The state money race

Introduction

State parties raised nearly $823 million in the 2001-2002 election cycle, bolstered by millions from labor unions, corporations, wealthy individuals and the national parties, according to a new study by the Center for Public Integrity. About 53 percent of the total went to Democrats and 47 percent went to Republicans.

The parties also reported spending more than $790 million during the same time period.

While Democrats out-raised the GOP at the state level, it was no contest at the national level, where Republicans were about even with Democrats in now-banned “soft money” contributions, but held a tremendous 2-1 advantage in hard money contributions.

The Center collected disclosure records from 229 state party and caucus committees over the past year, making it possible to calculate the combined total of state and national party contributions in an election cycle—more than $1.6 billion, a staggering amount, especially given that 2002 was an off-year, non-presidential election.

Federal law regulates the source and amount of contributions that the national parties—the Democratic National Committee, the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the Republican National Committee, the National Republican Senatorial Committee and the National Republican Congressional Committee—can receive. Such regulated money is known as federal or “hard” money. In the 2001-2002 election cycle, national parties could also receive unlimited donations, called “soft money,” but the 2002 passage of the Bipartisan Campaign Reform Act ended that practice.

Non-federal money, which in some cases can be considered soft money, is mostly regulated by the states. Rules on the sources and limits can vary widely at the state level, as can disclosure. In fact, in a 2002 nationwide ranking, the Center found that nearly half the states failed to keep the public fully informed of state party campaign activity.

The $823 million raised is $102 million more than was raised in 1999-2000, based on data from a previous Center study. While state parties received more money from the national parties in 1999-2000, they raised about $118 million more for their own state accounts overall in 2001-2002. The presidential election in 2000 could account for the larger role of the national parties in that election, while high-profile and costly statewide elections in 2002 helped boost the totals in Florida, California, New Hampshire and other states.

More money, fewer wins

The Democrats’ funding edge at the state level did not always translate to victories at the polls, as Republicans captured significant statewide elections in 2002.

In Georgia, Democratic party and caucus committees spent $5 million more than Republican committees, but nevertheless lost big: Among those Democrats toppled were the incumbent governor, a U.S. senator and the powerful speaker of the state House. In Missouri, Democratic committees raised $2.5 million more than GOP committees, yet lost a close U.S. Senate race and control of the state House for the first time in 48 years. Democratic parties did have some notable electoral achievements in states like Arizona, Illinois, New Mexico and Pennsylvania, where Democratic governors were elected.

The loss in Georgia typified the Democrats’ woes, especially because they had such a significant fundraising edge—Georgia’s Democratic Party raised $15.3 million during 2001 and 2002, $3 million more than the state GOP. A key difference, observers said, was that Georgia Republicans produced a massive ground operation in the final days before the election, turning out voters to elect Sonny Perdue as governor and Saxby Chambliss to the U.S. Senate. In consultation with the national party and political advisors to President George W. Bush, the Georgia GOP spent hundreds of thousands of dollars on get-out-the-vote efforts that paid off on Nov. 5, 2002.

The “72-hour project,” in Georgia and other states, which has since become a model for GOP voter turnout operations, is an illustration of the integral role that state parties play in elections for local, state and national office. It also serves as a lesson for the importance of voter turnout in the 2004 presidential campaign.

“Republicans tended to rely on the bells and whistles instead of relying on the people,” said John Hancock, a former executive director of the Missouri GOP and currently a consultant to the party. “The 72-hour task force is just a snazzy name for getting people back involved.”

How the money flows

Finding contributions hardly seemed to be a problem for state parties, especially when the national parties were eager to send millions their way. State party and caucus committees received at least $303 million from the six national party committees based in Washington, D.C. Of that, $217 million came in the form of “soft money” raised outside the limits of the federal campaign laws. The total is higher than what state filings reflect: inconsistencies in reporting at the state level occasionally meant that certain national party transfers did not appear in state records. Democrats in Tennessee and Michigan, among other states, set up separate committees that received soft money from the national parties and then passed it along to the state party committees, obscuring the identity of the original donors.

Under BCRA, national parties no longer can raise or spend soft money, cutting off a valuable supply of money for the state parties in the future. For example, state parties reported receiving at least $68 million from the Democratic Senatorial Campaign Committee, of which $48 million was soft money. National parties may still send “hard money” raised under federal limits to the states. In addition, state parties can raise money under state rules that would not otherwise be permitted under federal rules.

In practice, state parties often used the soft money transfers from the national parties to help pay for broadcast advertisements for competitive races. Having state parties buy the advertising time rather than the national parties often meant that fewer hard dollars needed to be used for the expenditure. For example, the Tennessee Republican Party aired a television spot attacking U.S. Senate candidate Bob Clement’s record on taxes, saying the ad was produced “in conjunction with the National Senatorial Committee” (sic). Federal records show that the NRSC sent the state party $284,000 on Oct. 23, 2002, the day the new ad was unveiled. The state party’s filing show that it paid National Media Inc., a consulting firm, $284,000 for “Campaign Exp-TV” two days later.

The Center obtained records from all 50 states detailing contributions and expenditures by state political party and legislative caucus committees. Some reports were available in electronic format, while others only came on paper and had to be entered into a database. To this the Center added records from the federal accounts of the 100 Democratic and Republican state party committees, available from the Federal Election Commission. Researchers then identified and categorized top donors, recipients and spending categories.

Among the states, only Arkansas and North Dakota did not require disclosure of state party expenditures during 2001-2002, and both have since changed their laws to require disclosure of such information. Expenditure information from the federal accounts of party committees in Arkansas and North Dakota was available from the FEC and is included in the study. