,” brochure, May 2007. Figure 3. Presidential Election Campaign Fund Balances, 1973-2007.

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In an effort to avoid a projected shortfall in the PECF, in 1993 Congress increased the checkoff amount from $1 (or $2 for married couples filing jointly) to $3 (or $6). That change took effect for 1993 tax returns. Increasing the checkoff amount did infuse additional money into the PECF, but the fund has nonetheless struggled with shortfalls for primary matching funds. Additional discussion appears below. Although fund balances have been sufficient to pay the convention grants and general-election grants, shortfalls in primary matching funds occurred in 1996 and 2000.[41] A shortfall also occurred briefly in 2004, but major shortfalls were avoided, as eventual nominees George W. Bush and John Kerry, among others, declined to participate in public financing during the primary.[42]

Shortfalls and Potential Shortfalls During the 2008 cycle The balance in the PECF appears to be sufficient to cover current obligations, but the fact that one candidate has chosen not to accept the general-election grant provides the fund with substantially more money than it would have otherwise. Even with sufficient resources to cover current obligations, shortfalls occurred previously during the 2008 cycle. Additional discussion appears below. In December 2007, the FEC projected that the approximately $166.2 million balance in the PECF (as of November 30, 2007) would be insufficient to permit matching payments scheduled to begin in January 2008.[43] By the spring of 2008, however, the PECF had accumulated a sufficient balance to permit matching fund payments. Although the FEC was unable to certify matching funds

Public Financing of Presidential Campaigns: Overview and Analysis

15

between January and June 2008, the Commission certified an additional $7.4 million in primary matching funds in July 2008. According to Treasury Department data, as of September 11, 2008, the PECF balance was approximately $107.1 million.[44] That amount is more than sufficient to cover remaining PECF obligations for the 2008 election cycle (apparently now limited to relatively small primary matching-fund payments). If, however, both major candidates had accepted public funds for the general election, the amount available in the PECF would have declined substantially.[45] In particular, the additional $84.1 million general-election grant would bring the available PECF balance to approximately $23.0 million. Therefore, if candidates had more fully participated in the public financing program, or if they did so under the current structure in 2012, the PECF balance may have been, or may be, insufficient to meet the fund’s obligations. These circumstances suggest that if the presidential public financing program is not altered before 2012 — and if candidates choose to participate in the program during the primary and the general, and assuming that taxpayer designations remain near current levels — shortfalls could be a continuing challenge.

Recent Congressional Activity

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Recent attempts to revisit presidential public financing date to at least the 102nd Congress (1991-1992). As is noted elsewhere in this article, the most recent significant change to the program occurred in 1993, when Congress increased the checkoff amount. Since that time, various attempts to curtail or bolster the program have been introduced in both chambers, but none has been successful.

110th Congress Legislation Four bills introduced in the 110th Congress would essentially maintain the current structure of the public financing system, but with some substantial financial changes. Two other bills would end all or part of the system. The following discussion provides additional details. Bills that Would Curtail Public Financing Although most recent attention to the public financing program has focused on maintaining the system, some Members of Congress and others wish to curtail or end presidential public financing. In the 110th Congress H.R. 72 (Bartlett) would end subsidies for nominating conventions. H.R. 484 (Doolittle) would end the public funding system entirely. In addition, under a unanimous consent

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agreement regulating floor consideration of the FY2008 Financial Services and General Government (FSGG) appropriations bill (H.R. 2829, Serrano), Representative Neugebauer could have offered amendments limiting collection or certification of public financing funds.[46] However, the Legislative Information System and Congressional Record show no sign of those amendments being offered on the floor. Implications of these and other approaches are discussed later in this article.

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The Presidential Funding Act of 2007 (H.R. 776, S. 436, H.R. 4294, and S. 2412) The Presidential Funding Act of 2007 was introduced at two different points in each chamber: initially in January 2007 and again in December 2007. The December 2007 versions of the bills include slight changes to the original legislation and, in some cases, have different sponsors or original cosponsors.[47] Appendix 1 at the end of this article provides a detailed comparison of the bills’ major provisions versus the status quo. Table 4, which follows the bill summaries below, provides an overview of total spending possibilities for publicly financed candidates under the status quo versus the four versions of the Presidential Funding Act of 2007. The additional funds and higher spending limits the four bills would provide are perhaps the most notable aspect of the legislation. In particular, participants would be eligible for base amounts and additional installments (called “escape hatch” funds, also known as “rescue funds”) based on non-participating opponents’ spending or fundraising. Overall, a publicly financed candidate could spend as much as $450 million under the proposed changes to the program, if the candidate participated in public financing in the primary and general phases of the campaign and if all escape-hatch options were exhausted. Under that scenario, the primary spending limit would be $250 million; the general spending limit would be $200 million. With respect to primary elections, all four bills would: •

•

•

raise the base spending limit from approximately $42 million for the entire primary (currently) to $150 million (of which $100 million could be spent before April 1 of an election year); make up to an additional $100 million (two $50 million installments) in “escape hatch” funds available if non-participating opponents raise or spend more than 120% of the participant spending limits (“escape hatch” funds do not currently exist); eliminate current state-by-state spending limits.

Public Financing of Presidential Campaigns: Overview and Analysis

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In all four bills, major changes to the primary matching fund program would: • •

lower the threshold for federal matching of eligible contributions from $250 (currently) to $200; increase the percentage at which those contributions are matched from 100% (currently) to 400% before March 31 of an election year; candidates still in the race after March 31 would be eligible for an additional 100% match, raising the total match amount to 500%.

Benefits and spending limits in the general election would also be revised. Major proposed revisions in all four bills would: • •

•

raise the base funding allocation from approximately $84.1 million (in 2008) to $100 million; make up to an additional $100 million in “escape hatch” funds available if non-participating opponents raise or spend more than 120% of the participant spending limits (“escape hatch” funds do not currently exist); make the Friday before Labor Day the uniform release date for generalelection funds (currently based on nomination date).

Limits on coordinated party expenditures — purchases political parties may make on behalf of candidate campaigns — would also be altered.[48] Major revisions in all four bills would: •

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•

raise the coordinated party expenditure limit from approximately $19 million (currently) to $50 million (two $25 million installments, one before and one after the nomination); permit unlimited coordinated party expenditures (currently prohibited) if non-participating opponents raise or spend more than 120% of the participant spending limits.

Other major provisions in all four bills include: •

changing the threshold to qualify for public financing in the primary by requiring candidates to raise $25,000 in amounts of $200 or less in at least 20 states (compared with $5,000 in amounts of $250 or less in at least 20 states currently);

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Table 4. Summary of Spending Limitsa Under Status Quo and H.R. 776, S. 436, H.R. 4294, and S. 2412, 110th Congress Primary Elections

Status Quo H.R. 776, S. 436, H.R. 4294, S. 2412

General Elections

Base

Escape Hatch

Base

Approximately $42 millionb in 2008 $150 million total ($100 million limit before April 1)

—

Approximately $84.1 million in 2008 $100 million

Up to $100 million (up to two $50 million installments based on opponent fundraising/ spending)

Escape Hatch —

Up to $100 million

Total Candidate Spending (Primary + General) Base Escape Hatch — Approximately $126 million in 2008c $250 million Up to $200 million

Coordinated Party Expenditures Base

Escape Hatch

Approximately $19 million in 2008 $50 million ($25 million between April 1 and nomination; $25 million after nomination)

—

Unlimited between April 1 (or date of triggering escape hatch) and nomination (or withdrawal)

Source: CRS analysis of bill texts, current law, and regulations. a. The table reflects current or proposed amounts, not future adjustments for inflation. The table also assumes that amounts available in the fund could support maximum permissible spending, and that candidates would remain in the race after April 1 of the election year, which would trigger additional spending limits. The table refers to major-party candidates only. Minor-party candidates would receive lesser amounts as specified in current law or proposed bills. b. In addition to a base amount of approximately $42 million, participants may spend approximately $8 million on fundraising costs and approximately $6 million on legal and accounting costs. c. Assumes participation in public financing during both the primary and general campaigns, as H.R. 776, S. 436, H.R. 4294, and S. 2412 would require.

Public Financing of Presidential Campaigns: Overview and Analysis •

•

•

•

•

19

requiring candidates who choose to participate in public financing to do so in both the primary and general elections (candidates may currently participate in either or both phases); increasing the checkoff amount on individual tax returns to $10 for individuals and $20 for married couples filing jointly (currently $3 and $6 respectively); requiring the Treasury Secretary to issue regulations to prohibit taxpreparation software from automatically accepting or declining participation in public financing; authorizing the FEC to undertake a public education campaign about presidential public financing (with up to $10 million from public financing funds); permitting appropriation of funds, to be repaid with interest, to cover public financing obligations for the first election after enactment.

Although the four bills are substantially similar, major provisions differ on how or whether to: • • • •

repeal the existing prioritization of convention funding over candidate funding; restrict fundraising or spending money that is not regulated under federal campaign finance law (i.e., “soft money”) for nominating conventions; amend bundling disclosure required of presidential campaigns; require offset provisions to fund increased public financing benefits.

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ANALYSIS OF POLICY OPTIONS FOR MAINTAINING PUBLIC FINANCING Various policy options exist for updating the public financing system. Some of those options are contained in current legislation. Others discussed below present alternatives for addressing concerns surrounding presidential public financing, but are not components of current legislation. The following sections discuss possibilities for increasing the amount of money available in the PECF and options for increasing the program’s attractiveness to candidates. Taxpayer participation is also discussed. None of the policy options discussed in this article and elsewhere are likely to be considered in isolation, as the public financing program has always contained a combination of benefits and requirements.

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R. Sam Garrett

Providing the Presidential Election Campaign Fund with More Money

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As noted previously, the chief concern surrounding presidential public financing is the amount of money available to candidates. Shortfalls in recent elections have delayed matching-fund payments during primaries — a critical time for candidates to establish their viability and recognition among the electorate. General-election subsidies are also a concern, although generally not viewed as pressing as primary funds. Regardless of the phase of the election, a higher balance in the PECF could facilitate higher spending by candidates, provided that Congress raised spending limits.

Increasing the Checkoff Amount The four bills introduced in the 110th Congress that would maintain public financing (H.R. 776, S. 436, H.R. 4294, and S. 2412) would all increase the checkoff amount (from $3 for individuals to $10, or from $6 to $20 for married couples filing jointly). Although it is unclear precisely how an increased checkoff amount would affect the PECF, the one previous increase in the checkoff amount did not result in greater taxpayer participation in public financing. Rather, the checkoff rate fell by almost one-quarter (23.3%), from 18.9% in 1992 to 14.5% in 1993. As Figure 4 (below) shows, that 4.4 percentage-point decline was the largest calendar-year change in taxpayer participation in the program’s history. Participation stabilized beginning in 1994. However, even with the decline in participation, increasing the checkoff amount did substantially bolster the fund balance (as shown in Table 3 and Figure 3). The fund balance grew from approximately $4.1 million in 1992 (the final year of the $1 checkoff) to more than $30.8 million in 1993 (the first year of the $3 checkoff). Decreases in the fund balance are to be expected during election years (when most disbursements are made, thereby depleting much of the balance). However, the percent increase in the fund balance between 1992 and 1993 was far more than in the increase in the post-election years that preceded the checkoff increase (1977, 1981, 1985, and 1989). The median percent increase in the fund balance between those years and those that preceded them was 56.5%, compared with an increase of more than 650% between 1992 and 1993.[49] Even with that infusion of funds, and as is typical, the fund balance decreased sharply during the 1996 election cycle.

Public Financing of Presidential Campaigns: Overview and Analysis

21

Source: CRS calculations of annual percentage change based on IRS data cited in Federal Election Commission, “Presidential Matching Fund Income Tax Check-Off Status,” brochure, May 2007. Figure 4. Annual (Calendar Year) Percentage Change in Checkoff Designations.

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Overall, the 1993 change suggests that, if taxpayers respond as they did when Congress last raised the checkoff amount, the participation rate will fall if Congress raises the amount again. As noted elsewhere in this article, in 2006, 10.9% of taxpayers made designations. Although the 2007 checkoff percentage is not yet available, a decline from the 2006 rate commensurate with the 4.4point percentage drop in 1993 suggests that fewer than 10% of taxpayers (6.5%) would make designations to the PECF if the checkoff amount is increased. However, the designations that do occur, because of the higher dollar amounts, could nonetheless increase the amount of money in the PECF. It should also be noted that the proposed public education campaign could either encourage or discourage participation.

Changing the Qualifying Requirements to Limit Candidate Access to Funds Rather than providing more money to the PECF, or in addition to doing so, Congress could choose to make it more difficult for candidates to qualify for public financing. The four bills introduced in the 110th Congress that propose maintaining the system (H.R. 776, S. 436, H.R. 4294, and S. 2412) would require a five-fold increase in fundraising to qualify for matching funds. Currently, to qualify for matching funds, candidates must raise at least $5,000 (in contributions of $250 or less) in 20 states, for a total of $100,000. By contrast, H.R. 776, S. 436, H.R.

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4294, and S. 2412 would require candidates to raise at least $500,000 to qualify for matching funds. The 20-state threshold would be maintained, although the matchingfund amount would decrease from $250 to $200. Those requirements would make it harder for some, but not most, candidates who have recently met the primary qualifying criteria to do so again. As shown in Table 2 above, the FEC certified only two candidates (Duncan Hunter and Dennis Kucinich) for matching funds in amounts less than $500,000 in 2007. In the entire 2004 cycle, only one candidate (Alfred C. Sharpton) was certified for less than $500,000.[50] This suggests that increasing the qualifying threshold to $500,000 would not have had a great effect on the number of publicly financed candidates during the current and immediate past presidential election cycles, assuming that those candidates could meet the higher state-by-state fundraising thresholds ($25,000 instead of $5,000). Raising the qualifying threshold to $500,000 also would not prevent any candidates from receiving public funds, if those candidates were able to meet the qualifying criteria. (Indeed, candidates who could meet the new criteria would receive more matching funds than they do currently.) However, increasing the qualifying threshold could preserve some money in the PECF, at least until candidates met the new criteria (assuming they could do so). Of course, Congress could consider other options to increase qualifying criteria beyond those envisioned in the current system or the legislation introduced in the 110th Congress. This assumes, however, that Congress wishes to limit the number of candidates who may receive public funds (to preserve money in the fund or for other reasons).

Reconsidering Funding Priorities As noted previously, public funds are currently disbursed in the following priority: (1) convention grants; (2) general- election grants; and (3) primary matching funds. Prioritization of the convention grants has been criticized recently because these events are heavily subsidized by local host committees.[51] Some observers have contended that conventions also benefit from “soft money” (funds not regulated under FECA) that is otherwise banned in federal elections.[52] If Congress believes that funding candidates should be the top priority in the public financing program, de-prioritizing convention funding could be an attractive option. Two of the bills introduced in the 110th Congress (S. 436 and S. 2412) would remove the convention-priority language from current law. Doing so could help avoid future shortfalls in primary matching funds by preserving money in the PECF that would currently go to conventions first. Nonetheless, shortfalls might then shift to general-election grants or convention grants (unless they were eliminated entirely).

Public Financing of Presidential Campaigns: Overview and Analysis

23

More generally, Congress could also consider eliminating one or more segments of the public financing program. For example, if Congress felt that convention funding were no longer necessary, these subsidies could be eliminated entirely. However, those concerned about the influence of private money, particularly soft money, in convention financing could object to conventions that are completely dependent upon private funds. In addition, given recent concerns about the viability of primary public financing, Congress could choose to eliminate matching funds and shift remaining amounts to the general election, convention grants, or both. These options could facilitate maintaining public financing in some form, and even bolster remaining portions of the program, without allocating new funds.

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Other Revenue Sources Current law requires that support for the program be limited to checkoff designations specified at $3 or $6. Congress might also consider allowing taxpayers to contribute to the PECF in ways beyond the checkoff mechanism. Currently, taxpayers are not permitted to determine how much they wish to designate toward the presidential public financing program. Rather, they may only indicate whether they wish to designate the fixed amount displayed on the 1040 form. Instead, Congress could permit additional taxpayer donations to the fund, allow taxpayers to specify a designation amount, or expand the number of designation choices.[53] If taxpayers chose to make larger contributions than the $3 amount, revenues in the fund could increase. They could also decrease if taxpayers chose to make smaller designations than the current $3 rate. Congressional Appropriations Congress has structured the public financing program such that checkoff designations have been solely responsible for the fund’s resources. If it chose to do so, however, Congress could appropriate some or all funds necessary to cover public financing needs. All four bills introduced in the 110th Congress that propose to maintain the program would permit appropriations to cover increased benefits for the first election after the new law’s enactment. The PECF, however, would have to repay those amounts, with interest, to the Treasury.[54] Congressional appropriations could have the advantage of supplementing or replacing declining checkoff designations. If regular and sufficient appropriations could be secured, the financial stability of the public financing program might also be more predictable than is the case today. However, some Members could find appropriations objectionable. Appropriations are also subject to being reduced or

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eliminated. In short, the PECF does not currently benefit from appropriations, but it also is not dependent upon the annual appropriations process.

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Making Public Financing More Attractive to Candidates If candidates are to be convinced to accept public financing, they must be persuaded that the program’s benefits outweigh its constraints. This calculation often depends on opponents’ behavior, particularly whether they, too, are expected to accept public financing. When two opposing candidates choose to participate, even low spending limits or benefits are likely to be sufficient because both sides are equipped with the same financial resources and face the same constraints. If, on the other hand, candidates believe that they can fare better outside the system — or that their opponents are likely to opt out — participation is less likely. Those scenarios seem to have discouraged participation during the primaries in recent elections. The additional benefits to candidates (and associated increases in spending limits) proposed in H.R. 776, S. 436, H.R. 4294, and S. 2412 would dramatically increase publicly financed candidates’ resources. As Table 4 shows, in 2008, the maximum a publicly financed candidate could spend under the current system is approximately $126 million (plus about $14 million in legal, fundraising, and accounting fees).[55] Under the four 110th Congress bills that would maintain the system, maximum candidate spending could increase to as much as $450 million if facing an opponent who had opted out of public financing and with maximum escape-hatch funding. Additional funds provided through the escape hatch could be particularly attractive to candidates and could dissuade candidates from opting out of public financing unless they expect to privately raise funds that exceed the higher escapehatch amounts. Potentially unlimited coordinated party expenditures (currently limited to about $19 million) are also likely to be attractive to candidates. Increased matching-fund amounts (and spending limits) could also be attractive to primary candidates who choose to participate in public financing. Under the four bills that would maintain the system, primary candidates would see small contributions matched not at the current 100% rate, but at 400%. Those who remained in the primary race beyond March 31 of the election year would receive an additional 100% match, for a total match of 500% of the donor’s original contribution (up to $200). Under that structure, a contribution of just $200, if matching at the full rate, could facilitate a $1,000 benefit to the candidate after a 500% match.

Public Financing of Presidential Campaigns: Overview and Analysis

25

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The proposed matching-fund changes arguably democratize presidential campaigns by placing renewed emphasis on small donors (perhaps even more so than now, as the maximum matched contribution would be $200 rather than $250).[56] The extra 100% match is apparently designed to provide additional money to publicly financed candidates between the end of the primaries and the nominating convention. Some publicly financed candidates have struggled financially in the past between the end of primaries and conventions because general-election grants are not released until after the candidate is nominated. It is also possible that offering the additional 100% match to candidates who remain in the race after March 31 might prolong the nomination contest. Even if the contest were essentially decided before March 31, candidates who have no hope of winning the nomination might choose to remain in the race until after March 31 to receive the additional matching payment to retire campaign debts. Candidates may currently receive matching funds well after the primary (or even the general election) to retire debts, but there is no additional match. Finally, public financing cannot control for all spending or fundraising that occurs in campaigns. Whether during the primary or general campaigns, candidates may be dissuaded from participating if they fear inadequate resources to respond not only to opponents, but also to opposing political action committees (PACs), 527 organizations, and other outside groups, some of which are arguably not regulated by campaign finance law.[57] In the absence of a constitutional amendment restricting the political speech of these and other organizations, curtailing campaign spending — except voluntarily — is unlikely. To summarize, increased benefits and spending limits are likely to be attractive to candidates, especially if both opponents participate. Even if candidate spending and resources are equal, however, publicly financed candidates could continue to face opposition spending from outside groups. Nonetheless, the proposed benefits and higher spending limits would provide publicly financed candidates with more resources than they would receive today.

Taxpayer Awareness of, and Participation in, Public Financing There is little current information about how well taxpayers understand the public financing program.[58] FEC focus groups conducted nationwide in 1989 found that “citizens may not know why the public funding program was implemented or how it works. The [FEC research] also revealed, however, that taxpayers would like to know more.”[59] In response, the FEC conducted an educational campaign in 1991 and 1992 that featured public-service announcements and media appearances by

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R. Sam Garrett

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commissioners.[60] Taxpayer participation has nonetheless generally declined, especially in 1993 when Congress increased the checkoff designation amount. In opinion polling, support for public financing (at various levels) fluctuates with question wording.[61] Although respondents tend to favor limiting the influence of private money in politics, they often react negatively to references to taxpayer funds or government support for campaigns. It is possible, therefore, that Americans support an alternative to private campaign financing as we know it, but nonetheless object to subsidizing campaigns through tax dollars, even though the checkoff designation does not change one’s tax liability. Without updated research on how Americans feel about public financing and the checkoff, it is unclear whether the low participation rate is due to a lack of knowledge, objection to the program, or other factors. It is also unclear whether more taxpayers could be persuaded to make checkoff designations, and if so, how. The public education campaign proposed in the four 110th Congress bills that would maintain the system, however, could address these and other questions.

Issues Regarding Tax-Preparation Software One possible explanation for the low checkoff rate is the popularity of taxpreparation software. Some such software has been criticized for setting “no” as a default response to the checkoff question.[62] All four 110th Congress bills that would retain public financing would require the Secretary of the Treasury to issue regulations requiring that tax- preparation software not automatically accept or decline public financing designations. It is unclear what effects this requirement could have on the checkoff rate, although voluntary changes in the past appear to have had little effect. In November 2005, H&R Block and Intuit, major vendors of tax-preparation software, reportedly agreed to requests from then-FEC commissioners Michael Toner and Scott Thomas and the Campaign Finance Institute to revise some software to not automatically select “yes” or “no” options in response to checkoff question, and to revise instructions to more accurately reflect IRS descriptions of the program.[63] IRS data do not clearly address the effects of those changes, but the changes appear to have had little, if any, effect on the overall checkoff rate. As Table 1 and Figure 2 above show, the checkoff rate fell slightly in 2005 compared with 2004 (from 9.2% to 9.1% respectively), but rose to 10.9% in 2006. It is possible that the increase between 2005 and 2006 was a result of the software changes, but it is impossible to know for certain with currently available data. IRS data do not isolate returns filed with particular commercial software, nor do they contain information about taxpayer knowledge or intent with respect to commercial software.

Public Financing of Presidential Campaigns: Overview and Analysis

27

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ANALYSIS OF POLICY OPTIONS FOR CURTAILING OR ELIMINATING PUBLIC FINANCING For those who are either philosophically opposed to public financing or who view the system as unnecessary, curtailing or repealing public financing could be desirable. In the 110th Congress, two bills would do so. H.R. 72 would repeal public financing for nominating conventions. H.R. 484 would repeal public financing entirely.[64] Whether Congress chose to pursue those approaches or others, repealing or curtailing public financing could be a straightforward matter of timelimiting or striking the relevant sections of law, as opposed to considering various options and amending relevant law to change the program. The preceding section on reconsidering funding priorities explains that repealing convention funding could preserve remaining amounts for primary matching funds and general-election grants. This option could also provide a financial boost to the PECF overall without allocating additional funds to the program. In 2008, convention grants account for approximately $33.6 million of the PECF’s obligations. That same amount, if not obligated for conventions, could reduce the threat of shortfalls for matching funds or, if necessary in the future, general-election grants. On the other hand, those concerned about the role of private funds in convention financing could object to repealing public funds. H.R. 484 would terminate the PECF entirely and return the remaining balance to the Treasury. For those who object to public financing, repealing the program could provide tens of millions of dollars annually for other purposes. (As of 2006, almost $1.5 billion had been designated for the PECF, as shown in Table 1.) Repealing the program would also remove taxpayer funding from presidential elections, a role that some lawmakers and others believe private contributions should fulfill. On the other hand, repealing public financing completely would leave presidential candidates entirely beholden either to self-financing or to private contributions. Even strong candidates may have difficulty raising enough funds to be competitive or may be uncomfortable with the notion that their candidacies are beholden to donors. For those who believe that candidates should be able to financially support their own campaigns or garner private contributions to do so, ending public financing would likely be acceptable. However, for those who believe that private contributions or personal wealth should not automatically include or exclude otherwise qualified presidential candidates, public financing remains an important resource. In addition, if public financing and its required spending limits were no longer options, the pace of private campaign fundraising, and unlimited spending, are

28

R. Sam Garrett

likely to increase, as candidates are constantly on guard for the next election and potentially high-spending opponents.

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CONCLUDING COMMENTS Warnings about the public financing system’s demise are not unique to the 2008 election cycle. Even at its peak, the taxpayer-participation rate has never exceeded 29%. Although fund balances were sufficient to meet candidate needs throughout the late-1970s and 1980s, by the early 1990s the system began to show signs of strain. Tripling the checkoff amount in 1993 provided a significant financial boost, although checkoff designations have generally continued to decline. Even with the larger checkoff amount, shortfalls have occurred at least briefly during the primary matching-funds phase of the program since the 1996 election cycle. Overall, almost from the beginning, the program has faced obstacles, even as most presidential candidates have participated in public financing. The 2008 campaign cycle has, however, shown evidence of unique challenges to the system. Although several candidates chose to participate in public financing during the primaries, those candidates who continued to actively pursue their parties’ nominations into the spring and summer of 2008 chose to opt out of primary public financing. Some candidates have, in just a few months (or less), raised more through private contributions than the entire primary spending limit for publicly financed candidates. In June 2008, Senator Obama, the presumptive Democratic nominee, announced that he would not participate in public financing during the general election. As noted previously, media reports suggest that Senator McCain will accept public funds for the general election. In addition, throughout the cycle, candidates from both major parties have raised record amounts through private fundraising. Between January 2007 and April 2008, presidential candidates reportedly raised almost $1 billion.[65] Historically, the public financing program provided access (or at least faster access) to more money than all but wealthy, self-financed candidates could raise privately. That proposition now appears questionable, at least for some candidates. Some major candidates could still choose to participate in public financing, but the threat of major candidates not participating is likely to make the current program less viable in the future, as candidates will potentially feel increasingly compelled to forgo the system to be competitive. The current system also does not provide additional resources to counter spending from outside groups, such as PACs and 527 organizations. For some observers, these challenges and a possible resurgence in

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Public Financing of Presidential Campaigns: Overview and Analysis

29

small donors suggest that public financing is unnecessary and should either be allowed to fade away or should be repealed outright. Others, however, contend that the program has provided vital assistance to high-quality candidates who are nonetheless unable to raise large sums of private contributions, or who choose not to do so. The four bills introduced in the 110th Congress that would maintain the program concentrate on increasing benefits to, and spending limits for, participating candidates. These measures are likely to make the program more attractive to potential participants. They will certainly provide more financial resources than are currently available to publicly financed candidates. However, in the absence of a constitutional amendment granting Congress the power to cap campaign spending or require participation in public financing, even the most ambitious reforms cannot guarantee that participants will not be outspent by non-participating opponents or outside interests. Any policy choice that maintains the public financing system with expanded benefits is likely to be expensive. On the other hand, proponents argue that the increased cost is a worthy investment in presidential campaigns. The Congressional Budget Office (CBO) has not issued cost estimates for the four 110th Congress bills that would maintain the system, although Senator Feingold has stated that “[t]he total cost of the changes to the system, based on data from the 2004 elections, is projected to be around $365 million over the four-year election cycle.”[66] In the Senate bills, some of those expenses would be covered by proposed offsets to certain federal programs. Additional checkoff designations could also offset additional costs. Precise costs would depend on funding sources, program elements, and candidate participation. If Congress chooses to maintain presidential public financing, it could be useful to consider what goals that system should pursue and how. The existing model of the checkoff designations appears to be either poorly understood by the taxpayers, unpopular with the taxpayers, or both. If that model is to be maintained, a commitment to educational outreach, and perhaps basic research about public opinion of, and knowledge about, presidential public financing could be useful. Perhaps more fundamentally, if Congress chooses to reform the program, doing so will require consensus among lawmakers about one of the most complex and contentious areas of campaign finance policy.

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APPENDIX. MAJOR PROVISIONS OF BILLS PROPOSING TO MAINTAIN THE PRESIDENTIAL PUBLIC FINANCING PROGRAM, 110TH CONGRESS Status Quo Short title __

Date introduced __ Committee referral __

H.R. 776 (Meehan-Shays)

S. 436 (Feingold)

H.R. 4294 (Price, NC)

S. 2412 (Feingold)

“Presidential Funding Act of 2007” [Sec. 1]

Same as H.R. 776 [Sec. 1]

Same as H.R. 776, S. 436 [Sec. 1]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 1]

01/31/2007

01/30/2007

12/05/2007

12/05/2007

House Administration; Ways and Means [Sec. 1]

Finance [Sec. 1]

House Administration; Ways and Means [Sec. 1]

Finance [Sec. 1]

Same as H.R. 776, S. 436 [see details below]

Same as H.R. 776, S. 436, H.R. 4294 [see details below]

PRIMARY ELECTIONS PROVISIONS Summary of funding available to participating candidates during primaries (major-party candidates) Funding based on government Funding based on Same as H.R. 776 [see match of private contributions; government match of details below] benefit not pre-determined, private contributions, total but maximum spending limit spending permitted would (federal and private funds) is be $150 million, as adjusted approximately $56 million in for inflation; additional 2008 (including exemptions payments for excessive for fundraising, accounting, spending by and legal costs above a $42 nonparticipating opponents; million base limit) [see details fundraising costs would be below] included in base spending limit [see details below]

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(Continued). Status Quo

H.R. 776 (Meehan-Shays)

Amounts and percentages determining matching funds during primaries Matches for individual Presidential Primary contributions up to $250 at a Matching Payment Account rate of 100% [26 U.S.C. § would match contributions 9034(a)] up to $200 at a rate of 400% of the contribution for those received before March 31 of the election year; for candidates still in the race after March 31, contributions received before and after March 31 would receive an additional 100% match (for a total match of 500%) [Sec. 2] Primary expenditure limits Limited to the $10 million Would limit primary plus stateby-state limits; both spending to $100 million limits are adjusted annually before April 1 of an election with inflation [2 U.S.C. §§ year (with future inflation 441a(b)(1); 441a(c)] 2008 adjustments); Would limit base limit is approximately total primary spending to $42 million; additional $150 million (with future amounts of approximately $8 inflation adjustments); million and $6 million are Would repeal state-by-state permitted to offset fundraising limits [Sec. 4] and legal/accounting costs, respectively

S. 436 (Feingold)

H.R. 4294 (Price, NC)

S. 2412 (Feingold)

Same as H.R. 776 [Sec. 2]

Same as H.R. 776, S. 436 [Sec. 2]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 2]

Same as H.R. 776 [Sec. 4]

Same as H.R. 776, S. 436 [Sec. 4]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 4]

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Status Quo

H.R. 776 (Meehan-Shays)

Availability of “escape hatch” (“rescue funds”) in primaries — Participants facing nonparticipating opponents who raise or spend more than 120% of various participant spending thresholds (see below) would receive additional funds equal to the amount of each contribution (up to $200) received by the non-participant; additional matching payments would be based on contributions received by non-participant six months before the first primary in any state [Sec. 5]

S. 436 (Feingold)

H.R. 4294 (Price, NC)

S. 2412 (Feingold)

Substantially similar to H.R. 776; additional matching payments would be based on contributions received by nonparticipant during the calendar year preceding the election year [Sec. 5]

Substantially similar to S. 436; same as H.R. 776 [Sec. 5]

Substantially similar to H.R. 776, H.R. 4294; same as S. 436 [Sec. 5]

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(Continued). Status Quo

H.R. 776 (Meehan-Shays)

S. 436 (Feingold)

H.R. 4294 (Price, NC)

S. 2412 (Feingold)

Same as H.R. 776 [Sec. 5]

Same as H.R. 776, S. 436 [Sec. 5]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 5]

Trigger for eligibility for “escape hatch” payments in primaries —

If a non-participating primary opponent receives contributions in the amount of, or spends more than, 120% of: $100 million preApril 1 limit (120% = $120 million); or $150 million limit for the entire primary period (120% = $180 million); $200 million in initial escape-hatch installment of $50 million plus $150 million base (120% = $240 million); Additional FEC reporting required when escape hatch is triggered [Sec. 5] Increased spending limits for “escape hatch” in primaries

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Status Quo —

H.R. 776 (Meehan-Shays)

S. 436 (Feingold)

Additional $50 million for Same as H.R. 776 [Sec. exceeding either pre-April 1 5] limit of $100 million or $150 million total primary limit (total permissible spending in latter case = $200 million); Additional $50 million above escapehatch installment if opponent fundraising or spending exceeds 120% of $200 million during primary (120% = $240 million by opponent; total participant spending limit = $250 million) [Sec. 5] Revised state-level fundraising threshold for primary-funding eligibility Candidates must raise at least Candidates must raise at Same as H.R. 776 [Sec. $5,000 in amounts of $250 or least $25,000 in amounts of 2] less from residents of at least 20 $200 or less from residents states [26 U.S.C. §§ 9033(b)(3); of at least 20 states [Sec. 2] 9033(b)(4)] Matching-fund time period Begins at the start of the Would begin six months Same as H.R. 776 [Sec. generalelection calendar year before the first primary is 2] [26 U.S.C. § 9032(6)] held in any state during the general-election year [Sec. 2] Connection between participation in public financing in the primary and general elections

H.R. 4294 (Price, NC) Same as H.R. 776, S. 436 [Sec. 5]

S. 2412 (Feingold) Same as H.R. 776, S. 436, H.R. 4294 [Sec. 5]

Same as H.R. 776, S. 436 [Sec. 2]

Same as H.R. 776, S. 436, H.R. 4294 Sec. 2]

Same as H.R. 776, S. 436 [Sec. 2]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 2]

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(Continued). Status Quo

H.R. 776 (Meehan-Shays)

S. 436 (Feingold)

Candidates may choose to participate in public financing during the primary, general, both, or neither

Would require candidates who receive primary matching funds to accept public financing in the general election; Candidates must have received public funds in the primary to receive public funds in the general [Secs. 2-3]

Same as H.R. 776 [Secs. 2-3]

H.R. 4294 (Price, NC) Same as H.R. 776, S. 436 [Secs. 2-3]

GENERAL ELECTIONS PROVISIONS Summary of funding available to participating candidates during general elections (major-party candidates) Grants to each party’s nominee; Base grant would be $100 Same as H.R. 776 [Sec. Same as H.R. 2008 amount is approximately million, indexed for 4] 776, S. 436 [Sec. $84.1 million inflation; additional $100 4] million could be provided depending on opponent spending [Sec. 4] Revised general-election expenditure limits Limited to $20 million, as Would limit participants’ Same as H.R. 776 [Sec. Same as H.R. adjusted for inflation; [2 U.S.C. general-election spending to 4] 776, S. 436 [Sec. §§ 441a(b)(1); 441a(c)] 2008 $100 million (with future 4] limit is approximately $84.1 inflation adjustments); other million spending would be permitted in response to certain opponent spending or fundraising (see below) [Sec. 4]

S. 2412 (Feingold) Same as H.R. 776, S. 436, H.R. 4294 [Secs. 23]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 4]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 4]

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Status Quo

H.R. 776 (Meehan-Shays)

Availability of “escape hatch” in general elections — Participants facing nonparticipating opponents would receive additional funds equal to 100% of the general-election expenditure limitation ($100 million; total general-election spending could be $200 million); separate provision is specified for minor-party candidates [Sec. 5] Trigger for eligibility for “escape hatch” payments in general elections — If a non-opponent receives contributions in the amount of, or spends more than, 120% of the combined primary and general spending limits ($150 million and $100 million respectively; 120% of the $250 million aggregate limit = $300 million); Excessive fundraising or spending by nonparticipants would have to be reported to the FEC within 24 hours [Sec. 5] Increased spending limits for “escape hatch” in general elections

S. 436 (Feingold)

H.R. 4294 (Price, NC)

S. 2412 (Feingold)

Same as H.R. 776 [Sec. 5]

Same as H.R. 776, S. 436 [Sec. 5]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 5]

Same as H.R. 776 [Sec. 5]

Same as H.R. 776, S. 436 [Sec. 5]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 5]

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(Continued). Status Quo —

H.R. 776 (Meehan-Shays)

Spending limits would be increased commensurate with additional public funds received by participating candidate [Sec. 5] Release date for general-election funding No more than 10 days after a The Friday before Labor candidate receives party Day of the election year, nomination and meets other regardless of when the eligibility criteria [26 U.S.C. §§ candidate received the 9005; 9006] party’s nomination [Sec. 6] COORDINATED PARTY EXPENDITURE LIMITS

S. 436 (Feingold) Same as H.R. 776 [Sec. 5]

Same as H.R. 776 [Sec. 6]

H.R. 4294 (Price, NC) Same as H.R. 776, S. 436 [Sec. 5]

Same as H.R. 776, S. 436 [Sec. 6]

S. 2412 (Feingold) Same as H.R. 776, S. 436, H.R. 4294 [Sec. 5]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 5]

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Status Quo Set by formula based on voting-agepopulation (VAP); adjusted for inflation [2 U.S.C. §§ 441a(d)(2); 441a(c)] 2008 limit is approximately $19.2 million in 2008

H.R. 776 (Meehan-Shays)

S. 436 (Feingold)

H.R. 4294 (Price, NC) Same as H.R. 776, S. 436 [Sec. 4]

Would increase coordinated Same as H.R. 776 party expenditure limit to $25 [Sec. 4] million on behalf of candidates between April 1 of election year and candidate receipt of nomination; additional $25 million in coordinated party spending permitted after candidate receives nomination (with future inflation adjustments) [Sec. 4] Additional coordinated party spending permitted for those facing high-spending opponents (“escape hatch”) — Would lift coordinated party Same as H.R. 776 Same as H.R. expenditure limit entirely [Sec. 4] 776, S. 436 [Sec. between April 1 of election 4] year (or date on which escape hatch is triggered) and time of nomination (or until opponent withdraws) if nonparticipating primary opponent receives contributions in the amount of, or spends more than, 120% of the $150 million overall primary spending limit (120% = $180 million) [Sec. 4]

S. 2412 (Feingold) Same as H.R. 776, S. 436, H.R. 4294 [Sec. 4]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 4]

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(Continued). Status Quo

H.R. 776 (Meehan-Shays)

TAX “CHECKOFF” PROVISIONS $3 for individuals; $6 for $10 for individuals; $20 for married couples filing jointly; married couples filing jointly; amounts not indexed for future indexing for inflation inflation [26 U.S.C. § [Sec. 7] 6096(a)] Automatic checkoff responses in tax-preparation software — Would require Treasury Secretary to promulgate regulations to ensure that software does not automatically accept or decline publicfinancing designations [Sec. 7] MISCELLANEOUS PROVISIONS Insufficient funds to cover public financing obligations Available funds are prorated Would permit Treasury on a roughly equal basis, as Secretary, in determining determined by the Treasury whether a shortfall exists, to Secretary; Other public estimate deposits that will be money may not be diverted to made during the election year; the fund to cover shortfalls Would authorize appropriations [26 U.S.C. § 9006(c)] for the fund during the first presidential election held after the act takes effect; the public financing fund would have to repay appropriated amounts, plus interest, to the Treasury’s general fund [Sec. 8]

S. 436 (Feingold)

H.R. 4294 (Price, NC)

S. 2412 (Feingold)

Same as H.R. 776 [Sec. 7]

Same as H.R. 776, S. 436 [Sec. 7]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 7]

Same as H.R. 776 [Sec. 7]

Same as H.R. 776, S. 436 [Sec. 7]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 7]

Same as H.R. 776 [Sec. 8]

Same as H.R. 776, S. 436 [Sec. 8]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 8]

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Status Quo

H.R. 776 (Meehan-Shays)

Provisions related to convention financing “Soft money” fundraising Would prohibit federal permitted in certain candidates or their “agents” circumstances from raising or spending soft money on conventions; spending from government sources is permissible [Sec. 9]

Convention financing receives priority over primary and general funding [26 U.S.C. § 9008(a)] Bundling disclosure

—

S. 436 (Feingold)

H.R. 4294 (Price, NC)

S. 2412 (Feingold)

Would prohibit federal candidates or their “agents” from raising or spending soft money on conventions; spending from government sources not mentioned [Sec. 10]

Substantially similar to S. 436; certain fundraising exceptions for Members, Senators, Delegate, or Resident Commissioner from the home state [or territory] in which the convention is held [Sec. 9] —

Same as S. 436 [Sec. 9]

Would repeal prioritization of convention funding [Sec. 9]

Same as S. 436 [Sec. 11]

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(Continued). Status Quo

H.R. 776 (Meehan-Shays)

S. 436 (Feingold)

Campaign committees must report to the FEC the name, address, occupation and employer of those making two or more bundled contributions aggregating at least $15,000 (with future indexing) during a six-month period [ 2 U.S.C. § 434(I)]

Would amend FECA to require presidential campaign committees to report to the FEC the name, address, occupation and employer of those making at least $10,000 in bundled contributions, and aggregate amounts of bundled contributions made by those donors [Sec. 10]

Same as H.R. 776 [Sec. 11]

H.R. 4294 (Price, NC) Would amend FECA and HLOGAa to require political committees, including presidential committees, to report to the FEC the name, address, occupation and employer of those making two or more bundled contributions aggregating at least $15,000 [$50,000 for authorized presidential committees]

S. 2412 (Feingold) Same as H.R. 4294 [Sec. 10]

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Status Quo

H.R. 776 (Meehan-Shays)

Treatment of fundraising costs as expenditures Exempts certain fundraising Would repeal the exemption costs from the definition of for presidential campaigns campaign “expenditures” [2 [Sec. 4] U.S.C. § 431(9)(B)(vi)] Public education regarding public-financing program

S. 436 (Feingold)

H.R. 4294 (Price, NC) (with future indexing) during specified sixmonth periods; reporting would have to specify bundled contributions for the reporting period and an aggregate amount for the entire four-year campaign cycle; contributions from spouses excluded [Sec. 10]

S. 2412 (Feingold)

Same as H.R. 776 [Sec. 4]

Same as H.R. 776, S. 436 [Sec. 4]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 4]

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(Continued). Status Quo

H.R. 776 (Meehan-Shays)

S. 436 (Feingold)

—

Would direct the FEC to conduct a public education program about public financing; permits the FEC to spend up to $10 million from the public financing fund on public education during a four-year presidential election cycle [Sec. 7]

Same as H.R. 776 [Sec. 7]

Elections occurring after January 1, 2009 [Sec. 11]

—

Effective date —

Offset —

H.R. 4294 (Price, NC) Same as H.R. 776, S. 436 [Sec. 7]

S. 2412 (Feingold)

Same as H.R. 776 [Sec. 13]

Same as H.R. 776, S. 436 [Sec. 11]

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 13]

Would cap taxpayer subsidies for promotion of agricultural products by $100 million to offset additional public campaign financing costs Sec. 12]

—

Would permit various fees or royalties related to oil, mining, gas, or grazing permits or claims [Sec. 12]

Source: CRS analysis of bill texts provided via the Legislative Information System (LIS). a . “HLOGA” refers to the Honest Leadership and Open Government Act of 2007; P.L. 110-81; 121 Stat. 735.

Same as H.R. 776, S. 436, H.R. 4294 [Sec. 7]

44

R. Sam Garrett

REFERENCES [1]

[2]

[3]

[4]

[5]

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

[6]

[7]

[8]

This report supercedes CRS Report RL32786, The Presidential Election Campaign Fund and Tax Checkoff: Background and Current Issues, by now-retired CRS Specialist Joseph E. Cantor. Parts of this report are adapted from the previous report. For an overview of arguments in favor of presidential public financing, see, for example, Campaign Finance Institute, Task Force on Financing Presidential Nominations, “So the Voters May Choose.. .Reviving the Presidential Matching Fund System,” April 2005, at [http://www.cfinst.org/ president/pdf/VotersChoose.pdf]. See, for example, Robert D. Lenhard, “A $3 Vote for Competitive Elections,” Washington Post, March 8, 2008, p. A15; Campaign Legal Center and Democracy 21, “Presidential Public Financing: Repairing the System,” conference report, December 9, 2005, at [http://www.campaignlegalcenter.org/attachments/16 14.pdf]; and Democracy 21, “Reform Groups Urge House Members to Co-Sponsor Legislation to Fix Presidential Public Financing System,” press release, February 7, 2007, at [http://www.democracy2 1 .org/index.asp?Type=B_PR&SEC= { 91FCB139-CC82-4DDDAE4E-3A81E6427C7F}&DE={92F0FA14AED0-4153-A1F4-286454 0CB25 }]. Richard L. Hasen, “Political Equality, the Internet, and Campaign Finance Regulation,” The Forum, vol. 6, no. 1, art. 7; at [http://www.bepress.com/forum/vol6/iss1/art7]. This electronic journal is not paginated. Letter from Donald F. McGahn, II, chairman, Federal Election Commission, to Senator John McCain, September 5, 2008, at [http://www.fec.gov/press/press2008/McCainLetterCert.pdf]. Shailagh Murray, “Obama Opts Out of Public Financing,” Washington Post online, June 19, 2008, at [http://blog.washingtonpost.com/thetrail/2008/06/1 9 / obama_opts_ out_of_public_finan.html?hpid=topnews]. For an overview of arguments against presidential public financing, see, for example, John Samples, “The Failure of Taxpayer Financing of Presidential Campaigns,” in John Samples, ed., Welfare for Politicians? Taxpayer Financing of Campaigns (Washington: Cato Institute, 2005), pp. 2 13-249; and Bradley A. Smith, Unfree Speech: The Folly of Campaign Finance Reform (Princeton: Princeton University Press, 2001), pp. 103-105. See, for example, John Samples, ed., Welfare for Politicians?.

Public Financing of Presidential Campaigns: Overview and Analysis [9]

[10]

[11] [12] [13] [14] [15] [16] [17] [18]

[19]

[20]

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

[21]

[22] [23]

45

For additional information on the FEC’ s operating status with and without a quorum, see CRS Report RS22780, The Federal Election Commission (FEC) With Fewer than Four Members: Overview of Policy Implications, by R. Sam Garrett. For additional discussion, see CRS Report RL34324, Campaign Finance: Legislative Developments and Policy Issues in the 110th Congress, by R. Sam Garrett. See 80 Stat. 1587 and 81 Stat. 57 respectively. On the presidential public financing portion of the Revenue Act, see 85 Stat. 573. 85 Stat. 574 FECA is 2 U.S.C. § 431 et seq. Public financing requirements are discussed later in this report. P.L. 93-443; 88 Stat. 1263 26 U.S.C. § 6096(a). On the increase, see P.L. 103-66; 107 Stat. 567-568. BCRA is P.L. 107-155; 116 Stat. 81. BCRA amended FECA. 424 U.S. 1 (1976). For additional discussion, see CRS Report RL30669, The Constitutionality of Campaign Finance Regulation: Buckley v. Valeo and Its Supreme Court Progeny, by L. Paige Whitaker. For additional discussion of convention funding, see CRS Report RL34630, Federal Funding of Presidential Nominating Conventions: Overview and Policy Options, by R. Sam Garrett and Shawn Reese. On prioritization of convention funding, see 26 U.S.C. § 9008(a). Duane Pugh, director, congressional affairs, FEC, also provided a telephone consultation on this point, April 10, 2008. Prorated funds are distributed under the so-called “shortfall rule,” which requires the Treasury Secretary to “seek to achieve an equitable distribution” among competing members of the same political party. See 26 U.S .C. § 9037(b). Therefore, in the event of a shortfall, those competing for matching funds receive approximately the same amounts. The IRS revisited these provisions in early 2008, when it issued temporary regulations permitting payments as soon as funds become available (rather than on the monthly basis specified in Title 26 of the U.S. Code) in the event of a shortfall. See Department of the Treasury, Internal Revenue Service, “Payments From the Presidential Primary Matching Payment Account,” 73 Federal Register 8608, February 14, 2008. See, for example, 26 U.S.C. § 9006(c). On the PECF, see 26 U.S.C. § 9001 et seq.

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R. Sam Garrett

[24] Taxpayers may also contribute to the fund through tax-preparation software, a topic discussed in more detail later in this report. [25] Anthony Corrado, “Public Funding of Presidential Campaigns,” in Anthony Corrado, Thomas E. Mann, Daniel R. Ortiz, and Trevor Potter, eds. The New Campaign Finance Sourcebook (Washington: Brookings Institution Press, 2005), p. 182. [26] However, those who pay no taxes would not contribute to the program. See Department of the Treasury, Internal Revenue Service, “Payments From the Presidential Primary Matching Payment Account,” p. 8608, which notes that “individuals whose income tax liability for the taxable year is $3 or more may designate $3 for the [PECF] on their tax returns.” Emphasis added. [27] Ibid., 26 U.S.C. § 9008(b); 26 U.S.C. § 9008(b)(2). On application procedures, see 11 C.F.R. 9008.3. The 2008 figures were aggregated by the author from $16,356,000 in Federal Election Commission, “FEC Approves Matching Funds for 2008 Candidates,” press release, at [http://www.fec.gov/press/press2007/2007 1207cert.shtml] and $464,760 in an inflation-adjustment figure provided by Wanda Thomas, deputy assistant staff director for public financing, FEC (e-mail correspondence with author, April 9, 2008). Conventions also receive additional federal funding for security. [28] See, for example, 26 U.S.C. § 9004(a)(3). [29] 2 U.S.C. §§ 441a(b)(1); 441a(c). The 2008 amount appears in Federal Election Commission, “FEC Approves Matching Funds for 2008 Candidates.” [30] The $250 cap applies to any single contribution or to small contributions from the same individual that aggregate more than $250. For example, a series of six $50 contributions (aggregating $300) would only be matched at $250. [31] The base amount, without the inflation adjustment, is $10 million. On primary spending limits, see 2 U.S.C. §§ 441a(b)(1); 441a(c). [32] 26 U.S.C. §§ 9033(b)(3); 9033(b)(4). [33] The 5% threshold appears in the relevant definition applying to “minor parties.” See 26 U.S.C. § 9002(7). On eligibility for general-election payments, see 26 U.S.C. § § 9004(a)(2); 9004(a)(3). [34] The base limit (before the inflation adjustment) is $10 million. See 2 U.S.C. § 44 1a(b) 1(A). For the 2008 limits, see Federal Election Commission, “Presidential Spending Limits for 2008,” at [http://www.fec.gov/pages/brochures/pubfund_limits_2008.shtml]. [35] The base limit (before the inflation adjustment) is $20 million. See 2 U.S.C. § 44 1a(b) 1(B).

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[36] 26 U.S.C. §§ 9003(a); 9033(a). On the $50,000 limit, see 26 U.S.C. § 9006(d). [37] The IRS provided CRS with aggregate tax-year 2006 data, from which CRS calculated a percentage. CRS calculated the percent changes based on the data in Table 1 [38] Examples include Ross Perot (1992) and Steve Forbes (1996). [39] Federal Election Commission, “FEC Approves Matching Funds for 2004 Presidential Candidates,” final certifications, press release, April 1, 2005, at [http://www.fec.gov/press/press2005/2005040 1cert.html]. See also Anthony Corrado, “Public Funding of Presidential Campaigns,” p. 184. [40] See Federal Election Commission, “FEC Approves Matching Funds for 2008 Candidates,” press release, December 20, 2007, at [http://www.fec.gov/press/press2007/ 20071207cert.shtml] for a base certification of $16,356,000. The FEC also certified an additional payment, to cover inflation, of $464,760. Information on the inflation adjustment comes from e-mail correspondence between the author and Wanda Thomas, deputy assistant staff director for public financing, FEC, April 9, 2008. [41] For additional discussion, see Anthony Corrado, “Public Funding of Presidential Campaigns,” pp. 183-184. [42] Federal Election Commission, “FEC Approves Matching Funds for 2004 Presidential Candidates.” See also Anthony Corrado, “Public Funding of Presidential Campaigns,” p. 184. Information on the brief 2004 shortfall (which occurred between February and March of 2004) was provided by Wanda Thomas, deputy assistant staff director for public financing, FEC (email correspondence with author, May 21, 2008). When shortfalls occur, candidates sometimes use certifications of their eligibility for public financing to secure private bank loans, which are subsequently repaid with public funds. [43] Federal Election Commission, “FEC Approves Matching Funds for 2004 Presidential Candidates.” [44] This figure was provided by the Treasury Department’s Financial Management Service staff via Thomas Santaniello, office of legislative and public affairs, Financial Management Service (e-mail correspondence with author September 11, 2008). [45] Specifically, another general-election grant of approximately $84.1 million would have to be reserved before matching payments could be made. [46] See Honorable José Serrano, “Providing for Further Consideration of H.R. 2829, Financial Services and General Government Appropriations Act, 2008.”

48

[47]

[48]

[49] [50] [51] [52]

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[53] [54] [55] [56]

R. Sam Garrett Remarks in the House. Congressional Record, daily edition, vol. 153 (June 27, 2007), p. H7296. For a discussion of the reintroduction of the Senate bill, see Senator Russell Feingold, remarks in the Senate, Congressional Record, daily edition, vol. 153 (December 5, 2007), pp. S14790-S14797. A statement from Senator Susan Collins, a co-sponsor, appears on p. S14797. H.R. 776 was introduced by Representatives Meehan and Shays. H.R. 4294 was introduced by Representative Price of North Carolina. Senator Feingold introduced S. 436 and S. 2412. On coordinated party expenditures, see CRS Report RS22644, Coordinated Party Expenditures in Federal Elections: An Overview, by R. Sam Garrett and L. Paige Whitaker. CRS calculated annual percentage change rates based on the FEC data cited in Table 1. Federal Election Commission, “FEC Approves Matching Funds for 2004 Presidential Candidates.” For an overview, see Anthony Corrado, “Public Funding of Presidential Campaigns,” pp. 190-193. As noted previously, for additional discussion of convention financing, see CRS Report RL34630, Federal Funding of Presidential Nominating Conventions: Overview and Policy Options, by R. Sam Garrett and Shawn Reese. See also Steve Weissman and Ruth Hassan, “The $100 Million Exemption: Soft Money and the 2004 National Party Conventions,” Campaign Finance Institute, July 2004, at [http://www.cfinst.org/ books_reports/pdf/full_partyconventions .pdf]; and Campaign Finance Institute, “Inside Fundraising for the 2008 Party Conventions: Party Surrogates Gather Soft Money While Federal Regulators Turn a Blind Eye,” n.d. [released June 2008], at [http://www.cfinst.org/ books_reports/conventions/2008Conventions_Rpt1 .pdf]. Caps would be necessary, however, to prevent taxpayers from designating their entire tax liability for the PECF. Both Treasury funds and PECF funds are generated by tax revenues, meaning that one form of public funds would be used to repay another. This assumes candidates participate in public financing during both the primary and general elections. Some preliminary evidence suggests that small donors are already enjoying renewed clout, particularly in light of some candidates’ successful Internet fundraising during the 2008 cycle. See, for example, Campaign Finance Institute, “April Presidential Reports: Small Donations Continue to Fuel

Public Financing of Presidential Campaigns: Overview and Analysis

[57]

[58]

[59]

[60] [61]

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[62]

[63] [64]

49

Democrats; McCain Has His Best Month; Clinton’s Debts Rise to $19.5 Million,” press release, May 22, 2008, at [http://www.cfinst.org/pr/ prRelease.aspx? ReleaseID= 191]; and Richard L. Hasen, “Political Equality, the Internet, and Campaign Finance Regulation,” The Forum, vol. 6, no. 1, art. 7; at [http://www.bepress.com/forum/vol6/iss 1/art7] On 527 organizations, see CRS Report RS22895, 527 Groups and Campaign Activity: Analysis Under Campaign Finance and Tax Laws, by L. Paige Whitaker and Erika Lunder. See also CRS Report RS21716, Political Organizations Under Section 527 of the Internal Revenue Code, by Erika Lunder. For an overview of 50 1(c) organizations, see CRS Report RL33377, Tax-Exempt Organizations: Political Activity Restrictions and Disclosure Requirements, by Erika Lunder. See, for example, Campaign Legal Center and Democracy 21, Presidential Public Financing: Repairing the System, conference report, December 9, 2005, at [http://www.campaignlegal center.org/attachments/1614.pdf], p. 9. A CRS search of scholarly literature also confirmed the point. Federal Election Commission, Report on the Presidential Public Funding Program (FEC: April 1993), p. 75. An HTML version of the report is available at [http://www.fec.gov/info/pfund.htm]. Ibid. See Appendix 5 of that report for scripts of the public-service announcements. See, for example, CRS Report RL338 14, Public Financing of Congressional Elections; and Stephen R. Weissman and Ruth A. Hassan, “Public Opinion Polls Concerning Public Financing of Federal Elections 1972-2000: A Critical Analysis and Proposed Future Directions” (Washington: Campaign Finance Institute, 2005), pp. 2-3, at [http://www.cfinst.org/president/pdf/ PublicFunding_Surveys.pdf]. For additional discussion, see Campaign Finance Institute, “Leading Tax Software Firms Alter Their Presidential Fund Check Off Questions to Promote Fair, Informed Choices,” press release, November 10, 2005, at [http://www.cfinst.org/pr/ prRelease.aspx?ReleaseID=6]. Ibid. See section 5 of H.R. 484; the rest of the bill would repeal various other campaign finance regulations. Also, as noted previously, amendments to the FY2008 FSGG bill proposed by Representative Neugebauer, which could have curtailed the program, would have been permitted. However, there is no record that they were offered on the floor.

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R. Sam Garrett

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[65] Campaign Finance Institute, “Presidential Candidates Fundraising Activity January 1, 2007 through April 30, 2008,” at [http://www.cfinst.org/president/pdf/ Pres08_M5_Table2.pdf]. [66] Senator Russell Feingold, remarks in the Senate, Congressional Record, daily edition, vol. 153 (December 5, 2007), p. S 14791.

In: Campaign Finance… Editor: Thomas P. Kallen, pp. 51-106

ISBN: 978-1-60692-836-3 © 2009 Nova Science Publishers, Inc.

Chapter 2

THE CONSTITUTIONALITY OF CAMPAIGN FINANCE REGULATION: BUCKLEY V. VALEO AND ITS SUPREME COURT PROGENY *

L. Paige Whitaker

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ABSTRACT Political expression is at the heart of First Amendment activity and the Supreme Court has granted it great deference and protection. However, according to the Court in its landmark 1976 decision, Buckley v. Valeo, an absolutely free political marketplace is not required by the First Amendment — nor is it desirable — because without reasonable regulation, corruption will result. Most notably, the Buckley Court ruled that the spending of money in campaigns, whether as a contribution or an expenditure, is a form of “speech” protected by the First Amendment. The Court upheld some infringements on free speech, however, in order to further the governmental interests of protecting the electoral process from corruption or the appearance of corruption. In Buckley, the Supreme Court considered the constitutionality of the Federal Election Campaign Act of 1971 (FECA), requiring political committees to disclose campaign contributions and expenditures and limiting, to various degrees, the ability of persons and organizations to make contributions and expenditures. While First Amendment freedoms and campaign finance regulation present conflicting means of attempting to preserve *

This is an edited, excerpted and augmented edition of CRS Report RL30669, dated April 2, 2008.

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L. Paige Whitaker the integrity of the political process, the Court resolved this conflict in favor of the First Amendment interests and subjected any regulation burdening free speech and free association to “exacting scrutiny.” Under this standard of review, a court will evaluate whether the government’s interests in regulating are compelling, examine whether the regulation burdens and outweighs First Amendment liberties, and inquire as to whether the regulation is narrowly tailored to serve the government’s interests. If a regulation meets all three criteria, a court will uphold it. This article first discusses the key holdings enunciated by the Supreme Court in Buckley, including those upholding reasonable contribution limits, striking down expenditure limits, upholding disclosure reporting requirements, and upholding the system of voluntary presidential election expenditure limitations linked with public financing. It then examines the Court’s extension of Buckley in several subsequent cases, evaluating them in various regulatory contexts: contribution limits (California Medical Association v. FEC; Citizens Against Rent Control v. Berkeley; Nixon v. Shrink Missouri Government PAC; FEC v. Beaumont); expenditure limits (First National Bank of Boston v. Bellotti; FEC v. Massachusetts Citizens for Life; Austin v. Michigan Chamber of Commerce; FEC v. National Right to Work; Colorado Republican Federal Campaign Committee (Colorado I) v. FEC; FEC v. Colorado Republican Federal Campaign Committee (Colorado II); FEC v. Democratic Senatorial Campaign Committee; FEC v. National Conservative Political Action Committee); disclosure requirements (Buckley v. American Constitutional Law Foundation; Brown v. Socialist Workers ‘74 Campaign Committee; FEC v. Akins; McIntyre v. Ohio Elections Commission); and political party soft money and electioneering communication restrictions (McConnell v. FEC; Wisconsin Right to Life, Inc. v. FEC (WRTL II)).

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INTRODUCTION Campaign finance regulation invokes two conflicting values implicit in the application of the First Amendment’s guarantee of free political speech and association. On the one hand, political expression constitutes “core” First Amendment activity, which the Supreme Court grants the greatest deference and protection in order to “assure [the] unfettered interchange of ideas for the bringing about of political and social changes desired by the people.”[1] On the other hand, according to the Court in its landmark 1976 decision, Buckley v. Valeo,[2] an absolutely free “political marketplace” is neither mandated by the First Amendment, nor is it desirable, because when left uninhibited by reasonable regulation, corruptive pressures undermine the integrity of political institutions and undercut public confidence in republican governance. In other words, although the Court reveres the

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freedoms of speech and association, it has upheld infringements on these freedoms in order to further the governmental interests of protecting the electoral process from corruption or the appearance of corruption. Case law subsequent to Buckley further illustrates that neither the freedom of speech and association nor the government’s regulatory powers are absolute. Accordingly, Supreme Court campaign finance holdings embody the doctrinal tension between striking a reasonable balance between protecting the liberty interests in free speech and association, on the one hand, and upholding campaign finance regulation enacted with the intent to encourage political debate while protecting the election process from corruption, on the other. The Court appears to uphold First Amendment infringements by campaign finance regulation only insofar as the regulation is deemed necessary to preserve the very system of representative democracy that unregulated First Amendment freedoms purport to insure.[3] In Buckley, the Court reviewed the constitutionality of the Federal Election Campaign Act of 1971 (FECA),[4] requiring political committees to disclose political contributions and expenditures, and limited to various degrees, the ability of natural persons and organizations to make political contributions and expenditures. While First Amendment freedoms and campaign finance regulation present conflicting means of preserving the integrity of the democratic political process, the Court resolved this conflict in favor of First Amendment interests and subjected any regulation burdening free speech and free association activities to “exacting scrutiny.” Under this standard of review, the Court evaluates whether the state’s interests in regulation are compelling, examines whether the regulation burdens and outweighs First Amendment liberties, and inquires whether the regulation is narrowly tailored to further its interest. If a regulation meets all three criteria, the Court will uphold it. This article discusses the critical holdings and rationales enunciated by the Buckley Court and then examines the Court’s extension of Buckley in subsequent cases. Buckley’s extensions are evaluated in various regulatory contexts: contribution limits, expenditure limits, disclosure requirements, and political party spending and electioneering communication restrictions. When discussing the Court’s rationale in each case, facts relevant to a regulator are highlighted: the object of regulation (e.g., a corporation, labor union, or natural person); the asserted liberty interest (e.g., freedom of speech or association); the asserted regulatory interest (e.g., deterring corruption); the triggers of the regulatory interests (e.g., political advantages gained by assuming the corporate form); the means by which the regulator obtained those interests (e.g., limiting campaign contributions); the extent to which the regulation burdened First Amendment liberties (e.g., completely prohibiting expenditures above a certain dollar amount); and the scope of regulation

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(e.g., whether the regulation was “narrowly tailored” to serve the compelling governmental interests).

BUCKLEY V. VALEO In Buckley v. Valeo, the Supreme Court considered the constitutionality of the Federal Election Campaign Act of 1971 (FECA), as amended in 1974,[5] and the Presidential Election Campaign Fund Act.[6] The Court upheld the constitutionality of certain provisions, including (1) contribution limitations to candidates for federal office,[7] (2) disclosure and record-keeping provisions,[8] and (3) public financing of presidential elections.[9] The Court found other provisions unconstitutional, including (1) expenditures limitations on candidates and their political committees,[10] (2) the $1,000 limitation on independent expenditures,[11] (3) expenditure limitations by candidates from their personal funds,[12] and (4) the method of appointing members to the Federal Election Commission.[13] In general, the Court struck down expenditure limitations, but upheld reasonable contribution limitations, disclosure requirements,[14] and public financing provisions, so long as participation is voluntary, not compelled. In considering the constitutionality of these statutes, the Buckley Court applied the standard of review known as “exacting scrutiny,” a standard applied by a court when presented with regulations that burden core First Amendment activity. Exacting scrutiny requires a regulation to be struck down unless it is narrowly tailored to serve a compelling governmental interest.

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Contribution and Expenditure Limits When analyzing First Amendment claims, a court will generally first determine whether the challenged government action implicates “speech” or “associational activity” guaranteed by the First Amendment. Most notably, the Buckley Court held that the spending of money, whether in the form of contributions or expenditures, is a form of “speech” protected by the First Amendment. A number of principles contributed to the Court’s analogy between money and speech. First, the Court found that candidates need to amass sufficient wealth to amplify and effectively disseminate their message to the electorate.[15] Second, restricting political contributions and expenditures, the Court held, “necessarily reduces the quantity of expression by restricting the number of

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issues discussed, the depth of the exploration, and the size of the audience reached. This is because virtually every means of communicating ideas in today’s mass society requires the expenditure of money.”[16] The Court then observed that a major purpose of the First Amendment was to increase the quantity of public expression of political ideas, as free and open debate is “integral to the operation of the system of government established by our Constitution.”[17] From these general principles, the Court concluded that contributions and expenditures facilitated this interchange of ideas and could not be regulated as “mere” conduct unrelated to the underlying communicative act of making a contribution or expenditure.[18] However, according to the Court, contributions and expenditures invoke different degrees of First Amendment protection.[19] Recognizing contribution limitations as one of FECA’s “primary weapons against the reality or appearance of improper influence” on candidates by contributors, the Court found that these limits “serve the basic governmental interest in safeguarding the integrity of the electoral process.”[20] Thus, the Court concluded that “the actuality and appearance of corruption resulting from large financial contributions” was a sufficient compelling interest to warrant infringements on First Amendment liberties “to the extent that large contributions are given to secure a quid pro quo from [a candidate.]”[21] Short of a showing of actual corruption, the Court found that the appearance of corruption from large campaign contributions also justified these limitations.[22] Reasonable contribution limits, the Court noted, leave “people free to engage in independent political expression, to associate [by] volunteering their services, and to assist [candidates by making] limited, but nonetheless substantial [contributions].”[23] Further, a reasonable contribution limitation does “not undermine to any material degree the potential for robust and effective discussion of candidates and campaign issues by individual citizens, associations, the institutional press, candidates, and political parties.”[24] Finally, the Court found that the contribution limits of FECA were narrowly tailored insofar as the act “focuses precisely on the problem of large campaign contributions.”[25] On the other hand, the Court determined that FECA’s expenditure limits on individuals, political action committees (PACs), and candidates imposed “direct and substantial restraints on the quantity of political speech” and were not justified by an overriding governmental interest.[26] The Court rejected the government’s asserted interest in equalizing the relative resources of candidates and in reducing the overall costs of campaigns. Restrictions on expenditures, the Court held, constitute a substantial restraint on the enjoyment of First Amendment freedoms. As opposed to reasonable limits on contributions, which merely limit the expression of a person’s

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“support” of a candidate, the “primary effect of [limitations on expenditures] is to restrict the quantity of campaign speech by individuals, groups and candidates.”[27] “A restriction on the amount of money a person or group can spend on political communication during a campaign necessarily reduces the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached,” the Court noted.[28] The Court also found that the government’s interests in stemming corruption by limiting expenditures were not compelling enough to override the First Amendment’s protection of free and open debate because unlike contributions, the risk of quid pro quo corruption was not present, as the flow of money does not directly benefit a candidate’s campaign fund.[29] Upon a similar premise, the Court rejected the government’s interest in limiting a wealthy candidate’s ability to draw upon personal wealth to finance his or her campaign and struck down the personal expenditure limitation[30]

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Reporting and Disclosure Requirements In Buckley, the Supreme Court generally upheld FECA’s disclosure and reporting requirements, but noted that they might be found unconstitutional as applied to certain groups. While compelled disclosure, in itself, raises substantial freedom of private association and belief issues, the Court held that these interests were adequately balanced by the state’s regulatory interests. The state asserted three compelling interests in disclosure: (1) providing the electorate with information regarding the distribution of capital between candidates and issues in a campaign, thereby providing voters with additional evidence upon which to base their vote; (2) deterring actual and perceived corruption by exposing the source of large expenditures; and (3) providing regulatory agencies with information essential to the election law enforcement. However, when disclosure requirements expose members or supporters of historically suspect political organizations to physical or economic reprisal,[31] then disclosure may fail constitutional scrutiny as applied to a particular organization.[32]

Voluntary Presidential Election Expenditure Limits Linked with Public Financing The Supreme Court in Buckley upheld the constitutionality of the system of voluntary presidential election expenditure limitations linked with public

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financing, through a voluntary income tax checkoff.[33] The Court found no First Amendment violation in not allowing taxpayers to earmark their $1.00 “checkoff” to a candidate or party of the taxpayer’s choice. As the checkoff constituted an appropriation by Congress, it did not require outright taxpayer approval, as “every appropriation made by Congress uses public money in a manner to which some taxpayers object.”[34] The Court also rejected a number of Fifth Amendment due process challenges, including a challenge contending that the public financing provisions discriminated against minor and new party candidates by favoring major parties through the full public funding of their conventions and general election campaigns, and by discriminating against minor and new parties who received only partial public funding under the act.[35] The Court held that “[a]ny risk of harm to minority interests ... cannot overcome the force of the governmental interests against the use of public money to foster frivolous candidacies, create a system of splintered parties, and encourage unrestrained factionalism.”[36]

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Issue and Express Advocacy Communications In Buckley, the Supreme Court provided the genesis for the concept of issue and express advocacy communications. In order to pass constitutional muster and not be struck down as unconstitutionally vague, the Court ruled that FECA can only apply to non-candidate “expenditures for communications that in express terms advocate the election or defeat of a clearly identified candidate for federal office,” i.e., expenditures for express advocacy communications.[37] In a footnote to the Buckley opinion, the Court further defines “express words of advocacy of election or defeat” as, “vote for,” “elect,” “support,” “cast your ballot for,” “Smith for Congress,” “vote against,” “defeat,” and “reject.”[38] Communications not meeting the express advocacy definition are commonly referred to as issue advocacy communications. In its rationale for establishing such a bright line distinction between issue and express advocacy, the Court noted that the discussion of issues and candidates as well as the advocacy of election or defeat of candidates “may often dissolve in practical application.” That is, candidates — especially incumbents — are intimately tied to public issues involving legislative proposals and governmental actions, according to the Court.[39]

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CONTRIBUTION LIMITS This section analyzes several Supreme Court opinions decided subsequent to Buckley in which the Court evaluated the constitutionality of contribution limitations. Specifically, in California Medical Association v. Federal Election Commission (FEC),[40] the Court upheld limits on contributions from an unincorporated association to its affiliated, non-party, multicandidate political action committee (PAC). In Citizens Against Rent Control v. Berkeley,[41] the Court reviewed a statute severely limiting the ability of an unincorporated association to raise funds through contributions in connection with its activities in a ballot initiative, holding that the limit unduly burdened the association’s free speech and association rights. In Nixon v. Shrink Missouri Government PA C,[42] the Court evaluated campaign contribution limit amounts and considered, among other things, whether Buckley’s approved contribution limits established a minimum for state limits, with or without adjustment for inflation, and concluded that Buckley did not. Finally, in FEC v. Beaumont, the Court reaffirmed the prohibition on all corporations — including tax- exempt corporations — making direct treasury contributions in connection with federal elections.

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Limiting Individual Contributions to Political Action Committees (California Medical Association v. FEC) California Medical Association (CMA) v. Federal Election Commission (FEC)[43] considered whether the rationale behind the Buckley Court affording such high protection to campaign contributions extended to political action committee (PAC) contributions as well. This case involved 2 U.S.C. § 441a(a)(1)(C) of FECA, which limits individual contributions to PACs to $5,000 per year.[44] An unincorporated association of medical professionals, (“the doctors”) and the association’s affiliated political action committee (“the PAC”) challenged FECA’s contribution limits, alleging, inter alia, violation of their free speech and association rights. The doctors argued that § 441a(a)(1)(C) was unconstitutional because it inhibited their use of the PAC as a proxy for their political expression.[45] Moreover, the doctors contended that the contribution limit did not serve a compelling state interest because the risk of corruption is not present where money does not flow directly into a candidate’s coffers.[46] Unpersuaded, the Supreme Court upheld FECA’s contribution limits. In evaluating the doctor’s free speech interest, the Court held that the doctors’ “speech

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by proxy” theory was not entitled to full First Amendment protection because Buckley reserved this protection for independent and “direct” political speech.[47] The Court found that the PAC was not simply the doctors’ “political mouthpiece,” but was a separate legal entity that received funding “from multiple sources” and engaged in its own, independent political advocacy.[48] In rejecting the doctors’ “speech by proxy” theory, the Court construed the doctors’ relationship with the PAC as providing “support” through campaign contributions, which does not warrant the same level of First Amendment protection as independent political speech.[49] In evaluating the state’s interests, the CMA Court rejected the PAC and the doctors’ argument that the risk of corruption is not present when contributions are made to a PAC. The Court interpreted this argument as implying that Congress cannot limit individuals and unincorporated associations from making contributions to multicandidate political committees. This rationale, the Court held, undercuts FECA’s statutory scheme by allowing individuals to circumvent FECA’s limits on individual contributions[50] and aggregate contributions[51] by making contributions to a PAC. Hence, the doctor’s rationale would erode Congress’ legitimate interest in protecting the integrity of the political process.[52] Under Buckley, the Court held that the state’s regulatory interests outweighed the doctors’ relatively weak free speech interest.

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Limiting Contributions in Connection with Ballot Initiatives (Citizens Against Rent Control v. Berkeley) In Citizens Against Rent Control v. Berkeley,[53] the Supreme Court addressed whether a city ordinance, imposing a $250 limit on contributions made to committees formed to support or oppose ballot measures, violated a PAC’s liberty interest in free speech and free association under the Fourteenth Amendment.[54] Citizens Against Rent Control (“the group”), an unincorporated association formed to oppose a Berkeley ballot initiative imposing rent control on various properties, challenged the ordinance’s constitutionality. The Court found for the group, on freedom of association and freedom of speech grounds. The Court held that while the limit placed no restraint on an individual acting alone, it clearly restrained the right of association, as the ordinance burdened individuals who wished to band together to voice their collective viewpoint on ballot measures.[55] The Court applied “exacting scrutiny” to the ordinance, weighing the city’s regulatory interests against the group’s associational rights.[56] While the Court noted that Buckley permitted contribution limits to candidates in order to

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prevent corruption, contributions tied to ballot measures pose “no risk of corruption.”[57] Moreover, as the ordinance required contributors to disclose their identity, the regulation posed “no risk” that voters would be confused by who supported the speech of the association.[58] Under “exacting scrutiny,” therefore, the $250 contribution limitation was held unconstitutional. Extending its holding, the Court found that the contribution limitations unduly burdened the free speech rights of the group and of individuals who wish to express themselves through the group.[59] Applying “exacting scrutiny,” the Court found no significant public interest in restricting debate and discussion of ballot measures, and held that the ordinance’s disclosure requirement adequately protected the sanctity of the political system.[60]

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Establishing Contribution Limit Amounts (Nixon v. Shrink Missouri Government PAC) In Nixon v. Shrink Missouri Government PA C,[61] the Supreme Court considered, among other things, whether Buckley’s approved limitations on campaign contributions established a minimum for state contribution limits today, with or without adjustment for inflation. Asserting free speech and association rights, a political action committee and a candidate challenged the facial validity of a Missouri regulation limiting contributions to amounts ranging from $275 to $1,075.[62] Missouri asserted interests similar to those articulated in Buckley, namely, that contribution limits serve the governmental interest in avoiding the real and perceived corruption of the electoral process.[63] The Eighth Circuit found these interests unpersuasive and required Missouri to show that “there were genuine problems that resulted from the contributions in amounts greater than the limits in place . . .”[64] The Court granted certiorari to review the agreement between the Eighth Circuit’s evidentiary requirement and Buckley.[65] Reversing, the Court found Missouri’s regulatory interests compelling and negated the proposition that the $1,000 limit upheld by Buckley is a constitutional floor to state contribution limitations.[66] Though the Court reviewed the case under an exacting scrutiny standard,[67] it upheld the regulation since it “was ‘closely drawn’ to match a ‘sufficiently important interest.’”[68] Notwithstanding the “narrow tailoring” requirement, the Court held that the limitation’s dollar amount “need not be ‘fine tuned.’”[69] As the risk of corruption is greater when money flows directly into a campaign’s coffers, the Court found that contribution limits are more likely to withstand constitutional scrutiny. In these cases, a contributor’s free speech interest is less compelling since “contributions” merely index for candidate “support,” not

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the contributor’s “independent” political point of view.[70] Addressing the lower court’s evidentiary requirement, the Court noted that “[t]he quantum of empirical evidence needed to satisfy heightened judicial scrutiny of legislative judgments will vary up or down with the novelty and plausibility of the justifications raised.”[71] However, it found that Missouri cleared the standard implied by Buckley and its progeny.[72] Given the relative weakness of the asserted free speech and associational interests, as compared to the state’s weighty regulatory interest, the Court upheld the Missouri state campaign contribution limits.

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Prohibiting Contributions by Tax-Exempt Corporations (FEC v. Beaumont) The Supreme Court in Federal Election Commission (FEC) v. Beaumont,[73] evaluated the constitutional application of 2 U.S.C. § 441b of the Federal Election Campaign Act (FECA) to North Carolina Right to Life (NCRL), a tax-exempt advocacy corporation. Section 441b prohibits corporations, including tax-exempt advocacy corporations, from using treasury funds to make direct contributions and expenditures in connection with federal elections. Corporations seeking to make such contributions and expenditures may legally do so only through a political action committee or PAC. As it notes in Beaumont, the Supreme Court has long upheld the ban on corporate contributions, including those made by corporations that are tax-exempt under the Internal Revenue Code. However, in FEC v. Massachusetts Citizens for Life, Inc. (MCFL),[74] the Court created an exception for independent expenditures made by such entities that do not accept significant corporate or labor union money finding that restrictions on contributions require less compelling justification under the First Amendment than restrictions on independent expenditures. In FEC v. Beaumont, NCRL unsuccessfully attempted to extend the MCFL exception to contributions by tax-exempt corporations. Finding that limits on contributions are more clearly justified under the First Amendment than limits on expenditures, the Court reaffirmed the prohibition on all corporations making direct treasury contributions in connection with federal elections and upheld the ban on corporate contributions as applied to NCRL. According to the Court, quoting from some of its earlier decisions, it has upheld the “well established constitutional validity of ... regulat[ing] corporate contributions,” including contributions by membership corporations that “might not exhibit all the evil that contributions by traditional economically organized corporations exhibit.”[75] Stating its refusal to “second-guess a legislative determination as to the need for

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prophylactic measures where corruption is the evil feared,” the Court rejected the argument that deference to congressional judgments is determined by whether the corporations affected by a regulation are for-profit or non-profit.[76] Beaumont also clarified the standard for review applicable to campaign finance regulation under the First Amendment. In the view of the Court, determining the appropriate standard of review depends on the nature of the activity being regulated. Commencing with its 1976 ruling in Buckley, the Court said that it has treated the regulation of contributions as only a “marginal” speech restriction, subject to “relatively complaisant review under the First Amendment,” since contributions are a less direct form of speech than expenditures.[77] Hence, the Court concluded that instead of requiring a contribution regulation to pass strict scrutiny by meeting the requirement that it be narrowly tailored to serve a compelling governmental interest, a contribution regulation involving “significant interference with associational rights” passes constitutional muster by merely satisfying the lesser requirement of “being ‘closely drawn’ to match a ‘sufficiently important interest.’”[78] The Court held that the Section 441b prohibition passed this lower level of scrutiny because it does not render a complete ban on corporate contributions, i.e., corporations are still permitted to use treasury funds to establish, solicit funds for, and pay the administrative expenses of a political action committee or PAC, which can then in turn make contributions.[79] Invoking its unanimous holding in FEC v. National Right to Work, the Court rejected the argument that the regulatory burdens on PACs, including restrictions on their ability to solicit funds, renders a PAC unconstitutional as the only way that a corporation can make political contributions.[80] In summary, the Supreme Court in FEC v. Beaumont upheld the ban on corporate contributions as applied to NCRL because corporate campaign contributions — including contributions by tax-exempt advocacy corporations — pose a risk of harm to the political system. Consequently, the Court found, courts owe deference to legislative judgments on how best to address their risk of harm. In addition, the Court announced that limits on contributions are merely “marginal” speech restrictions subject to a “relatively complaisant” or lesser review under the First Amendment than the strict scrutiny standard of review.

EXPENDITURE LIMITS This section analyzes several Supreme Court opinions decided subsequent to Buckley in which the Court evaluated the constitutionality of expenditure

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limitations. The first area of case law involves the regulation of corporations. In First National Bank v. Bellotti,[81] the Court held that corporate speech in the form of expenditures, in a state referendum, could not be suppressed under the First Amendment. In two other corporate speech cases, the Court generally upheld a requirement that corporate political expenditures be made from a special segregated fund or political action committee (PAC), but subjected this requirement to an exception for “purely” political organizations: Federal Election Commission (FEC) v. Massachusetts Citizens for Life (MCFL)[82] and Austin v. Michigan Chamber of Commerce.[83] The second area of case law involves the regulation of labor unions. In FEC v. National Right to Work Committee[84] the Court upheld a regulation restricting from whom labor unions can solicit funds for their separate segregated funds or PACs. The third area of case law addresses the regulation of political party expenditures. In Colorado Republican Federal Campaign Committee v. FEC,[85] the Court upheld a political party’s purchase and broadcasting of radio “attack ads,” finding it was an “uncoordinated independent expenditure.” The final context examines the regulation of PACs. In FEC v. National Conservative Political Action Committee (NCPA C),[86] struck down a prohibition on independent expenditures above $1,000 in support of a “publicly funded” candidate.

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Prohibiting or Limiting Corporate Expenditures (First National Bank of Boston v. Bellotti; FEC v. Massachusetts Citizens for Life, Inc.; Austin v. Michigan Chamber of Commerce) Representing an important new emphasis on First Amendment protection of corporate free speech, in First National Bank of Boston v. Bellotti, the Supreme Court held that the fact that the corporation is the speaker does not limit the scope of its interests in free expression, as the scope of First Amendment protection turns on the nature of the speech, not the identity of the speaker. However, as demonstrated in FEC v. Massachusetts Citizens for Life, Inc. (MCFL) and Austin v. Michigan Chamber of Commerce, the fact that the speaker is a corporation may elevate the state’s interests in regulating a corporation’s expressive activity, on equitable grounds. MCFL and Austin appear to expand the Court’s “governmental interest” jurisprudence from the interest identified in Buckley, i.e., avoiding candidate corruption, to a broader interest of avoiding corruption in the entire electoral process. Although the Court emphasized that equalizing the relative voices of persons and

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entities in the political process is not a valid regulatory end, MCFL and Austin appear to hold that the government has equitable interests in ensuring fair and open debate in the political marketplace by preventing corporate monopolization. However, in both cases, the Court stressed that corporate wealth, in itself, is not a valid object of speech suppression. In First National Bank of Boston v. Bellotti,[87] the Supreme Court evaluated the constitutional basis of a Massachusetts criminal statute, which in pertinent part, prohibited corporate expenditures made to influence the outcome of a referendum. The statute did not completely ban corporate expenditures: it permitted expenditures when a referendum’s outcome could materially affect a corporation’s business, property, or assets[88] Bellotti arose in connection with a proposed state constitutional amendment permitting the state to impose a graduated tax on an individual’s income.[89] When the proposal was presented to the voters, a group of corporations wanted to expend money to publicize their point of view;[90] however, their desire was burdened by the statutory provision stating that issues concerning the taxation of individuals do not “materially affect” a corporate interest.[91] The corporations sought to prevent enforcement of the statute, arguing that it was facially invalid under the First and Fourteenth Amendments.[92] In agreement with the corporations, the Supreme Court struck down the statute. First, the Bellotti Court considered whether a speaker’s “corporate” identity substantively affects the extension of First Amendment liberties. On the state’s contention that the scope of the First Amendment narrows when the speaker is a corporation, the Court found no constitutional support.[93] This conclusion followed from the Court’s framing of the issues. The Court did not address the question of whether corporate interests in free speech are coextensive with those of natural persons, finding the issue peripheral to the case’s efficient resolution.[94] Instead, the threshold issue was whether the statute proscribed speech that “the First Amendment was meant to protect.”[95] In other words, the Court focused on the nature of the speech, not the identity of the speaker. As the Massachusetts statute burdened expressive activity addressing a proposed amendment to the state constitution, the nature of the speech fell squarely within the historic and doctrinal mandate of the First Amendment — protecting the free discussion of governmental affairs.[96] As the corporations asserted ‘core’ First Amendment interests, the statute was subject to “exacting scrutiny,” triggering the remaining issues, where the Court considered whether the government’s regulatory interests were compelling and obtained by narrowly tailored means.[97] Massachusetts advanced two rationales for the prohibition of corporate speech: (1) elevating and “sustaining” the individual’s role in electoral politics, and (2) ensuring that corporate political expenditures are funded by shareholders who agree

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with their corporation’s political views.[98] In the context of candidate elections, the Court found these rationales “weighty,” but in a “direct democracy” context, they were simply not advanced in a material way.[99] While ensuring that individuals sustain confidence in government and maintain an active role in elections is “of the highest importance,”[100] the Bellotti Court did not find that regulating corporate speech would necessarily enhance the role of the individual in this context. The Court reasoned that the inclusion of corporate political perspectives does not demonstrate that they will unduly “influence the outcome of a referendum vote”[101] and stressed that restricting the speech of some to amplify the voice of others is not a valid object suppression.[102] As such, the Court held that permitting corporate speech in a referendum does not exert coercive pressures (real or perceived) on the “direct democracy” process.[103] Likewise, the Bellotti Court rejected the state’s purported interest in protecting minority shareholders who object to their corporation’s majority political philosophy. With respect to this interest, the Court found the statute was both over and under- inclusive. The statute was over-inclusive insofar as it proscribed corporate speech, where the corporate political policy and speech enjoyed unanimous assent by its members.[104] The Court emphasized that corporate democracy informs the decision to engage in public debate, that shareholders are presumed to protect their own interests, and that they are not compelled to contribute additional funds to their corporation’s political activities.[105] The statute was under-inclusive insofar as corporations may exert political influence by lobbying for the passage and defeat of legislation and may express its political views on an issue when it does arise in connection to a ballot measure.[106] As a result, the Court held that the statute unduly infringed on the corporations’ protected free speech interest in expressing its political point of view.[107] The Supreme Court in Federal Election Commission (FEC) v. Massachusetts Citizens for Life (MCFL)[108] evaluated the constitutional application of 2 U.S.C. § 441b of the Federal Election Campaign Act (FECA), prescribing a separate segregated fund or PAC for corporate political expenditures. In this case, the requirement was applied to a non-profit corporation founded for purely political purposes. The founding charter of MCFL was to “foster respect for life,” a purpose motivating various educational and public policy activities.[109] Drawing from its general treasury, the corporation funded a pre-election publication entitled “Everything You Need to Know to Vote Pro-life,” which triggered litigation under § 441b.[110] As the publication was tantamount to an “explicit directive [to] vote for [named] candidates,” MCFL’s speech constituted “express advocacy of the election of particular candidates,” subjecting the expenditure to regulation[111] under the express advocacy standard first articulated by the

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Court in Buckley.[112] However, as applied to MCFL, § 44 1b was held unconstitutional because it infringed on protected speech without a compelling justification.[113] Noting that § 441b burdened expressive activity,[114] the Court examined the government’s regulatory interests in alleviating corruptive influences in elections by requiring the use of corporate PACs and the Court held that concentration of wealth, in itself, is not a valid object of regulation.[115] The Court noted that a corporation’s ability to amass large treasuries confers upon it an unfair advantage in the political marketplace, as general treasury funds derive from investors’ economic evaluation of the corporation, not their support of the corporation’s politics.[116] By requiring the use of a PAC, § 441b ensures that a corporation’s independent expenditure fund indexes for the “popular support” of its political ideas.[117] The Court held that by prohibiting general treasury fund expenditures to advance a political point of view, the regulation “ensured that competition among actors in the political arena is truly competition among ideas.”[118] While the Court found these interests compelling as applied to most corporations, it held the restriction unconstitutional as applied to MCFL. Specifically, the MCFL Court found the following characteristics exempt a corporation from the regulation: (1) its organizational purpose is purely political; (2) its shareholders have no economic incentive in the organization’s political activities; and, (3) it was not founded by nor accepts contributions from business organizations or labor unions.[119] Carving out an exception for corporations with these characteristics, the Court raised equitable grounds for the regulation, stressing that “[r]egulation of corporate political activity . . . has reflected concern not about the use of the corporate form per se, but about the potential for the unfair deployment of [general treasury funds] for political purposes.”[120] The Court held that MCFL’s general treasury is not a function of its economic success, but is an index for membership support of its political ideas.[121] Thus, according to the Court, purely political organizations such as MCFL cannot constitutionally be regulated by § 441b because their treasuries already embody what the regulation purports to achieve: an index of the corporation’s political support. In other words, MCFL is an example of a corporation that is not at risk for gaining an “unfair” advantage in the electoral process.[122] In Austin v. Michigan State Chamber of Commerce,[123] the Supreme Court affirmed and clarified its MCFL holding when it considered whether a non-profit corporation’s free speech rights were unconstitutionally burdened by a state prohibition on using general treasury funds to finance a corporation’s independent

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expenditures in state elections. While prohibiting expenditures from general treasury funds,[124] the statute permitted independent contributions as long as they were made from a separate segregated fund or PAC.[125] Plaintiff-corporation, a non-profit founded for political and non-political purposes, asserted that the regulation burdened its First Amendment interest in political speech by limiting its spending.[126] Further, the plaintiff contended that the regulation was not narrowly tailored to obtain the state’s interests in avoiding the appearance of corruption by limiting a corporate entity’s inherent ability to concentrate economic resources.[127] Although economic power, in itself, does not necessarily index the persuasive value of a corporation’s political ideas, the state argued, a corporation’s structural ability to amass wealth makes it “a formidable political presence” — a presence which triggers its regulatory interest.[128] Unpersuaded by the corporation’s assertion of right, the Court upheld the regulation. Under Buckley[129] and MCFL,[130] the Court addressed whether the plaintiff’s free speech interests were burdened by the regulation; evaluated the state’s regulatory interests; and asked whether the regulation was narrowly tailored to achieve those interests.[131] The Court found that the plaintiff’s freedom of expression was burdened by the regulation, but held that the state achieved its compelling interests by narrowly tailored means. By limiting the source of a corporation’s independent expenditures to a special segregated fund or PAC, the Austin Court held that the regulation burdened the plaintiff’s freedom of expression.[132] The regulation placed various organizational and financial burdens on a corporation’s management of its PAC,[133] limited PAC solicitations to “corporate members” only;[134] and prohibited independent expenditures from corporate treasury funds.[135] Similar to its finding in MCFL, the Court found that the statute’s requirements burdened, but did not stifle, the corporation’s exercise of free expression to a point sufficient to raise a genuine First Amendment claim.[136] Thus, to overcome the claim, the regulation had to be motivated by compelling governmental interests and be narrowly tailored to serve those interests. First, the Austin Court evaluated the state’s regulatory interests. The state argued that a corporation’s “unique legal and economic characteristics”[137] renders it a “formidable political presence” in the market place of ideas, which necessitates regulation of its political expenditures to “avoid corruption or the appearance of corruption.”[138] The Court stressed that the regulation’s purpose was not to equalize the political influence of corporate and non-corporate speakers, but to ensure that expenditures “reflect actual public support for political ideas espoused by corporations.”[139] Moreover, the Court was careful to emphasize that the mere fact that corporations can amass large treasuries was not its justification for

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upholding the statute. Rather, the Court identified the compelling state interest as “the unique state- conferred corporate structure,” which facilitates the amassing of large amounts of wealth.[140] On these grounds, the Court appeared to recognize a valid regulatory interest in assuring that the conversion of economic capital to political capital is done in an equitable way. In other words, the Court held that corruption of the electoral process itself, rather than just the corruption of candidates, is a compelling regulatory interest. After finding a compelling state interest, the Austin Court determined that the regulation was neither over-inclusive nor under- inclusive with respect to its burden on expressive activity. Responding to the plaintiff’s argument that the regulation was over-inclusive insofar as it included closely held corporations, which do not enjoy the same capital resources as larger or publicly-held corporations, the Court ruled that the special benefits conferred to corporations and their potential for amassing large treasuries justified the restriction.[141] Plaintiff’s underinclusiveness argument, alleging that the regulatory scheme failed to include unincorporated labor unions with large capital assets, fared no better. The Court distinguished labor unions from corporations on the ground that unions “amass large treasuries ... without the significant state-conferred advantages of the corporate structure.”[142] Here again, the Court remarked that the corporate structure, not corporate wealth, triggers the state’s interest in regulating a corporation’s independent expenditures.[143] Hence, despite the burden on political speech, the Court upheld the regulation because it was narrowly tailored to reach the state’s compelling interests.[144] In sum, the Austin Court clarified MCFL and upheld the three-part test for when a corporation is exempt from the state’s general interest in requiring a corporation to use a separate segregated fund or PAC for its “independent expenditures.”[145] Under Austin, a corporation is exempt from the PAC requirement when (1) the CRS-2 1 “organization was formed for the express purpose of promoting political ideas;”[146] (2) no entity or person has a claim on the organization’s assets or earnings, such that “persons connected with the organization will have no economic disincentive for disassociating with it if they disagree with its political activity;”[147] and (3) the organization is independent from “the influence of business corporations.”[148]

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Restricting from whom Labor Unions Can Solicit PAC Funds (FEC v. National Right to Work)[149] In Federal Election Commission (FEC) v. National Right to Work Committee (NRWC),[150] the Supreme Court evaluated 2 U.S.C. § 441b(b)(4)(C) of FECA, which requires labor unions to solicit only “members” when amassing funds for its separate segregated fund or PAC. In particular, the Court considered, inter alia, whether the Federal Election Commission’s (FEC) interpretation of “member” abridged NRWC’s associational rights and held that it did not. The NRWC, a non-profit corporation, essentially considered anyone who gave a contribution a “member.”[151] On the other hand, the FEC advanced a narrower definition of “member,” under which a participant would have to display various levels of involvement with the soliciting-organization, beyond providing a contribution,[152] or the participant would have to enjoy responsibilities, rather than mere privileges, in connection to the soliciting organization.[153] Persuaded by the FEC’s interpretation, the Court held that NRWC’s asserted associational liberties were burdened by the FEC’s definition, but were overborne by the state’s regulatory interests.[154] While associational rights are “basic constitutional” freedoms deserving of the “closest scrutiny,” they are not absolute.[155] While § 441b restricts the solicitations of corporations and labor unions, thereby restricting their freedom of association, the state had an interest in hedging corporations and labor organizations’ particular legal and economic attributes, since they may be converted into a political advantage.[156] For example, corporations and labor unions can amass large, financial “war chests,” which could be leveraged to incur political debts from candidates.[157] Indeed, citing Bellotti, the Court affirmed the fundamental importance of curbing the potential, corruptive influence represented by political debts.[158] The Court was further persuaded by the state’s additional interest in protecting investors and members who provide financial support to their organization over their objection to or distaste for the corporation’s majority-political philosophy.[159] “In order to prevent both actual and apparent corruption,” the Court concluded, “Congress aimed a part of its regulatory scheme at corporations, [reflecting a constitutionally warranted] judgment that the special characteristics of the corporate structure require particularly careful regulation.”[160]

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Limiting Political Party Expenditures (Colorado Republican Federal Campaign Committee v. FEC (Colorado I); FEC v. Colorado Republican Federal Campaign Committee (Colorado II); FEC v. Democratic Senatorial Campaign Committee) In Colorado Republican Federal Campaign Committee v. Federal Election Commission (Colorado I),[161] the Supreme Court examined whether the FECA “Party Expenditure Provision,”[162] which imposed dollar limits on political party expenditures “in connection with the general election campaign of a [congressional] candidate,” was unconstitutionally enforced against a party’s funding of radio “attack ads” directed against its likely opponent in a federal senatorial election. This case concerned expenditures for radio ads by the Colorado Republican Party (CRP), which attacked the likely Democratic Party candidate in the 1986 senatorial election.[163] At the time the ads were purchased and aired, the CRP already transferred to the National Republican Party the full amount of the funds it was permitted to expend “in connection with” senatorial elections under FECA.[164] Finding that the CRP exceeded its election spending limits, the FEC noted that the ads were purchased after the fund transfer and found that the expenditure was “in connection with the campaign of a candidate for federal office.”[165] The CRP challenged the constitutionality of the Party Expenditure Provision’s “in connection with” language as unconstitutionally vague[166] and objected to how the provision was applied in this instance.[167] Rendering a narrow holding, the Court found for the CRP on a portion of its “as applied” challenge. The Court’s ruling turned on whether CRP’s ad purchase was an “independent expenditure,” a “campaign contribution” or a “coordinated expenditure.”[168] “Independent expenditures,” the Court noted, do not raise heightened governmental interests in regulation because the money is deployed to advance a political point of view “independent” of a candidate’s viewpoint.[169] Indeed, the Court found that when independent expenditures display little coordination and prearrangement between the payor and a candidate, they alleviate the expenditure’s corruptive influence on the polity.[170] Moreover, the Court stressed that restrictions on independent expenditures “represent substantial . . . restraints on the quantity and diversity of political speech,”[171] and constrict “core First Amendment activity.”[172] However, restrictions on “contributions,” which only marginally impair a “contributor’s ability to engage in free communication,”[173] do not burden free speech interests to the same degree and decrease the risk that corruptive influences will taint the political process.[174] Similarly, “coordinated expenditures” are not as inviolable as “independent expenditures” because they are the functional

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equivalent of a “contribution” and accordingly, they trigger regulatory interests in staving off real and perceived corruption.[175] Given the heightened First Amendment protection of independent expenditures, the Court did “not see how a provision that limits a political party’s independent expenditures” could withstand constitutional scrutiny.[176] The Court held that the CRP’s ad purchase was an independent expenditure deserving constitutional protection. In categorizing the expenditure, the Court emphasized that at the time of the purchase the Republicans had not nominated a candidate and that the CRP’s chairman independently developed the script, offering it for review only to the Party’s staff and the Party’s executive director.[177] Moreover, the Court held that the CRP asserted significant free speech interests because “independent expression of a political party’s philosophy is ‘core’ First Amendment activity.”[178] According to the Court, the CRP’s First Amendment interests were not counterbalanced by the state’s interest in protecting the sanctity of the political process, as restraints on “party” expenditures neither eliminate nor alleviate corruptive pressures on the candidate through an expectation of a quid pro quo.[179] The greatest risk for corruption, the Court recognized, resided in the ability of an individual to circumvent the $1,000 restraint on “individual contributions” by making a $20,000 party contribution with the expectation that it will benefit a particular candidate; however, the Court did not believe “that the risk of corruption here could justify the ‘markedly greater burden on basic freedoms caused by’ . . . limitations on expenditures.”[180] If anything, the Court remarked, an independent expenditure originating from a $20,000 donation that is controlled by a political party rather than an individual donor would seem less likely to corrupt than a similar independent expenditure made directly by a donor.[181] Additionally, the Court held that the statute was not overly broad and was narrowly tailored to obtain its compelling interests. In FEC v. Colorado Republican Federal Campaign Committee (Colorado II), [182] the Supreme Court ruled 5 to 4 that a political party’s coordinated expenditures, unlike genuine independent expenditures, may be limited in order to minimize circumvention of FECA contribution limits. While the Court’s opinion in Colorado I was limited to the constitutionality of the application of FECA’s “Party Expenditure Provision,”[183] to an independent expenditure by the Colorado Republican Party (CRP), in Colorado II the Court considered a facial challenge to the constitutionality of the limit on coordinated party spending. Persuaded by evidence supporting the FEC’s argument, the Court found that coordinated party expenditures are indeed the “functional equivalent” of contributions.[184] Therefore, in its evaluation, the Court applied the same scrutiny

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to the coordinated “Party Expenditure Provision” that it has applied to other contribution limits, i.e., whether the restriction is “closely drawn” to the “sufficiently important” governmental interest of stemming political corruption.[185] The Court further determined that circumvention of the law through “prearranged or coordinated expenditures amounting to disguised contributions” is a “valid theory of corruption.”[186] In upholding the limit, the Court noted that “substantial evidence demonstrates how candidates, donors, and parties test the limits of the current law,” which, the Court concluded, “shows beyond serious doubt how contribution limits would be eroded if inducement to circumvent them were enhanced by declaring parties’ coordinated spending wide open.”[187] Although Federal Election Commission (FEC) v. Democratic Senatorial Campaign Committee (DSCC)[188] dealt primarily with issues of statutory construction and application, the Supreme Court’s rationale is relevant to the extension of Buckley and the First Amendment generally. Specifically, the Court addressed whether 2 U.S.C. § 441a(d) of FECA, which prohibits party committees from making expenditures on behalf of candidates, extends to party expenditures paid on behalf of other state and national party committees. This case arose in connection with the National Republican Senatorial Campaign Committee’s (NRSC) agency relationship with its state and national party committees, under which the NRSC made various expenditures on behalf of its state and national affiliates.[189] The DSCC challenged an FEC interpretation of §441a(d) permitting the NRSC to make such expenditures.[190] The Court affirmed the FEC’s interpretation. Under Buckley, the Court held, inter alia, the FEC’s interpretation was not inconsistent with the purpose of FECA.[191] Agency agreements do not raise the risk of corruption nor the appearance of corruption, spawned by the real or perceived coercive effect of large candidate contributions, so long as the candidate is not a party to the agency relationship.[192] Under an agency agreement, contribution limits to candidates apply with equal force when a committee transfers its spending authority to one of its affiliate committees — the agreement does not increase the expenditure of a single additional dollar under FECA.[193] Thus, the Court held, non-candidate agency agreements are consistent with Buckley and the purposes of FECA.

Limiting Political Action Committee Independent Expenditures (FEC v. National Conservative Political Action Committee) In Federal Election Commission (FEC) v. National Conservative Political Action Committee (NCPA C),[194] the Supreme Court addressed whether the First

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Amendment prohibits enforcement of 26 U.S.C. § 9012(f) of FECA, which proscribed any “committee, association, or organization” from making expenditures over $1,000 in furtherance of electing a “publicly financed” presidential candidate. NCPAC arose in connection with President Reagan’s 1984 bid for reelection, where the Democratic National Committee sought an injunction under § 90 12(f) against NCPAC from expending “large sums of money” to support President Reagan’s publicly funded campaign.[195] NCPAC, an ideological multicandidate political committee, argued that § 90 12(f) unduly burdened its First Amendment interests in free expression and free association, as its expenditures were protected as “independent expenditures.”[196] NCPAC intended to raise and expend money for the purposes of running radio and television ads to encourage voters to elect Reagan. Holding § 90 12(f) unconstitutional, the Court found that the expenditure limitation burdened NCPAC’s “core” First Amendment speech, that it was supported by a comparatively weak state interest, and that it was fatally over-inclusive. The Court noted that in Buckley it had upheld expenditure restrictions on individual and political advocacy associations; however, in this case, the fact that NCPAC’s expenditures were not made in coordination with the candidate supplied the distinguishing key opening the door to First Amendment protection. In sum, a regulation may not burden a non-candidate’s First Amendment rights based on whether a candidate accepts or does not accept public funds. The Court first determined whether NCPAC was entitled to First Amendment protection. After interpreting the statute as proscribing NCPAC’s expenditures, the Court concluded that the proscription burdened speech “of the most fundamental First Amendment activities, [as the discussion of] public issues and debate on the qualification of candidates [is] integral to [a democratic form of governance.]”[197] While the statute did not exact a prior restraint on NCPAC’s political speech, the Court held that limiting their expenditures to no more than $1,000 in today’s sophisticated (and expensive) media market was akin to “allowing a speaker in a public hall to express his views while denying him the use of an amplifying system.”[198] The Court then rejected the argument that NCPAC’s organizational structure eroded its First Amendment liberty interests. Associational values and class consciousness pervaded the Court’s reasoning. For example, the Court stressed that political committees are “mechanisms by which large numbers of individuals of modest means can join together in organizations which serve to ‘amplify the voice of [the committee’s] adherents.’”[199] Moreover, the Court did not find that individuals were speaking through a political committee constitutionally significant: “to say that . . . collective action in pooling ... resources to amplify [a

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political perspective] is not entitled to full First Amendment would [unduly disadvantage those of modest means].”[200] The Court distinguished its holding in National Right to Work Committee,[201] which upheld a FECA regulation of corporations and unions by virtue of their unique organizational structure, and noted that “organizational structure” is irrelevant to its facial analysis of § 9012(f) because the statute equally burdens informal groups who raise and expend money in support of federally funded presidential candidates.[202] After concluding that NCPAC’s First Amendment liberties were burdened by § 9012(f), the Court evaluated the state’s regulatory interests and asked whether the section was narrowly tailored to reach those interests. The state’s interests in alleviating the specter of corruption through a regulation which proscribes uncoordinated, independent expenditures by informal and formal organizations were not compelling to the Court as “independent expenditures may well provide little assistance to the candidate’s campaign and indeed may prove counter productive.” As such, the Court held that low probability of truly independent expenditures materializing into a political debt owed by the candidate to an independent speaker significantly undermined the state’s asserted interest in deterring actual and perceived corruption. Entertaining the state’s contention that the ability of political committees to amass large pools of funds increase the risk of corruption tainting the political process, the Court held that § 9012(f) was fatally over-inclusive, as it included within its scope informal groups that barely clear the $1,000 limitation.[203]

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DISCLOSURE REQUIREMENTS This section analyzes Supreme Court opinions decided subsequent to Buckley in which the Court evaluated the constitutionality of disclosure requirements. The first line of cases clarifies the scope of Buckley’s general rule, upholding liberal disclosure requirements. In Buckley v. American Constitutional Law Foundation (ACLF),[204] the Court struck down a regulation prescribing, among other things, “payee” disclosure in connection with a ballot initiative. Moreover, in Brown v. Socialist Workers ‘74 Campaign Committee,[205] the Court struck down a state disclosure requirement as applied to a minority party that had historically been the object of harassment and discrimination in the public and private sectors. In the second regulatory context, the Court in Federal Election Commission v. Akins[206] was presented with the question of whether certain “political committees,” without the

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primary purpose of electing candidates, must nonetheless disclose under FECA. The Court, however, did not issue a holding on this issue.

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Requiring Reporting and Disclosure (Buckley v. American Constitutional Law Foundation; Brown v. Socialist Workers ‘74 Campaign Committee; FEC v. Akins) Reviewing a First Amendment privacy of association and belief claim, the Supreme Court in Buckley v. American Constitutional Law Foundation (ACLF)[207] examined the facial validity of a Colorado ballot-initiative statute requiring initiativesponsors to provide “detailed, monthly disclosures” of the name, address, and amount paid and owed to their petition-circulators.[208] Colorado affords its citizens many “law-making” opportunities by placing initiatives on election ballots for public ratification.[209] A non-profit organization founded to promote the tradition of “direct democracy” challenged the facial validity of the state’s statute regulating the initiative-petition process, alleging, inter alia, that the regulation’s disclosure requirement burdened citizens’ associational and speech interests.[210] Colorado did not dispute that the regulation burdened expressive activity,[211] but asserted regulatory interests in disseminating information concerning the distribution of capital tied to initiative campaigns.[212] Colorado asserted that the regulation promotes “informed public decision-making,” and deters actual and perceived corruption.[213] Unimpressed with Colorado’s interests, the ACLF Court upheld the lower court’s decision,[214] finding the disclosure requirement unconstitutional. Under Buckley, the Court determined that “exacting scrutiny” is necessary where, as here, a regulation compels the disclosure of campaign related payments.[215] After noting the state’s interest in regulation, the Court examined the fit between the proposed statutory remedy and its requirements.[216] As the lower court did not strike down the regulation in toto, but upheld the state’s requirements for payor disclosure, the electorate had access to information about who proposed an initiative and who funded the circulation of the initiative.[217] The added “informational” benefit of requiring payee disclosure was not supported by the record and would be de minimis at best, held the Court.[218] The Court further noted that, as Meyer v. Grant[219] demonstrates, the risk of quid pro quo corruption, while common in candidate elections, is not as great in ballot initiatives because there is no corrupting object present, especially at the time of petition.[220] Ergo, the Court held that while compelling state interests motivated

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Colorado’s regulatory régime, the link between “payee” disclosures and the state’s interests was too tenuous to warrant First Amendment infringement.[221] In Brown v. Socialist Workers ‘74 Campaign Committee[222] the Supreme Court considered whether a state disclosure requirement was constitutionally applied, under the Fourteenth Amendment’s liberty interest in free speech and association, to a minority political party that historically had been the object of harassment and discrimination in the public and private sectors. The Court reviewed a state disclosure law requiring candidates to report the names and addresses of contributors and recipients of campaign funds.[223] The principal plaintiff, a small political party operating in the socialist tradition, sought and obtained a restraining order against enforcement of the requirement and challenged the constitutionality of the statute as applied to its fundraising and expenditure activities.[224] Agreeing with the plaintiff, the Court upheld the constitutional challenge. This was a fact intensive holding. The Brown Court affirmed Buckley’s prohibition on compelled disclosures where contributors would be subject to a reasonable probability of threats, harassment, or reprisals by virtue of their support of a currently and historically suspect political organization.[225] The Court extended Buckley to protect recipients of campaign contributions.[226] Affording the plaintiff “sufficient flexibility” in the proof of injury, the Court found “substantial evidence” to support the contention that compliance with the disclosure requirement would subject both contributors and recipients of campaign funds to the risk of threats, harassment, or reprisals.[227] Plaintiff’s showing of current hostility by government and private parties included threatening phone calls, hate mail, burning of party literature, dismissal from employment due to member’s political affiliation, destruction of the membership’s property, harassment of the party’s candidate, and the firing of gunshots at the party’s offices.[228] Plaintiff also developed a factual record of historic discrimination and hostility against the party and its membership.[229] From this expansive record, the Court found that the plaintiffs established a “reasonable probability” that acts of discrimination, threats, reprisals, and hostility would continue in the future.[230] Therefore, the Court held that the disclosure requirement was unconstitutional as applied to the plaintiffs’ political committees.[231] In Federal Election Commission (FEC) v. Akins,[232] the Supreme Court did not issue a holding on whether “an organization that otherwise satisfies the [FECA’s] definition of ‘political committee,’ and thus is subject to its disclosure requirements, nonetheless falls outside that definition because ‘its major purpose’ is not ‘the nomination or election of candidates.’”[233] However, the Court reiterated that “political committees,” for the purposes of FECA, refer to organizations under the

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“control of a candidate” or with the major purpose of nominating or electing a candidate to political office.

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Requiring Attribution Disclosure by Individuals Distributing Leaflets in Issue-Based Elections (McIntyre v. Ohio Elections Commission) In McIntyre v. Ohio Elections Commission,[234] the Supreme Court further defined the universe of permissible disclosure requirements when it struck down an Ohio election law, which prohibited the distribution of anonymous campaign literature and required attribution disclosure of the name of the literature’s author on all distributed campaign material. McIntyre arose in relation to a school tax levy, where a parent published and distributed anonymous campaign leaflets opposing the tax measure.[235] The Court held that the statute violated the parent’s liberty interest in free speech under the First Amendment as incorporated by the Fourteenth Amendment.[236] As the statute burdened the parent’s First Amendment interest in anonymous pamphleteering — “an honorable tradition of advocacy and dissent” in U.S. political history — the Court applied exacting scrutiny to the regulation.[237] The Court construed the First Amendment interest in anonymity as “a shield from the tyranny of the majority. . . . [exemplifying] the purpose behind the Bill of Rights and of the First Amendment in particular, [which protects] unpopular individuals from retaliation and their ideas from suppression at the hand of an intolerant society.”[238] The Court recalled, for example, that the Federalist Papers were published under fictitious names.[239] Balanced against the parent’s interests in anonymous publishing, the Court acknowledged Ohio’s interest in preventing the dissemination of fraudulent and libelous statements and in providing voters with information on which to evaluate the message’s worth. However, the Court found that the state’s interests were not served by a ban on anonymous publishing because it had a number of regulations designed to prevent fraud and libel and because a person’s name has little significance to evaluating the normative weight of a speaker’s message.[240] Thus, the Court held that the statute was not narrowly tailored to serve its regulatory interests and therefore, struck it down. The McIntyre Court specifically found that neither Bellotti nor Buckley were controlling in the McIntyre case: Bellotti concerned the scope of First Amendment protection afforded to corporations and the relevant portion of the Buckley opinion concerned mandatory disclosure of campaign expenditures.[241] Neither case involved a prohibition of anonymous campaign literature. In Buckley, the Court noted,

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it had stressed the importance of providing the electorate with information regarding the origin of campaign funds and how candidates spend those funds, but that such information had no relevance to the kind of “independent activity” in the case of McIntyre. “Required disclosures about the level of financial support a candidate has received from various sources are supported by an interest in avoiding the appearance of corruption that has no application in this case,” the Court stated.[242] Moreover, the Court found that independent expenditure disclosure above a certain threshold, which the Court upheld in Buckley,[243] although clearly impeding First Amendment activity, is a “far cry from compelled self-identification on all election-related writings.” An election related document, particularly a leaflet, is often a personally crafted statement of a political viewpoint and as such, compelled identification is particularly intrusive, according to the Court. In contrast, the Court found, expenditure disclosure, reveals far less information; that is, “even though money may ‘talk,’ its speech is less specific, less personal, and less provocative than a handbill — and as a result, when money supports an unpopular viewpoint it is less likely to precipitate retaliation.”[244] Further distinguishing Buckley, the McIntyre Court found that not only is a prohibition on anonymous campaign literature more intrusive than the disclosure requirements upheld in Buckley, but it rests on “different and less powerful state interests.”[245] The Federal Election Campaign Act (FECA), at issue in Buckley, regulates only candidate elections, not referenda or other issue-based elections, and the Buckley Court had construed “independent expenditures” to only encompass those expenditures that “expressly advocate the election or defeat of a clearly identified candidate.”[246] Unlike candidate elections, where the government can identify a compelling governmental interest of avoiding quid pro quo candidate corruption, issue based elections do not present such a risk and hence, the Court ruled, the government cannot justify such an intrusion on free speech.[247]

POLITICAL PARTY SOFT MONEY AND ELECTIONEERING COMMUNICATION RESTRICTIONS McConnell v. FEC In its most comprehensive campaign finance ruling since Buckley v. Valeo, the Supreme Court in its 2003 decision, McConnell v. FEC,[248] upheld against facial constitutional challenges key portions of the Bipartisan Campaign Reform Act of 2002 (BCRA),[249] also known as the McCain-Feingold or

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Shays-Meehan campaign finance reform law. In McConnell, a 5-to-4 majority of the Court upheld restrictions on the raising and spending of previously unregulated political party soft money and a prohibition on corporations and labor unions using treasury funds to finance “electioneering communications,” requiring that such ads may only be paid for with corporate and labor union political action committee (PAC) funds. The Court invalidated BCRA’s requirement that parties choose between making independent expenditures or coordinated expenditures on behalf of a candidate and its prohibition on minors age 17 and under making campaign contributions. By a 5-to-4 vote, the McConnell Court upheld two critical BCRA provisions, Titles I and II, against facial constitutional challenges. In the majority opinion, coauthored by Justices Stevens and O’Connor and joined by Justices Souter, Ginsburg, and Breyer, the Court upheld the limits on raising and spending previously unregulated political party soft money (Title I), and the prohibition on corporations and labor unions using treasury funds — which is unregulated soft money — to finance directly electioneering communications (Title II). In upholding BCRA’s “two principal, complementary features,” the Court readily acknowledged that it is under “no illusion that BCRA will be the last congressional statement on the matter” of money in politics. The Court observed, “money, like water, will always find an outlet.” Hence, campaign finance issues that will inevitably arise and the corresponding legislative responses from Congress “are concerns for another day.”[250]

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Restricting Political Party Soft Money Title I of BCRA prohibits national party committees and their agents from soliciting, receiving, directing, or spending any soft money.[251] As the Court noted, Title I takes the national parties “out of the soft-money business.”[252] In addition, Title I prohibits state and local party committees from using soft money for activities that affect federal elections; prohibits parties from soliciting for and donating funds to tax-exempt organizations that spend money in connection with federal elections; prohibits federal candidates and officeholders from receiving, spending, or soliciting soft money in connection with federal elections and restricts their ability to do so in connection with state and local elections; and prevents circumvention of the restrictions on national, state, and local party committees by prohibiting state and local candidates from raising and spending soft money to fund advertisements and other public communications that promote or attack federal candidates.[253] Plaintiffs challenged Title I based on the First Amendment as

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well as Art. I, § 4 of the U.S. Constitution, principles of federalism, and the equal protection component of the Due Process Clause of the 14th Amendment. The Court upheld the constitutionality of all provisions in Title I, finding that its provisions satisfy the First Amendment test applicable to limits on campaign contributions: they are “closely drawn” to effect the “sufficiently important interest” of preventing corruption and the appearance of corruption. Rejecting plaintiff’s contention that the BCRA restrictions on campaign contributions must be subject to strict scrutiny in evaluating the constitutionality of Title I, the Court applied the less rigorous standard of review — “closely drawn” scrutiny. Citing its landmark 1976 decision Buckley v. Valeo and its progeny, the Court noted that it has long subjected restrictions on campaign expenditures to closer scrutiny than limits on contributions in view of the comparatively “marginal restriction upon the contributor’s ability to engage in free communication” that contribution limits entail.[254] The Court observed that its treatment of contribution limits is also warranted by the important interests that underlie such restrictions, i.e. preventing both actual corruption threatened by large dollar contributions as well as the erosion of public confidence in the electoral process resulting from the appearance of corruption.[255] The Court determined that the lesser standard shows “proper deference to Congress’ ability to weigh competing constitutional interests in an area in which it enjoys particular expertise.”[256] Finally, the Court recognized that during its lengthy consideration of BCRA, Congress properly relied on its authority to regulate in this area, and hence, considerations of stare decisis as well as respect for the legislative branch of government provided additional “powerful reasons” for adhering to the treatment of contribution limits that the Court has consistently followed since 1976.[257] Responding to plaintiffs’ argument that many of the provisions in Title I restrict not only contributions but also the spending and solicitation of funds that were raised outside of FECA’s contribution limits, the Court determined that it is “irrelevant” that Congress chose to regulate contributions “on the demand rather than the supply side.” Indeed, the relevant inquiry is whether its mechanism to implement a contribution limit or to prevent circumvention of that limit burdens speech in a way that a direct restriction on a contribution would not. The Court concluded that Title I only burdens speech to the extent of a contribution limit: it merely limits the source and individual amount of donations. Simply because Title I accomplishes its goals by prohibiting the spending of soft money does not render it tantamount to an expenditure limitation.[258] In his dissent, Justice Kennedy criticized the majority opinion for ignoring established constitutional bounds and upholding a campaign finance statute that does not regulate actual or apparent quid pro quo arrangements.[259] According to Justice

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Kennedy, Buckley clearly established that campaign finance regulation that restricts speech, without requiring proof of specific corrupt activity, can only withstand constitutional challenge if it regulates conduct that presents a “demonstrable quid pro quo danger.” The McConnell Court, however, interpreted the anti-corruption rationale to allow regulation of not only “actual or apparent quid pro quo arrangements,” but also of “any conduct that wins goodwill from or influences a Member of Congress.” Justice Kennedy further maintained that the standard established in Buckley defined undue influence to include the existence of a quid pro quo involving an officeholder, while the McConnell Court, in contrast, extended the Buckley standard of undue influence to encompass mere access to an officeholder. Justice Kennedy maintained that the Court, by legally equating mere access to officeholders to actual or apparent corruption of officeholders, “sweeps away all protections for speech that lie in its path.”[260] Unpersuaded by Justice Kennedy’s dissenting position that Congress’s regulatory interest is limited to the prevention of actual or apparent quid pro quo corruption “inherent in” contributions made to a candidate, the Court found that such a “crabbed view of corruption” and specifically the appearance of corruption “ignores precedent, common sense, and the realities of political fundraising exposed by the record in this litigation.”[261] According to the Court, equally problematic as classic quid pro quo corruption, is the danger that officeholders running for reelection will make legislative decisions in accordance with the wishes of large financial contributors, instead of deciding issues based on the merits or constituent interests. Since such corruption is neither easily detected nor practical to criminalize, the Court reasoned, Title I offers the best means of prevention, i.e., identifying and eliminating the temptation.[262]

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Prohibiting Corporate and Labor Union Treasury Fund Financing of Electioneering Communications Title II of BCRA created a new term in FECA, “electioneering communication,” which is defined as any broadcast, cable, or satellite communication that “refers” to a clearly identified federal candidate, is made within 60 days of a general election or 30 days of a primary, and if it is a House or Senate election, is targeted to the relevant electorate.[263] Title II prohibits corporations and labor unions from using their general treasury funds (and any persons using funds donated by a corporation or labor union) to finance electioneering communications. Instead, the statute requires that such ads may only be paid for with corporate and labor union political action committee

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(PAC) regulated hard money.[264] The Court upheld the constitutionality of this provision. In Buckley v. Valeo, the Court construed FECA’s disclosure and reporting requirements, as well as its expenditure limitations, to apply only to funds used for communications that contain express advocacy of the election or defeat of a clearly identified candidate.[265] After Buckley, many lower courts had interpreted the decision to stand for the proposition that communications must contain express terms of advocacy, such as “vote for” or “vote against,” in order for regulation of such communications to pass constitutional muster under the First Amendment. Absent express advocacy, lower courts had held, a communication is considered issue advocacy, which is protected by the First Amendment and therefore may not be regulated. Effectively overturning such lower court rulings, the Supreme Court in McConnell held that neither the First Amendment nor Buckley prohibits BCRA’s regulation of “electioneering communications,” even though electioneering communications, by definition, do not necessarily contain express advocacy. The Court determined that when the Buckley Court distinguished between express and issue advocacy it did so as a matter of statutory interpretation, not constitutional command. Moreover, the Court announced that by narrowly reading FECA provisions in Buckley to avoid problems of vagueness and overbreadth, it “did not suggest that a statute that was neither vague nor overbroad would be required to toe the same express advocacy line.”[266] “[T]he presence or absence of magic words cannot meaningfully distinguish electioneering speech from a true issue ad,” the Court observed.[267] In response to plaintiffs maintaining that the justifications supporting the regulation of express advocacy do not apply to communications covered by the definition of “electioneering communication,” the Court found that the argument failed to the extent that issue ads broadcast during the 30- and 60-day periods prior to primary and general elections are the “functional equivalent” of express advocacy.[268] The Court reasoned that the justifications for the regulation of express advocacy “apply equally” to ads broadcast during those periods if the ads have the intent and effect of influencing elections. Based on the evidentiary record, the Court determined that the vast majority of such ads “clearly had such a purpose.”[269] While Title II prohibits corporations and labor unions from using their general treasury funds for electioneering communications, the Court observed that they are still free to use separate segregated funds (PACs) to run such ads. Therefore, the Court concluded that it is erroneous to view this provision of BCRA as a “complete ban” on expression rather than simply a regulation.[270] Further, the Court found that the regulation is not overbroad because the “vast majority” of ads that are

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broadcast within the electioneering communication time period (60 days before a general election and 30 days before a primary) have an electioneering purpose.[271] The Court also rejected plaintiffs’ assertion that the segregated fund requirement for electioneering communications is under-inclusive because it only applies to broadcast advertisements and not print or internet communications. Congress is permitted, the Court determined, to take one step at a time to address the problems it identifies as acute. With Title II of BCRA, the Court observed, Congress chose to address the problem of corporations and unions using soft money to finance a “virtual torrent of televised election-related ads” in recent campaigns.[272] In his dissent, Justice Kennedy criticized the majority for permitting “a new and serious intrusion on speech” by upholding the prohibition on corporations and unions using general treasury funds to finance electioneering communications. Finding that this BCRA provision “silences political speech central to the civic discourse that sustains and informs our democratic processes,” the dissent further noted that unions and corporations “now face severe criminal penalties for broadcasting advocacy messages that ‘refer to a clearly identified candidate’ in an election season.”[273] In upholding BCRA’s extension of the prohibition on using treasury funds for financing electioneering communications to non-profit corporations, the McConnell Court found that even though the statute does not expressly exempt organizations meeting the criteria established in its 1986 decision in FEC v. Massachusetts Citizens for Life (MCFL),[274] it is an insufficient reason to invalidate the entire section. Since MCFL had been established Supreme Court precedent for many years prior to enactment of BCRA, the Court assumed that when Congress drafted this section of BCRA, it was well aware that this provision could not validly apply to MCFL-type entities.[275]

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Requiring Sponsors of Election-Related Advertisements to Self- Identify (“Stand-by-Your-Ad Provision”) By an 8-to-1 vote, the Court upheld Section 311 of BCRA, which requires that general public political ads that are “authorized” by a candidate clearly indicate that the candidate or the candidate’s committee approved the communication.[276] Rejecting plaintiffs’ assertion that this provision is unconstitutional, the Court found that this provision “bears a sufficient relationship to the important governmental interest of ‘shedding the light of publicity’ on campaign financing.”[277]

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Requiring Political Parties to Choose between Coordinated and Independent Expenditures after Nominating a Candidate

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By a 5-to-4 vote, the Court invalidated BCRA’s requirement that political parties choose between coordinated and independent expenditures after nominating a candidate,[278] finding that it burdens the right of parties to make unlimited independent expenditures.[279] Specifically, Section 213 of BCRA[280] provides that, after a party nominates a candidate for federal office, it must choose between two spending options. Under the first option, a party that makes any independent expenditure is prohibited from making any coordinated expenditure under this section of law; under the second option, a party that makes any coordinated expenditure under this section of law — one that exceeds the ordinary $5,000 limit — cannot make any independent expenditure with respect to the candidate. FECA, as amended by BCRA, defines “independent expenditure” to mean an expenditure by a person “expressly advocating the election or defeat of a clearly identified candidate” and that is not made in cooperation with such candidate.[281] According to the McConnell Court, the regulation presented by Section 213 of BCRA “is much more limited than it initially appears.” A party that wants to spend more than $5,000 in coordination with its nominee is limited to making only independent expenditures that contain the magic words of express advocacy. Although the Court acknowledges that “while the category of burdened speech is relatively small,” it is nonetheless entitled to protection under the First Amendment. Furthermore, the Court determined that under Section 213, a party’s exercise of its constitutionally protected right to engage in free speech results in the loss of a longstanding valuable statutory benefit. Hence, to pass muster under the First Amendment, the provision “must be supported by a meaningful governmental interest” and, the Court announced, the interest in requiring parties to avoid the use of magic words does not suffice.[282]

Prohibiting Campaign Contributions by Minors Age 17 and under By a unanimous vote, the Court invalidated Section 318 of BCRA, which prohibited individuals age 17 or younger from making contributions to candidates and political parties.[283] Determining that minors enjoy First Amendment protection and that contribution limits impinge on such rights, the Court determined that the prohibition is not “closely drawn” to serve a “sufficiently important interest.”[284]

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In response to the government’s assertion that the prohibition protects against corruption by conduit — that is, parents donating through their minor children to circumvent contribution limits — the Court found “scant evidence” to support the existence of this type of evasion. Furthermore, the Court postulated that such circumvention of contribution limits may be deterred by the FECA provision prohibiting contributions in the name of another person and the knowing acceptance of contributions made in the name of another person.[285] Even assuming, arguendo, that a sufficiently important interest could be provided in support of the prohibition, the Court determined that it is over-inclusive. According to the Court, various states have found more-tailored approaches to address this issue, for example, counting contributions by minors toward the total permitted for a parent or family unit, imposing a lower cap on contributions by minors, and prohibiting contributions by very young children. The Court, however, expressly declined to decide whether any alternatives would pass muster.[286]

Establishing Staggered Increases in Contribution Limits if Opponent Spends Certain Amount in Personal Funds (“Millionaire Provisions”): Challengers Held to Lack Standing By a unanimous vote, the Court determined that the challenges to Sections 304, 316, and 319 of BCRA, also known as the “millionaire provisions,” were properly dismissed by the district court due to lack of standing.[287] The millionaire provisions, which therefore remain in effect, provide for a series of staggered increases in otherwise applicable limits on contributions to candidates if a candidate’s opponent spends a certain amount in personal funds on his or her own campaign.[288]

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Supreme Court Deference to Congressional Findings A notable aspect of the Supreme Court’s ruling in McConnell v. FEC is the extent to which the majority of the Court deferred to Congressional findings and used a pragmatic rationale in upholding BCRA. According to the Court, the record before it was replete with perceived problems in the campaign finance system, circumstances creating the appearance of corruption, and Congress’s proposal to address these issues. As the Court remarked at one point, its decision showed “proper deference” to Congress’s determinations “in an area in which it enjoys

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particular expertise.”[289] Furthermore, “Congress is fully entitled,” the Court observed, “to consider the real- world” as it determines how best to regulate in the political sphere.[290]

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WISCONSIN RIGHT TO LIFE, INC. V. FEC (WRTL II) Ruling 5 to 4, the Supreme Court in its 2007 decision Wisconsin Right to Life, Inc. v. FEC (WRTL II)[291] found that a provision of the Bipartisan Campaign Reform Act of 2002 (BCRA), prohibiting corporate or labor union treasury funds from being spent on advertisements broadcast within 30 days of a primary or 60 days of a general election, was unconstitutional as applied to ads that Wisconsin Right to Life, Inc. sought to run. While not expressly overruling its 2003 ruling in McConnell v. FEC, which upheld the BCRA provision against a First Amendment facial challenge, the Court limited the law’s application. Specifically, it ruled that advertisements that may reasonably be interpreted as something other than as an appeal to vote for or against a specific candidate are not the functional equivalent of express advocacy, and therefore, cannot be regulated. Section 203 of the Bipartisan Campaign Reform Act of 2002 (BCRA)[292] prohibits corporate or labor union treasury funds from being spent for “electioneering communications.” BCRA defines “electioneering communication” as any broadcast, cable, or satellite transmission made within 30 days of a primary or 60 days of a general election (sometimes referred to as the “blackout periods”) that refers to a candidate for federal office and is targeted to the relevant electorate.[293] In McConnell v. Federal Election Commission (FEC),[294] the Supreme Court had upheld Section 203 of BCRA against a First Amendment facial challenge even though the provision regulates not only campaign speech or “express advocacy,” (speech that expressly advocates the election or defeat of a clearly identified candidate), but also “issue advocacy,” (speech that discusses public policy issues, while also mentioning a candidate). Specifically, the Court determined that the speech regulated by Section 203 was the “functional equivalent” of express advocacy.[295] In July 2004, Wisconsin Right to Life (WRTL), a corporation that accepts contributions from other corporations, began broadcasting advertisements exhorting viewers to contact Senators Feingold and Kohl to urge them to oppose a Senate filibuster to delay and block consideration of federal judicial nominations. WRTL planned to run the ads throughout August 2004 and to finance them with its general treasury funds, thereby running afoul of Section 203, as such ads would have been

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broadcast within the 30 day period prior to the September 14, 2004, primary. Anticipating that the ads would be illegal “electioneering communications,” but believing that they nevertheless had a First Amendment right to broadcast them, WRTL filed suit against the FEC, seeking declaratory and injunctive relief and alleging that Section 203’s prohibition was unconstitutional as applied to the ads and any future ads that they might plan to run. Just prior to the BCRA 30-day blackout period, a three-judge district court denied a preliminary injunction, finding that McConnell v. FEC left no room for such an “as-applied” challenge. Accordingly, WRTL did not broadcast its ads during the blackout period, and the district court subsequently dismissed the complaint in an unpublished opinion. On appeal, in Wisconsin Right to Life, Inc. v. FEC (WRTL I),[296] the Supreme Court vacated the lower court judgment, finding that by upholding Section 203 against a facial challenge in McConnell, “we did not purport to resolve future as-applied challenges.”[297] On remand, after permitting four Members of Congress to intervene as defendants, the three-judge district court granted WRTL summary judgment, determining that Section 203 was unconstitutional as applied to WRTL’s ads.[298] It concluded that the ads were genuine issue ads, not express advocacy or its “functional equivalent” under McConnell, and held that no compelling interest justified their regulation.[299] The FEC appealed.

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Prohibiting Corporate and Labor Union Treasury Fund Financing of Electioneering Communications Affirming the lower court ruling, the Supreme Court in Wisconsin Right to Life, Inc. v. FEC (WRTL II)[300] determined that Section 203 of BCRA was unconstitutional as applied to the WRTL ads, and that they should have been permissible to broadcast. In a plurality opinion, written by Chief Justice Roberts, joined by Justice Alito — Justice Scalia wrote a separate concurrence, joined by Justices Kennedy and Thomas[301] — the Court announced that “[b]ecause WRTL’s ads may reasonably be interpreted as something other than as an appeal to vote for or against a specific candidate, we hold they are not the functional equivalent of express advocacy, and therefore, fall outside the scope of McConnell’s holding.”[302] In determining the threshold question, as the Court found was required by McConnell, of whether the ads were the “functional equivalent” of speech expressly advocating the election or defeat of a candidate for federal office or genuine issue advocacy, the Court observed that it had long recognized that the practical distinction between campaign advocacy and issue advocacy can

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often dissolve because candidates, particularly incumbents, “are intimately tied to public issues involving legislative proposals and governmental actions.”[303] Nonetheless, the Court stated, its jurisprudence in this area requires it to make such a distinction, and “[i]n drawing that line, the First Amendment requires ... err[ing] on the side of protecting political speech rather than suppressing it.”[304] The FEC argued that in view of the fact that McConnell had already held that Section 203 was facially valid, WRTL — and not the government — should bear the burden of demonstrating that BCRA is unconstitutional as applied to its ads.[305] Rejecting the FEC’s contention, the Court pointed out that Section 203 burdens political speech and is therefore subject to strict scrutiny.[306] Under strict scrutiny, the Court determined that the FEC — not the regulated community — had the burden of proving that the application of Section 203 to WRTL’s ads furthered a compelling interest, and was narrowly tailored to achieve that interest.[307] As it had already ruled in McConnell that Section 203 “survives strict scrutiny to the extent it regulates express advocacy or its functional equivalent,” the Court found that in order to prevail, the FEC needed to show that the WRTL ads it sought to regulate fell within that category.[308] On the other hand, if the speech that the FEC sought to regulate is not express advocacy or its functional equivalent, the Court cautioned that the FEC’s task is “more formidable” because it must demonstrate that banning such ads during the blackout periods is narrowly tailored to serve a compelling governmental interest, a conclusion that no precedent has reached.[309] In response to the FEC’s and the dissent’s[310] argument that McConnell had established a test for determining whether an ad is the functional equivalent of express advocacy, that is, “whether the ad is intended to influence elections or has that effect,” the Court disagreed, finding that it had not adopted any type of test as the standard for future as-applied challenges.[311] Instead, the Court found that its analysis in McConnell was grounded in the evidentiary record, particularly studies showing that the BCRA definition of “Electioneering Communications accurately captures ads having the purpose or effect of supporting candidates for election to office.”[312] Hence, when the McConnell Court made its assessment that the plaintiffs in that case had not sufficiently proven that Section 203 was overbroad and could not be enforced in any circumstance, it did not adopt a particular test for determining what constituted the “functional equivalent” of express advocacy. Indeed, the Court held, the fact that in McConnell it looked to such intent and effect “neither compels nor warrants accepting that same standard as the constitutional test for separating, in an as-applied challenge, political speech protected under the First Amendment from that which may be banned.”[313] Accordingly, the Court turned to establishing the proper standard for an asapplied challenge to Section 203 of BCRA, finding that such a standard “must be

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objective, focusing on the substance of the communication rather than amorphous considerations of intent and effect,” involving “minimal if any discovery” so that parties can resolve disputes “quickly without chilling speech through the threat of burdensome litigation,” and eschewing “‘the open-ended rough-and-tumble of factors,’ which ‘invit[es] complex argument in a trial court and a virtually inevitable appeal.’”[314] In summation, the Court announced that the standard “must give the benefit of any doubt to protecting rather than stifling speech.”[315] Taking such considerations into account, the Court held that

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[A] Court should find that an ad is the functional equivalent of express advocacy only if the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate. Under this test, WRTL’s three ads are plainly not the functional equivalent of express advocacy. First, their content is consistent with that of a genuine issue ad: The ads focus on a legislative issue, take a position on the issue, exhort the public to adopt that position, and urge the public to contact public officials with respect to the matter. Second, their content lacks indicia of express advocacy: The ads do not mention an election, candidacy, political party, or challenger; and they do not take a position on a candidate’s character, qualifications, or fitness for office.[316]

Moreover, the Court cautioned, contextual factors “should seldom play a significant role in the inquiry.” Although courts are not required to ignore basic background information that provides relevant contextual information about an advertisement — such as whether the ad describes a legislative issue that is under legislative consideration — the Court found that such background information “should not become an excuse for discovery.”[317] In applying the standard it developed for as-applied challenges to the ads that WRTL sought to broadcast, the Court determined that the FEC had failed to demonstrate that such ads constituted the functional equivalent of express advocacy because they could reasonably be interpreted as something other than a vote for or against a candidate. The Court’s established jurisprudence has recognized the governmental interest in preventing corruption and the appearance of corruption in elections, which has been invoked in order to justify contribution limits and, in certain circumstances, spending limits on electioneering expenditures that pose the risk of quid pro quo corruption. In McConnell, the Court noted, it had applied this interest in justifying the regulation of express advocacy and its functional equivalent, but in order to justify regulating WRTL’s ads, “this interest must be stretched yet another step to ads that are not the functional equivalent of express advocacy.”[318] In strongly worded opposition to extending the

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application of this governmental interested yet again, the Court announced, “Enough is enough.” The WRTL ads are not equivalent to contributions — they are political speech — and the governmental interest in avoiding quid pro quo corruption cannot be used to justify their regulation.[319] The Court also announced that the discussion of issues cannot be suppressed simply because the issues may also be relevant to an election: “Where the First Amendment is implicated, the tie goes to the speaker, not the censor.”[320] While the ultimate impact and aftermath of the Supreme Court’s decision in WRTL II remains to be seen, application of the federal law prohibiting corporate and labor union treasury funds from being spent on ads that are broadcast 30 days before a primary and 60 days before a general election has been limited. As a result of this ruling, only ads that are susceptible of no reasonable interpretation other than an exhortation to vote for or against a candidate can be regulated. While the Court’s ruling was careful not to overrule explicitly its earlier upholding of this portion of the Bipartisan Campaign Reform Act (BCRA) in its 2003 decision, McConnell v. FEC, WRTL II seems to indicate that the FEC’s ability to regulate the electioneering communication ban has nonetheless been circumscribed.

CONCLUSION

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In the landmark 1976 decision, Buckley v. Valeo, the Supreme Court established the constitutional framework for campaign finance regulation and in numerous subsequent decisions, extended its holding. Although it has provided much guidance with regard to the constitutionality of various aspects of campaign finance regulation, the Court’s jurisprudence in this area continues to evolve and many questions remain unanswered. While awaiting further guidance from the Court, those proposing or evaluating campaign finance legislation rely on Buckley and its progeny for constitutional direction.

REFERENCES [1] [2] [3]

Roth v. United States, 354 U.S. 476, 484 (1957). 424 U.S. 1 (1976). For example, in a line of cases involving the regulation of corporations, the Court endeavored to resolve whether the First Amendment’s value for

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open debate by diverse participants permits the government to impose regulations designed to promote fairness and prevent corporate monopolization of the political marketplace; and whether the First Amendment’s value for liberty proscribes the government from regulating the political speech and association rights of corporations. Compare Buckley v. Valeo, 424 U.S. 1, 48- 49 (1976) (“[T]he concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.”), with Buckley, 424 U.S. at 49 (“[T]he First Amendment ... was designed ‘to secure the widest possible dissemination of information from diverse and antagonistic sources’” (quoting New York Times v. Sullivan, 376 U.S. 254, 266 (1964)). [4] 2 U.S.C. § 431 et seq. [5] In summary, the FECA provisions at issue contained: (A) spending limitations consisting of (1) a $1,000 contribution cap to any candidate by any individual, (2) a $25,000 limit on an individual’s annual, aggregate contributions, (3) a $1,000 cap on a person’s or group’s independent expenditures “relative to a clearly identified candidate,” (4) spending limits on various candidates for various federal offices, and (5) spending limits on political parties’ national conventions; (B) reporting and disclosure requirements on contributions and expenditures above certain thresholds; and (C) a provision establishing the Federal Election Commission to administer and enforce the statute. The Court evaluated “spending” and “disclosure” regulation under separate (though interrelated) lines of judicial principles. Evaluating a facial challenge to spending limitations, the Court construed the regulation as burdening two sorts of “speech acts”: (1) “contributions,” which express the level of a person or group’s “support” of a candidate, and (2) “independent expenditures,” which express the level of a person or group’s “independent political point of view.” In addition to evaluating “speech” activity, the Court analyzed “contributions” and “independent expenditures” in connection with their “associational” value. [6] 26 U.S.C. § 9001 et seq. [7] 2 U.S.C. § 441a. [8] 2 U.S.C. § 434. [9] Subtitle H of the Internal Revenue Code of 1954, codified at 26 U.S.C. § 9001 et seq. [10] Formerly 18 U.S.C. § 608(c)( 1 )(C-F). The Court made an exception for presidential candidates who accept public funding.

92 [11] [12] [13] [14]

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[15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30]

[31]

L. Paige Whitaker Formerly 18 U.S.C. § 608e. Formerly 18 U.S.C. § 608a. Formerly 2 U.S.C. § 437c(a)(1)(A-C). There are two exceptions to this general rule: (1) disclosure requirements will probably not be upheld if disclosure of a contributor places him or her at risk for economic reprisal or physical threats for being “publicly” associated with the political group, see NAACP v. Alabama, 357 U.S. 449 (1958) discussed infra, and Brown v. Socialist Workers, 459 U.S. 87 (1982), discussed infra, and (2) disclosure requirements will probably not be upheld if they abridge the right of an individual to publish and distribute leaflets anonymously, expressing a political point of view, in a referenda or other issue-based election, see McIntyre v. Ohio Elections Commission, 514 U.S. 334 (1995) discussed infra. See Buckley, 424 U.S. at 21. Id. at 19. Id. at 15. Id. at 17. See id. at 24. Id. at 59. Id. at 27. See id. Id. at 28. Id. at 29. Id. Id. at 39. Id. Id. at 19. Id. at 55. Id. at 51-54. The Court distinguished this holding from its validation of Subtitle H, which provides for the public financing of presidential elections. Limitations on expenditures by presidential candidates receiving public funds were distinguishable because the acceptance of public funds was voluntary. See National Association for the Advancement of Colored People (NAACP) v. Alabama, 357 U.S. 449 (1958). The reasoning in Buckley and Brown v. Socialist Workers ‘74 Campaign Comm., 459 U.S. 87 (1982), discussed infra, has historical roots in NAACP v. Alabama. In NAACP, the Court addressed whether a non-profit organization’s associational rights were abridged by a state statute compelling disclosure of its members and agents

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[33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44]

[45] [46] [47] [48] [49]

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without regard to their position and responsibilities in the association. The organization did not comply with the disclosure requirement. Finding for the NAACP, the Court held that the freedom of association is an “inseparable aspect” of the freedoms guaranteed by the First and Fourteenth Amendments, see id. at 460-61; that compelled disclosure of the association’s membership would effectively restrain that freedom, see id. at 46 1-463; and that, under strict scrutiny, the state’s interests in disclosure were insufficient to overcome the association’s deprivation of right, see id. at 463-366. The Court stressed that the “vital relationship between freedom to associate and privacy in one’s associations” was unduly burdened by the disclosure requirement, as past revelation of membership identity resulted in economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility. Id. at 462. See also McIntyre v. Ohio Elections Commission, 514 U.S. 334 (1995) (further defining the scope of Buckley’s disclosure jurisprudence to proscribe disclosure requirements that infringe on the right of an individual to publish and distribute leaflets anonymously, expressing a political point of view, in a referenda or other issue-based election), discussed infra. 26 U.S.C. § 9001 et seq. See Buckley, 424 U.S. at 85. See id. at 86. Id. at 101. Id. at 44. Id., n. 52. Buckley, 424 U.S. at 42. See also FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. 238 (1986), discussed infra. 453 U.S. 182 (1981). 454 U.S. 290 (1981). 528 U.S. 377 (2000). 453 U.S. 182 (1981). See id. at 184. A related provision, 2 U.S.C. § 441 a(f), makes it unlawful for a political committee to knowingly accept contributions exceeding this limit. See id. at 195. See id. See id. at 196. Id. See id. at 197.

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[50] CMA, 453 U.S. 198 (“Since multicandidate political committees may contribute up to $5,000 per year to any candidate, 2 U.S.C. § 441a(a)(2)(A), an individual or association seeking to evade the $1,000 limit on individual contributions could [channel] funds through a multicandidate political committee”). [51] Id. at 198-199 (“Individuals could evade the $25,000 limit on aggregate annual contributions to candidates if they were allowed to give unlimited sums to multicandidate political committees, since such committees are not limited in the aggregate amount they may contribute in any given year”). [52] See id. at 199. [53] 454 U.S. 290 (1981). [54] The Fourteenth Amendment prohibits state governments from depriving “any person of life, liberty, or property, without due process of law.” U.S. CONST., Amdt. 14 § 1. By virtue of the inclusion of the term “liberty,” the First Amendment has become applicable to the states. See Whitney v. California, 274 U.S. 357, 373 (1927) (Brandeis, concurring) (“[A]ll fundamental rights comprised within the term liberty are protected by the Federal Constitution from invasion by the States. The right of free speech [and assembly] ... are fundamental rights.”) Although the plain language of the First Amendment proscribes the Congress from abridging the freedom of speech and association, Justice Brandeis’ reading of the Fourteenth Amendment has become a part of the Supreme Court’s incorporation jurisprudence. See also First National Bank of Boston v. Bellotti, 435 U.S. 765, 779-780 (1978), discussed infra. [55] See id. at 296. “The freedom of association ‘is diluted if it does not include the right to pool money through contributions, for funds are often essential if advocacy is to be truly or optimally effective.’” Id. (quoting Buckley, 424 U.S. at 65-66). [56] See id. at 298-199 (finding that “[r]egulation of First Amendment Rights is always subject to exacting scrutiny”). [57] Id. at 298 (noting that “[r]eferenda are held on issues, not candidates for public office. The risk of corruption perceived in cases involving candidate elections simply is not present in a popular vote on a public issue” (quoting First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978)). [58] See id. [59] Id. at 298 (finding that “[c]ontributions by individuals to support concerted action by a committee advocating a position on a ballot

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[60] [61] [62] [63] [64] [65]

[66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77]

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[78] [79]

[80] [81] [82] [83] [84]

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measure is beyond question a very significant form of political expression”). See id. at 299-300. 528 U.S. 377 (2000). Id. at 901. The amounts were statutory base lines to be adjusted each year in light of the cumulative consumer price index. See id. Id. at 902. Id., quoting 161 F.3d 520, 521-522. See id. at 903 (announcing that [t]he [First Amendment] has its fullest and most urgent application precisely to the conduct of campaigns for political office.” Id. Id. at 909. Id. at 903. Id. at 904, quoting Buckley, 424 U.S. at 25. Id. at 904, quoting Buckley, 424 U.S. at 30, n. 3. Id. at 904-905. Id. at 906. See id. at 906-908. 539 U.S. 146 (2003). 479 U.S. 238 (1986), discussed infra. Beaumont, 539 U.S. at 157 (quoting National Conservative Political Action Comm., 470 U.S. at 500-01). Id. (quoting National Right to Work Comm., 459 U.S. at 210). The Court explained that “[w]hile contributions may result in political expression if spent by a candidate or an association ... the transformation of contributions into political debate involves speech by someone other than the contributor.” Id. at 161 (quoting Buckley, 424 U.S. at 20-2 1). Id. (quoting Buckley, 424 U.S. at 25). See id. at 162-63. (“The PAC option allows corporate political participation without the temptation to use corporate funds for political influence, quite possibly at odds with the sentiments of some shareholders or members, and it lets the government regulate campaign activity through registration and disclosure, see §§ 432-434, without jeopardizing the associational rights of advocacy organizations’ members”). Id. (citing National Right to Work, 459 U.S. at 201). 435 U.S. 765 (1978). 479 U.S. 238 (1986). 494 U.S. 652 (1990). 459 U.S. 197 (1982).

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[85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95] [96]

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518 U.S. 604 (1996). 470 U.S. 1 (1985). 435 U.S. 765 (1978). Id. at 768. Id. at 769. Id. Id. at 768. Id. at 769. See id. at 784-786. See id. at 776. Id. See id. at 776-777 (citing Mills v. Alabama, 384 U.S. 214, 218 (1966) (noting that the nature of the corporation’s speech “is the type of speech indispensable to decision making in a democracy, and this is no less true because the speech comes from a corporation rather than an individual”). [97] Id. at 787. [98] Id. [99] Id. at 788. [100] Id. at 789 (citing Buckley, 352 U.S. at 2). [101] Id. [102]Id. [103] Id. at 790. Moreover, the Court asserted that the people, not the government, are the final arbiter and evaluator of the “relative and conflicting arguments” on referendum issues. [104] See id. at 794. [105] See id. at 794-795. [106] See id. at 793. [107] See id. at 795. [108] 479 U.S. 238 (1986). [109] See id. at 24 1-242. [110] See id. at 242. [111]Id. at 249. The Court found that the publication not only urged voters to vote for “pro-life” candidates, but also identified and provided photographs of specific candidates. As a result, the Court determined that the publication could not be considered a “mere discussion” of public issues. Id. [112] See Buckley v. Valeo, 424 U.S. 1, 44 (1976), supra. [113] See FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. at 263. [114]See id. at 252.

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[115] Id. at 257 (“political ‘free-trade’ does not necessarily require [that participants] in the political marketplace [compete with equal resources]”). [116] See id. at 258 (cited by Austin, 494 U.S. at 659). [117] Id. 258, see also Austin, 494 U.S. at 660 (holding that the separate segregated fund requirement “ensures that expenditures reflect actual public support”). [118] Id. at 259. [119] See id. at 259, 264. [120] Id. (emphasis added). See also, id. at 263 (“voluntary political organizations do not suddenly present the specter of corruption merely by assuming the corporate form.”), but see Austin, 494 U.S. 659, 660 (suggesting that the selection of the corporate form in itself triggers the state’s regulatory interests; “[t]he unique state-conferred corporate structure that facilitates the amassing of large treasuries warrants the limit on independent expenditures”). [121]See MCFL, 479 U.S. at 259. [122]See id. at 260. [123]494 U.S. 652 (1990). [124] The statute defined “expenditure” as “a payment, donation, loan, pledge, or promise of payment of money or anything of ascertainable monetary value for goods, materials, services, or facilities in assistance of, or in opposition to, the nomination or election of a candidate.” Id. at 655 (quoting Mich. Comp. Laws § 169.206(1) (1979)). [125] The Michigan Statute was modeled on a provision of the Federal Election Campaign Act (FECA) requiring corporations and labor unions to use a separate segregated fund or PAC when making independent expenditures in connection with federal elections. See Austin, 494 U.S. at 656, n. 1. [126] See id. at 658. [127] See id. at 659. [128] Id. (quoting Federal Election Comm’n v. Massachusetts Citizens for Life, 479 U.S. 238, 258 (1986) (MCFL)). [129] 424 U.S. 1 (1976) (per curiam). [130] 479 U.S. 238 (1986). [131] See Austin, 494 U.S. at 657. Antecedent to these inquiries, the Court affirmed that the plaintiff’s interest in using general funds for independent expenditures is “political expression at the core of our electoral process and of the First Amendment freedoms.” Id. at 657,

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(quoting Buckley, 424 U.S. at 39). Moreover, the Court noted that the plaintiff’s status as a corporation did not completely erode its free speech interest under the First Amendment. See Austin, 494 U.S. at 657 (citing Bellotti, 435 U.S. at 777). [132] See Austin, 494 U.S. at 657. [133] For example, the Court noted that the regulation required a corporation to appoint a treasurer to administer the fund, keep records of the funds’ transactional history, and create and periodically update an informational statement about the fund for the state. Id. at 658. [134] Id. [135] Id. [136]Id. (citing MCFL, 479 U.S. at 252 (plurality opinion)). [137] As examples, the Court cited attributes that enhanced a corporation’s ability to manage and attract capital assets favorable to its shareholder’s proprietary interests, such as perpetual life, limited liability, and favorable treatment with respect to the accumulation and distribution of capital. Austin, 494 U.S. at 658-659. [138] Id. at 658, 659 (citing Federal Election Comm’n v. National Conservative Political Action Committee, 470 U.S. 480, 496-497 (1985), and MCFL, 479 U.S. at 258)). [139] Id. at 660. [140]Id. [141] See id. at 663. [142] Id. at 665. [143] Id. (“The desire to counter-balance those advantages unique to the corporate form is the State’s compelling interest in this case.”) But see MCFL, 479 U.S. at 259 (“[r]egulation of the corporate political activity thus has reflected concern not about the corporate form per se, but about the potential for unfair deployment of wealth for political purposes”). [144] The Court also considered whether the corporation’s “ideological” purposes, rather than purely “economic” purposes, provided a constitutional warrant for “excepting” it from the “segregation” requirement. [145] See Austin, 494 U.S. 662-664. [146] Id. at 662 (quoting MCFL, 479 U.S. at 264). [147] Id. at 663 (quoting MCFL, 479 U.S. at 264). [148] Id. at 664 (citing MCFL, 479 U.S. at 264). [149] Outside the First Amendment and Buckley contexts, but relevant to the regulation of political activities by labor unions, in Communications Workers of America v. Beck, 487 U.S. 735 (1988), the Supreme Court

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considered whether the National Labor Relations Act, 29 U.S.C. § 158(a)(3), permits a labor union to expend funds collected from dues paying, non-union member employees for activities unrelated to collective bargaining, contract administration, and grievance adjustment. The plain language of the act permits an employer and an exclusive bargaining representative to enter into an agreement requiring all employees in the bargaining unit to pay periodic union dues and initiation fees as a condition of continued employment, whether or not the employees otherwise wish to be a member of the union. See Beck, 487 U.S. at 736. The Court found that Congress intended to correct abuses associated with “closed shop” agreements by limiting compulsory unionism to regimes that require non-member contributions only insofar as they are necessary to defray the costs of collective-bargaining efforts made on behalf of union and non-union employees. See id. at 745. Accordingly, the Court held that the act does not permit a union, over the objections of dues paying nonmember employees, to expend funds collected from them on activities unrelated to collective bargaining, including funds expended for political activities. See id. at 744-62. For further discussion of Communication Workers of America v. Beck, see CRS Report 97-618, The Use of Labor Union Dues For Political Purposes: A Legal Analysis, by L. Paige Whitaker. [150] 459 U.S. 197 (1982). [151] See id. at 202 (“A person who, through his response [to the organization’s publications or material], evidences an intention to support NRWC in promoting [the organization’s purposes] qualifies as a member”). Id. Under this definition, contributors to the NRWC’s segregated fund were construed as members. [152] See id. at 203 (“A person is not considered a member ... if the only requirement for membership is a contribution to a separate segregated fund”). 11 CFR § 114.1(e) (1982). [153] See NRWC, 459 U.S. at 203. [154] See id. at 207. [155] See id. at 206-207. [156] See id. at 207. [157] See id. at 207-208. [158] See id. at 209 (citing Bellotti, 435 U.S. at 788, n. 26.). [159] See id. at 208. [160] Id. at 209-210. For reasons similar to those in Austin and MCFL, the Court held that the regulation was narrowly tailored to attain its regulatory interests. See id. at 210.

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[161] 518 U.S. 604 (1996). [162] 2 U.S.C. § 441a(d)(3). [163] See 518 U.S. at 612. [164] At the time of this decision, FECA exempted political parties from its general contribution and expenditure limits, which limits “multicandidate” political committees to making no more than $5,000 in direct and indirect contributions to candidates. See 2 U.S.C. §§ 441a(a)(2),(7)(B)(i). Instead, FECA allowed political parties to make greater contributions and expenditures. See § § 441 a(d)(1 ),(3)(A). In this case the CRP qualified to spend about $103,000 in connection with the senatorial campaign, but transferred that amount to their national party. See 518 U.S. at 611. [165] See id. at 612. However, at the time of the expenditure, the Republicans had not selected their senatorial candidate. See id. at 614. [166] See id. at 618. [167] See id. at 613. [168] See id at 614, 615, 618, 622-623. [169] See id. at 614-615 (citing Federal Election Comm’n v. National Conservative Political Action Committee (NCPAC), 479 U.S. 238 (1985)). [170] See id. at 615 (citing Buckley, 424 U.S. at 47). [171] Id. (quoting Buckley, 424 U.S. at 19). [172] Id. at 616. [173] Id. at 614 (quoting Buckley, 424 U.S. at 20-21). [174] Id. at 615. [175] See id. at 610, 611, 613, 619. [176] See id. at 615. [177] See id. at 614-615. [178] Id. at 616. [179] See id. at 617. [180] See id. (quoting Buckley, 424 U.S. at 44). [181]See id. [182] 533 U.S. 431 (2001). [183] 2 U.S.C. § 441a(d)(3). [184] Id at 447. [185] Id. at 456. [186] Id. at 446, 456. [187] Id. at 457. [188] 454 U.S. 27 (1981).

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[189] See id. at 29, 30. [190] See id. at 31. [191] See id. at 41. [192] See id. [193]See id. [194] 470 U.S. 480 (1985). [195] See id. at 483. [196] See id. at 490. [197] See id. at 493 (quoting Buckley, 424 U.S. at 14). [198] Id. See also Buckley, 424 U.S. at 19(“A restriction on the amount of money a person or group can spend on political communication during a campaign necessarily reduces the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached. This is because virtually every means of communicating ideas in today’s mass society requires the expenditure of money.”) [199] NCPAC, 470 U.S. at 494 (quoting Buckley, 424 U.S. at 22). [200] Id. at 495 (distinguishing California Medical Assoc. 453 U.S. at 196 (Marshal, J.) (plurality opinion)). [201]Discussed supra. [202] See NCPAC, 470 U.S. at 496. [203] See id. at 498. [204] 525 U.S. 182 (1999). [205] 459 U.S. 87 (1982). [206] 524 U.S. 11 (1998). [207]525 U.S. 182 (1999). [208] See id. at 201. [209]See id. at 186. In addition to “disclosure,” the statute limited petition circulation to six months and required that petition-circulators be at least eighteen years old, be registered to vote, wear identification badges indicating their status as “volunteer” or “paid,” and attach a signed affidavit to each petition stating that they have read and understood the laws governing petition-circulation. See id. at 188-189. The Court, however, only reviewed the constitutionality of the voting registration, badge, and disclosure requirements. See id. at 186. [210]See id. at 20 1-202. [211] See id. [212] See id. at 202. [213] See id.

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[214] The lower court invalidated the disclosure requirement “only insofar as it compels disclosure of information specific to each paid contributor, in particular, the circulators’ names and addresses and the total amount paid to each circulator.” Id. at 201 (citing American Constitutional Law Foundation v. Meyer, 120 F.3d 1092, 1104-1105 (1997)). [215] See id. (citing Buckley, 424 U.S. at 64-65). By requiring proponents to identify paid circulators by name, it would decrease the supply of those willing to be circulators, thereby “chilling” core political speech. See ACLF, 525 U.S. at 212 (Thomas, J. concurring). [216] See ACLF, 525 U.S. 202. [217]See id. at 203. [218] See id. [219] 486 U.S. 414 (1988) (holding a Colorado statute making it a felony to pay for circulation of initiative petitions to abridge political speech in violation of the First and Fourteenth Amendments.) [220] See ACLF, 525 U.S. at 203 (quoting Meyer, 486 U.S. at 427) (“The risk of fraud or corruption, or the appearance thereof, is more remote at the petition stage of an initiative than at the time of balloting.”) [221] See ACLF, 525 U.S. at 204. [222]479 U.S. 87 (1982). [223]See id. at 89. [224]See id. at 88. [225] See id. at 93 (citing Buckley, 424 U.S. at 74). [226] See id. at 97, 98. [227] See id. at 101-102. [228] See id. at 99. [229] See id. [230] See id. at 100. [231] See id. at 102. [232] 524 U.S. 11 (1998). [233] See id. at 14. [234] 514 U.S. 334 (1995). [235] See id. at 336. [236] See id. at 357. [237] Id. [238] Id. at 347. [239]See id. [240] See id. at 348, 349.

The Constitutionality of Campaign Finance Regulation

[241]Id. at 353. [242]Id. at 354. [243] Id. at 355 (citing Buckley, 424 U.S. at 75-76). In Buckley, the Supreme Court had upheld a requirement that independent expenditures above a certain threshold be reported to the FEC. [244] Id. [245] Id. at 356. [246] Id. (quoting Buckley, 424 U.S. at 80. [247] See id. [248] 540 U.S. 93 (2003). For further discussion of this decision, see CRS Report RL32245, Campaign Finance Law: A Legal Analysis of the Supreme Court Ruling in McConnell v. FEC, by L. Paige Whitaker. [249] P.L. 107-155. The Bipartisan Campaign Reform Act of 2002 (BCRA) was the first major overhaul of federal campaign finance laws since the enactment of the Federal Election Campaign Act of 1971. [250] Id. at 706. [251] 2 U.S.C. § 441i(a). [252] McConnell, 124 S. Ct. at 654. [253] 2 U.S.C. §§ 441i(b), 441i(d), 441i(e), 441i(f). [254] McConnell, 124 S. Ct. at 647 (quoting FEC v. Beaumont, 123 S. Ct. 2200 (2003)). [255] Id. at 656 (quoting FEC v. National Right to Work, 459 U.S. 197, 208 (1982)). [256] Id. at 65 6-57. The Court further noted that “closely drawn” scrutiny provides Congress with sufficient room to anticipate and respond to circumvention of the federal election regulatory regime, which is designed to protect the integrity of the political process. Id. [257] Id. [258] Id. at 657-5 8. [259] Id. at 742-59 (Kennedy, J., concurring, in part, dissenting, in part) (joined by Chief Justice Rehnquist, Justices Scalia (except to the extent it upholds FECA § 3 23(e) and BCRA § 202) and Thomas (only with respect to BCRA § 213). [260] Id. at 746. [261] Id. at 665. [262] Id. at 666. [263] 2 U.S.C. § 434(f)(3)(A)(i). BCRA defines “[t]argeted to the relevant electorate” as a communication that can be received by 50,000 or more .

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persons in a state or congressional district where the Senate or House election, respectively, is occurring. 2 U.S.C. § 434(f)(3)(C). [264] 2 U.S.C. § 441b(b). [265] Buckley, 424 U.S. at 80. [266] McConnell, 124 S. Ct. at 688. [267]Id. at 689. [268]Id. at 696. [269] Id. (citing 251 F. Supp. 2d 176, 573-578 (D.D.C.) (Kollar-Kotelly, J.), 826-827 (Leon, J.)). [270] Id. at 695. [271] Id. at 696. [272] Id. at 697. [273] Id. at 762 (Kennedy, J., concurring, in part, dissenting, in part) (joined by Chief Justice Rehnquist and Justices Scalia (except to the extent it upholds FECA § 323(e) and BCRA § 202) and Thomas (only with respect to BCRA § 213)). While Justice Kennedy’s opinion served as the primary dissent for the minority, in a separate dissent, Justice Scalia wrote, “[t]his is a sad day for the freedom of speech,” further commenting that “[i]f the Bill of Rights had intended an exception to the freedom of speech in order to combat this malign proclivity of the officeholder to agree with those who agree with him, and to speak more with his supporters than his opponents, it would surely have said so.” Id. at 720, 726. [274] 479 U.S. 238 (1986) (holding that the following characteristics exempt a corporation from regulation: (1) its organizational purpose is purely political; (2) its shareholders have no economic incentive in the organization’s political activities; and, (3) it was neither founded by nor accepts contributions from business organizations or labor unions). [275] McConnell, 124 S. Ct. at 699. [276] 2 U.S.C. § 441d. [277] McConnell, 124 S. Ct. at 710. [278] 2 U.S.C. § 315(d)(4). [279] McConnell, 124 S. Ct. at 703. [280] 2 U.S.C. § 315(d)(4). [281] 2 U.S.C. § 301(17). [282] McConnell, 124 S. Ct. at 702. [283] 2 U.S.C. § 44 1k. [284] McConnell, 124 S. Ct. at 711. [285] See 2 U.S.C. § 44 1f. [286] McConnell, 124 S. Ct. at 711.

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[287] Id. [288] 2 U.S.C. § 3 15(a). [289] McConnell, 124 S. Ct. at 656-57. [290] Id. at 686. [291] 127 S.Ct. 2652 (2007). For further discussion of this decision, see CRS Report RS22687, The Constitutionality of Regulating Political Advertisements: An Analysis of Federal Election Commission v. Wisconsin Right to Life, Inc., by L. Paige Whitaker. [292] P.L. 107-155. This law is also known as “McCain-Feingold,” referring to the principal Senate sponsors of the legislation. [293] See 2 U.S.C. § 441b(b)(2). [294] 540 U.S. 93 (2003), discussed supra. [295] Id. at 204-205, 206. [296] 546 U.S. 410 (2006). [297] Id. at 412. [298] Wisconsin Right to Life, Inc. v. Federal Election Commission, 466 F. Supp. 2d 195 (D.D.C. 2006). [299] Id. at 210. [300] 127 S.Ct. 2652 (2007). [301] In a concurrence, Justice Scalia found that the attempt in the Court’s ruling to distinguish McConnell is “unpersuasive enough, and the change in the law it works is substantial enough, that seven Justices ... having widely divergent views concerning the constitutionality of the restrictions at issue, agree that the opinion effectively overrules McConnell without saying so.” Id. at 2684, n. 7 (Scalia, J. concurring in part and concurring in the judgment). [302] Id. at 2670. [303] Id. at 2659 (quoting Buckley v. Valeo, 424 U.S. 1, 42 (1976)). [304] Id. [305] See id. at 2663-64. [306] See id. at 2664 (citing McConnell v. FEC, 540 U.S. 93, 205 (2003); Austin v. Michigan Chamber of Commerce, 494 U.S. 652, 658 (1990); FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, 252 (1986); First Nat. Bank of Boston v. Bellotti, 435 U.S. 765, 786 (1978); Buckley v. Valeo, 424 U.S. 1, 44-45 (1976)). [307] Id. (finding “[e]specially where, as here, a prohibition is directed at speech itself, and the speech is intimately related to the process of governing ... ‘the burden is on the government to show the existence of [a

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compelling] interest.’”(quoting First Nat. Bank of Boston v. Bellotti, 435 U.S. at 786)). [308] Id. (quoting McConnell v. FEC, 540 U.S. at 206). [309] Id. [310] The dissenting opinion maintained that the principal opinion establishes a “new test to identify a severely limited class of ads that may constitutionally be regulated as electioneering communications, a test that is flatly contrary to ... [and] simply inverts” the Court’s holding in McConnell. Id. at 2669 (Souter, J., dissenting) (quoting McConnell v. FEC, 540 U.S. at 206-207, n. 88). While the Court in McConnell had “left open the possibility” of a “‘genuine’ or ‘pure’ issue ad that might not be open to regulation under § 203,” the dissent argued that the Court meant that an issue ad that did not contain campaign advocacy could escape the regulation, not that “if an ad is susceptible to any ‘reasonable interpretation other than as an appeal to vote for or against a specific candidate,’ then it must be a ‘pure’ or ‘genuine’ issue ad.” Id. (Souter, J., dissenting) [311] Id. at 2664. [312]Id. at 2665. [313] Id. The Court further noted that in its seminal 1976 campaign finance decision, Buckley, it had expressly “rejected an intent-and-effect test for distinguishing between discussions of issues and candidates,” finding that such an analysis would afford “‘no security for free discussion.’” Id. (quoting Buckley v. Valeo, 424 U.S. 1, 43-44 (1976), quoting Thomas v. Collins, 323 U.S. 516 (1945)). [314] Id. at 2666 (quoting Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 547 (1995)). [315] Id. at 2667 (citing New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964)). [316] Id. [317] Id. at 2669. [318] Id. at 2672 (emphasis included). [319] Id. at 2673. [320] Id. at 2669.

In: Campaign Finance… Editor: Thomas P. Kallen, pp. 107-129

ISBN: 978-1-60692-836-3 © 2009 Nova Science Publishers, Inc.

Chapter 3

CAMPAIGN FINANCE: AN OVERVIEW

*

Joseph E. Cantor

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ABSTRACT Concerns over financing federal elections have become a seemingly perennial aspect of our political system, long centered on the enduring issues of high campaign costs and reliance on interest groups for needed campaign funds. Rising election costs had long fostered a sense in some quarters that spending was out of control, with too much time spent raising funds and elections “bought and sold.” Debate had also focused on the role of interest groups in campaign funding, especially through political action committees (PACs). Differences in perceptions of the campaign finance system were compounded by the major parties’ different approaches. Democrats tended to favor more regulation, with spending limits and public funding or benefits a part of past proposals. Republicans generally opposed such limits and public funding. The 1996 elections marked a turning point in the debate’s focus, as it shifted from whether to further restrict already regulated spending and funding sources to addressing election-related activities largely or entirely outside federal election law regulation and disclosure requirements (i.e., soft money). While concerns had long been rising over soft money in federal elections, its widespread and growing use for so-called issue advocacy since 1996 raised questions over the integrity of existing regulations and the feasibility of any limits at all. Following 1996, reform supporters offered legislation whose primary goals were to prohibit use of soft money in ways that could affect *

This is an edited, excerpted and augmented edition of CRS Report RL33580, dated April 20, 2007.

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Joseph E. Cantor federal elections and to bring election-related issue advocacy communications under federal regulation. In both the 105th and 106th Congresses, the House passed the Shays-Meehan bill, but the Senate failed to invoke cloture to allow a vote on the companion McCain-Feingold bill. The 106th Congress did, however, agree on an aspect of campaign reform, in passing P.L. 106-230, to require disclosure by certain tax-exempt political organizations organized under Section 527 of the Internal Revenue Code. Such groups exist to influence elections, but many had not been required to disclose financial activity (to the FEC or IRS). In the 107th Congress, the Senate passed McCain-Feingold, as amended, and the House passed the companion Shays-Meehan bill, as amended. The Senate then passed the House bill, which was signed into law by President Bush as the Bipartisan Campaign Reform Act of 2002 — BCRA (P.L. 107-155) — constituting the first major change to the nation’s campaign finance laws since 1979. In the 2004 elections, some $435 million was raised and spent by “political organizations” organized under Section 527 of the Internal Revenue Code but outside of federal election law regulation. In response to this perceived circumvention of election law regulation, the 109th Congress examined the role of 527 groups in federal elections; while the House passed legislation to address it, no Senate bill was passed. Similar bills — H.R. 420 and S. 463 — have been introduced in the 110th Congress. This article provides an overview of campaign finance law governing federal elections, issues raised in recent years by campaign finance practices, and recent legislative activity and proposals in Congress.

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EVOLUTION OF THE CURRENT SYSTEM Today’s federal campaign finance law evolved during the 1970s out of five major statutes and a paramount Supreme Court case. That case not only affected earlier statutes, but it has also continued to shape the dialogue on campaign finance reform. The 1971 Federal Election Campaign Act (FECA), as amended in 1974, 1976, and 1979, imposed limits on contributions, required disclosure of campaign receipts and expenditures, and set up the Federal Election Commission (FEC) as a central administrative and enforcement agency. The Revenue Act of 1971 inaugurated public funding of presidential general elections, with funding of primaries and nominating conventions added by the 1974 FECA Amendments. The latter also imposed certain expenditure limits, later struck down by the Supreme Court’s landmark Buckley v. Valeo ruling [424 U.S. 1 (1976)].

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In the Buckley ruling, the Court upheld the act’s limitations on contributions as appropriate legislative tools to guard against the reality or appearance of improper influence stemming from candidates’ dependence on large campaign contributions. However, Buckley invalidated the act’s limitations on independent expenditures, on candidate expenditures from personal funds, and on overall campaign expenditures. These provisions, the Court ruled, placed direct and substantial restrictions on the ability of candidates, citizens, and associations to engage in protected First Amendment free speech rights. The Court saw no danger of corruption arising from large expenditures, as it did from large contributions, and reasoned that corruption alone could justify the First Amendment restrictions involved. Only voluntary limits on expenditures could be sustained, perhaps in exchange for government benefits. Such a plan was specifically upheld in the existing presidential public funding system, as a contractual agreement between the government and the candidate. The Court’s dichotomous ruling, allowing limits on contributions but striking down mandatory limits on expenditures, has shaped subsequent campaign finance practices and laws, as well as the debate over campaign finance reform. In 2002, Congress enacted the Bipartisan Campaign Reform Act (BCRA) of 2002 (popularly known as McCain-Feingold for its Senate sponsors). This statute made the most significant changes in the FECA since the 1970s, featuring higher contribution limits, a ban on the raising of soft money[1] by political parties and federal candidates, and a restriction on broadcast ads by outside groups in the closing days of an election. BCRA’s constitutionality was challenged in court but, in a decision that surprised many observers, was essentially upheld by the Supreme Court in its December 10, 2003, ruling in McConnell v. FEC.

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CAMPAIGN FINANCE PRACTICES AND RELATED ISSUES From the mid-1970s through at least the late 1990s, the limits on contributions by individuals, political action committees (PACs), and parties, and an absence of congressional spending limits, governed the flow of money in congressional elections. Throughout the 1980s and much of the 1990s, the two paramount issues raised by campaign finance practices were the phenomena of, first, rising campaign costs and the large amounts of money needed for elections and, second, the substantial reliance on PACs as a source of funding. After 1996, the debate shifted considerably to a focus on the perceived loopholes in existing law (a source of increasing debate since the mid-1980s). The

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PAC issue was largely supplanted by more fundamental issues of election regulation, with one-time critics finding new appreciation for the limited, disclosed nature of PAC funds. The issue of high campaign costs and the concomitant need for vast resources continues to underlie the debate, but even this was almost overshadowed by concerns over the system’s perceived loopholes. Although these practices were (largely) presumably legal, they may have violated the law’s spirit, raising a basic question of whether money in elections can, let alone should, be regulated.

ENDURING ISSUES: CAMPAIGN COSTS AND FUNDING SOURCES

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Increased Campaign Costs Since first being systematically compiled in the 1970s, campaign expenditures have risen substantially, even exceeding the overall rise in the cost of living. An estimated $540 million was spent on all elections (at all levels) in the U.S. in 1976,[2] rising to some $3.9 billion in 2000.[3] Preliminary estimates from the 2004 elections show that spending on federal elections alone exceeded $3.9 billion.[4] Aggregate costs of House and Senate campaigns increased tenfold between 1976 and 2004, from $115.5 million to $1.16 billion, while the cost of living rose a little more than threefold. Campaign costs for average winning candidates, a useful measure of the real cost of seeking office, showed an increase in the House from $87,000 in 1976 to $1.0 million in 2004; a winning Senate race went from $609,000 in 1976 to $7.0 million in 2004 (not adjusted for inflation). The above data are cited by many as evidence that our democratic system of government has suffered as election costs have grown to levels often considered exorbitant. Specifically, it is argued that officeholders must spend too much time raising money, at the expense of their public duties and communicating with constituents. The high cost of elections and the perception that they are “bought and sold” are seen as contributing to public cynicism about the political process. Some express concern that spiraling campaign costs have resulted in more wealthy individuals seeking office or determining election winners, denying opportunities for service to those lacking adequate resources or contacts. Others see a correlation between excessive, available money and the perceived increased reliance of sophisticated, often negative, media advertising.

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Not all observers view the high cost of elections with alarm. Many insist we do not spend too much on elections and maybe do not spend enough. They contrast the amount spent on elections with that spent by government at all levels, noting that only a fraction of a percent is spent to choose those who make vital decisions on the allocation of tax dollars. Similarly, they contrast costs of elections with those on commercial advertising: the nation’s two leading commercial advertisers in 1996, Proctor & Gamble and General Motors, spent more to promote their products that year ($5 billion) than was spent on all U.S. elections.[5] In such a context, these observers contend, the costs of political dialogue may not be excessive. High election costs are seen largely as a reflection of the paramount role of media in modern elections. Increasingly high television costs and costs of fundraising in an era of contribution limits require candidates to seek a broad base of small contributors — a democratic, but time-consuming, expensive process — or to seek ever-larger contributions from small groups of wealthy contributors. It has been argued that neither negative campaigning nor wealthy candidates are new or increasing phenomena but merely that better disclosure and television’s prevalence make us more aware of them. Finally, better-funded candidates do not always win, as some recent elections show.

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PACs and Other Sources of Campaign Funds Issues stemming from rising election expenses were, for much of the 1970s through 1990s, linked to substantial candidate reliance on PAC contributions. The perception that fundraising pressures might lead candidates to tailor their appeals to the most affluent and narrowly “interested” sectors raised perennial questions about the resulting quality of representation of the whole society. The role of PACs, in itself and relative to other sources, became a major issue. In retrospect, however, it appears that the issue was really about the role of interest groups and money in elections, PACs being the most visible vehicle thereof. As discussed below, the PAC issue per se has seemed greatly diminished by recent events, while concerns over interest group money through other channels have grown. Through the 1980s, statistics showed a significant increase in PAC importance. From 1974 to 1988, PACs grew in numbers from 608 to a high of 4,268, in contributions to House and Senate candidates from $12.5 million to $147.8 million (a 400% rise in constant dollars), and in relation to other sources from 16% of congressional campaign receipts to 34%. While PACs remain a considerable force, data show a relative decline in their role since 1988: the percentage of PAC money

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in total receipts dropped to 28% in 2004; PAC numbers dropped to 4,040 in 2004; and, after individual giving had been declining vis-à-vis PACs, there has been some increase of late, with individuals giving 72% of Senate and 56% of House receipts in 2004, for example. Still, not all indicators show decline in the PAC role; PAC contributions to candidates rose to $289.1 million in 2004, for example. Despite some aggregate data on the relative decline of PACs, they still provide a considerable share of election financing for various subgroups. For example, in 2004, House candidates got 35% of their funds from PACs; House incumbents received 41%. To critics, PACs raise troubling issues in the campaign financing debate: Are policymakers beholden to special interests for election help, impairing their ability to make policy choices in the national interest? Do PACs overshadow average citizens, particularly in Members’ states and districts? Does the appearance of quid pro quo relationships between special interest givers and politician recipients, whether or not they actually exist, seriously undermine public confidence in the political system? PAC defenders view them as reflecting the nation’s historic pluralism, representing not a monolithic force but a wide variety of interests. These observers see them, rather than overshadowing individual citizens, merely as groups of such citizens, giving voice to many who were previously uninvolved. PACs are seen as promoting, not hindering, electoral competition, by funding challengers in closely contested races. In terms of influencing legislative votes, donations are seen more as rewards for past votes than as inducements to alter future ones. Defenders also challenge the presumed dichotomy between special and national interest, viewing the latter as simply the sum total of the former. PACs, they argue, afford clearer knowledge of how interest groups promote their agendas, particularly noteworthy in light of the flood of unregulated and undisclosed money since 1996.

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Today’s Paramount Issues: Perceived Loopholes in Current Law Interest has intensified, especially since 1996, in campaign finance practices that have been seen by some as undermining the law’s contribution and expenditure limits and its disclosure requirements. Although these practices may be legal, they have been characterized as “loopholes” through which electoral influence is sought by spending money in ways that detract from public confidence in the system and that are beyond the scope intended by Congress. Some of the prominent practices have been soft money, election-related issue advocacy, and, most recently, election-related activities by groups operating under Section 527 of the Internal Revenue Code (IRC).

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Soft Money This term has generally been used to refer to money that may influence federal elections (at least indirectly) but is raised and spent outside the purview of federal laws and would be illegal if spent directly on a federal election by a candidate, party, or PAC. The significance of soft money, prior to enactment of BCRA, stemmed from several factors: (1) many states permitted (then and now) direct union and corporate contributions and individual donations in excess of $25,000 in state campaigns, all of which were (and are) prohibited in federal races; (2) under the 1979 FECA Amendments and FEC rulings, such money could be spent by state and local parties in large or unlimited amounts on grassroots organizing and voter drives that could benefit all party candidates; and (3) publicly funded presidential candidates could not spend privately raised money in the general election. In presidential elections through 2000, national parties made extensive efforts to raise money for their state affiliates, partly to boost the national tickets beyond what could be spent directly. The data for 2000 showed some $495 million in soft money was raised by the major parties, nearly double the $262 million raised in 1996. Issue Advocacy Although federal law regulates expenditures in connection with federal elections, it has generally used a fairly narrow definition for what constitutes such spending. Prevailing judicial interpretation of Supreme Court precedent, both before and arguably since BCRA, has created a conundrum by permitting regulation of only those communications containing express advocacy, that is, communications containing explicit terms urging the election or defeat of clearly identified federal candidates. By avoiding such terms, groups arguably can promote their views and issue positions in reference to particular elected officials, without triggering the disclosure and source restrictions of the FECA. Such activity, known as issue advocacy, is widely perceived as having the intent of bolstering or detracting from the public image of officials who are also candidates for office. In 1996, an estimated $135 million was spent on issue advocacy, rising to between $275 and $340 million in 1998, and to $509 million in 2000 (although these data do not distinguish between campaign-related and non-campaign-related communications). Also, groups ranging from labor unions to the Christian Coalition promote their policy views through voter guides, which present candidates’ views on issues in a way that some see as helpful to some candidates and harmful to others, without meeting the standards for FECA coverage.

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527 Political Organizations In the years leading up to enactment of BCRA and in the wake of its major provisions being upheld by the Supreme Court in December 2003, attention has been increasingly focused on activity by interest groups operating outside the regulatory framework of federal election law. Of particular interest have been groups operating under Section 527 of the Internal Revenue Code, which provides tax-exempt status to organizations it defines as political. In 2000, some groups engaged in election-related issue advocacy aroused controversy when it was revealed that they were operating under Section 527 of the IRC while not being regulated under the FECA. At that time, BCRA was still under consideration, and Congress was enmeshed in the thorny issue of regulating activity that was not express advocacy. Rather than short-circuit that debate and begin yet another on the also complicated issue of differing definitions of political organization under the IRC and political committee under the FECA, Congress addressed the issue by simply requiring disclosure to the IRS by groups with tax- exempt 527 status.

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Table 1. Receipts and Disbursements by Federal-Related 527s: 2000-2006 (dollars in millions) Election Cycle

Total Spending

2000

Receipts Total

Democraticoriented 527s

Republicanoriented 527s

$88.6

$61.3

$39.7

$21.6

2002

$193.6

$183.6

$104.3

$78.2

2004

$434.9

$431.5

$264.0

$165.7

2006

$234.7

$215.2

$109.4

$103.0

Source: PoliticalMoneyLine, “key groups” (those that were clearly federal-election related) identified from IRS filings [http://www.tray.com/cgi-win/irs_ef_527.exe?DoFn =&sYR=2000], site visited Jan. 12, 2007.

In 2002, Title II of BCRA addressed the express advocacy issue, but only with regard to broadcast advertisements in the period just prior to federal elections. BCRA was silent regarding interest groups’ involvement in such other election-related activities as public communications through non-broadcast methods, broadcasts prior to the last 30 days before a primary or 60 days before a general election, voter identification, and get-out-the-vote and registration drives.

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These activities loom particularly large in the wake of BCRA’s prohibition on national political party use of non-federally permissible funds (i.e., soft money) to pay for voter mobilization activities. With some $435 million reported as having been spent in the 2004 elections by groups with Section 527 status, public attention has shifted to these new patterns of electioneering, raising questions as to whether requiring disclosure to the IRS is sufficient. The following table presents data on spending and receipts of 527s since IRS disclosure was required in 2000. The source, PolicalMoneyLine, examined reports and identified “key groups,” those that were clearly federal election-related.

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POLICY OPTIONS TO ADDRESS CAMPAIGN FINANCE ISSUES The policy debate over campaign finance laws proceeds from the philosophical differences over the underlying issues discussed above, as well as the more practical, logistical questions over the proposed solutions. Two primary considerations frame this debate. What changes can be made that will not raise First Amendment objections, given court rulings in Buckley and other cases? What changes will not result in new, unforeseen, and more troublesome practices? These considerations are underscored by the experience with prior amendments to FECA, such as PAC growth after the 1974 limits on contributions. Just as the overriding issues centered until recently around election costs and funding sources, the most prominent legislation long focused on controlling campaign spending, usually through voluntary systems of public funding or cost-reduction benefits, and on altering the relative importance of various funding sources. Some saw both concepts primarily in the context of promoting electoral competition, to remedy or at least not exacerbate perceived inequities between incumbents and challengers. Increasingly since the mid-1980s, and particularly since the 1996 elections, concerns over perceived loopholes that undermine federal regulation have led to proposals to curb such practices. Conversely, some proposals have urged less regulation, on the ground that it inherently invites circumvention, while still other proposals have focused exclusively on improving or expanding disclosure.

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Addressing the Enduring Issues Campaign Spending Limits and Government Incentives or Benefits Until the late 1990s, the campaign reform debate often focused on the desirability of campaign spending limits. To a great extent, this debate was linked with public financing of elections. The coupling of these two controversial issues stemmed from Buckley’s ban on mandatory spending limits, while allowing voluntary limits, with adherence a prerequisite for subsidies. Hence the notion arose in the 1970s that spending limits must be tied to public benefits, absent a constitutional amendment. Public funding not only might serve as an inducement to voluntary limits, but by limiting the role of private money, it is also billed as the strongest measure toward promoting the integrity of and confidence in the electoral process. Furthermore, it could promote competition in districts with strong incumbents or one-party domination. Public financing of congressional elections has been proposed in nearly every Congress since 1956 and has passed in several Congresses. The nation has had publicly funded presidential elections since 1976, and tax incentives for political donations were in place from 1972 to 1986. Objections to public financing are numerous, many rooted in philosophical opposition to funding elections with taxpayer money, supporting candidates whose views are antithetical to those of many taxpayers, and adding another government program in the face of some cynicism toward government spending. The practical objections are also serious: How can a system be devised that accounts for different natures of districts and states, with different styles of campaigning and disparate media costs, and is fair to all candidates — incumbent, challenger, or open-seat, major or minor party, serious or “longshot”? A major challenge to spending limit supporters has been how to reduce, if not eliminate, the role of public funding in their proposals. Although spending limits may have wide public support, most evidence suggests far less support for public financing. In the 105th through 107th Congresses, the principal reform bills debated on the floor contained neither campaign spending limits nor public funding, reflecting not only the overriding concerns over soft money and issue advocacy but also the changed political climate since the 1970s. Stemming from the spending limits debate have been proposals to lower campaign costs, without spending limits. Proposals for free or reduced rate broadcast time and postage have received some notable bipartisan support. Such ideas seek to reduce campaign costs and the need for money, without the possibly negative effects of arbitrary limits.

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Changing the Balance among Funding Sources Until the late 1990s, most proposed bills sought, at least in part, to curb PACs’ perceived influence, either directly, through a ban or reduced contribution limits, or indirectly, through enhancing the role of individuals and parties. Prior to enactment of BCRA, individuals could give $1,000 per candidate, per election, while most PACs (if they were “multicandidate committees”) could give $5,000 per candidate, thus increasing their ability to assist candidates. Furthermore, unlike individuals, there was (and is) no aggregate limit on all contributions in federal elections by a PAC in a given time period, thus further increasing a PAC’s opportunity to be involved. Three chief methods of direct PAC curbs were prominent in proposals advanced through the mid-1990s: banning PAC money in federal elections; lowering the $5,000 limit; and limiting candidates’ aggregate PAC receipts. These concepts were included, for example, in all of the bills that the House and Senate voted on in the 101st through 104th Congresses. Although support for such proposals was fueled by a desire to reduce the perceived role of interest groups, each proposal had drawbacks, such as constitutional questions about limiting speech and association rights and the more practical concern over devaluation of the $5,000 limit by inflation since it was set in 1974. Yet another concern raised during that period was the potential encouragement for interest groups to shift resources to “independent” activities, which are less accountable to voters and more troublesome for candidates in framing the debate. Furthermore, independent advertisements were often marked by negativity and invective. If such prospects gave pause to lawmakers during the 1980s, the surge of financial activity outside the framework of federal election law since 1996 has largely dampened attempts to further limit PACs. The major reform bills in the 105th through 107th Congresses contained no further PAC restrictions. Partly because of this problem, both before and after 1996, many have looked to more indirect ways to curb PACs and interest groups, such as raising limits on individual or party donations to candidates. These increases have also been proposed on a contingency basis to offset such other sources as wealthy candidates spending large personal sums on their campaigns. As enacted in 2002, BCRA provided both for higher individual contribution limits in general and provisional increases in both individual and party limits to assist candidates opposed by free-spending, wealthy opponents. While higher limits might counterbalance PACs and others and offset inflation, opponents observed that few Americans could afford to give even $1,000, raising age-old concerns about “fat cat” contributors. House Republicans have pushed to boost the role of individuals in candidates’ states or districts, to increase ties between Members and constituents. By

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requiring a majority of funds to come from the state or district (or prohibiting outof-state funds), supporters sought to indirectly curb PACs, typically perceived as outof-state, or Washington, influences. Support also exists for increasing or removing party contribution and coordinated expenditure limits, based on the notions that the party role can be maximized without leading to influence peddling and on strengthening party ties to facilitate effective policymaking. Opponents note that many of the prominent allegations in 1996 involved party-raised funds.

Closing Perceived Loopholes

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Proposals have increasingly addressed perceived loopholes in FECA, and indeed this area was the primary focus of recent reform efforts, culminating in enactment of BCRA in the 107th Congress. This debate underscored a basic philosophical difference between those who favored and opposed government regulation of campaign finances. Opponents said that regulation invited attempts at subterfuge, that interested money would always find its way into elections, and that the most one could do was see that it was disclosed. Proponents argued that while it was hard to restrict money, it was a worthwhile goal, hence one ought to periodically fine-tune the law to correct “unforeseen consequences.” Proposed “remedies” stemmed from the latter view (i.e., curtail the practices as they arise).

Soft Money This issue was one of the key issues addressed by BCRA. Title I provided that national parties and federal candidates or officials, and entities they directly or indirectly establish, finance, maintain, or control, may not solicit, receive, direct, transfer, or spend funds not raised under the limits, prohibitions, and reporting requirements of federal law (i.e., soft money). State and local political parties, and entities they directly or indirectly establish, finance, maintain, or control, may not spend soft money on “federal election activities.” The act’s so-called Levin amendment, however, allowed for some use of soft money under certain conditions for specified grassroots activities by state and local parties.

Issue Advocacy The other key issue addressed by BCRA pertained to issue advocacy. The challenge to Congress in addressing this practice, a form of soft money, involved broadening the definition of what constituted federal election-

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related spending. A 1995 FEC regulation had offered such a definition, using a “reasonable person” standard, but this was struck down by a First Circuit federal court in 1996; this decision was later upheld by an appeals court but was at variance with an earlier Ninth Circuit ruling. The FEC was reluctant to enforce the regulation pending further judicial or legislative action. Earlier versions of what became BCRA (the Shays-Meehan bill, as passed in the 105th and 106th Congresses) sought to codify a definition of “express advocacy” that allowed a communication to be considered as a whole, in context of such external events as timing, to determine if it was election related. In the final analysis, BCRA adopted a narrower approach, in large measure to enhance its chances of withstanding judicial scrutiny, by incorporating into Title II language initially proposed by Senators Snowe and Jeffords. This title regulates election-related issue advocacy by creating a new term in federal election law, electioneering communications (i.e., political advertisements that refer to clearly identified federal candidates, broadcast within 30 days of a primary or 60 days of a general election). Generally, they may not be funded from union or corporate treasuries, and disbursements of over $10,000 and donors of $1,000 or more must be disclosed.

527 Activity Efforts to address the activity of 527 political organizations that operate outside the regulatory framework of federal election law were seen in the 109th Congress. Supporters of BCRA offered measures (S. 1053 and H.R. 513) to apply federal election law regulation to 527 groups involved in federal election- related activities. The 527 Reform Act of 2005 would add political organizations under Section 527 of the IRC to the definition of political committee under FECA, unless they are involved exclusively in state and local elections. The Senate bill was reported by the Rules and Administration Committee and placed on the Senate’s legislative calendar. In response to this proposal, H.R. 1316 (Pence-Wynn) was introduced to address the issue more indirectly, largely by loosening restrictions on individuals, parties, and PACs under the FECA, and in the soft money realm as well. This bill, intended to provide some balance to the role of the 527s, was reported by the House Administration Committee, which later reported H.R. 513 without recommendation. This set the stage for a potential House floor debate between two bills to address the 527 issue based on diametrically opposed philosophies, although such a debate never occurred. On April 5, 2006, the House passed H.R. 513 (Shays-Meehan), as amended, by a 218-209 vote. The bill, the 527 Reform Act of 2006, would subject 527 political organizations involved in federal elections to regulation under the Federal Election

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Campaign Act (FECA). (It included one floor amendment, to remove political party coordinated expenditure limits.) The text of H.R. 513, as passed, was also added to H.R. 4975, the Lobbying Accountability and Transparency Act of 2006, which passed the House on May 3, 2006; it also included an amendment added by the House Rules Committee to prohibit leadership PAC funds from being converted to personal use but to allow them to be transferred without limit to national party committees (as is the case with funds in principal campaign committees). After passing H.R. 4975, the House substituted it for the text of S. 2349, the Senate-passed version of the bill, to enable a conference with the Senate. The Senate-passed bill did not contain the 527 provisions, and the Senate resisted considering 527s in the context of ethics reform. This conflict between the House and Senate kept the issue from being resolved in the 109th Congress.

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LEGISLATIVE ACTION IN CONGRESS Congress’s consideration of campaign finance reform has steadily increased since 1986, when the Senate passed the PAC-limiting Boren-Goldwater amendment, marking the first campaign finance vote in either house since 1979 (no vote was taken on the underlying bill). With Senate control shifting to Democrats in 1986, each of the next four Congresses saw intensified activity, based on Democraticleadership bills with voluntary spending limits combined with inducements to participation, such as public subsidies or cost-reduction benefits. In the 100th Congress, Senate Democrats were blocked by a Republican filibuster. In the 101st through 103rd Congresses, the House and Senate each passed comprehensive bills based on spending limits and public benefits. Those bills were not reconciled in the 101st or 103rd, while a conference version in the 102nd was vetoed by President George H. W. Bush. Republicans assumed control in the 104th Congress, and changes in campaign finance laws were not a priority for the new leadership, as many of them had philosophical differences with the most prominent “reform” proposals. A bipartisan bill based on previous Democratic-leadership bills was blocked by filibuster in the Senate, while both Republican- and Democratic-leadership bills — with starkly different approaches — failed to pass in the House. In the 105th Congress, reform supporters succeeded in passing the Shays-Meehan bill in the House (H.R. 2183, as amended). Senate sponsors of its companion McCain-Feingold measure (S. 25, as revised) failed on three occasions to break a filibuster in opposition, and no vote occurred on the bill.

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In the 106th Congress, the House again passed the Shays-Meehan bill (H.R. 417). Supporters of the companion McCain-Feingold bill initially introduced S. 26, much the same bill as its final version in the 105th Congress. They later introduced a much narrower version (S. 1593), focusing largely on party soft money but dropping the issue advocacy and other provisions. This version was debated in October 1999 but failed to break a filibuster in opposition. Reform supporters succeeded, however, in enacting a law to require disclosure by tax-exempt political organizations under Section 527 of the Internal Revenue Code. In the 107th Congress, the long stalemate over campaign finance reform was broken when Congress enacted BCRA. The Senate passed S. 27 (McCain-Feingold) on April 2, 2001, by a vote of 59-41, after a two-week debate which added 22 amendments on the floor and rejected 16 others. The Senate also defeated S.J.Res. 4 (Hollings-Specter), a constitutional amendment to allow mandatory campaign spending limits, by a 40-56 vote on March 26, 2001. Although Senate passage marked a major breakthrough, the measure appeared to be stalled in the House in 2001, when the House rejected (by 203-228) the proposed rule for consideration on July 12. Supporters of Shays-Meehan filed a discharge petition to force reconsideration and, on January 24, 2002, secured the last four needed signatures. On February 13, 2002, the House passed H.R. 2356 (Shays-Meehan) by a 240-189 vote, after including four perfecting amendments and rejecting two substitute and eight perfecting amendments. On March 20, the Senate passed H.R. 2356 by a 60-40 vote, and President Bush signed the measure into law on March 27, as P.L. 107-155. Also in the 107th Congress, P.L. 107-276 was enacted to relieve 527 tax-exempt political organizations that operate at the state and local levels from reporting requirements enacted in 2000 and to improve IRS dissemination of federally filed reports under that law. The 108th Congress was a transitional one in terms of campaign finance issues, as the political community adjusted to the newly enacted BCRA and watched the courts for rulings on its constitutionality. This matter was settled on December 10, 2003, when the Supreme Court, in McConnell v. FEC (549 U.S. 93), upheld the constitutionality of key provisions of BCRA, dealing with soft money and electioneering communications. The issue of 527 political organizations, which emerged as strong forces in the wake of BCRA, occupied some congressional attention, with hearings held on the subject in the House Administration and Senate Rules and Administration Committees and bills introduced by supporters of BCRA to apply federal election law regulation to such groups involved in federal electionrelated activities.

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109th Congress In the wake of the 2004 elections, when some $435 million was spent by 527 organizations outside federal election law regulation, the 109th Congress examined the role of 527 groups in federal elections. On March 8, 2005, the Senate Rules and Administration Committee held a hearing on S. 271 (McCain-FeingoldLott), a bill to require that 527s involved in federal elections comply fully with federal election law, and on April 27, it voted to report the bill, as amended in committee. On May 17, that bill was reported as an original bill — S. 1053 — and placed on the Senate’s legislative calendar. The House Administration Committee held a hearing April 20, 2005, on regulation of 527 organizations, which focused on H.R. 513 (Shays-Meehan), the companion to S. 271 (which became S. 1053), and H.R. 1316 (Pence-Wynn). In sharp contrast with the bill reported in the Senate, H.R. 1316 sought to address the 527 issue indirectly, by loosening restrictions on funding sources within FECA. By so doing, proponents maintained that there would be less of an incentive for political money to flow to 527 groups operating outside the framework of FECA. On June 9, 2005, House Administration voted to report H.R. 1316, as amended; it was reported on June 22.[6] On June 29, the committee held a markup of H.R. 513 (Shays-Meehan), and ordered it reported (as amended to reflect the sponsors’ changes), without recommendation,[7] thus setting the stage for a floor debate on the two contrasting measures. Such a debate never occurred, however. On April 5, 2006, the House passed H.R. 513 (Shays-Meehan), as amended, by a 218-209 vote. The rule under which it was considered — H.Res. 755[8] — allowed one floor amendment, by Representative Dreier, to remove political party- coordinated expenditure limits. This was added by voice vote before final passage. The text of H.R. 513 was also incorporated into the House Republican leadership’s lobby and ethics reform bill — H.R. 4975 (Dreier). As introduced, Title VI of the bill incorporated the language of H.R. 513 as reported by the House Administration Committee. In addition, it included one provision unrelated to 527s, to remove the political party-coordinated expenditure limits in 2 U.S.C. §441a(d). Prior to House passage of H.R. 4975, an amendment was included by the House Rules Committee to prohibit leadership PACs from converting funds to personal use but to allow them to transfer unlimited funds to national party committees (as is the case with funds in principal campaign committees). On May 3, 2006, the House passed H.R. 4975, the Lobbying Accountability and Transparency Act of 2006, which included the text of H.R. 513 (Shays-Meehan), as well as the amendments on

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leadership PACs and party coordinated expenditures. After passing H.R. 4975, the House substituted it for the text of S. 2349, the Senate-passed version of the bill, to enable a conference with the Senate. The Senate-passed bill did not contain the 527 provisions, and the Senate resisted considering 527s in the context of ethics reform. This conflict between the House and Senate kept the issue from being resolved in the 109th Congress. On other 109th Congress issues, a provision allowing leadership PACs to transfer unlimited funds to national parties was added in committee to the Transportation-Treasury-HUD-Judiciary-DC appropriations bill for FY2006 (H.R. 3058). Following a move by BCRA sponsors, the Senate deleted the provision by unanimous consent on October 17, 2005. Also, the Senate Indian Affairs Committee held a hearing February 8, 2006, to examine rules governing campaign contributions by Indian tribes, in response to large sums of money given in recent elections and concerns over the application of federal campaign finance law thereto. In its final report on its investigation of lobbying and political activities by Indian tribes, the committee recommended requiring Indian tribes making federal election contributions to register with the FEC and improving rules for disclosure of those contributions.[9] The issue of regulation of Internet communications was addressed at a House Administration Committee hearing September 22, 2005. On November 2, the House failed to approve a measure to exempt Internet communications from regulation under federal campaign finance laws. H.R. 1606 (Hensarling) was brought up under suspension of the rules but failed on a 225-182 vote. On March 9, 2006, the House Administration Committee ordered the bill favorably reported,[10] and it was expected to be considered by the House on March 16, but that vote was postponed. On March 27, the FEC approved new regulations to regulate only paid advertisements placed on another’s website, thus addressing much of the concern expressed about Internet regulation. On March 29, House Majority Leader Boehner announced that consideration of H.R. 1606 would be postponed indefinitely. In all, 51 bills (43 House and 8 Senate) were introduced in the 109th Congress to change federal campaign finance law.

110th Congress Although campaign finance has yet to emerge as a major issue in the 110th Congress, the Senate’s consideration of S. 1, the Ethics Reform bill, touched upon several aspects of campaign finance practices as they pertained to lobbyists. Several

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campaign finance-related amendments were incorporated into S. 1, which passed the Senate January 18, 2007 by a 96-2 vote.[11] As passed, S. 1 contains provisions to •

• •

•

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•

amend FECA to exempt air travel by federal candidates on private airplanes from definition of “contribution” under FECA (and thus not subject to source prohibitions and limits) only if reimbursement is provided at the fair market value, based on the private charter rate; amend Senate Rules to prohibit Senators from being honored during national party conventions at events sponsored by registered lobbyists; require registered lobbyists to disclose on required reports relevant information (including names and dollar amounts) on federal candidates, party committees, and leadership PACs for whom they sponsored fundraisers, made contributions to, and collected contributions or otherwise arranged for contributions to be made (i.e., bundling); require that information disclosed on lobbyists’ reports be made available on a public database, with links to relevant information filed with the Federal Election Commission; and require the newly established Commission to Strengthen Confidence to report to Congress on campaign contributions made by specified entities during a specified period.

Two other proposed campaign finance-related amendments to S. 1, both offered by Senator Vitter, were tabled by the Senate: amendment 5, to require Indian tribes to set up political action committees to make campaign contributions, rather than using tribal treasury funds; and amendment 6, to prohibit immediate family of federal candidates on the payroll of their principal campaign committees or leadership PACs.[12] On March 28, 2007, the Senate Rules and Administration Committee unanimously voted to report S. 223 (Feingold), to require electronic filing of Senate candidates’ campaign disclosure reports. The measure was placed on the Senate legislative calendar. On April 18, 2007, the Senate Rules and Administration Committee held a hearing on S. 1091 (Corker), a bill to eliminate limits on political party coordinated expenditures (i.e., expenditures made by a party in coordination with a candidate’s campaign, subject to limits since the 1974 FECA Amendments). The limits are relatively high compared with limits on contributions, with typical House candidates eligible for $79,200 in 2006 and a Senate candidate as much as $4.2 million (in California) that year. Ever since the Supreme Court ruling in

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Colorado Republican Federal Campaign Committee v. FEC (518 U.S. 604 (1996)), which permitted parties to make independent expenditures on behalf of their candidates, the importance of coordinated expenditures has been diminished. The prospect of unlimited independent expenditures has been increasingly appealing to the parties, and it has become common for parties to make both independent expenditures and coordinated expenditures for the same candidates, albeit from at least nominally different departments of a party committee. In 2006, Democratic party committees (federal, state, and local) made $20.7 million in coordinated expenditures and $108.1 million in independent expenditures to promote their federal candidates; Republican party committees made $14.2 million in coordinated expenditures and $115.6 million in independent expenditures. BCRA had contained a provision to require a party to choose making either independent expenditures or coordinated expenditures, but not both, for one of its nominees; this, however, was one of two BCRA provisions struck down by the Supreme Court in McConnell v. FEC (549 U.S. 93(2003)). Hence, while abolishing the limit on coordinated expenditures would appear to allow the parties to spend unlimited amounts on behalf of their candidates, they already have that right, albeit through expenditures that are technically made without any coordination with the favored candidate. Supporters of removing the limits assert that doing so would largely indicate acceptance of the current reality and allow parties to reinforce their direct ties with candidates. Opponents assert that this would send the wrong message to an electorate cynical about the role of money in politics and also that the national parties are now playing a significant role, especially in light of increased hard money limits under BCRA. In the 2004 election cycle, the first conducted after the soft money prohibition went into effect, nearly $1.5 billion was raised by party committees (all hard money), more than ever had been raised in combined hard and soft money by the national parties. Thus far in the 110th Congress (as of April 19, 2007), 41 bills (12 in the Senate and 29 in the House) have been introduced to make changes in campaign finance law or related campaign practices. Two of them, H.R. 420 and S. 463, the 527 Reform Act of 2007, are essentially the proposal passed twice by the House in the 109th Congress (see summary below) and which reform supporters consider unfinished business for the 110th Congress to address.

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MAJOR LEGISLATION IN 110TH CONGRESS H.R. 420 (Meehan-Shays) — 527 Reform Act of 2007 •

•

•

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•

•

•

Includes in definition of political committee any IRC §527 organization, unless it: (1) has annual gross receipts of less than $25,000; (2) is a political committee of a state or local party or candidate; (3) exists solely to pay certain administrative expenses or expenses of a qualified newsletter; (4) is composed solely of state or local officeholders or candidates whose voter drive activities refer only to state/ local candidates and parties; or (5) is exclusively devoted to elections where no federal candidate is on ballot, to nonfederal elections, ballot issues, or to selection of non-elected officials; Makes last exemption (above) inapplicable if the IRC §527 organization spends more than $1,000 for: public communications that promote, support, attack, or oppose a clearly identified federal candidate within one year of the general election in which that candidate is seeking office; or for any voter drive effort conducted by a group in a calendar year, unless: (1) sponsor confines activity solely to one state; (2) non-federal candidates are referred to in all voter drive activities and no federal candidate or party is referred to in any substantive way; (3) no federal candidate or officeholder or natl. party official/agent is involved in organization’s direction, funding, or spending; AND (4) no contributions are made by the group to federal candidates; Codifies 2005 FEC regulations and makes them applicable to 527s not affected by current rules; Allows contributions to non-federal accounts making allocations (above) only by individuals and subject to limit of $25,000 per year; prohibits fundraising for such accounts by national parties and officials and federal candidates and officeholders; States that this act shall have no bearing on FEC regulations, on any definitions of political organizations in Internal Revenue Code, or on any determination of whether a 501(c) tax-exempt organization may be a political committee under FECA; Provides special expedited judicial review procedures, similar to BCRA’s, for a challenge on constitutional grounds, and allows any Member to bring or intervene in any such case.

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Introduced January 11, 2007; referred to Committee on House Administration

S. 223 (Feingold) — Senate Campaign Disclosure Parity Act Requires Senate candidates’ disclosure reports to be filed electronically. Introduced January 9, 2007; referred to Committee on Rules and Administration. March 28, 2007, unanimously reported by Rules and Administration Committee, as amended, and placed on Senate legislative calendar.

S. 463 (McCain-Feingold) — 527 Reform Act of 2007 Identical to H.R. 420. Introduced January 31, 2007; referred to Committee on Rules and Administration.

S. 1091 (Corker) — Campaign Accountability Act of 2007 Repeals limits on political party coordinated expenditures. Introduced April 11, 2007; referred to Committee on Rules and Administration. April 18, 2007, hearings held in Rules and Administration Committee.

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FOR ADDITIONAL READING CRS Report RS21176, Application of Campaign Finance Law to Indian Tribes, by L. Paige Whitaker and Joseph E. Cantor. CRS Report RL31402, Bipartisan Campaign Reform Act of 2002: Summary and Comparison with Previous Law, by Joseph E. Cantor and L. Paige Whitaker. CRS Report RS21693, Campaign Finance Law: The Supreme Court Upholds Key Provisions of BCRA in McConnell v. FEC, by L. Paige Whitaker. CRS Report RL33836, Campaign Finance Legislation and Activity in the 109th Congress, by Joseph E. Cantor and R. Sam Garrett. CRS Report 97-1040, Campaign Financing: Highlights and Chronology of Current Federal Law, by Joseph E. Cantor.

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CRS Report RS22272, Campaign Finance Reform: Regulating Political Communications on the Internet, by L. Paige Whitaker and Joseph E. Cantor. CRS Report RL30669, Campaign Finance Regulation Under the First Amendment: Buckley v. Valeo and Its Supreme Court Progeny, by L. Paige Whitaker. CRS Report RS22644, Coordinated Party Expenditures in Federal Elections: An Overview, by R. Sam Garrett and L. Paige Whitaker. CRS Report RL32954, 527 Political Organizations: Legislation in the 109th Congress, by Joseph E. Cantor and Erika Lunder. CRS Report RS21716, Political Organizations Under Section 527 of the Internal Revenue Code, by Erika Lunder. CRS Report RL33814, Public Financing of Congressional Elections: Background and Analysis, by Joseph E. Cantor and R. Sam Garrett. CRS Report RL33888, Section 527 Political Organizations: Background and Issues for Federal Election and Tax Laws, by Joseph E. Cantor, Erika Lunder, and L. Paige Whitaker. CRS Report RL32786, The Presidential Election Campaign Fund and Tax Checkoff: Background and Current Issues, by Joseph E. Cantor.

REFERENCES [1]

[2]

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[3]

[4]

[5] [6]

Soft money (discussed more fully in this article) generally refers to funds that are raised and spent outside the purview of federal election law regulation but which are intended to affect federal elections, at least indirectly. Herbert E. Alexander, Financing the 1976 Election (Washington: Congressional Quarterly Press, 1979), p. 166. Candice J. Nelson, “Spending in the 2000 Elections,” in David B. Magleby (ed.), Financing the 2000 Election (Washington: Brookings Institution Press, 2002), p. 24. Center for Responsive Politics, ‘04 Elections Expected to Cost Nearly $4 Billion, press release, Oct. 21, 2004, [http://www.opensecrets.org/ press releases/2004/04spending.asp], site visited July 21, 2006. “100 Leaders by U.S. Advertising Spending,” Advertising Age, Sept. 29, 1997, p. 14. U.S. Congress, House Committee on House Administration, 527 Fairness Act of 2005, report to accompany H.R. 1316, 109th Cong., 1st sess., H.Rept. 109-146 (Washington: GPO, 2005).

Campaign Finance: An Overview

U.S. Congress, House Committee on House Administration, 527 Reform Act of 2005, report to accompany H.R. 513, 109th Cong., 1st sess., H.Rept. 109-18 1 (Washington: GPO, 2005). [8] U.S. Congress, House Committee on Rules, Providing for Consideration of H.R. 513, 527 Reform Act of 2005, report to accompany H.Res. 755, 109th Cong., 2nd sess., H.Rept. 109-404 (Washington: GPO, 2006). [9] U.S. Congress, Senate Committee on Indian Affairs, “Gimme Five”: Investigation of Tribal Lobbying Matters, final report, 109th Cong., 2nd sess., June 22, 2006; at [http://www.indian.senate.gov/ public/_files/ Report.pdf], visited July 21, 2006. [10] U.S. Congress, House Committee of House Administration, Online Freedom of Speech Act, report to accompany H.R. 1606, 109th Cong., 2nd sess., H.Rept. 109-389 (Washington: GPO, 2006). [11] “Legislative Transparency and Accountability Act of 2007,” Congressional Record, daily edition, vol. 153 (Jan. 18, 2007), p. S746. [12] “Legislative Transparency and Accountability Act of 2007,” Congressional Record, daily edition, vol. 153 (Jan. 10, 2007), pp. S343344.

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[7]

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In: Campaign Finance… Editor: Thomas P. Kallen, pp. 131-149

ISBN: 978-1-60692-836-3 © 2009 Nova Science Publishers, Inc.

Chapter 4

FEDERAL FUNDING OF PRESIDENTIAL NOMINATING CONVENTIONS: OVERVIEW AND POLICY OPTIONS *

R. Sam Garrett and Shawn Reese

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ABSTRACT This article provides an overview and analysis of two recurring questions surrounding the federal government’s role in financing presidential nominating conventions. First, how much public funding supports presidential nominating conventions? Second, what options exist for changing that amount if Congress chooses to do so? Both issues have generated controversy in the past and continue to be the subject of legislative debate. Four bills introduced in the 110th Congress propose changes to the structure or amounts of federal funds for presidential nominating conventions. Those bills (H.R. 72, H.R. 484, S. 436, and S. 2412) would affect Presidential Election Campaign Fund (PECF) convention grants. (Two other bills, H.R. 776 and H.R. 4294, would affect nonfederal convention funds.) Congress enacted one law (P.L. 110-161) in FY2008 that affected convention security funding with the appropriation of $100 million for the Democratic and Republican nominating conventions (each were allocated $50 million). This security funding is not provided to party convention committees but to the state and local law enforcement entities assisting in securing the convention sites. *

This is an edited, excerpted and augmented edition of CRS Report RL34630, dated August 22, 2008.

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R. Sam Garrett and Shawn Reese A total of approximately $133.6 million in federal funds has supported, or will support, the 2008 Democratic and Republican conventions. Such funding is provided through separate federal programs that support public financing of presidential campaigns and convention security. Some Members of Congress and others have objected to federal convention funding and have argued that the events should be entirely self-supporting. Others, however, contend that public funding is necessary to avoid real or apparent corruption in this aspect of the presidential nominating process. If Congress decides to revisit convention financing, a variety of policy options discussed in this article might present alternatives to current funding arrangements. Additional discussion of public financing of presidential campaigns appears in CRS Report RL34534, Public Financing of Presidential Campaigns, by R. Sam Garrett. For additional information on National Special Security Events, which include presidential nominating conventions, see CRS Report RS22754, National Special Security Events, by Shawn Reese.

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INTRODUCTION Every four years, the two major political parties, and some third parties, select their presidential nominees at conventions. These conventions are run by and for parties, without a formal role for the federal government. Federal funds do, however, provide certain financial support to convention committees that choose to accept public money. Additionally, Congress appropriates federal funding for the securing of the convention venues. A variety of policy issues surrounds convention financing. Some observers have questioned why federal funds subsidize conventions considering the availability of substantial private resources and that they are party, rather than governmental, events. Others have contended that private funds, particularly so-called “soft money,” which falls outside the scope of federal campaign finance law, have become too pervasive in conventions and that tighter restrictions are needed. These divergent views on the use of public funds to support party conventions also appear in other contexts in the broader debate surrounding campaign finance policy. Two taxpayer-supported revenue sources are available to conventions: (1) presidential public campaign funds; and (2) security funds. Approximately $133.6 million from those sources have gone or will go toward the 2008 Democratic and Republican national conventions. No third parties received convention funds for the 2008 election cycle.[1] Before proceeding, it is important to note the distinction between presidential public funds and security funds. Presidential public funds and security funds come

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from separate revenue sources. They are allocated differently, are used for different purposes, and are subject to different points of debate. Although both presidential public funds and security funds both support conventions, Congress may reassess them separately.

CONVENTION FINANCING: AN OVERVIEW Federal Funds

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Two sources of federal funds support different aspects of presidential nominating conventions. First, funds for convention operations come from the Presidential Election Campaign Fund (PECF), which provides financial assistance to publicly financed presidential candidates.[2] Second, funds are appropriated by Congress to the Department of Justice (DOJ) for security costs incurred by state and local governments hosting the conventions.

PECF Funds Congress makes no appropriations for PECF funds (including amounts used to support conventions). Rather, amounts in the PECF are determined by “checkoff” designations on individuals’ federal income tax returns. Individuals may choose to designate $3 of their tax liability to the PECF. Married couples filing jointly may designate a total of $6 to the fund.[3] Federal law permits the two major parties’ conventions to receive grants of $16.8 million for the 2008 election cycle (an inflation-adjusted base amount of $4 million each). These grants are awarded to the relevant party’s convention committee.[4] Qualifying convention committees are not obligated to accept PECF funds, but doing so is standard practice. Third parties are eligible for limited public convention funds, but they rarely qualify.[5] Under federal law, PECF convention grants must first be reserved before other elements of presidential public funding can be distributed. Once convention grants are reserved, the Treasury Department may distribute general election grants and primary matching funds to participating presidential candidates.[6] The Federal Election Commission (FEC) determines eligibility for PECF funds based on requirements established in Title 26 of the U.S. Code (the Internal Revenue Code), the Federal Election Campaign Act (FECA), and FEC regulations.[7]

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DOJ Funds The second source of federal convention funds come through the Office of Justice Programs (OJP), within the Department of Justice (DOJ). This OJP funding has only been available in FY2004 and FY2008, arguably as a result of the September 11, 2001, terrorist attacks.[8] In 2004, Congress appropriated $100 million, through DOJ, for the Democratic and Republican presidential nominating conventions in Boston and New York City.[9] More recently, Congress appropriated $100 million for the Democratic and Republican presidential nominating convention security in Denver and Minneapolis-St. Paul, respectively.[10] In 2008, the $100 million is to be administered through OJP’s Edward Byrne Memorial State and Local Law Enforcement Assistance Programs. DOJ, reportedly, will use most of this funding to reimburse state and local law enforcement entities for overtime costs associated with convention security. Even though DOJ administers the convention security funding, DOJ is not responsible for security at the presidential nominating conventions. Rather, the U.S. Secret Service (USSS) is responsible for planning, coordinating, and implementing security operations at conventions. Congress authorized the USSS — when directed by the President — to be the lead federal agency for convention security in P.L. 106544 (the Presidential Threat Protection Act of 2000) because the conventions are designated as National Special Security Events (NSSE).[11] In addition to presidential nominating conventions, NSSEs include such events as presidential inaugurations, major international summits held in the United States, and some major sporting events. Recent Federal Convention Funding As Table 1 shows, the federal government provided (or will provide) a total of approximately $133.6 million — combining PECF grants and security expenditures — to support the 2008 Democratic and Republican conventions. Each convention is allocated approximately $66.8 million. In 2004, federal funding for the Democratic and Republican conventions totaled approximately $129.6 million ($29.6 million in PECF funds and $100 million in security funds). No third parties qualified for any federal funding in 2008 or 2004. A third party most recently received PECF funds in 2000. That year, the Reform Party reportedly qualified for $2.5 million in federal funds.[12] Congress has never appropriated funds for a third party’s convention security.

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Table 1. Federal Funds Supporting the 2008 Presidential Nominating Conventions (in millions of dollars) Presidential Election Campaign Fund (PECF) Grants $16.8

Security Funding $50.0

Total Federal Funding $66.8

Republican Convention

$16.8

$50.0

$66.8

Total

$33.6

$100.0a

$133.6

Democratic Convention

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Sources: PECF data appears in U.S. Treasury Department, Financial Management Service, “Disbursements From the Presidential Election Campaign Fund and Related Payments,” July 31, 2008; provided to CRS by the Office of Legislative and Public Affairs, Financial Management Service. The 110th Congress appropriated $100 million (through OJP) for securing the 2008 presidential nominating conventions in P.L. 110-161, Div. B, Title II. Notes: Amounts in the table are rounded. CRS aggregated totals in the table. a. This amount does not include any funding that the U.S. Secret Service may expend in protecting major presidential candidates at the conventions.

Conditions on PECF Funds In exchange for receiving public funds, a party’s convention committee must agree not to raise or spend additional funds.[13] Certain exceptions are permitted for legal or accounting fees. (As is discussed later in this article, nonfederal funds also supplement conventions, although those funds do not flow through the convention committees.) Among other requirements, convention committees receiving public funds must file disclosure reports with the FEC, agree to provide the commission with any requested documents, and submit to an audit of their PECF spending.[14] Federal law places relatively few restrictions on how PECF convention funds are spent, as long as purchases are lawful and are used to “defray expenses incurred with respect to a presidential nominating convention.”[15] FEC regulations provide additional guidance on permissible and prohibited spending.[16] Per FEC regulations, permissible PECF convention expenses include items such as: • •

“preparing, maintaining, and dismantling” the convention site; personnel and staff expenses (including bonuses);

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convention operations and planning; security;[17] transportation; certain entertainment; administrative items (e.g., office supplies); gifts for convention staff or volunteers (limited to $150 per person or $20,000 total); production of candidate biographical films; or investment of PECF funds if the profits are to be used to defray convention costs.[18]

It is important to note, however, that although federal regulations permit the types of spending described above, individual convention committees do not necessarily choose to fund all of those activities. Convention committees are prohibited from spending PECF funds on items including: •

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• • •

candidate or delegate participation in the convention, except in limited circumstances; any item that would violate federal or state laws; penalties resulting from enforcement of federal election law; or replacing lost or stolen items, except in limited circumstances.[19]

Conditions on Security Funds There are no conditions on security funds per se; however, convention security funding can only be used for costs associated with specifically identified presidential nominating conventions. In 2008, the Democratic convention in Denver, and the Republican convention in Minneapolis-St. Paul are the only ones authorized to receive federal security funding. This funding is primarily used to directly reimburse state and local law enforcement entities for their expenses, thus neither major party is an eligible recipient of this security funding. The $100 million Congress appropriated for the FY2008 presidential nominating conventions will be, reportedly, primarily used to reimburse state and local law enforcement costs associated with their participation in securing the convention sites. In 2004, the main security costs that state and local law enforcement entities incurred involved overtime payments. This overtime of state and local law enforcement personnel might be the result of their participation in not only securing the convention venue, but participating in such activities as advance

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planning, conducting liaison for venue and air space security, training, and establishing and maintaining communications.[20] Additionally, there are other security costs incurred by the federal government associated with the conventions that are not part of the $100 million appropriated in FY2008. Some of these additional security costs include the USSS protection of major presidential candidates (whether at the convention or at other campaign locations)[21] and the use of other federal government personnel assisting in securing the convention sites, such as Federal Protective Service law enforcement officers.[22] Other federal security costs include the securing of the convention venue through the positioning of fencing and barricades, as well as pre-positioning federal law enforcement K-9 units and other teams such as the U.S. Department of Homeland Security’s (DHS) Domestic Emergency Support Teams, and Urban Search and Rescue Teams.[23]

Nonfederal Funds

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As discussed below, conventions also benefit from nonfederal money that supports certain activities and security operations. In both cases, amounts of nonfederal funds can vary widely and are not necessarily centrally reported.

Convention-Related Activities Nonfederal funds are a major source of money associated with the political (as opposed to security) side of presidential nominating conventions. The Campaign Finance Institute (CFI, a campaign finance interest group) has estimated that more than 75% of money related to the 2004 Democratic and Republican conventions came from private sources.[24] Although a complete accounting is not yet available, the 2008 conventions also appear to be heavily subsidized, albeit indirectly, by nonfederal funds.[25] In August 2008, CFI and the Center for Responsive Politics (another campaign finance interest group) estimated that 80% of funds for the 2008 Democratic and Republican conventions would come from private (nonfederal) sources.[26] As is discussed below, state and local governments may also spend additional amounts on security. Nonfederal funds[27] are generally not subject to the limits on contribution sources and amounts found in federal campaign finance law, although some FEC reporting requirements apply.[28] Although convention committees may not accept private funds (other than certain amounts to offset legal and accounting needs), local “host committees” may solicit and spend private contributions for activities

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related to the convention, such as “use of an auditorium or convention center,” promoting the convention city, and hosting receptions or tours for attendees.[29] As a practical matter, the regulation of federal versus nonfederal funds rests largely on how FECA and the FEC have treated each source. FECA is largely silent on campaign finance aspects of nonfederal funds, and the FEC has determined that nonfederal funds do not explicitly support the conventions per se, even if they support events associated with those conventions. In particular, a 2003 FEC rulemaking reaffirmed the commission’s long-held view that: donations of funds to host committees are, as a matter or law, distinct from other donations by prohibited sources [defined in FECA] in that they are motivated by a desire to promote the convention city and hence are not subject to the absolute ban on corporate contributions in 2 U.S.C. 441b [a FECA provision]. This conclusion is buttressed by the fact that frequently members of the opposite political party have played prominent and active roles in convention host committees.[30]

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State or local governments, or coalitions of those governments, may also provide financial assistance to conventions through entities known as “municipal funds.”[31] The FEC has also permitted corporations and labor unions, which may not provide direct financial support to federal campaigns, to make certain contributions of goods or services to host committees and municipal funds.[32] In addition, “commercial vendors” may provide goods or services to convention committees “at reduced or discounted rates, or at no charge” in certain circumstances.[33]

Security Operations Even though the primary use of the $100 million of federal funds through DOJ’s security grants is intended to offset the security costs incurred by state and local governments, additional funds may be needed. Therefore, one can assume that nonfederal funding (state and local government funding) is also used to secure the conventions. The amount of nonfederal funding is based on the costs to state and local law enforcement entities that work with the USSS and other federal law enforcement agencies during the convention.[34] Additionally, unlike the funding used by party convention committees, any nonfederal funds used for convention security would come from state and local governments, not PECF designations.

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RECENT LEGISLATIVE ACTIVITY Legislation that Would Affect PECF Convention Funding As shown in Table 2, four bills introduced in the 110th Congress would affect PECF convention financing. Only one of those bills (H.R. 72) is principally concerned with convention funding. Others emphasize broader presidential public financing issues. Additional discussion of the policy approaches proposed in all four bills appears in the “Policy Issues and Options” section of this article. Table 2. Legislation Introduced in the 110th Congress that would Affect PECF Convention Funding Bill

Principal Sponsor

Major Convention Funding Provisions (federal-funds only)

Most Recent Action

H.R. 72 H.R. 484

Bartlett

Would repeal PECF convention grants

Referred to Committee on House Administration

Doolittle

Would repeal the PECF entirely (including convention grants)

Referred to Committees on House Administration and Ways and Means

S. 436

Feingold

Would repeal prioritization of PECF convention funds

Referred to Committee on Finance

S. 2412

Feingold

Would repeal prioritization of PECF convention funds

Referred to Committee on Finance

Source: CRS analysis of bill texts. Note: For additional information on these and other presidential public financing bills, see CRS Report RL34534, Public Financing of Presidential Campaigns, by R. Sam Garrett.

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Presently, there is no legislation pending that would affect convention security funding.

POLICY ISSUES AND OPTIONS PECF Convention Funding As Congress considers whether, or how, to address PECF convention funds, Members may first examine what role it wishes those funds (or other federal funds) to play in modern conventions. The current system of PECF convention grants (and the presidential public financing program generally) has been in place since

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the 1976 election cycle and has remained essentially unchanged since that time. Although this article is not focused on nonfederal funds (e.g., “soft money”), it is widely accepted that such funds play a prominent, even if indirect, role in convention financing. As discussed below, the tension between federal and nonfederal funds is likely to shape congressional consideration of convention financing. Those who are wary of private, “interested” money in politics typically argue that public funds are a way to insulate conventions (or other aspects of elections) from undue individual, corporate, or labor influence and from real or apparent corruption stemming from private funds. From that perspective, maintaining or expanding public financing of conventions could be attractive. Similarly, Congress could choose to restrict sources of nonfederal funds.[35] On the other hand, in light of the availability of nonfederal funds, even those who support public financing in general might argue that federal funding for conventions is unnecessary or that it should be diminished. Finally, those opposed to campaign finance regulation often view any public financial assistance to campaigns (or conventions) as an inappropriate use of taxpayer funds. As is evident from the preceding discussion, the policy options addressed below, or others, would likely be part of a larger debate surrounding convention financing and presidential public financing in general.

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Maintaining the Status Quo If Congress chooses to make no policy changes, the role of PECF convention funds will remain as it is today. Convention committees that choose to accept public funds would continue to be bound by the regulations discussed above, and nonfederal funds would likely continue playing a role in convention financing. The amount of PECF funds available to convention committees is likely to continue to increase incrementally with inflation.[36] Options that Could Increase or Decrease Federal Convention Funding[37] The policy options discussed below could change the amount of federal funding available to conventions. Some of these options are proposed in current legislation. Others provide additional approaches that have been offered for consideration, but are not the subject of current legislation. Regardless of the particular approach, expanding federal funding could decrease the perceived need for nonfederal funds. However, in the absence of additional regulation of nonfederal funds, or voluntary decreases in spending by entities providing nonfederal funds, expanded federal funding could also increase the total amount of money surrounding conventions. Any change in federal

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convention funding would require amending the amounts currently specified in federal law ($4 million for major parties, as adjusted for inflation; $16.8 million in 2008).

Changing the Prioritization of Convention Funds As noted previously, PECF convention grants are reserved before matching funds or general-election grants are paid to publicly financed presidential candidates. If, however, Congress believes that funding candidates should be the top priority for the public financing program, de-prioritizing convention funding could be an option. Two bills introduced in the 110th Congress (S. 436 and S. 2412) would repeal the priority status of convention financing currently in law. Doing so might help avoid future financial shortfalls in other aspects of the public financing program (particularly primary matching funds). Nonetheless, it is possible that shortfalls could then affect convention funds, especially if convention funds were distributed after candidate funds.

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Appropriating Funds Appropriating funds would permit Congress to annually (or every four years) determine the amount of money available to conventions, as opposed (or in addition) to the current PECF amount of $16.8 million per major party.[38] If the PECF grant structure were abandoned in favor of appropriated funds, Congress could legislate any other funding amount (or none, as discussed below).[39] Accordingly, although appropriations might yield more funding for conventions than is currently available, Congress might also appropriate less funding. Appropriating convention funds would also mark a departure from Congress’s traditional approach to presidential public financing, which has always emphasized taxpayers’ roles in determining available funding. Altering the Checkoff-Designation Question As noted previously, federal financing of presidential campaigns — including convention financing — relies entirely on “checkoff” designations by individual taxpayers. Currently, the checkoff question allows taxpayers only to designate to the PECF $3 for individuals, or $6 for married couples filing jointly. Available funds are then distributed through convention grants, general election grants, and matching funds, as described previously. Congress could, however, choose to alter the checkoff designation by posing two separate questions to taxpayers: one for candidate financing, and another for convention financing. Of course, taxpayers might choose to either provide more or less funding to conventions (and candidate campaigns).

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Altering the Checkoff Amount Increasing the checkoff designation amount is frequently proposed as a way to provide additional funds to the PECF in general.[40] The same could be proposed for convention funding in particular.[41] For the first and only time, Congress tripled the checkoff amount (from $1 to $3 and $2 to $6) to their current levels in 1993.[42] Although increasing the checkoff amount did provide an influx of money to the PECF, it did not increase the percentage of taxpayers contributing to the fund.[43] If that same scenario occurred with another increase in the checkoff amount, more money would be available for public financing (including conventions if Congress so designates), but declining participation could threaten available funds in the long term. Repealing Convention Funding If Congress determines that convention funding were no longer necessary — or if it wanted to concentrate remaining funding on candidate campaigns — convention grants could be eliminated entirely. This outcome could be accomplished by repealing relevant sections of federal law, or by amending the law to prohibit the FEC from certifying convention grants, or the Treasury Secretary from making convention payments. In the 110th Congress, H.R. 72 (Bartlett) would end subsidies for nominating conventions. H.R. 484 (Doolittle) would end the public funding system entirely. Those concerned about the influence of private money, particularly soft money, in convention financing would likely object to conventions that are completely dependent upon private funds.

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Security Funds During the presidential election years of 2004 and 2008, Congress appropriated funding through DOJ for convention security; however, DOJ does not plan, train, exercise, or implement convention security operations. Instead, the USSS (a DHS entity) is the lead federal agency for convention security. DOJ’s role in providing convention security funding, the mission of the USSS, and the relationship between federal funding and nonfederal costs associated with convention security could be issues that Congress might choose to address prior to the conventions in 2012. Presently, the USSS is responsible for administering the convention security operations, in coordination with nonfederal entities, and using its own funding to cover any costs incurred by federal agencies involved in the security operations. However, state and local governments, following the convention, must apply to DOJ for reimbursement of their costs associated with convention security. DOJ

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administers the security grants because the USSS is not authorized to reimburse state and local government costs associated with any NSSE, and specifically any costs associated with presidential nominating conventions. It may be argued that the federal security activities executed by the USSS require coordination with the distribution of federal funds. State and local law enforcement entities are responsible for providing personnel and equipment during conventions and working with the USSS to “develop and implement a seamless security plan that will create a safe and secure environment for the general public, event participants, Secret Service protectees, and other dignitaries.”[44] To support this effort, in FY2008, Congress appropriated $1 million for NSSE costs within the USSS,[45] and the 2008 presidential nominating conventions have been designated as NSSEs.

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Maintaining the Status Quo If Congress chooses to make no policy changes, the routine of appropriating convention security funds during presidential election years would remain unchanged. State and local law enforcement entities would continue assisting the USSS in securing the convention venues and then apply to DOJ for reimbursement following the completion of the conventions. State and local governments can use some DHS grants, such as the State Homeland Security Grant Program (SHSGP) and the Urban Area Security Initiative (UASI) for convention security activities, even though DHS does not administer the convention security grants that Congress appropriated in FY2004 and FY2008.[46] The grant approval process for the DHS programs, however, is not flexible, so the programs have limited application to conventions. States and localities, when hosting a convention, would need to incorporate plans to use SHSGP and UASI funding for convention security in their grant applications. DHS does authorize states and localities to reprogram SHSGP and UASI funding with the DHS Secretary’s approval; however, that may result in states and localities not funding other planned homeland security activities. Options that Could Increase or Decrease Federal Convention Security Funding The policy options discussed below could change the amount of federal security funding available to conventions. None of these options have been proposed in legislation.

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Authorize SHSGP or UASI Amounts for Convention Locations For presidential election years, Congress could fund convention security through DHS’s SHSGP and UASI grants. This could be achieved by either increasing the SHSGP and UASI allocations for convention locations in election years, or by requiring convention states and localities to apply and program SHSGP and UASI funding specifically for convention security during election years. As noted above, this is an option that states and localities can utilize; however, it may result in not funding other planned homeland security activities. This option would also remove DOJ from the convention security funding cycle. States and localities have an established grant application mechanism with DHS related to homeland security funding and activities, and the use of SHSGP and UASI appropriations for convention security, arguably, are homeland security activities.

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Authorize USSS to Reimburse State and Local Government Costs Another option Congress may consider is authorizing the USSS to reimburse state and local convention security costs. Because the USSS is the federal agency responsible for convention security, one could argue that Congress could appropriate funding to the USSS to reimburse state and local costs. Arguably, the USSS could be more effective in auditing state and local law enforcement costs and determine reimbursement amounts since the USSS is the lead federal agency for convention security. This option, like the preceding one, would remove DOJ from administering the convention security funding. Conversely, this option would require the USSS to establish and administer a grant process that is not, at present, a responsibility of the agency. Discontinue Convention Security Funding to States and Localities Congress could also choose to not appropriate funding to reimburse state and local governments convention security costs. This might result in a reduced security role for state and local law enforcement entities or force state and local governments to fund all of their convention security activities. However, this option seems unlikely given the present national concern with homeland security, and the national interest in protecting major presidential candidates and ensuring the security of mass political events.

CONCLUSION Although PECF funding of convention operations has been in place since the 1976 election cycle, the role of federal convention funding remains subject to debate

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in Congress and beyond. Most of that debate, however, occurs within the broader discussions of presidential public financing and “hard” versus “soft” money in campaigns. Congress has several options for revisiting the federal role in PECF funding, if it chooses to do so. The role of the federal government in funding convention security is a fairly new development since the terrorist attacks of September 11, 2001. As federal, state, and local governments further refine their homeland security activities generally, and specifically convention security operations, Congress may consider different options for how the federal government provides funding for state and local costs incurred in securing convention venues.

REFERENCES [1]

[2]

[3]

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[4]

[5] [6] [7] [8]

Although third-party conventions are occasionally eligible for presidential public financing grants, Congress has only appropriated security funds for the 2004 and 2008 Democratic and Republican conventions. On the PECF, see 26 U.S.C. § 9001 et seq. and CRS Report RL34534, Public Financing of Presidential Campaigns. Convention funding was added through the 1974 Federal Election Campaign Act (FECA) amendments. See P.L. 93-443; 88 Stat. 1263. The checkoff question does not permit taxpayers to distinguish between making a designation to publicly financed presidential candidates versus to publicly financed conventions. In other words, taxpayers may choose to make a PECF designation, but may not specify how those funds are distributed or spent. Convention committees are separate political committees (i.e., candidate committees, party committees, and political action committees (PACs)) “responsible for conducting the day to day arrangements and operations of that party’s presidential nominating convention,” including receiving public funds. See 11 C.F.R. § 9008.3(a)(2). 26 U.S.C. § 9008(b). On prioritization of convention funding, see 26 U.S.C. § 9008(a). FECA is 2 U.S.C. § 431 et seq. However, federal assistance for convention security has been provided in at least one election year prior to 2004. According to The Campaign Finance Institute, in 1980 the cities of Detroit and New York City received “Federal Law Enforcement Assistance grants” of $3.2 million and $3.5

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[9]

[10] [11]

[12]

[13] [14] [15] [16]

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[17]

[18] [19] [20]

R. Sam Garrett and Shawn Reese million respectively for convention security. Steve Weissman with the assistance of Margaret Sammon and Jennifer Sykes, Inside Fundraising for the 2008 Party Conventions: Party Surrogates Gather Soft Money While Federal Regulators Turn a Blind Eye (Washington: Campaign Finance Institute, 2008). See the table entitled “Sources of Funding for Major Party Presidential Nominating Conventions, 1980-2004,” which is not paginated. In P.L. 108-287 (An Act Making Appropriations for the Department of Defense for the fiscal year ending September 30, 2005, and For Other Purposes), Sec. 11002, Congress appropriated $25 million for Boston and $25 million for New York City convention security. In P.L. 108-199 (An Act Making Appropriations for Agriculture, Rural Development, Food and Drug Administration, and Related Agencies for the Fiscal Year Ending September 30, 2004, and for Other Purposes), Sec. 103, Congress appropriated $50 million for the 2004 presidential nominating conventions. P.L. 110-161, Div. B, Title II. For information on the U.S. Secret Service’s missions, see CRS Report RL34603, The U.S. Secret Service: An Examination and Analysis of Its Evolving Missions, by Shawn Reese. Anthony Corrado, “Public Funding of Presidential Campaigns,” in Anthony Corrado, Thomas E. Mann, Daniel R. Ortiz, and Trevor Potter, eds. The New Campaign Finance Sourcebook (Washington: Brookings Institution Press, 2005), p. 191. 26 U.S.C. § 9008(d). 11 C.F.R. § 9008.3. 26 U.S.C. § 9008(c). Convention committees seeking specific guidance can consult the Federal Election Commission or legal counsel for additional information. Although PECF funds could be spent on security, it is likely that security would be paid for with other federal funds discussed elsewhere in this report. 11 C.F.R. 9008.7(a). 11 C.F.R. 9008.7(b). U.S. Department of Homeland Security, U.S. Secret Service, Office of Legislative Affairs, “National Special Security Events: Meeting the Counter-Terrorism Challenge” (Washington: 2006), p. 1. This document is only available by contacting the U.S. Secret Service’s Office of Legislative Affairs.

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[21] In FY2008, Congress appropriated $85 million for major presidential candidate protection, P.L. 110-161, Div. E. [22] U.S. Department of Homeland Security, U.S. Immigration and Customs Enforcement, Federal Protective Service, “Fiscal Year 2009 Congressional Justification,” p. 5. [23] U.S. Department of Homeland Security, Office of the Press Secretary, “National Special Security Events: Fact Sheet,” available at [http://www.dhs.gov/xnews/releases/press_release _0207.shtm]. [24] Steve Weissman with the assistance of Margaret Sammon and Jennifer Sykes, Inside Fundraising for the 2008 Party Conventions: Party Surrogates Gather Soft Money While Federal Regulators Turn a Blind Eye (Washington: Campaign Finance Institute, 2008). See “Sources of Funding for Major Party Presidential Nominating Conventions, 1980-2004,” which is not paginated. The report is available at [http://www.cfinst.org/books_reports/ conventions/2008Conventions_Rpt1 .pdf]. [25] See, for example, Fredreka Schouen, “Donors Pick up Parties’ Expenses; ‘Egregious Loophole’ Seen at Conventions,” USA Today, August 15, 2008, p. A1; and Leslie Wayne “Candidates Forgo Soft Money, But Conventions Rake It In,” New York Times, June 7, 2008, p. A1. See also ibid. and Craig Holman, Angela Canterbury, and Zoe Bridges-Curry, Party Conventions Are Free-For-All for Influence Peddling (Washington: Public Citizen, 2008) at [http://www.citizen.org/documents/Party% 20 Conventions2.pdf]. As the titles suggest, the CFI and Public Citizen reports address convention financing in addition to other issues (e.g., lobbying). Those reports also take policy positions on convention financing. This CRS report lists those sources as references, but does not take a position on convention financing. [26] Campaign Finance Institute, “Party Conventions’ Financiers Have Spent Nearly $1.5 billion on Federal Campaign Contributions and Lobbying Since 2005,” press release, August 20, 2008, at [http://www.cfinst.org/ pr/prRelease.aspx?ReleaseID=203], p. 1. [27] On the various funding sources discussed in this and the preceding sections, see Anthony Corrado, “Public Funding of Presidential Campaigns,” pp. 62-63. [28] Nonfederal funds that support conventions (except for security funding) are sometimes called “soft money,” a term of art used to describe money believed to influence elections, but which falls outside federal campaign finance law. On FEC reporting requirements for host committees and municipal funds (discussed below), see 11 C.F.R. § 9008.51.

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[29] Host committees are “any local organization,” such as civic associations, whose “principal purpose is the encouragement of commerce in the convention city, as well as the projection of a favorable image of the city to the convention attendees.” See 11 C.F.R. § 9008.50(b). On FEC receipt and expenditure regulations, see 11 C.F.R. § 9008.52. [30] Federal Election Commission, “Public Financing of Presidential Candidates and Nominating Conventions,” 68 Federal Register 47401, August 8, 2003. [31] Municipal funds are “any fund or account of a government agency, municipality, or municipal corporation whose principal purpose is the encouragement of commerce in the municipality and whose receipt and use of funds is subject to the control of officials of the State or local government.” See 11 C.F.R. § 9008.50(c). On FEC receipt and expenditure regulations, see 11 C.F.R. § 9008.53. Former FEC chairman David Mason provided consultations on some points regarding commission regulation of host committees and municipal funds (e-mail correspondence with R. Sam Garrett, August 14, 2008). [32] See 11 C.F.R. §§ 9008.52 and 9008.53(b). [33] 11 C.F.R. § 9008.9. [34] CRS is unable to determine the amount of nonfederal funding used by Boston and New York City in 2004, and there are no projections available for the 2008 conventions in Denver and Minneapolis-St. Paul. [35] For a discussion of constitutional issues, see CRS Report RL3 0669, The Constitutionality of Campaign Finance Regulation: Buckley v. Valeo and Its Supreme Court Progeny, by L. Paige Whitaker. [36] This assumes that sufficient balances would remain in the PECF to cover convention grants. [37] Some of the material in this section is adapted from CRS Report RL34534, Public Financing of Presidential Campaigns. See that report for additional discussion. [38] As noted previously, this amount is regularly adjusted for inflation. [39] Four 110th Congress bills that propose to revamp the presidential public financing program (H.R. 776; H.R. 4294; S. 436, and S. 2412) would permit congressional appropriations to initially cover additional benefits proposed in those bills, but the PECF would later have to repay those appropriations. This proposal is distinct from appropriations specifically for convention funding. [40] See, for example, H.R. 776, H.R. 4294, S. 436, and S. 2412 in the 110th Congress.

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[41] In the 110th Congress, H.R. 776, S. 436, H.R. 4294, and S. 2412 would all increase the checkoff amount, but do not propose additional funding for conventions. [42] 26 U.S.C. § 6096(a). On the increase, see P.L. 103-66; 107 Stat. 567568. [43] CRS Report RL34534, Public Financing of Presidential Campaigns. [44] U.S. Department of Homeland Security, U.S. Security Service, Office of Legislative Affairs, “National Special Security Events: Meeting the Counter-Terrorism Challenge” (Washington: 2006), p. 1. This document is only available by contacting the U.S. Secret Service’s Office of Legislative Affairs. [45] P.L. 110-161, Div. E. [46] For more information on recent appropriations for DHS grants, see CRS Report RS22805, FY2009 Appropriations for State and Local Homeland Security, by Shawn Reese.

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In: Campaign Finance… Editor: Thomas P. Kallen, pp. 151-169

ISBN: 978-1-60692-836-3 © 2009 Nova Science Publishers, Inc.

Chapter 5

CAMPAIGN FINANCE: LEGISLATIVE DEVELOPMENTS AND POLICY ISSUES IN THE 110TH CONGRESS *

R. Sam Garrett

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ABSTRACT During the 110th Congress, the House and Senate’s campaign finance work has overlapped in three areas. First and most significantly, a lobbying and ethics law enacted in September 2007, the Honest Leadership and Open Government Act (HLOGA; P.L. 110-81, which was S. 1), contains some campaign finance provisions. Second, the House and Senate have both passed H.R. 6296, which would extend the Federal Election Commission’s (FEC) Administrative Fine Program (AFP) until 2013. (As of this writing, there is no indication that President Bush will veto the bill.) Third, the Committee on House Administration and the Senate Rules and Administration Committee have held hearings on automated political telephone calls (also known as “robo calls” or “auto calls”), a subject that is related to campaign finance. Otherwise, the House and Senate have largely focused on different campaign finance issues. Specifically, the House has passed three bills, not passed by the Senate, containing campaign finance provisions. First, H.R. 3032 would allow candidates to designate an individual to disburse remaining campaign funds if the candidate dies. Second, H.R. 2630 would restrict *

This is an edited, excerpted and augmented edition of CRS Report RL34324, dated October 8, 2008.

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R. Sam Garrett campaign and leadership political action committee (PAC) payments to candidate spouses. Third, , a provision in the House-passed version of an appropriations bill (H.R. 3093) would have prohibited spending Justice Department funds on criminal enforcement of the Bipartisan Campaign Reform Act (BCRA) “electioneering communication” provision. However, the language was not included in the FY2008 consolidated appropriations law (P.L. 110-161). Similarly, the Senate has largely considered legislation not considered in the House. The Senate’s campaign finance activity has also been confined largely to hearings. S. 223, which would require electronic filing of campaign disclosure reports was reported from the Rules and Administration Committee but has not received floor consideration. During the spring and summer of 2007, the committee also held hearings on coordinated party expenditures (S. 1091) and congressional public financing legislation (S. 1285). Non-legislative items are also noteworthy. Following a Senate impasse over four nominees to the Federal Election Commission (FEC) during the first session of the 110th Congress, the Commission lacked the quorum necessary to make major policy decisions between January and June 2008. Senate confirmations of five nominees on June 24, 2008, restored the FEC to full capacity. FEC rulemakings are ongoing or expected in response to legislative activity, and Supreme Court rulings addressing electioneering communications (Federal Election Commission v. Wisconsin Right to Life, Inc.) and the “Millionaire’s Amendment” (Davis v. Federal Election Commission).

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BRIEF HISTORICAL OVERVIEW Federal campaign finance law emphasizes limits on contributions, restrictions on funding sources, and public disclosure of information about fundraising and spending. These goals and others are embodied in the 1971 Federal Election Campaign Act (FECA), which remains the cornerstone of the nation’s campaign finance law.[1] Major FECA amendments (in 1974, 1976, and 1979) expanded the presidential public-financing system and placed limits on campaign contributions and expenditures.[2] After these post-Watergate efforts to reduce the risk or appearance of corruption, campaign finance received relatively little legislative attention until the late 1990s. The Bipartisan Campaign Reform Act of 2002 — also known as “BCRA” or “McCain-Feingold” for its principal Senate sponsors — constituted the first major change to the nation’s campaign finance laws since 1979.[3] Among other points, BCRA banned large corporate and union donations to

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political parties (soft money) in federal elections and restricted certain political advertising preceding elections (electioneering communications). Much of the policy activity since that time has emphasized implementing BCRA, particularly at the FEC and in the courts.

FEC NOMINATIONS AND THE COMMISSION’S OPERATING STATUS Due to the loss of its quorum between January and June 2008, the FEC was unable to execute some of its core functions, including rulemaking to implement campaign finance law.[4] On June 24, 2008, the Senate confirmed five nominations to the agency.[5] Together with a sixth commissioner who continues to serve in holdover status, the FEC is now back at full strength. The new Commission held its first open meeting on July 10, 2008. At that meeting, Donald McGahn was unanimously elected chairman. Steven Walther was unanimously elected vice chairman. Pending issues facing the Commission include rulemaking to implement portions of the Honest Leadership and Open Government Act of 2007 (HLOGA, discussed later in this article), pending enforcement cases and advisory opinion requests, and administering the presidential public campaign financing program.[6] The Commission may also need to respond to ongoing litigation surrounding BCRA.

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Overview of the Nominations Dispute During the first session of the 110th Congress, the Senate considered four nominations — those of Robert D. Lenhard (D), David M. Mason (R), Steven T. Walther (D), and Hans A. von Spakovsky (R) — to the six-seat FEC. Mason originally began serving at the Commission in 1998 and had been renominated. Lenhard, Walther, and von Spakovsky were serving in recessappointments at the agency. Amid controversy surrounding the von Spakovsky nomination in particular, and over whether the nominations should be considered separately or as a group, the Senate declined to confirm or reject any of the nominations. The three recess appointees’ terms subsequently expired at the end of the first session of the 110th Congress, leaving the agency with just two sitting commissioners (Mason (R) and Ellen L. Weintraub (D)).

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The stalemate over FEC nominations continued with few developments between January and April of 2008. In April, Lenhard requested that his nomination be withdrawn.[7] In May 2008, in addition to withdrawing Lenhard’s nomination, President Bush withdrew the Mason and von Spakovsky nominations.[8] This series of events left the Walther nomination pending and Weintraub in holdover status. Also in April 2008, the President nominated Cynthia L. Bauerly (D), Caroline C. Hunter (R), and Donald F. McGahn II (R) to the Commission. The Senate Rules and Administration Committee held a confirmation hearing on the Bauerly, Hunter, and McGahn nominations on May 21, 2008. The committee favorably reported all three nominations on May 22, 2008. Also on May 22, the White House announced the President’s intention to nominate Matthew S. Petersen (R) to the Commission.[9] The Rules and Administration Committee did not hold a confirmation hearing on Petersen (a staffer on the committee). On June 24, 2008, the Senate confirmed Bauerly, Hunter, McGahn, Petersen, and Walther. The five new commissioners joined Ellen Weintraub, who continues to serve at the FEC in holdover status. McGahn was elected the Commission’s chairman. Between January and June 2008, the FEC’s operating status was significant because, under FECA, at least four Commissioners must vote affirmatively to approve, among other things, agency rules, enforcement decisions, and advisory opinions.[10] The Commission also could not implement legislation without at least four Commissioners in office.[11]

CAMPAIGN FINANCE LEGISLATION TH

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IN THE 110

CONGRESS

Legislative activity regarding campaign finance has occurred on two fronts during the 110th Congress. First, and most notably, the Honest Leadership and Open Government Act (HLOGA) contains some campaign finance provisions, but the law is primarily devoted to lobbying and ethics. HLOGA is the only legislation changing campaign financing policy to become law during the 110th Congress. Second, various other bills that emphasize campaign finance have been the subject of committee or floor action, but none have become law. Overall, approximately 50 bills that would affect campaign finance policy have been introduced in the 110th Congress.[12] The following discussion provides additional details on campaign

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finance bills that have been the subject of committee action or floor votes during the 110th Congress.

Campaign Finance Provisions in HLOGA

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S. 1, which became P.L. 110-81 on September 14, 2007, contains two significant campaign finance provisions: one related to bundling and another related to travel aboard private aircraft.[13] Both were seen as sources of potential abuse in the past. The law also prohibits Member attendance at presidential convention events in their honor if registered lobbyists or “private entit[ies]” that hire lobbyists pay for the events.[14] It also requires additional disclosure about lobbyists’ contributions (exceeding $200) to political committees, presidential inaugural committees, and presidential libraries.[15] FEC rulemaking (discussed below) is required to implement the bundling and campaign travel portions of HLOGA (sections 204 and 601 respectively). Although the travel section took effect upon the bill’s enactment, the FEC in late 2007 adopted rules providing its interpretation of the law. HLOGA requires the FEC to promulgate regulations implementing the bundling provision within six months of enactment (March 14, 2008), although the lack of a quorum prevented the agency from doing so.[16]

Bundling “Bundling” refers to a campaign fundraising practice in which an intermediary — often a lobbyist — either receives contributions and passes them to a campaign or is credited with soliciting contributions that a campaign receives directly. Before HLOGA became law, although FEC regulations on “earmarked” contributions technically restricted bundling, they were viewed as largely inapplicable to designated campaign fundraisers, including certain lobbyists. In response, HLOGA requires disclosure of bundling activities by registered lobbyists. Specifically, political committees (candidate committees, party committees, and PACs) must report to the FEC the name, address, and employer of each Lobbying Disclosure Act (LDA)-registered lobbyist “reasonably known” to have made at least two bundled contributions totaling more than $15,000 during specified six-month reporting periods.[17] HLOGA only requires disclosure of bundling by registered lobbyists — not other fundraisers. Therefore, HLOGA will provide more transparency than was previously available about which lobbyists arrange bundled contributions. However, it does not mandate disclosure of bundled contributions that

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do not meet the time and monetary thresholds discussed above or require information about bundling by non-lobbyists.

FEC Rulemaking The FEC issued a notice of proposed rulemaking (NPRM) on the bundling issue on October 30, 2007.[18] Most notably, and consistent with HLOGA, the FEC’s proposed rules would require political committees to report bundled contributions if the same source arranged or was credited with arranging two or more contributions totaling at least $15,000 during a six-month period. (The FEC also solicited comments about an alternative proposal for quarterly reporting.)[19] The proposed rules would also add the term “lobbyist/registrant PACs” — those committees “established or controlled” by registered lobbyists — to existing examples of political committees subject to FECA regulation and bundling disclosure.[20] Despite some specificity, the NPRM did not address how all reporting issues would be resolved. Rather, throughout the document, the Commission posed several questions about a range of issues, such as how widely disclosure requirements should apply and how committees should determine whether contributions were bundled.[21] Parts of the NPRM suggested that bundling disclosure could apply beyond lobbyists per se. Specifically, the FEC asked whether Congress intended for bundling disclosure to apply only to contributions arranged by registered lobbyists (who would be known as “lobbyist/registrants” under proposed rules), or also to fundraising by other actors. The latter could include non-lobbyist employees at lobbying organizations or hosts of fundraisers at which bundling occurs.[22] Several interested parties, including Members of Congress, submitted comments responding to the NPRM. A September 17, 2008, FEC hearing explored many of the issues raised in the NPRM. In particular, discussion and debate among Commissioners and witnesses (election lawyers and interest-group representatives) addressed how bundling activities should be reported to the FEC, which activities should be reported, and how fundraising should be reported if several individuals are involved in fundraising at a single event. The FEC has yet to announce final bundling rules. As noted previously, HLOGA requires the FEC to issue bundling rules within six months of the law’s enactment (the relevant deadline would have been March 14, 2008). However, the agency was unable to act between January and June 2008 due to the loss of its quorum. On July 28, 2008, FEC Chairman Donald F. McGahn reportedly stated that bundling regulations could not realistically be promulgated in time to affect the 2008 elections.[23] If it chose to do so, Congress could legislate bundling- disclosure details that would normally be left to the FEC.

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Campaign Travel HLOGA restricts campaign travel on private, non-commercial aircraft. Before HLOGA became law, political committees were permitted to reimburse those providing private aircraft at the rate of first-class travel as long as commensurate first-class commercial service were available for the route flown.[24] Reimbursement at non-discounted coach or charter rates was required if commensurate first-class service were unavailable on that route. Under the new law, Senators, candidates, and staff may continue to travel on private aircraft only if they reimburse the entity providing the aircraft for the “pro rata share of the fair market value” for rental or charter of a comparable aircraft. Those amounts could be well above the old first-class rate that applied to most flights before the law took effect. Unlike their Senate counterparts, House Members, candidates, and staff are “substantially banned” from flying aboard private, non-commercial aircraft, as the law precludes reimbursements for such flights.[25] FEC Rulemaking Under rules adopted by the FEC on December 14, 2007, all Senate, presidential, and vice-presidential campaign travel must be reimbursed at the “pro-rata share” of the charter rate, regardless of the route flown.[26] Consistent with HLOGA, political committees related to House of Representatives candidates are prohibited from making reimbursements for campaign travel aboard private aircraft, which essentially bans such travel. The “pro-rata share” reimbursement standard for Senate, presidential, and vice-presidential travel is based on the number of candidate committees (i.e., candidate campaigns) represented on a flight. If more than one candidate is represented on a flight, reimbursement would be shared among the relevant candidate committees. Specifically, political committees must provide reimbursement for all campaign travelers’ shares of the “normal and usual charter fare or rental charge for travel on a comparable aircraft or comparable size.”[27] These requirements also apply to travel on behalf of PACs, including leadership PACs, and party committees, although candidate committees represented on the flight would be responsible for covering costs for those travelers.[28] Travel aboard government aircraft must also be reimbursed at the per-person charter rate or at the rate the government entity providing the aircraft specifies for “private travel.”[29] Certain exceptions exist for travel aboard aircraft owned or leased by a candidate or an immediate family member, but reimbursement for campaign travel is nonetheless required.[30] Before publishing the final travel rules in the Federal Register, the Commission must approve an “explanation and justification” (E&J) document summarizing the

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public comments the FEC received and the agency’s reasoning in interpreting the law. These documents typically provide additional information about how the Commission intends to enforce the new rules and what those rules mean in practice. Although the FEC approved final travel rules in December 2007, it did not formally consider an E&J document. That document cannot be approved without affirmative votes from at least four Commissioners. The matter remains pending.

The Administrative Fine Program

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H.R. 6296 (Brady) would extend the FEC’s authority to conduct the Administrative Fine Program (AFP) until 2013. The House passed the bill on July 15, 2008, under suspension of the rules and by voice vote. The Senate passed the bill by unanimous consent on October 2, 2008. As of this writing, there is no public indication of a veto threat by President George W. Bush. The AFP sets standard penalties for routine financial-reporting violations and requires fewer resources than the Commission’s full enforcement process. Since the program’s inception in FY2000, the FEC has processed more than 1,600 enforcement cases, and assessed more than $3.1 million in fines, through the AFP.[31] Revenues from the program are deposited into the U.S. Treasury and do not directly benefit the FEC. Congress first granted authority for the AFP in the Treasury and General Government Appropriations Act of 2000 and has extended the program three times.[32] Because AFP legislative language has always included a “sunset” date, the program is not permanent. The current authorization to conduct the AFP will expire on December 31, 2008.[33] As noted above, H.R. 6296 would extend authority for the program until December 2013. Although AFP extensions have been traditionally handled through the appropriations process, H.R. 6296 is a stand-alone measure that would amend FECA.

Senate Activity on Other Campaign Finance Legislation Other than HLOGA and H.R. 6296, no campaign finance measures have passed the Senate during the 110th Congress. However, the Rules and Administration Committee has held hearings on four bills. First, on March 28, 2007, the committee held a hearing on S. 223 (Feingold), which would require Senate campaign committees (including candidate committees and party committees) to file campaign finance disclosure reports electronically. Currently, Senate campaign committees

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are the only federal political committees not required to do so. The bill has not received floor consideration, despite attempts to bring it up by unanimous consent. Second, on April 18, 2007, the committee considered S. 1091 (Corker), which would lift existing limits on coordinated expenditures that political parties may make on behalf of candidate campaigns. S. 1091 remains in committee. Third, on June 20, 2007, the committee held a hearing on S. 1285 (Durbin), which proposes a voluntary system to publicly finance Senate campaigns.[34] That bill also has not been subject to additional legislative action. Finally, the committee considered S. 2624 (Feinstein) at a February 27, 2008, hearing on automated political telephone calls. That topic is discussed below in more detail. The bill has not been subject to additional legislative action.

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House Activity on Other Campaign Finance Legislation The House has passed three bills (in addition to lobbying reform measures and H.R. 6296) containing campaign finance provisions. First, H.R. 3093, the House version of the FY2008 Commerce, Justice, Science, and Related Agencies appropriations bill, contained an amendment sponsored by Representative Pence that would have prohibited spending funds for criminal enforcement of BCRA’s electioneering communication provision (discussed below).[35] However, the measure was not included in companion Senate legislation or the FY2008 consolidated appropriations law.[36] A second House bill, H.R. 2630 (Schiff), would prohibit candidate campaign committees and leadership PACs from paying candidate spouses for campaign work. The bill would also require disclosure of certain payments to other family members. It would not affect spouses working for other campaigns (e.g., as political consultants). Another provision in the bill would hold candidates personally liable for violations of the new restrictions (if they knew violations occurred). That proposal marks a departure from existing FECA requirements, which largely hold campaign organizations and treasurers (not candidates) responsible for compliance.[37] H.R. 2630 passed the House on July 23, 2007, without a committee hearing. It has not been considered in the Senate. Third, the House passed H.R. 3032 (Jones, NC) on July 15, 2008, under suspension of the rules and by voice vote. The bill would permit candidates to designate to the FEC an individual (or a backup) to spend campaign funds if the candidate dies. Upon the candidate’s death, only the designee would have authority to disburse campaign funds. Currently, campaign treasurers have authority over campaign funds, as is discussed below. The bill would not relieve treasurers from

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FEC reporting responsibilities. The bill could alleviate the potential for asset disputes following candidate deaths, provided that designees would be more faithful to candidates’ wishes than would be treasurers. To that end, H.R. 3032 also permits candidates to provide instructions for disbursing campaign funds in the event of their death. H.R. 3032 would provide more candidate control over campaign assets than currently exists. FECA is largely silent on candidate responsibility for campaign operations, including spending. In fact, treasurers — not candidates — are legally responsible for disbursing campaign funds (and for most FEC compliance) regardless of whether the candidate is living or dead.[38] FECA also does not specify a role for candidates in campaign financial decisions. Accordingly, although H.R. 3032 would provide a legal mechanism for circumventing the treasurer after a candidate dies, the bill would not provide additional remedies for such action while the candidate is living. This may be a minor distinction due to candidates’ de facto influence over their campaigns, despite FECA’s general silence on the issue. Nonetheless, if Congress chose to enact H.R. 3032 and felt it were important to create parity in candidates’ abilities to direct campaign spending in life and after death, it could amend FECA to create a clearer candidate role over campaign funds regardless of whether the candidate is living or dead. Congress might also provide explicit permission in FECA for candidates to hire and fire campaign treasurers.

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Hearings on Automated Political Calls Also during the 110th Congress, House and Senate committees have held hearings on automated political telephone calls (also known as “robo calls” or “auto calls”). This issue is related to campaign finance because FEC reporting and disclaimer requirements apply to many such calls. Legislation aimed at restricting automated political calls also often references or would amend FECA. Another CRS report provides additional detail.[39] Several bills introduced in the 110th Congress would address automated political calls in some way, but none has been reported from committee or received floor consideration. The Committee on House Administration, Subcommittee on Elections, held an oversight hearing on automated political calls on December 6, 2007. In addition to providing background information about automated calls practices, Members and witnesses at the hearing considered whether, or if, automated calls could be constitutionally restricted. Some Members also emphasized the value of official (franked) automated calls to arrange telephone-based town hall meetings. The Senate Rules and Administration Committee also held a hearing on the calls, and related bill

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S. 2624 (Feinstein), on February 27, 2008. Discussion at that hearing emphasized voter and candidate frustration with the calls, and whether the calls could be constitutionally restricted.

OTHER RECENT DEVELOPMENTS Electioneering Communications

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BCRA prohibits corporate and union treasury funds from financing political advertising known as electioneering communications.[40] Under BCRA, electioneering communications are broadcast, cable, or satellite political advertising aired within 30 days of a primary election (or convention or caucus) or 60 days of a general election (or special or runoff election) that refers to a “clearly identified” federal candidate and is targeted to the relevant electorate.[41] Before BCRA became law, such advertising was often viewed as thinly veiled electioneering by corporations and unions, although some observers contended that the advertising reflected sponsors’ policy positions. On June 25, 2007, the U.S. Supreme Court issued a 5-4 decision in Federal Election Commission v. Wisconsin Right to Life, Inc. (WRTL II).[42] In brief, the case considered whether the electioneering communication provision prohibited the group Wisconsin Right to Life (WRTL) from paying for advertising, mentioning a Senate candidate, it intended to run during the 2004 election cycle. The Court held that the electioneering communication provision was unconstitutional as applied to the WRTL ads. Shortly thereafter, the FEC announced that it would revise its electioneering communications rules.

FEC Rulemaking The FEC held hearings on its electioneering communications rulemaking on October 17-18, 2007.[43] The Commission approved final rules in December 2007.[44] Although corporate and union treasury funds are generally prohibited in federal elections, the new rules allow payments for certain electioneering communications that focus on public policy issues rather than electing or defeating federal candidates.[45] As with other electioneering communications, certain information about spending on, and donations received for, these advertisements must be reported to the FEC.[46] The advertisements must also contain disclaimers identifying the person or organization responsible for the electioneering communication.[47]

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The new rules also require that electioneering communications paid for with corporate or union treasury funds must meet three “safe harbor” criteria intended to ensure that the advertising is not directly aimed at electing or defeating candidates. Specifically, the advertising may not: (1) mention “any election, candidacy, political party, opposing candidate, or voting by the general public” or (2) take a position on a candidate’s “character, qualifications, or fitness for office.” Third, the advertisement must either “[focus] on a legislative, executive or judicial matter or issue,” such as urging the public or candidates to adopt a policy position, or propose “a commercial transaction” (e.g., an advertisement for a candidate’s business).[48] Overall, the new rules permit corporations and unions to fund issue-oriented advertising in ways that were prohibited by BCRA. For those who view issue advertising as thinly veiled electoral advocacy, the rules could be seen as a loophole that allows otherwise prohibited corporate and union money to influence elections — the same concern that motivated BCRA’s electioneering communications provision that was held unconstitutional as applied to the WRTL ads. On the other hand, the FEC’s explanatory statement accompanying the new rules suggests that even general references to elections or candidates (e.g., election dates or a party name) could void the safe harbor protection for corporate and union spending.[49] If the Commission reaches such a determination in future enforcement cases, electioneering communications funded by corporate or union treasury funds would have to be strictly related to public policy issues, although they could be aired during election periods. Precise implications of the new rules are likely to become clearer over time, as advertisers test the rules during the 2008 election cycle and beyond and as the FEC considers future advisory opinions and enforcement cases. Additional litigation, which has been common following BCRA rulemakings, is also possible.

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“Millionaire’s Amendment” On June 26, 2008, a 5-4 majority of the U.S. Supreme Court declared the “Millionaire’s Amendment” unconstitutional in Davis v. Federal Election Commission.[50] (Another CRS product provides a legal analysis of the case.[51]) The Millionaire’s Amendment, which was enacted in BCRA, permitted congressional candidates facing certain self-financed opponents to receive larger campaign contributions than would normally be permitted. In some cases, political parties could also make unlimited coordinated expenditures on behalf of campaigns facing self-financed opponents.

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The FEC issued a public statement on July 25, 2008, noting that the “Court’s analysis in Davis precludes enforcement of the House provision of the [Millionaire’s Amendment] and effectively precludes enforcement of the Senate provision as well.”[52] Accordingly, the amendment’s reporting requirements and increased contribution limits no longer apply. The Commission will initiate a rulemaking to comport with the ruling, but “will no longer enforce the Amendment.”[53] On October 2, 2008, the Commission approved a notice of proposed rulemaking in light of Davis.[54] Essentially, the FEC proposes to repeal its rules originally promulgated to implement the Millionaire’s Amendment language in BCRA (particularly rules currently at 11 C.F.R. § 400). Repealing these and other relevant rules would clarify that the Millionaire’s Amendment is no longer applicable in House and Senate elections. Such a repeal would be consistent with the Commission’s stated practice of no longer enforcing the Amendment. The public comment period on the proposed repeal of the FEC’s Millionaire’s Amendment rules will close on November 21, 2008.

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CONCLUSION AND ANALYSIS HLOGA represents the most significant legislative development related to campaign finance during the 110th Congress. More than 50 other campaign finance bills have been introduced in the 110th Congress, but few have received major legislative attention. Other significant campaign finance developments have occurred away from Capitol Hill, particularly at the FEC and in the federal courts. FEC activity has focused on rulemakings in response to recent congressional activity, particularly regarding HLOGA. The campaign travel rules are relatively straightforward and consistent with the new lobbying and ethics law. Those rules, however, could be clarified by an E&J statement that has yet to be considered. The bundling and electioneering communications rulemakings (the latter was undertaken in response to the Supreme Court’s ruling in WRTL II) are more complicated and, in some cases, less clear. Although the proposed bundling rules are consistent with HLOGA’s content, the many questions and regulatory alternatives posed in the NPRM and at the September 2008 FEC hearing suggest that the agency is still considering how to implement that section of the law. Similarly, although the Commission has already adopted final electioneering communications rules, what those rules mean in practice will depend on how the FEC decides to pursue future enforcement and advisory cases. These issues could also be revisited now that additional Commissioners are in office.

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The long-term effect of the FEC’s inability to consider major policy questions between January and June 2008 remains to be seen.[55] It is clear, however, that the agency faces a substantial rulemaking and enforcement backlog in the short term. The fact that four of six Commissioners are new to the agency could also delay some activities. The HLOGA rulemaking is perhaps the most prominent one now facing the FEC. The absence of bundling rules means that certain disclosure required under HLOGA is not occurring, nor can it occur until the agency tells political committees how to report their bundled contributions. The schedule set forth in HLOGA would have facilitated partial reporting for the 2008 cycle. It now appears, however, that bundling disclosure as envisioned in HLOGA will not take effect until the 2010 cycle. Even if bundling-disclosure rules were in place now, however, they would not necessarily alter fundraising practices. Indeed, as was discussed at the September 17 FEC hearing, HLOGA requires more transparency about bundling, but does not restrict the practice. In addition, and as noted previously, although the HLOGA travel rules also have yet to be finalized via publication in the Federal Register, implementation of those rules is perhaps a less pressing matter because the relevant portion of the law took effect upon enactment, whereas the FEC bundling-disclosure provisions in HLOGA require Commission action to take effect. Overall, recent changes in campaign finance policy have been incremental, as has been the case since FECA became law in the 1970s. Congress generally did not focus on campaign finance legislation in the immediate aftermath of FECA and BCRA, perhaps because passing those laws had required substantial momentum that was difficult to replicate in the short term. That pattern could also hold following HLOGA, although most of that bill was related to lobbying and ethics rather than campaign finance. Even if Congress decides not to undertake major legislative activity on campaign finance in the near future, non-legislative activity is likely to keep campaign finance before the public and lawmakers. This is particularly true given the high-profile 2008 elections and heavy spending that has and will accompany those contests. Litigation, and the FEC’s response, is also likely to continue shaping the policy environment. These events demonstrate that the evolution of campaign finance policy occurs not only in Congress, but also at the FEC, in the courts, in other federal agencies, and, perhaps most of all, in campaigns themselves. As long as those campaigns continue, Congress will be faced with questions about how to regulate political money.

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REFERENCES 2 U.S.C. 431 § et seq. The Supreme Court struck down mandatory spending limits, except those accepted voluntarily in exchange for public campaign financing, in its 1976 Buckley v. Valeo decision. See CRS Report RL30669, The Constitutionality of Campaign Finance Regulation: Buckley v. Valeo and Its Supreme Court Progeny, by L. Paige Whitaker. [3] On BCRA, see P.L. 107-155; 116 Stat. 81. For additional information, see CRS Report RL3 1402, Bipartisan Campaign Reform Act of 2002: Summary and Comparison with Previous Law, by Joseph E. Cantor and L. Paige Whitaker. Cantor is now retired from CRS. Contact R. Sam Garrett with questions regarding Mr. Cantor’s portfolio. [4] For additional discussion, see CRS Report RS22780, The Federal Election Commission (FEC) With Fewer than Four Members: Overview of Policy Implications, by R. Sam Garrett. [5] “Confirmations,” Congressional Record, daily edition, vol. 154 (June 24, 2008), p. S6096. [6] For additional information on presidential public financing, see CRS Report RL34534, Public Financing of Presidential Campaigns: Overview and Analysis, by R. Sam Garrett. On convention financing, which is an element of the presidential public financing program, see CRS Report RL34630, Federal Funding of Presidential Nominating Conventions: Overview and Policy Options, by R. Sam Garrett and Shawn Reese. [7] Matthew Murray, “Democratic FEC Nominee Withdraws; Reid Blasts White House,” Roll Call, April 14, 2008, at [http://www.rollcall.com/is sues/ 1 _1/breakingnews/ 22987-1 .html?type=pf]. [8] On von Spakovsky, see, for example, Matthew Murray, “FEC May Be Back in Business Soon,” Roll Call, May 19, 2008, p. A1. [9] White House, Office of the Press Secretary, “Personnel Announcement,” May 22, 2008, at [http://www.whitehouse.gov/news/releases/ 2008/05/ 20080522-9.html]. [10] CRS Report RS22780, The Federal Election Commission (FEC) With Fewer than Four Members: Overview of Policy Implications, by R. Sam Garrett. [11] This assumes that at least four Commissioners could reach agreement.

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[1] [2]

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[12] This total is approximate because of varying ways in which “campaign finance” could be classified. The total does not include FEC appropriations legislation. On that topic, see the FEC portion of CRS Report RL33998, Financial Services and General Government (FSGG): FY2008 Appropriations, Garrett L. Hatch, Coordinator. [13] See also CRS Report RL34166, Lobbying Law and Ethics Rules Changes in the 110th Congress, by Jack Maskell. That report provides additional discussion and analysis. [14] 121 Stat. 753; 121 Stat. 767. Exceptions exist for presidential or vice-presidential candidates. [15] 121 Stat. 743. [16] 121 Stat. 744-121 Stat. 745. [17] 121 Stat. 744. On LDA, see 2 U.S.C. § 1601 et seq. [18] Federal Election Commission, “Reporting Contributions Bundled by Lobbyists, Registrants and the PACs of Lobbyists and Registrants,” 72 Federal Register 62600, November 6, 2007. Although the Commission approved the NPRM on October 30, it was not published in the Federal Register until November 6, 2007. [19] Ibid., pp. 62606-62607. [20] Ibid. [21] Ibid., pp. 62603-62604. [22] Ibid., pp. 62602-62603. [23] Kenneth P. Doyle, “Already Too Late to Act on ‘Bundling’ Rule Affecting 2008 Contest, FEC Chairman Says” Daily Report for Executives, July 29, 2008, p. A-6. [24] Campaigns must reimburse service-providers for travel (or other services) so that vendors do not make, or campaigns do not receive, prohibited “inkind” contributions that are excessively expensive, come from prohibited sources, or both. [25] 121 Stat. 774; and CRS Report RL34166, Lobby Law and Ethics Rules Changes in the 110th Congress, by Jack Maskell. [26] The new rules have not been published in the Federal Register. The rules are available on the Commission’s website. See “Draft Final Rule on Campaign Travel,” FEC open meeting agenda document no. 07-94, at [http://www.fec.gov/agenda/2007/mtgdoc07-94.pdf]. [27] On the quoted material see FEC, “Draft Final Rule on Campaign Travel,” p. 7. [28] The FEC reportedly chose this arrangement out of concern that party and PAC officials providing travel reimbursement could indirectly subsidize

Campaign Finance: Legislative Developments and Policy Issues…

[29] [30] [31]

[32]

[33] [34]

[35] [36]

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[37] [38] [39]

[40] [41] [42]

[43]

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candidate travel, which HLOGA sought to restrict (telephone consultation between Duane Pugh, Deputy Director, Congressional Affairs, FEC, and R. Sam Garrett, January 10, 2008). Conversely, under the new rules, candidates are arguably subsidizing party or PAC travel. The FEC could clarify this issue when it considers a related “explanation and justification” document, which is discussed in the text of this report. FEC, “Draft Final Rule on Campaign Travel,” pp. 8-9. Ibid., pp. 9-10. The precise numbers as of May 2008 were 1,629 and $3,157,682, respectively. The FEC and Treasury Department have been unable to collect the full amount due in some cases. This information comes from a telephone consultation between the author and Duane Pugh, director, legislative affairs, FEC, June 5, 2008. On the program’s creation, see P.L. 106-58; 113 Stat. 476. Extensions occurred in 2001 (115 Stat. 555), 2004 (118 Stat. 359), and 2005 (119 Stat. 2493-2494). 119 Stat. 2493-2494. See also 2 U.S.C. § 437g(a)(4)(C). CRS Report RS22644, Coordinated Party Expenditures in Federal Elections: An Overview, by R. Sam Garrett and L. Paige Whitaker; and CRS Report RL33814, Public Financing of Congressional Elections: Background and Analysis, by R. Sam Garrett, provide additional discussion of coordinated party expenditures and public financing of congressional elections, respectively. H.R. 3093 as passed by the House, Sec. 711. The consolidated appropriations bill is H.R. 2764, which became P.L. 110161. 2 U.S.C. § 432; 434. See, for example, 2 U.S.C. § 432(a). CRS Report RL3436 1, Automated Political Telephone Calls (“Robo Calls”) in Federal Campaigns: Overview and Policy Options, by R. Sam Garrett and Kathleen Ann Ruane. 2 U.S.C. § 441b(b)(2). See Title II of BCRA at 116 Stat. 88 and 2 U.S.C. § 434(f)(3)(A)(I). For additional detail and a legal analysis of the case, see CRS Report RS22687, The Constitutionality of Regulating Political Advertisements: An Analysis of Federal Election Commission v. Wisconsin Right to Life, Inc., by L. Paige Whitaker. The hearings focused on two alternative rules: one that would have allowed corporate and union-funded electioneering communications but would have

168

[44] [45]

[46]

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[47]

[48] [49] [50] [51]

[52]

R. Sam Garrett maintained FEC reporting and disclaimer requirements, and another that would have exempted corporate and union-funded electioneering communications from FEC reporting and disclaimer requirements. On the two alternative proposals, see Federal Election Commission, “Electioneering Communications,” 72 Federal Register 50271, August 31, 2007. The hearings also addressed whether revisions to the electioneering communications rules required changes to the Commission’s regulations on “express advocacy,” which explicitly calls for election or defeat of federal candidates. In particular, debate focused on 11 C.F.R. 100.22(b). Federal Election Commission, “Electioneering Communications,” 72 Federal Register 50271, December 26, 2007, p. 72899. Under the new rules, advertising funded by corporate and union treasury funds must be “susceptible of no reasonable interpretation other than as an appeal to vote for or against a clearly identified Federal candidate,” the same standard the Court articulated in WRTL II. See ibid., p. 72914. Ibid., pp. 72900-72901; pp. 72911-72913. Under the rules, spending on electioneering communications that exceeds $10,000 in a calendar year must be reported to the FEC. Donations exceeding $1,000 to fund such advertising, received since the start of the year preceding the reporting period, must also be reported. Ibid., pp. 72900-7290 1; see also 11 C.F.R. 110.11(a). The word “disclaimer” appears as a term of art in FEC regulations, although its definition in that context generally differs from the literal one. Rather than renouncing responsibility (as the literal definition of “disclaimer” implies), disclaimers required by FEC regulations generally signal that the sponsoring committee was, in fact, responsible for a communication. On the other hand, disclaimers on communications that are not authorized by principal campaign must note that candidates were not responsible for the communication. Ibid., p. 72903; p. 72914. Ibid., p. 72903. 554 U.S. ___ (2008); see 2 U.S.C. § 441a-1 and 2 U.S.C. § 441a(I). CRS Report RS22920, Campaign Finance Law and the Constitutionality of the “Millionaire’s Amendment”: An Analysis of Davis v. Federal Election Commission, by L. Paige Whitaker. Federal Election Commission,” Public Statement on the Supreme Court’s Decision in Davis v. FEC,” press release July 25, 008, at [http://www.fec.gov/press/press2008/220080725millionaire.shtml].

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[53] Ibid. [54] As of this writing, the NPRM has not been published in the Federal Register. It is available at [http://www.fec.gov/agenda/2008/mtgdoc0826.pdf]. [55] As noted previously, two Commissioners did remain in office during the 2008 “shutdown,” and staff continued doing work that did not require Commission approval.

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In: Campaign Finance… Editor: Thomas P. Kallen, pp. 171-178

ISBN: 978-1-60692-836-3 © 2009 Nova Science Publishers, Inc.

Chapter 6

CAMPAIGN FINANCE LAW AND THE CONSTITUTIONALITY OF THE “MILLIONAIRE’S AMENDMENT”: AN ANALYSIS OF DAVIS V. FEDERAL ELECTION COMMISSION *

L. Paige Whitaker

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ABSTRACT In a 5-to-4 decision, the Supreme Court struck down a provision of the Bipartisan Campaign Reform Act of 2002 (BCRA), also known as the McCain-Feingold law, establishing increased contribution limits for congressional candidates whose opponents significantly self-finance their campaigns. This provision is frequently referred to as the “Millionaire’s Amendment.” The Court found that the burden imposed on expenditures of personal funds is not justified by the compelling governmental interest of lessening corruption or the appearance of corruption and, therefore, held that the law is unconstitutional in violation of the First Amendment.

*

This is an edited, excerpted and augmented edition of CRS Report RS22920, dated July 17, 2008.

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BACKGROUND Section 319(a)[1] of the Bipartisan Campaign Reform Act of 2002 (BCRA),[2] also known as the McCain-Feingold law, establishes increased contribution limits for House candidates whose opponents significantly self-finance their campaigns. This provision — in tandem with Section 304,[3] which applies a similar program to Senate candidates — is frequently referred to as the “Millionaire’s Amendment.” Basically, the complex statutory formula provides that if a candidate for the House of Representatives spends more than $350,000 of personal funds during an election cycle, individual contribution limits applicable to his or her opponent are increased from the usual current limit ($2,300 per election) to up to triple that amount (or $6,900 per election). Likewise for Senate candidates, a separate provision generally raises individual contribution limits for a candidate whose opponent exceeds a designated threshold level of personal campaign funding that is based on the number of eligible voters in the state. For both House and Senate candidates, the increased contribution limits are eliminated when parity in spending is reached between the two candidates. BCRA also requires self-financing candidates to file special disclosure reports regarding their campaign spending — as such expenditures are made — in addition to reporting in accordance with the regular periodic disclosure schedule.[4]

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CASE HISTORY In 2004 and 2006, Jack Davis was a candidate for the House of Representatives from the 26th Congressional District of New York. During the 2004 election cycle, he spent $1.2 million, which was principally from his own funds, and during the 2006 cycle, he spent $2.3 million, which (with the exception of $126,000) came from personal funds. In 2006, after the Federal Election Commission (FEC) informed Davis that it had reason to believe that he had violated BCRA’s disclosure requirements for self-financing candidates by failing to report personal expenditures during the 2004 election cycle, Davis filed suit in the U.S. District Court for the District of Columbia seeking declaration that the Millionaire’s Amendment was unconstitutional and an injunction preventing the FEC from enforcing the law during the 2006 cycle. A district court three-judge panel concluded sua sponte that Davis had standing to bring the suit, but rejected his claims on the merits and granted summary judgment to the FEC.[5] Invoking BCRA’s provision for direct

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appeal to the Supreme Court for actions brought on constitutional grounds,[6] Davis appealed.

SUPREME COURT RULING Reversing the three-judge district court decision, in a 5-to-4 vote, the Supreme Court in FEC v. Davis[7] invalidated the Millionaire’s Amendment as lacking a compelling governmental interest in violation of the First Amendment. Justice Alito wrote the opinion for the majority and was joined by Chief Justice Roberts, and Justices Scalia, Kennedy, and Thomas. Justice Stevens wrote an opinion concurring in part and dissenting in part, and was joined, in part, by Justices Souter, Ginsburg, and Breyer. Justice Ginsburg also wrote an opinion, concurring in part and dissenting in part, which was joined by Justice Breyer. The Court remanded the case to the district court for proceedings consistent with its opinion.

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Majority Opinion Citing prior decisions, the Court began its opinion by noting that it has long upheld the constitutionality of limits on individual contributions and coordinated party expenditures.[8] While recognizing that contribution limits implicate First Amendment free speech interests, it has sustained such limits on the condition that they are “closely drawn” to serve a “sufficiently important interest” such as the prevention of corruption or the appearance of corruption.[9] On the other hand, the Court observed that it has definitively rejected any limits on a candidate’s expenditure of personal funds to finance campaign speech, finding that such limits impose a significant restraint on a candidate’s right to advocate for his or her own election, which is not justified by the compelling governmental interest of preventing corruption. Instead of preventing corruption, a candidate’s use of personal funds “‘reduces the candidate’s dependence on outside contributions and thereby counteracts the coercive pressures and attendant risks of abuse to which ... contribution limitations are directed.’”[10] With regard to the Millionaire’s Amendment, the Court observed that while it does not directly impose a limit on a candidate’s expenditure of personal funds, it “imposes an unprecedented penalty on any candidate who robustly exercises that First Amendment right.”[11] Further, it requires a candidate to choose between the right of free political expression and “subjection to discriminatory fundraising

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limitations.”[12] If it simply increased the contribution limits for all candidates — both the self-financed candidate as well as the opponent — it would pass constitutional muster.[13] Although many candidates who can afford significant personal expenditures in support of their own campaigns may choose to do so despite the Millionaire’s Amendment, the Court determined that they would bear “a special and potentially significant burden if they make that choice.”[14] In fact, the Court concluded that if a candidate vigorously exercises the right to use personal funds, it creates a fundraising advantage for his or her opponents.[15] In its 1976 landmark decision Buckley v. Valeo,[16] the Supreme Court upheld a provision of the Federal Election Campaign Act (FECA) providing presidential candidates with the option to receive public funds on the condition that they comply with expenditure limits, even though it found overall expenditure limits to be unconstitutional.[17] Distinguishing the Millionaire’s Amendment from FECA’s presidential public financing provision, the Davis Court observed that the choices presented by each of the statutes are “quite different.”[18] By forgoing public financing, a presidential candidate can still retain the unencumbered right to make unlimited personal expenditures. In contrast, the Millionaire’s Amendment fails to provide any options for a candidate to exercise that right “without abridgement.”[19] Finding that the Millionaire’s Amendment imposes a “substantial burden” on the First Amendment right to expend personal funds in support of one’s own campaign, thereby triggering strict scrutiny, the Court announced that it is not sustainable unless it can be justified by a compelling governmental interest.[20] As the Court held in Buckley, reliance on personal funds reduces the threat of corruption, and therefore, the burden imposed by the Millionaire’s Amendment cannot serve that governmental interest. Responding to the FEC’s argument that the statute’s “asymmetrical limits” are justified because they level the playing field for candidates of differing personal wealth, the Court pointed out that its jurisprudence offers no support for the proposition that this rationale constitutes a compelling governmental interest. According to the Court, “[p]reventing corruption or the appearance of corruption are the only legitimate and compelling government interests thus far identified for restricting campaign finances.”[21] Moreover, “‘the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.’”[22] Specifically, the Court cautioned that restricting a candidate’s speech in order to level opportunities for election among candidates presents “ominous implications” because it would permit Congress to “arrogate the voters’ authority to evaluate the strengths of candidates competing for office.”[23] Voters are

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entrusted with the duty to judge candidates for public office and, according to the Court, Different candidates have different strengths. Some are wealthy; others have wealthy supporters who are willing to make large contributions. Some are celebrities; some have the benefit of a well-known family name. Leveling electoral opportunities means making and implementing judgments about which candidates should be permitted to contribute to the outcome of an election. The Constitution, however, confers upon voters, not Congress, the power to choose the Members of the House of Representatives, Article I, § 2, and it is dangerous business for Congress to use the election laws to influence the voters’ choices.[24]

In considering the constitutionality of the disclosure requirements contained within the Millionaire’s Amendment, the Court emphasized that it has repeatedly held that compelled disclosure significantly infringes on privacy of association and belief, as guaranteed under the First Amendment. Therefore, it has subjected such requirements to exacting scrutiny in order to ascertain whether there is a “relevant correlation” or “substantial relation” between the governmental interest and the information required to be disclosed.[25] In view of its holding that the Millionaire’s Amendment is unconstitutional, the Court likewise reasoned that the burden imposed by its disclosure requirements cannot be justified, and accordingly, struck them down.[26]

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Dissenting Opinions In a dissent, Justice Stevens — joined, in part, by Justices Souter, Ginsburg, and Breyer — argued that the Millionaire’s Amendment represents Congress’s judgment that candidates who spend over $350,000 of their own money in a campaign for a House or Senate seat have an advantage over other candidates who must raise contributions. The statute imposes no burden on self-financing candidates and “quiets no speech.”[27] Instead, the dissent found that it does no more than merely “assist the opponent of a self-funding candidate” to make his or her voice heard and that “this amplification in no way mutes the voice of the millionaire, who remains able to speak as loud and as long as he likes in support of his campaign.”[28] As a result of finding no direct restriction on the speech of the self-financed candidate, the dissent would subject the Millionaire’s Amendment to a less rigorous standard of review.[29] Indeed, the dissent specifically criticized the Court’s landmark Buckley ruling, which struck down limits on expenditures, arguing

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that “a number of purposes, both legitimate and substantial,” can justify the imposition of reasonable spending limits.[30] Maintaining that combating corruption and the appearance of corruption are not the only governmental interests justifying congressional regulation of campaign financing, the dissent remarked that the Court has also recognized the governmental interests of reducing both the influence of wealth and the appearance of wealth on the outcomes of elections. While conceding that such prior decisions have focused on the aggregations of wealth that are accumulated in the corporate form, it reasoned that the logic of such decisions — particularly concerns about the “corrosive and distorting effects of wealth” on the political process — could be extended to the context of individual wealth as well.[31] In a separate dissent, Justice Ginsburg — joined by Justice Breyer — concluded that sustaining the constitutionality of the Millionaire’s Amendment would be consistent with the Court’s earlier holding in Buckley v. Valeo. She resisted, however, joining Justice Stevens’s dissent to the extent that it addresses the Court’s ruling in Buckley invalidating expenditure limits. Noting that the Court had not been asked to overrule Buckley — and that this issue had not been briefed — Justice Ginsburg preferred to leave reconsideration of that case “for a later day.”[32]

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CONCLUDING OBSERVATIONS The Court’s decidedly antiregulatory opinion in Davis appears to be a reaffirmation of its finding in the landmark 1976 decision, Buckley v. Valeo, that Congress has no compelling interest in attempting to level the playing field among candidates. In fact, the Davis Court determined that Congressional attempts to do so would supplant the choices of the voters. Notably, the decision also seems to be a departure from its 2003 decision in McConnell v. FEC[33] — upholding key portions of BCRA — where the Court expressed deference to Congress’s expertise in regulating the system under which its Members are elected.[34] While Justice Stevens still appears to subscribe to this view,[35] the majority of the Davis Court seems less deferential.

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REFERENCES [1] [2] [3] [4] [5] [6] [7] [8]

[9]

[10] [11] [12] [13] [14]

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[15] [16]

[17] [18] [19] [20] [21]

2 U.S.C. § 441a-1. P.L. 107-155. BCRA amended the Federal Election Campaign Act (FECA), codified as amended at 2 U.S.C. § 431 et seq. 2 U.S.C. § 441a(h), (i). 2 U.S.C. § 434(a)(6)(B). See Davis v. FEC, 501 F. Supp. 2d 22 (D.D.C. 2007). P.L. 107-155, § 403. No. 07-320 (U.S. June 26, 2008). See id., slip op. at 10 (citing Buckley v. Valeo, 424 U.S. 1, 23-35, 38, 46-47, n. 53 (1976); FEC v. Colorado Republican Federal Campaign Comm., 533 U.S. 431, 437, 465 (2001 )(Colorado II)). Id., slip op. at 10-11 (quoting McConnell v. FEC, 540 U.S. 93, 136, 138, n. 40 (2003); Colorado II, 533 U.S. at 456 (2001); Nixon v. Shrink Missouri Government PAC, 528 U.S. 377, 387-88 (2000); Buckley v. Valeo, 424 U.S. 1, 25-30, 38 (1976)). Id., slip op. at 12 (quoting Buckley, 424 U.S. at 53 (1976)). Id. Id. See id., slip op. at 10-11. Id., slip op. at 12-13 (citing Day v. Holahan, 34 F. 3d 1356, 1359-60 (8th Cir. 1994) (holding that a Minnesota statute that increased candidate expenditure limits and eligibility for public funds based on the amount of independent expenditures made in opposition to his or her candidacy burdened the speech of those making the independent expenditures)). See id., slip op. at 13. 424 U.S. 1 (1976). For further discussion of Buckley, see CRS Report RL30669, The Constitutionality of Campaign Finance Regulation: Buckley v. Valeo and Its Supreme Court Progeny, by L. Paige Whitaker. See id. at 57, n. 65, 54-58. Davis, slip op. at 13. Id. See id., slip op. at 14. Id., slip op. at 15 (quoting FEC v. National Conservative Political Action Comm., 470 U.S. 480, 496-97 (1985); Randall v. Sorrell, 548 U.S. 230, 268 (2006) (Thomas, J., concurring in judgment) (noting “the interests

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[22] [23] [24] [25] [26] [27] [28] [29]

[30] [31] [32] [33]

[34]

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[35]

L. Paige Whitaker the Court has recognized as compelling, i.e., the prevention of corruption or the appearance thereof”)). Id., slip op. at 15-16 (quoting Buckley, 424 U.S. at 48-49 (1976)). Id., slip op. at 16. Id. Id., slip op. at 18. See id. Id., slip op. at 5 (Stevens, J., dissenting). Id., slip op. at 5-6 (Stevens, J., dissenting). See id., slip op. at 2-3 (Stevens, J., dissenting) (quoting Justice White’s dissent in Buckley maintaining that expenditure limitations should be analyzed not as direct restrictions on speech, but as analogous to time, place, and manner regulations, which are sustainable on the condition that they serve purposes that are “legitimate and sufficiently substantial.” Buckley v. Valeo, 424 U.S. 1, 264 (1976) (White, J., concurring in part and dissenting in part)). Id., slip op. at 3 (Stevens, J., dissenting). Id., slip op. at 8 (Stevens, J., dissenting). Id., slip op. at 1 (Ginsburg, J., dissenting). 540 U.S. 93 (2003). For further discussion of McConnell, see CRS Report RL32245, Campaign Finance Law: A Legal Analysis of the Supreme Court Ruling in McConnell v. FEC, by L. Paige Whitaker. In McConnell v. FEC, the Court notably deferred to Congressional findings in upholding BCRA, remarking that its decision showed “proper deference” to Congress’s determinations “in an area in which it enjoys particular expertise.” Furthermore, “Congress is fully entitled,” the Court observed, “to consider the real-world” as it determines how best to regulate in the political sphere. 540 U.S. 93, 137, 188 (2003). See Davis, slip op. at 4, 9 (Stevens, J., dissenting) (“It seems to me that Congress is entitled to make the judgment ...” and “as we explained in McConnell, ‘Congress is fully entitled to consider ... real-world differences ... when crafting a system of campaign finance regulation.’”) (Stevens, J., dissenting) (quoting McConnell, 540 U.S. at 188 (2003)).

In: Campaign Finance… Editor: Thomas P. Kallen, pp. 179-186

ISBN: 978-1-60692-836-3 © 2009 Nova Science Publishers, Inc.

Chapter 7

CAMPAIGN FINANCE: REGULATING POLITICAL COMMUNICATIONS ON THE INTERNET *

L. Paige Whitaker and R. Sam Garrett

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ABSTRACT The Federal Election Campaign Act (FECA) regulates “federal election activity,” which is defined to include a “public communication” (i.e., a broadcast, cable, satellite, newspaper, magazine, outdoor advertising facility, mass mailing, or telephone bank communication made to the general public) or “any other form of general public political advertising.” In 2006, in response to a federal district court decision, the FEC promulgated regulations amending the definition of “public communication” to include paid Internet advertisements placed on another individual or entity’s website. As result, a key element of online political activity — paid political advertising — subject to federal campaign finance law and regulations. During the 110th Congress, the regulation of political communications on the Internet has not been the subject of major legislative action. H.R. 894 (Price, NC) would extend “stand by your ad” disclaimer requirements to Internet communications, among others. H.R. 5699 (Hensarling) would exempt from treatment as a contribution or expenditure any uncompensated Internet services by individuals and certain corporations.[1]

*

This is an edited, excerpted and augmented edition of CRS Report RS22272, dated April 16, 2008.

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BACKGROUND The Federal Election Campaign Act The Federal Election Campaign Act (FECA), as amended by the Bipartisan Campaign Reform Act of 2002 (BCRA),[2] regulates “federal election activity,” which is defined to include (1) voter registration drives in the last 120 days of a federal election; (2) voter identification, get-out-the vote drives (GOTV), and generic activity in connection with an election in which a federal candidate is on the ballot; (3) “public communications” that refer to a clearly identified federal candidate and promote, support, attack, or oppose that candidate (regardless of whether the communications expressly advocate a vote for or against a candidate); and (4) services by a state or local party employee who spends at least 25% of paid time per month on activities in connection with a federal election.[3] FECA further defines “public communications” as broadcast, cable, satellite, newspaper, magazine, outdoor advertising facility, mass mailing, or telephone bank communications made to the general public, “or any other form of general public political advertising.”[4] As a result, candidate and party committees can only use regulated federal funds to pay for such “federal election activity.” Regulated federal funds, also known as “hard money,” are funds that are subject to FECA’s contribution limitations, source restrictions, and reporting requirements.[5]

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Shays v. FEC Shortly after enactment of the BCRA amendments to FECA in 2002, the FEC promulgated regulations that exempted Internet communications from federal campaign finance regulation altogether by excluding such communications from the definition of “public communication.”[6] In response, the two primary sponsors of BCRA in the House of Representatives, Representatives Shays and Meehan, filed suit in U.S. district court against the FEC. In seeking to invalidate the regulations, the plaintiffs argued, inter alia, that by not regulating Internet activities, the FEC was opening a new avenue for circumvention of federal campaign finance law, contrary to Congress’s intent in enacting BCRA. In 2004, in Shays v. FEC,[7] the U.S. District Court for the District of Columbia agreed with the BCRA sponsors and generally overturned the FEC’s initial regulations governing political communications on the Internet.

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The Shays court held that excluding all Internet communications from the FEC rule defining “public communication,” at 11 CFR § 100.26, was inconsistent with Congress’s use of the phrase, “or any other form of general public political advertising,” in the BCRA definition of “public communication.” Further, the court found that the FEC had failed to provide legislative history that would persuade the court to ignore the plain meaning of the statute.[8] While not all Internet communications fall within the phrase, “any other form of general public political advertising,” the court observed that “some clearly do.”[9] However, the court left it to the FEC to determine precisely what constitutes “general public political advertising” in the context of the Internet.[10] Furthermore, while the court specifically upheld the definition of “generic campaign activity” as a “public communication,” it found that the FEC’s 2002 Notice of Proposed Rulemaking (NPRM) failed to provide adequate notice to the public, under the Administrative Procedure Act (APA), that the FEC might establish such a definition. As the court noted, it could not “fathom how an interested party ‘could have anticipated the final rulemaking from the draft rule.’”[11] The Shays court also found that the FEC rule exempting Internet communications from the definition of “public communications” meant that no matter how closely such communications are coordinated with political parties or candidate campaigns, they cannot be considered “coordinated communications” and hence, subject to FECA regulation.[12] As the court observed, it has long been a tenet of campaign finance law that, in order to prevent circumvention of regulation, FECA treats expenditures that are made “in cooperation, consultation, or concert, with or at the suggestion of a candidate” as a contribution to such candidate.[13] According to the court, the exclusion of Internet communications from coordinated communications contrasts with prior FEC rules and was contrary to Congress’s intent in enacting the statute.[14] The court remanded the case for further action consistent with its decision.[15]

FEC RULEMAKING Background In response to the district court’s decision in Shays v. FEC, in April 2005, the FEC published an NPRM seeking comment on its proposal to amend the definition of “public communication” to conform to the ruling.[16] In its NPRM, the FEC requested comments on proposed rules to include paid Internet

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advertisements in the definition of “public communication.” In addition, the FEC sought comment on the related definition of “generic campaign activity,” on proposed changes to disclaimer regulations, and on proposed exceptions to the definitions of “contribution” and “expenditure” for certain Internet activities and communications that would qualify as individual volunteer activity or that would qualify for the “press exemption.” According to the FEC, the proposed rules were intended to ensure that political committees properly finance and disclose their Internet communications, without impeding individual citizens from using the Internet to speak freely regarding candidates and elections (e.g., blogging). The comment period closed and a public hearing was held in June 2005, and in anticipation of congressional action, the FEC delayed consideration of the Internet regulations. However, with congressional action being uncertain, in March 2006, the FEC voted unanimously to approve the new regulations. In so doing, the commissioners cited the 2004 Shays v. FEC federal district court decision as requiring them to take such action.

Summary of Regulations

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Generally, the Internet regulations reflect an attempt by the FEC to leave blogs, created and wholly maintained by individuals, free of FECA regulation, so long as such services are not performed for a fee. As stated in its NPRM: While drafting a proposed rule, the Commission recognized the important purpose of BCRA in preventing actual and apparent corruption and the circumvention of the Act as well as the plain meaning of “general public political advertising,” and the significant public policy considerations that encourage the promotion of the Internet as a unique forum for free or low-cost speech and open information exchange. The Commission was also mindful that there is no record that Internet activities present any significant danger of corruption or the appearance of corruption, nor has the Commission seen evidence that its 2002 definition of “public communication” has led to circumvention of the law or fostered corruption Internet advertising on another person’s website as a “public communication,” but otherwise sought to exclude all Internet communications from the definition of “public communication.”[17]

The regulations apply only when money is exchanged for Internet-related campaign advertisements. Accordingly, the funds expended for such

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advertisements are subject to the limitations, source restrictions, and reporting requirements of FECA. Key aspects of the FEC regulations include the following: •

•

•

•

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•

•

Regulation of paid Internet ads as “public communications” — The definition of “public communication” includes paid Internet ads placed on another individual or entity’s website as a form of “general public political advertising,” with no dollar threshold required; the advertiser, not the website operator, is considered to be making the public communication. Accordingly, the fees for such ads are subject to FECA contribution limits, source restrictions, and disclosure requirements.[18] Disclaimer requirements — Disclaimers (statements of attribution) are required on all political committee websites available to the public. As “public communications,” paid Internet ads must contain disclaimers if they expressly advocate the election or defeat of a clearly identified federal candidate or solicit contributions. Disclaimers are not required on e-mails from individuals or groups unless they are political committees, in which case disclaimers are required if more than 500 substantially similar, unsolicited e-mails are sent within a 30-day period.[19] Disclosure of fees paid by candidates to bloggers — Payments to bloggers from candidates are required to be disclosed only on candidate disclosure statements; no such disclaimers are required on blog sites.[20] Coordinated communications — Internet advertisements made for the purpose of influencing a federal election, placed on the website of another person or entity for a fee — and coordinated with a candidate or party committee — are considered “coordinated communications” and as such, constitute in-kind contributions to the candidate or committee. Accordingly, the fees for such ads are subject to FECA contribution limits, source restrictions, and disclosure requirements.[21] Media exemption — Under the definition of “contribution,” the general exemption from FECA coverage of news stories, commentaries, and editorials distributed through broadcasters, newspapers, and periodicals applies to such communications that are distributed over the Internet.[22] Exceptions for individual or volunteer activity on the Internet — Under the definitions of “contribution” and “expenditure,” an uncompensated individual or group of individuals using Internet equipment and services in order to influence a federal election, whether or not such services were known by or coordinated with a campaign, are excluded from FECA regulation.[23]

184

L. Paige Whitaker and R. Sam Garrett

CONGRESSIONAL ACTIVITY Brief History

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During Congress’s consideration of BCRA in 2001 and 2002, the subject of communications over the Internet was not addressed, but it was discussed during debate on a previous version of what became BCRA during House consideration of H.R. 417 (Shays-Meehan) in the 106th Congress. An amendment was offered to that bill by Representative DeLay to exempt communications over the Internet from regulation under FECA, but was defeated by a vote of 160268.[24] During the 109 th Congress, several bills were proposed to exempt all communications over the Internet from the BCRA definition of “public communication,” and therefore, regulation under FECA. These proposals included H.R. 1606 (Hensarling), the Online Freedom of Speech Act, which was considered by the House under suspension of the rules but, on a 225-182 vote, failed to receive the two-thirds necessary for passage. The bill was brought up again and ordered reported favorably by the House Administration Committee on March 9, 2006, setting up consideration by the House, but the vote was postponed pending FEC regulatory action. Also during the 109th Congress, in response to concerns that the Online Freedom of Speech Act could open the door to FECA circumvention (for example, by allowing corporations and unions to finance advertisements), two additional bills were offered: H.R. 4194 (Shays-Meehan) would have excluded Internet communications from FECA regulation, but regulated communications placed on a website for a fee and those made by most corporations and unions, by any political committee, and by state and local parties; and H.R. 4900 (Allen- Bass) would have exempted from FECA regulation most individual online communications and advertisements below a dollar threshold. In the wake of the new FEC regulations approved on March 27, 2006, however, House floor action was postponed indefinitely.

110th Congress During the 110th Congress, the regulation of political communications on the Internet has not been the subject of major legislative action. H.R. 894 (Price, NC) would extend “stand by your ad” disclaimer requirements to Internet

Campaign Finance: Regulating Political Communications

185

communications, among others. It was referred to the Committee on House Administration. H.R. 5699 (Hensarling) would exempt from treatment as a contribution or expenditure any uncompensated Internet services by individuals and corporations that are wholly owned by individuals engaging primarily in Internet activities, which do not derive a substantial portion of revenue from sources other than income from Internet activities, except payment for (1) a public communication (other than a nominal fee), (2) the purchase or rental of an email address list made at the direction of a political committee, or (3) an email address list that is transferred to a political committee. H.R. 5699 would also exempt blogs and other Internet and electronic publications from treatment as an expenditure by including such communications in the general media exemption applicable to broadcast stations and newspapers. It was referred to the Committee on House Administration.

REFERENCES [1]

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[2] [3] [4] [5] [6]

CRS specialist Joseph E. Cantor (now retired) originally co-authored this report. P.L. 107-155 (2002). 2 U.S.C. § 43 1(20). 2 U.S.C. § 43 1(22). See 11 C.F.R. § 300.2(k). “The term public communication shall not include communications over the Internet.” 11 C.F.R. § 100.26 (2005). The FEC also determined that Internet communications should not be considered “electioneering communications,” which is a specific type of broadcast, cable, or satellite advertising. According to the FEC: The Internet is included in the list of exceptions in the final rules in section 100.29(c)(1) because, in most instances, it is not a broadcast, cable, or satellite communication. BCRA’s legislative history ... establishes Congress’s intent to exclude communications over the Internet from the electioneering communication provisions. The Commission concludes that Congress did not seek to regulate the Internet in subtitle A of Title II of BCRA. The relatively few commenters who opposed the Internet exemption did not disagree with this conclusion; rather, they argued that as the Internet develops, aspects of it might come to be used in a manner like radio or television. To these commenters, this potential evolution of the Internet calls for a more precise

186

[7] [8] [9] [10] [11] [12]

[13] [14] [15] [16] [17]

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[18] [19] [20] [21] [22] [23] [24]

L. Paige Whitaker and R. Sam Garrett approach and makes the exemption as proposed too broad a treatment of this issue. The Commission has decided to include the exemption in the final rules, rather than attempt to craft a regulation that responds to unknown, future developments. Electioneering Communications, 67 Fed. Reg. 65,190 (2002). See 11 CFR § 100.29 for the definition of “electioneering communication.” 337 F. Supp. 2d 28 (D.D.C. 2004), aff’d, 414 F. 3d 76 (D.C. Cir. 2005), reh ’g en banc denied, No. 04-5352 (October 21, 2005). Id. at 69. Id. at 67. Id. at 70. Id. at 112 (quoting Anne Arundel Co., Maryland v. U.S. EPA., 963 F.2d 412, 418 (D.C. Cir. 1999)). For further discussion of coordination, see CRS Report RS22644, Coordinated Party Expenditures in Federal Elections: An Overview, by R. Sam Garrett and L. Paige Whitaker. Id. at 62 (quoting McConnell v. FEC, 124 S. Ct. 619, 705 (2003)). Id. at 65. Id. Internet Communications, 70 Fed. Reg. 16,967 (April 4, 2005). Internet Communications, 71 Fed. Reg. 18,589, 18,593 (April 12, 2006) (codified at 11 C.F.R. pts. 100, 110, and 114). See 11 C.F.R. § 100.26. See 11 C.F.R. § 110.11. See 11 C.F.R. § 104.3(b). See 11 C.F.R. § 109.21(b). See 11 C.F.R. § 100.73. See 11 C.F.R. §§ 100.94, 100.32. Bipartisan Campaign Reform Act of 1999. 145 CONG. REC. 21526 (September 14, 1999).

INDEX

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A AC, xvi, 78, 79, 85, 106, 162, 204 access, 39, 101, 109 accounting, x, 2, 10, 11, 26, 33, 41, 43, 183, 186 acute, 112 adaptation, 8 adjustment, 63, 64, 79, 81, 132 administration, 132 administrative, 84, 145, 170, 184 Administrative Procedure Act, 244 advertisement, 120, 218 advertisements, xviii, 107, 111, 116, 153, 158, 160, 167, 218, 241, 245, 246, 247, 248 advertising, xvii, 148, 149, 206, 217, 218, 226, 227, 241, 242, 243, 246, 250 advocacy, xiii, 77, 78, 80, 83, 84, 89, 98, 104, 110, 111, 112, 113, 116, 117, 118, 119, 120, 126, 128, 141, 144, 151, 152, 153, 157, 160, 163, 218, 226 affiliates, 97, 152 age, 11, 106, 114, 158 agent, 171 agents, 54, 107, 124 agricultural, 58 air, 167, 185 air travel, 167

Alabama, 123, 124, 128 aliens, 5 alternative, 35, 210, 226 alternatives, xv, 27, 114, 178, 220 amendments, 5, 6, 21, 67, 155, 163, 166, 167, 168, 196, 205, 243 amorphous, 119 antagonistic, 122 AP, 11 APA, 244 application, 63, 71, 78, 82, 88, 96, 97, 105, 116, 118, 120, 121, 127, 166, 194 appropriations, xvi, 20, 32, 53, 166, 180, 191, 194, 200, 201, 204, 213, 214, 223, 226 argument, 80, 83, 84, 92, 96, 99, 108, 111, 119, 233 assessment, 119 assets, 86, 92, 131, 215 attacks, 181, 195 attractiveness, 27 attribution, 104, 247 auditing, 195 authority, 97, 108, 213, 215, 234 availability, 179, 189

B background information, 120, 216 Barack Obama, 4

188

Index

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bargaining, 132 basic research, 40 BCRA, xiv, xvi, xvii, 6, 61, 106, 107, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 121, 137, 138, 139, 144, 146, 151, 152, 153, 157, 158, 159, 160, 161, 163, 164, 166, 169, 173, 204, 205, 206, 217, 218, 219, 220, 221, 222, 226, 229, 230, 236, 238, 242, 243, 246, 248, 250 behavior, 32 benefits, x, xiii, 2, 9, 24, 27, 32, 33, 34, 39, 40, 92, 144, 146, 155, 156, 162, 200 bipartisan, 157, 163 Bipartisan Campaign Reform Act, xiii, xvi, xvii, 6, 106, 115, 116, 121, 137, 144, 146, 173, 204, 205, 222, 229, 230, 242, 251 Bipartisan Campaign Reform Act of 2002, xiii, xvii, 106, 115, 116, 137, 144, 173, 205, 222, 229, 230, 242 blog, 60, 247 blogs, 245, 249 Boston, xii, 70, 86, 126, 127, 140, 141, 181, 197, 200 bounds, 109 broadcasters, 247 Buckley v. Valeo, vii, xi, 6, 61, 69, 71, 73, 106, 108, 110, 121, 122, 129, 140, 141, 146, 173, 200, 222, 233, 235, 236, 237, 238 bundling, 24, 55, 168, 208, 209, 210, 220, 221 burning, 103

C campaign costs, xii, 143, 147, 148, 157 campaign finance, x, xi, xii, xiv, xv, xvi, xviii, 2, 6, 24, 34, 40, 67, 70, 72, 84, 106, 107, 109, 115, 121, 137, 141, 143, 145, 146, 147, 151, 155, 159, 162, 163, 164, 166, 167, 168, 170, 179, 186, 189, 199, 203, 204, 205, 206, 208, 213, 214, 216, 220, 221, 223, 234, 239, 242, 243, 244

campaign funds, xii, xvi, 6, 102, 104, 143, 179, 204, 215 campaign organizations, 215 campaign spending limits, 156, 157, 163 campaigns, ix, xi, xvii, 1, 7, 11, 16, 23, 26, 34, 35, 37, 69, 75, 77, 101, 112, 127, 148, 152, 158, 187, 189, 191, 192, 195, 212, 214, 215, 216, 219, 222, 224, 229, 230, 233, 244 candidates, x, xvi, xvii, 2, 3, 4, 5, 6, 7, 10, 11, 14, 15, 17, 19, 21, 22, 23, 25, 27, 29, 30, 32, 33, 34, 37, 38, 39, 41, 42, 47, 48, 51, 54, 64, 66, 73, 74, 75, 76, 77, 78, 81, 89, 92, 93, 97, 99, 100, 102, 103, 104, 107, 114, 115, 118, 119, 122, 123, 124, 126, 127, 129, 133, 141, 146, 148, 149, 150, 152, 156, 157, 158, 159, 160, 167, 168, 169, 170, 171, 180, 181, 183, 185, 190, 195, 196, 204, 211, 212, 215, 218, 219, 224, 225, 226, 227, 229, 230, 231, 232, 233, 234, 235, 236, 245, 247 capacity, xvii, 205 Capitol Hill, 220 case law, 85 cast, 78 certification, 21, 64 certifications, 9, 16, 64 CFI, 186, 199 channels, 150 Chief Justice, 118, 138, 139, 231 children, 114 circulation, 101, 135, 136 citizens, 35, 75, 101, 146, 150, 245 closed shop, 132 cloture, xiii, 144 Co, xii, 60, 71, 100, 101, 136, 141, 251 coalitions, 187 coercion, 125 collective bargaining, 132 Colorado, xii, 70, 85, 94, 96, 101, 136, 169, 237 Columbia, 231, 243 commerce, 199, 200 Commerce, Justice, Science, 214

189

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Index Committee on House Administration, xvi, 171, 174, 188, 204, 216, 249 Committee on Rules and Administration, 172 communication, xii, xvi, xvii, 71, 72, 75, 95, 108, 110, 111, 113, 116, 119, 121, 135, 138, 160, 204, 214, 217, 218, 227, 241, 243, 245, 246, 248, 249, 250 community, 118, 164 compelling governmental interest, xvii, 73, 74, 84, 91, 105, 119, 230, 231, 232, 233, 234 competition, 4, 89, 150, 155, 156 competitiveness, 3 compliance, 102, 215 components, 27 concentration, 89 confidence, 71, 88, 108, 150, 151, 156 conflict, xi, 70, 72, 162, 166 Congress, iv, vii, x, xiii, xiv, xv, xvii, xviii, 2, 3, 4, 5, 6, 7, 13, 18, 20, 25, 27, 29, 30, 31, 32, 33, 35, 36, 39, 40, 41, 61, 77, 78, 80, 93, 107, 108, 109, 111, 112, 115, 117, 126, 132, 138, 144, 145, 146, 151, 153, 156, 159, 160, 161, 162, 163, 164, 166, 167, 168, 170, 173, 174, 175, 177, 178, 179, 180, 181, 182, 183, 185, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 198, 200, 201, 203, 205, 207, 208, 210, 211, 213, 214, 216, 220, 221, 224, 234, 236, 238, 239, 242, 248, 249, 250 Congressional Budget Office, 40 congressional elections, 147, 156, 225 Congressional Record, 21, 65, 68, 175, 223 consciousness, 99 consensus, x, 2, 40 consent, 20, 166, 213, 214 Constitution, 74, 107, 126, 234 constraints, 32 construction, 97 consultants, 215 consumer price index, 127 contingency, 158

control, xii, 34, 80, 103, 143, 159, 162, 200, 215 conversion, 91 corporations, xviii, 79, 83, 84, 85, 87, 88, 89, 90, 91, 92, 93, 99, 104, 106, 110, 111, 112, 116, 122, 130, 187, 217, 218, 242, 248, 249 correlation, 148, 234 corrosive, 235 corruption, xi, xv, xvii, 69, 71, 72, 73, 75, 76, 79, 80, 81, 82, 83, 86, 90, 91, 93, 95, 96, 97, 99, 101, 102, 105, 107, 108, 109, 114, 115, 120, 127, 130, 136, 146, 178, 189, 205, 230, 232, 233, 234, 235, 238, 246 cost of living, 148 costs, x, xii, 2, 10, 11, 26, 40, 41, 43, 57, 58, 75, 132, 143, 147, 148, 149, 155, 157, 180, 181, 184, 185, 187, 192, 193, 194, 195, 196, 212 counsel, 198 counterbalance, 158 couples, 8, 180 coupling, 156 courts, 84, 110, 120, 164, 206, 220, 222 coverage, 153, 247 covering, 212 CRP, 94, 95, 96, 133 CRS, xv, 1, 8, 13, 14, 16, 18, 25, 28, 59, 60, 61, 64, 65, 66, 67, 69, 92, 133, 137, 139, 143, 173, 174, 177, 178, 182, 183, 188, 196, 197, 199, 200, 201, 203, 216, 219, 222, 223, 224, 225, 226, 227, 229, 237, 238, 241, 250, 251 current limit, 230 cycles, 30 cynicism, 148, 156

D danger, 109, 146, 246 database, 168 death, 215, 216 deaths, 215 debt, 100

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190 debts, 9, 34, 93 decision making, 128 decisions, xvii, 4, 83, 109, 121, 149, 205, 208, 216, 232, 235 defendants, 117 definition, xviii, 57, 63, 78, 93, 103, 111, 119, 133, 152, 160, 161, 167, 170, 227, 241, 243, 244, 245, 246, 247, 248, 250 demand, 108 democracy, 72, 88, 101, 128 Democratic Party, 94 Democrats, xii, 14, 66, 143, 162 Department of Defense, 197 Department of Homeland Security, 185, 198, 201 Department of Justice (DOJ), 180, 181 deposits, 53 deprivation, 125 desire, 87, 131, 158, 187 destruction, 103 devaluation, 158 dichotomy, 151 disclosure, xi, xiii, xvi, 24, 55, 70, 72, 73, 76, 81, 100, 101, 102, 103, 104, 105, 110, 122, 123, 124, 125, 128, 135, 136, 144, 145, 149, 151, 152, 153, 154, 155, 163, 167, 169, 172, 183, 204, 205, 209, 210, 211, 214, 215, 221, 230, 231, 234, 246, 247 discourse, 112 discrimination, 100, 102, 103 discriminatory, 232 disputes, 119, 215 disseminate, 74 dissenting opinion, 141 distribution, 62, 76, 101, 104, 131, 193 District of Columbia, 231, 243 diversity, 95 doctors, 79 donations, x, 2, 10, 31, 108, 151, 152, 156, 158, 187, 206, 218 donor, 96 donors, 33, 37, 39, 55, 66, 97, 160 draft, 244 due process, 77, 126

Index Due Process Clause, 107 duties, 148

E earnings, 92 economic resources, 90 election, ix, xi, xii, xiii, xiv, xvii, 1, 4, 5, 7, 9, 10, 14, 15, 16, 19, 22, 24, 25, 27, 28, 30, 31, 32, 33, 34, 37, 38, 39, 40, 42, 43, 46, 48, 50, 51, 53, 58, 63, 65, 70, 72, 76, 77, 78, 89, 94, 101, 103, 105, 110, 112, 113, 116, 118, 119, 120, 121, 123, 125, 130, 138, 143, 144, 145, 147, 148, 149, 150, 151, 152, 153, 154, 155, 157, 158, 160, 161, 164, 166, 170, 174, 179, 180, 184, 189, 190, 192, 193, 194, 195, 197, 210, 217, 218, 219, 226, 230, 231, 232, 234, 241, 242, 247, 248 election law, xiii, xiv, 76, 103, 144, 145, 153, 158, 160, 161, 164, 174, 184, 210, 234 electoral process, xi, 70, 71, 75, 81, 86, 90, 92, 108, 131, 156 eligibility criteria, 50 email, 249 employees, 132, 210 employment, 103, 125, 132 encouragement, 158, 199, 200 entertainment, 184 environment, 193, 222 EPA, 251 equating, 109 erosion, 108 ethics, xv, 162, 165, 166, 203, 208, 220, 221 evil, 83 evolution, 222, 250 exclusion, 244 excuse, 120 exercise, 91, 113, 192, 233 expenditures, xi, xvi, xvii, 23, 33, 57, 65, 70, 72, 73, 74, 75, 76, 77, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 94, 95, 96, 97, 98, 99, 100, 104, 105, 106, 108,

Index 113, 120, 122, 124, 129, 130, 131, 133, 137, 145, 146, 148, 152, 166, 169, 172, 182, 204, 205, 214, 219, 225, 230, 231, 232, 233, 235, 237, 244 expert, iv expertise, 108, 115, 236, 238

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F fairness, 122 family, 114, 168, 212, 215, 234 family members, 215 fat, 158 fear, 34 February, 60, 62, 64, 164, 166, 214, 217 FEC, xii, xiii, xv, xvii, xviii, 4, 5, 9, 11, 13, 15, 16, 18, 19, 23, 29, 35, 36, 45, 49, 55, 58, 61, 62, 63, 64, 65, 67, 70, 78, 79, 82, 83, 84, 85, 86, 88, 92, 94, 96, 97, 98, 101, 103, 105, 106, 112, 115, 116, 117, 118, 120, 121, 125, 129, 137, 138, 140, 141, 144, 145, 147, 152, 160, 164, 167, 169, 171, 173, 181, 183, 186, 187, 192, 199, 200, 203, 204, 206, 207, 209, 210, 211, 212, 213, 215, 216, 217, 218, 219, 220, 221, 222, 223, 224, 225, 226, 227, 231, 236, 237, 238, 241, 243, 244, 245, 246, 248, 250, 251 FECA, xi, xvii, 5, 6, 10, 11, 30, 55, 61, 70, 72, 73, 75, 77, 79, 82, 88, 93, 94, 96, 97, 98, 99, 100, 103, 105, 110, 111, 113, 114, 122, 130, 133, 138, 139, 145, 146, 152, 153, 155, 159, 161, 165, 167, 169, 171, 181, 186, 187, 196, 205, 208, 210, 213, 215, 216, 221, 233, 236, 241, 242, 243, 244, 245, 246, 247, 248 Federal Convention, 182, 190, 194 federal courts, 220 federal election activities, 160 Federal Election Commission, viii, xv, xvii, 4, 13, 14, 16, 18, 28, 60, 61, 63, 64, 65, 67, 73, 78, 79, 82, 85, 88, 92, 94, 97, 98, 100, 103, 116, 123, 140, 145, 168, 181, 197, 199, 203, 204, 217, 219, 222, 223, 224, 226, 227, 229, 231

191 federal elections, xii, xiii, xiv, 30, 79, 83, 107, 130, 143, 144, 145, 148, 151, 152, 153, 157, 161, 165, 174, 206, 218 federal funds, xiv, xv, 178, 179, 180, 183, 187, 189, 193, 198, 243 federal government, xiv, 177, 179, 182, 185, 195 federal law, 7, 121, 151, 152, 159, 180, 185, 187, 190, 192 Federal Register, 62, 199, 212, 221, 224, 226, 227 federalism, 107 fee, 245, 247, 248, 249 fees, 33, 58, 132, 183, 246, 247 felony, 136 fencing, 185 Fifth Amendment, 77 films, 184 finance, x, xi, xii, xiv, xv, xvi, xvii, xviii, 2, 6, 24, 34, 40, 67, 70, 71, 72, 76, 84, 90, 106, 107, 109, 110, 112, 115, 117, 121, 137, 141, 143, 145, 146, 147, 151, 155, 159, 162, 163, 164, 166, 167, 168, 170, 179, 186, 189, 199, 203, 204, 205, 206, 208, 213, 214, 216, 220, 221, 223, 229, 230, 232, 239, 242, 243, 244, 245, 248 financial resources, ix, x, 1, 2, 32, 39 Financial Services and General Government (FSGG), 20, 65, 223 financial stability, 32 financial support, 93, 105, 179, 187 financing, ix, x, xii, xiv, xv, 1, 2, 3, 4, 5, 6, 7, 9, 12, 14, 15, 16, 20, 23, 27, 28, 31, 32, 33, 35, 36, 37, 38, 39, 40, 52, 54, 57, 58, 61, 64, 66, 73, 77, 112, 113, 143, 150, 156, 177, 178, 179, 188, 189, 190, 191, 192, 199, 205, 206, 208, 217, 222, 223, 230, 231, 233, 235 fines, 213 fire, 216 First Amendment, xi, xvii, 69, 70, 71, 72, 73, 74, 75, 76, 77, 79, 83, 84, 85, 86, 87, 90, 91, 95, 96, 97, 98, 99, 101, 102, 104, 107, 110, 113, 114, 116, 117, 118,

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192 119, 121, 122, 126, 127, 131, 132, 146, 155, 173, 230, 231, 232, 233, 234 fitness, 120, 218 flexibility, 102 flight, 212 flood, 151 flow, 76, 79, 147, 165, 183 focus group, 35 focus groups, 35 focusing, 119, 163 Food and Drug Administration, 197 Fourteenth Amendment, 80, 87, 102, 104, 124, 126, 136 framing, 87, 158 fraud, 104, 136 free association, xi, 70, 72, 80, 98 freedom, 71, 73, 76, 80, 91, 93, 124, 126, 139 freedoms, xi, 70, 71, 72, 75, 93, 96, 124, 131 Friday, 22, 50 frustration, 217 FSGG, 67 full capacity, xvii, 205 funding, ix, xii, xiii, xiv, xv, 7, 20, 22, 24, 30, 31, 33, 35, 37, 40, 41, 46, 47, 50, 54, 61, 62, 63, 77, 79, 94, 123, 143, 144, 145, 146, 147, 150, 155, 156, 157, 165, 171, 177, 178, 179, 180, 181, 182, 183, 184, 187, 188, 189, 190, 191, 192, 194, 195, 196, 199, 200, 201, 205, 230, 235 fundraising, x, 2, 3, 10, 11, 21, 24, 25, 26, 29, 30, 33, 34, 38, 39, 41, 43, 46, 48, 49, 54, 57, 66, 102, 109, 149, 171, 205, 209, 210, 211, 221, 232 funds, ix, xii, xiv, xvi, xvii, 1, 4, 5, 6, 7, 9, 10, 11, 12, 13, 14, 15, 16, 18, 19, 21, 22, 23, 24, 27, 29, 30, 31, 32, 33, 34, 35, 37, 38, 39, 41, 42, 43, 47, 48, 50, 53, 62, 64, 66, 73, 78, 83, 84, 85, 88, 89, 90, 91, 93, 94, 98, 100, 104, 106, 107, 108, 110, 111, 112, 115, 116, 117, 121, 124, 126, 128, 131, 132, 143, 146, 147, 150, 154, 158, 159, 162, 166, 168,

Index 174, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190, 191, 192, 193, 196, 198, 199, 204, 214, 215, 216, 217, 218, 219, 226, 230, 231, 232, 233, 237, 243, 246

G gas, 58 general election, 4, 7, 9, 10, 11, 14, 15, 19, 22, 23, 31, 34, 38, 46, 47, 48, 49, 66, 77, 94, 110, 111, 116, 121, 145, 152, 154, 160, 171, 181, 191, 217 general fund, 5, 8, 53, 54, 131 General Motors, 149 get-out-the-vote, 154 gifts, 184 goals, xiii, 40, 108, 144, 205 governance, 71, 99 government, 4, 10, 35, 41, 54, 74, 86, 88, 103, 105, 108, 118, 122, 126, 128, 129, 141, 146, 148, 149, 156, 159, 179, 180, 182, 185, 186, 187, 193, 195, 199, 212, 234 GPO, 174, 175 grants, ix, xiv, 1, 4, 7, 9, 15, 19, 30, 31, 34, 37, 71, 178, 180, 182, 187, 188, 189, 190, 191, 192, 193, 194, 196, 197, 200, 201 graph, 14, 18 grassroots, 152, 160 grazing, 58 Great Lakes, 141 greed, 243 groups, xii, xiii, xiv, 34, 39, 75, 76, 99, 100, 143, 144, 145, 146, 149, 150, 151, 152, 153, 154, 158, 161, 164, 165, 247 growth, 155 guidance, 121, 183, 197

H hanging, 208 harassment, 100, 102

193

Index harm, 77, 84 hate, 103 hearing, 165, 166, 167, 169, 207, 210, 214, 215, 216, 220, 221, 245 heart, xi, 69 hedging, 93 height, 11 Homeland Security, 177, 185, 193, 194, 195, 196, 198, 201 Homeland Security Grant Program, 193 Honest Leadership and Open Government Act, xv, 59, 203, 206, 208 host, 30, 186, 187, 199, 200 hostility, 103, 125 House, xiii, xiv, xv, xvi, 41, 60, 65, 110, 138, 144, 145, 148, 150, 158, 161, 162, 163, 164, 165, 166, 167, 169, 170, 171, 174, 175, 188, 203, 204, 211, 212, 213, 214, 215, 216, 219, 220, 225, 230, 231, 234, 235, 243, 248, 249 House Administration Committee, 161, 165, 167, 248 HUD, 166

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I id, xiii, 5, 6, 103, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 140, 144, 237, 238, 250 identification, 105, 135, 154, 242 identity, 81, 86, 87, 125 illusion, 106 Immigration and Customs Enforcement, 198 implementation, 221 incentive, 89, 139, 165 inclusion, 88, 126 income, ix, 1, 62, 77, 87, 180, 249 income tax, ix, 1, 62, 77, 180 increased competition, 3 incumbents, 78, 118, 150, 155, 156 indexing, 52, 55, 56 Indian, 166, 168, 173, 175 indication, xvi, 203, 213 indicators, 150

inflation, 9, 11, 13, 18, 25, 41, 43, 47, 48, 51, 52, 63, 64, 79, 81, 148, 158, 180, 190, 200 informal groups, 99, 100 information exchange, 246 Information System, 21, 59 infringement, 102 initiation, 132 injunction, 98, 117, 231 injury, iv, 102 institutions, 71 integrity, xi, xiii, 70, 71, 72, 75, 80, 138, 144, 156 interest groups, xii, 143, 149, 151, 153, 158 interference, 84 Internal Revenue Code (IRC), xiii, xiv, 67, 83, 123, 144, 145, 151, 153, 163, 171, 173, 181 Internal Revenue Service, 9, 62 Internet, viii, ix, xviii, 60, 66, 111, 167, 173, 241, 242, 243, 244, 245, 246, 247, 248, 249, 250, 251 interpretation, 93, 97, 111, 119, 121, 141, 152, 209, 226 investment, 40, 184 investors, 93 IRC, 153, 161, 170, 171 IRS, xiii, 8, 9, 13, 14, 18, 28, 36, 62, 64, 144, 153, 154, 164 IS, 59 isolation, 27 issue advocacy, xiii, 78, 110, 111, 116, 118, 144, 151, 152, 153, 157, 160, 163

J January, xvii, 4, 19, 21, 39, 58, 67, 163, 167, 171, 172, 205, 206, 207, 208, 211, 221, 225 judge, 117, 231, 234 judgment, 93, 117, 140, 231, 235, 238, 239 Judiciary, 166 Justice Department, xvi, 204 justification, 3, 83, 89, 91, 212, 225

194

Index

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L labor, 72, 83, 85, 89, 92, 93, 106, 110, 111, 116, 121, 130, 132, 139, 153, 187, 189 language, xvi, 30, 95, 126, 132, 160, 165, 204, 213, 220 law, xiii, xiv, xv, xvi, xvii, xviii, 7, 24, 25, 30, 31, 34, 37, 71, 85, 96, 101, 102, 106, 113, 121, 126, 140, 144, 145, 147, 152, 159, 161, 163, 164, 165, 166, 167, 170, 178, 179, 180, 181, 183, 184, 185, 186, 187, 190, 192, 193, 195, 199, 203, 204, 205, 206, 208, 209, 211, 212, 214, 217, 220, 221, 229, 230, 231, 242, 243, 244, 246 law enforcement, xv, 76, 178, 181, 184, 185, 187, 193, 195 laws, xiv, 6, 135, 137, 145, 146, 151, 155, 162, 167, 184, 206, 221, 234 lawyers, 210 lead, 9, 149, 182, 192, 195 leadership, xvi, 162, 166, 168, 204, 212, 215 legislation, ix, xiii, xiv, xvi, 2, 5, 21, 27, 30, 88, 121, 140, 144, 145, 155, 188, 190, 194, 204, 208, 214, 221, 223 legislative, ix, xiv, xv, xvii, xviii, 2, 16, 65, 78, 82, 83, 84, 107, 108, 109, 118, 120, 145, 146, 151, 160, 161, 165, 169, 172, 177, 178, 204, 205, 213, 214, 218, 220, 222, 225, 242, 243, 249, 250 legislative calendar, 161, 165, 169, 172 legislative proposals, 78, 118 Legislative Transparency and Accountability Act, 175 liberal, 100 liberty, 72, 73, 80, 99, 102, 104, 122, 126 limitation, 48, 73, 75, 76, 81, 98, 100, 108 limitations, xi, 6, 70, 73, 74, 75, 77, 78, 81, 82, 85, 96, 110, 122, 146, 232, 238, 243, 246 limited liability, 131 links, 168 litigation, 89, 109, 119, 206, 219

loans, 64 lobby, 165 lobbying, xv, 88, 166, 199, 203, 208, 210, 214, 220, 221 Lobbying Disclosure Act, 209 lobbyists, 167, 168, 209, 210 local government, 180, 186, 187, 193, 195, 196, 200 long-term, 221 loopholes, 147, 151, 155, 159

M magnetic, iv management, 91 mandatory spending limits, 156, 222 market, 91, 99, 168, 211 market value, 168, 211 married couples, x, 2, 5, 6, 8, 13, 18, 23, 28, 52, 191 Maryland, 251 Massachusetts, xii, 70, 83, 85, 86, 87, 88, 112, 125, 129, 130, 140 matching funds, 4, 7, 10, 14, 15, 16, 18, 19, 29, 30, 31, 34, 37, 42, 47, 62, 181, 190, 191 measures, 39, 80, 81, 83, 161, 165, 213, 214 media, 35, 39, 99, 148, 149, 157, 249 median, 28 membership, 83, 90, 103, 124, 133 messages, 112 mining, 58 Minnesota, 237 minority, 77, 88, 100, 102, 139 minors, 106, 114 missions, 197 Missouri, xii, 70, 78, 81, 82, 237 momentum, 221 money, ix, xi, xii, xiii, 3, 7, 16, 18, 19, 24, 27, 29, 30, 31, 33, 35, 39, 53, 54, 69, 71, 74, 75, 76, 77, 79, 82, 83, 87, 95, 98, 99, 105, 106, 107, 108, 110, 112, 126, 130, 135, 144, 146, 147, 148, 149, 150, 151, 154, 156, 157, 159, 160, 161,

195

Index 163, 164, 165, 166, 170, 174, 179, 185, 186, 189, 190, 191, 192, 195, 199, 206, 218, 222, 235, 243, 246 monolithic, 150

N narrowly tailored, xi, 70, 72, 73, 74, 75, 84, 87, 90, 91, 92, 96, 99, 104, 118, 133 nation, 156 national, 97, 107, 122, 134, 150, 151, 152, 154, 159, 162, 166, 168, 170, 171, 179, 195 National Labor Relations Act, 132 national parties, 107, 152, 159, 166, 170, 171 National Party, 66 natural, 72, 87 NC, xviii, 41, 42, 43, 44, 45, 47, 48, 50, 51, 52, 54, 55, 56, 57, 215, 242, 249 negativity, 158 New York, iii, v, 122, 141, 181, 197, 198, 200, 231 New York Times, 122, 141, 198 newspapers, 247, 249 Nixon, xii, 5, 70, 78, 81, 237 Nominations, 60, 206, 207 non-profit, 84, 88, 90, 93, 101, 112, 124 non-union, 132 normal, 212 North Carolina, 65, 82 novelty, 82

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O obligations, 19, 24, 37, 53 Office of Justice Programs (OJP), 181 Ohio, xii, 71, 103, 123, 125 oil, 58 OJP, 181, 183 online, xviii, 60, 242, 249 online communication, 249 operator, 246 opposition, 34, 120, 130, 156, 163, 237

organization, 76, 92, 93, 98, 101, 102, 103, 124, 153, 170, 171, 199, 218 organizations, xi, xiii, xiv, 34, 39, 66, 70, 72, 76, 85, 89, 90, 99, 100, 103, 107, 112, 130, 139, 144, 145, 153, 161, 163, 164, 165, 171, 210, 215 oversight, 216 overtime, 181, 185

P PA, 78, 81 PACs, xii, 34, 39, 75, 79, 84, 85, 89, 111, 143, 147, 149, 150, 157, 158, 159, 161, 166, 168, 196, 209, 210, 212, 215, 224 parents, 114 payroll, 168 penalties, 112, 184, 213 penalty, 232 perception, 148, 149 perceptions, xii, 143 performance, 9 periodic, 132, 230 permit, 3, 19, 23, 31, 32, 53, 58, 132, 184, 191, 196, 200, 215, 218, 234 personal, x, xvii, 2, 3, 11, 38, 73, 76, 115, 146, 158, 162, 166, 230, 231, 232, 233 personal wealth, 3, 38, 76, 233 philosophical, 155, 156, 159, 162 philosophy, 88, 93, 95 phone, 103 photographs, 129 planning, 181, 184, 185 plausibility, 82 play, 120, 189 pluralism, 150 plurality, 118, 131, 135 policy choice, 40, 150 policymakers, 150 political action committee, xii, xvi, 34, 75, 78, 79, 81, 83, 84, 85, 106, 110, 143, 147, 168, 196, 204 political participation, 128 political parties, 5, 23, 75, 113, 114, 122, 133, 146, 159, 179, 206, 214, 219, 244

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196 politics, 3, 35, 87, 89, 106, 170, 189 polling, 35 pools, 100 popular vote, 9, 10, 127 population, 11 portfolio, 222 power, 39, 90, 234 powers, 71 pragmatic, 115 president, 15, 60, 67, 68 President Bush, xiii, xvi, 15, 144, 164, 203, 207 presidential campaigns, ix, xv, 2, 5, 8, 24, 33, 40, 57, 178, 191 presidential elections, 3, 37, 73, 124, 152, 156 presidential travel, 212 prevention, 109, 232, 238 primaries, 5, 27, 33, 34, 38, 41, 42, 43, 44, 45, 146 primary elections, 21 priorities, 37 privacy, 101, 125, 234 private, ix, x, 2, 3, 10, 11, 31, 35, 37, 38, 39, 41, 64, 76, 100, 102, 103, 156, 167, 179, 186, 189, 192, 208, 211, 212 private sector, 100, 102 probability, 100, 102 production, 184 profit, 84, 88, 90, 93, 101, 112, 124 profits, 184 progeny, 82, 108, 121 program, ix, x, 1, 2, 3, 4, 5, 6, 7, 9, 10, 11, 14, 16, 17, 19, 20, 21, 22, 27, 30, 31, 32, 35, 36, 37, 38, 39, 40, 57, 58, 62, 67, 156, 189, 190, 194, 200, 206, 213, 223, 230 pro-life, 129 promote, 101, 107, 122, 149, 151, 152, 156, 169, 187 property, iv, 86, 103, 126 prophylactic, 83 proposition, 39, 82, 110, 233

Index protection, xi, 69, 71, 74, 76, 79, 86, 95, 98, 99, 104, 107, 113, 114, 185, 198, 219 proxy, 79 public, ix, x, xi, xii, xiv, xv, xvi, xvii, 1, 2, 3, 4, 5, 6, 7, 9, 10, 11, 12, 14, 15, 16, 19, 20, 21, 23, 24, 26, 27, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 46, 47, 50, 52, 53, 57, 58, 60, 61, 63, 64, 65, 66, 67, 70, 71, 73, 74, 77, 78, 81, 88, 89, 91, 98, 99, 100, 101, 102, 107, 108, 112, 116, 118, 120, 123, 124, 125, 127, 129, 130, 143, 145, 146, 148, 150, 151, 152, 153, 155, 156, 157, 162, 168, 171, 175, 177, 178, 179, 180, 183, 188, 189, 190, 191, 192, 193, 195, 196, 200, 204, 205, 206, 212, 213, 218, 219, 220, 222, 223, 225, 233, 234, 237, 241, 242, 243, 244, 245, 246, 247, 248, 249, 250 public affairs, 16, 65 public education, x, 2, 23, 29, 35, 58 public financing, ix, x, xii, xv, xvi, 1, 2, 3, 4, 5, 6, 7, 9, 10, 11, 12, 14, 15, 16, 19, 20, 21, 23, 24, 26, 27, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 46, 47, 53, 58, 60, 61, 63, 64, 66, 70, 73, 77, 124, 156, 157, 178, 188, 189, 190, 191, 192, 195, 196, 200, 204, 223, 225, 233 public funding, xiii, xiv, xv, 20, 35, 77, 123, 144, 145, 146, 155, 157, 177, 178, 180, 192 public funds, 4, 9, 10, 15, 16, 19, 30, 37, 39, 47, 50, 64, 66, 98, 124, 179, 183, 189, 196, 233, 237 public interest, 81 public money, 53, 77, 179 public opinion, 40 public policy, 89, 116, 218, 219, 246 public support, 4, 91, 130, 157

Q qualifications, 120, 218 quantum, 82 quorum, xvii, 4, 61, 205, 206, 209, 211

197

Index

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R race, 22, 25, 33, 34, 42, 148 radio, 85, 94, 98, 250 range, 11, 210 reading, 111, 126 reaffirmation, 236 reality, 74, 146, 169 reasoning, 6, 99, 124, 212 recognition, 27 reduction, 155, 162 reelection, 98, 109 reflection, 149 Reform Act, 161, 170, 172, 174, 175 reforms, 39 regular, 32, 230 regulation, xi, xii, xiii, xiv, xviii, 69, 70, 71, 72, 74, 81, 82, 84, 85, 89, 90, 91, 92, 94, 95, 98, 99, 100, 101, 104, 109, 110, 111, 113, 117, 120, 121, 122, 123, 131, 132, 133, 139, 141, 143, 144, 145, 147, 152, 155, 159, 160, 161, 164, 165, 167, 174, 186, 189, 190, 200, 210, 235, 239, 242, 243, 244, 245, 248, 249, 250 regulations, xiii, xviii, 23, 25, 36, 52, 62, 67, 74, 104, 122, 144, 167, 171, 181, 183, 184, 189, 199, 200, 209, 211, 226, 227, 238, 241, 243, 245, 246, 249 regulatory framework, 153, 161 reimbursement, 168, 193, 195, 212, 225 relationship, 80, 97, 113, 125, 192 relationships, 150 relevance, 104 rent, 80 Republican, xii, xiv, xv, 4, 7, 9, 10, 15, 70, 85, 94, 96, 97, 154, 162, 163, 165, 169, 178, 179, 181, 182, 184, 186, 196, 237 Republican Party, 94, 96 Republicans, xiii, 14, 95, 134, 144, 158, 162 research, 35, 40 residential, xiv, 9, 13, 14, 18, 28, 63, 177, 181, 211 resolution, 87

resources, ix, x, 1, 2, 3, 19, 32, 33, 34, 39, 75, 90, 92, 99, 129, 147, 148, 158, 179, 213 responsibilities, 93, 124, 215 retaliation, 104, 105 returns, ix, 1, 7, 9, 13, 18, 23, 36, 63, 180 revenue, 7, 179, 249 rewards, 151 risk, 76, 77, 79, 80, 81, 82, 84, 90, 95, 96, 97, 100, 102, 103, 105, 120, 123, 127, 136, 205 risks, 232 royalties, 58 Rules and Administration Committee, xvi, 161, 164, 165, 168, 169, 172, 204, 207, 214, 216 Rules Committee, 162, 166 runoff, 217

S satellite, xvii, 110, 116, 217, 241, 242, 250 Schiff, 215 school, 104 scripts, 67 search, 67 Secret Service, 181, 183, 193, 197, 198, 201 Secretary of the Treasury, 36 security, xiv, xv, 63, 141, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 192, 193, 194, 195, 196, 197, 198, 199 segregation, 132 Self, 112 senate, 175 Senate, xiii, xiv, xv, xvi, xvii, 4, 40, 65, 68, 110, 116, 138, 140, 144, 145, 146, 148, 150, 158, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 172, 175, 203, 204, 205, 206, 207, 211, 213, 214, 215, 216, 217, 219, 220, 230, 235 September 11, 16, 19, 65, 181, 195 series, 63, 115, 207 services, iv, xviii, 75, 130, 187, 224, 242, 245, 247, 249

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198 shape, 145, 189 shaping, 9, 222 shareholders, 87, 88, 89, 128, 139 shares, 212 Shays-Meehan bill, xiii, 144, 160, 163 sign, 21 signs, 38 sites, xv, 178, 185, 247 social change, 71 socialist, 102 soft money, xii, xiii, 24, 30, 31, 54, 71, 106, 107, 108, 112, 144, 146, 151, 154, 157, 159, 160, 161, 163, 164, 170, 179, 189, 192, 199, 206 software, 23, 36, 52, 62 solutions, 155 special interests, 150 specificity, 210 specter, 99, 130 speech, xi, 6, 34, 70, 71, 72, 73, 74, 75, 78, 79, 80, 81, 82, 84, 85, 86, 87, 88, 89, 90, 92, 95, 98, 99, 101, 102, 104, 105, 108, 109, 111, 112, 113, 116, 118, 119, 120, 122, 123, 126, 128, 131, 136, 139, 141, 146, 158, 232, 234, 235, 237, 238, 246 spending limits, ix, xii, 1, 3, 4, 6, 11, 14, 17, 21, 22, 23, 25, 27, 32, 33, 34, 38, 39, 45, 49, 63, 94, 120, 122, 143, 147, 156, 157, 162, 235 sponsor, 65, 171 spouse, 8 stability, 32 standards, 153 state laws, 184 statistics, 150 statutes, 73, 145, 233 statutory, 80, 87, 97, 101, 111, 113, 127, 230 strain, 38 strength, 5, 206 strong force, 164 subgroups, 150 subsidies, x, 2, 3, 4, 20, 27, 31, 58, 156, 162, 192

Index summaries, 21 summer, xvi, 38, 204 supply, 108, 136 suppression, 86, 88, 104 Supreme Court, vii, xi, xvii, 6, 61, 69, 70, 71, 72, 73, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 88, 90, 93, 94, 96, 97, 98, 100, 101, 102, 103, 106, 110, 112, 115, 116, 117, 121, 126, 132, 137, 145, 146, 147, 152, 153, 164, 169, 173, 200, 205, 217, 219, 220, 222, 227, 229, 231, 233, 237, 238 systems, 155

T tax incentive, 156 tax incentives, 156 taxation, 87 taxes, 8, 62 tax-exempt, xiii, 83, 84, 107, 144, 153, 163, 164, 171 taxpayers, x, 2, 5, 8, 11, 29, 31, 35, 40, 66, 77, 156, 191, 196 telephone, xvi, xvii, 62, 204, 214, 216, 225, 241, 242 television, 98, 149, 250 television ads, 98 tension, 72, 189 territory, 54 terrorist, 181, 195 terrorist attack, 181, 195 theory, 79, 97 third party, 183 threat, 37, 39, 119, 125, 213, 233 threatened, 108 threatening, 103 threats, 102, 123 threshold, 22, 23, 29, 46, 63, 87, 105, 118, 137, 230, 246, 249 threshold level, 230 thresholds, 30, 43, 122, 209 time, x, xii, 2, 3, 12, 20, 27, 37, 46, 51, 94, 95, 102, 111, 133, 134, 136, 143, 147,

199

Index 148, 149, 153, 157, 189, 191, 206, 209, 211, 219, 238, 242 timing, 160 title, 41, 160 tradition, 101, 102, 104 training, 185 transfer, 94, 159, 166 transformation, 128 transmission, 116 transparency, 209, 221 transportation, 184 travel, 208, 209, 211, 212, 220, 221, 224, 225 Treasury, 7, 8, 9, 16, 19, 23, 32, 36, 37, 52, 53, 62, 65, 66, 110, 117, 166, 180, 182, 192, 213, 225 Treasury Department, 8, 9, 16, 19, 65, 181, 182, 225 treasury funds, 83, 84, 89, 90, 91, 106, 110, 111, 112, 116, 117, 121, 168, 217, 218, 219, 226 trial, 119 tribal, 168 tribes, 166, 168 triggers, 73, 90, 92, 130

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U U.S. Treasury, 8, 16, 182, 213 uniform, 22 unionism, 132 unions, 85, 89, 92, 93, 99, 106, 110, 111, 112, 130, 132, 139, 153, 187, 217, 218, 248 United States, 122, 182 universe, 103 updating, 27

V validation, 124 validity, 81, 83, 101

values, 71, 99 variance, 160 venue, 185 vice-president, 5, 211, 224 visible, 149 Vitter, 168 voice, 80, 88, 99, 122, 150, 165, 213, 215, 234, 235 voluntary spending limits, 162 voters, 76, 81, 87, 98, 104, 129, 158, 230, 234, 236 voting, 11, 51, 135, 218

W war, 93 warrants, 119, 130 Washington Post, 60 water, 107 Watergate, 205 weakness, 82 wealth, 3, 38, 74, 76, 86, 89, 90, 91, 92, 132, 233, 235 weapons, 74 wear, 135 websites, 247 White House, 207, 223 winning, 34, 148 Wisconsin, xii, xvii, 71, 115, 116, 117, 140, 205, 217, 226 withdrawal, 25 witnesses, 210, 216 writing, xv, 203, 213, 227

Y yield, 191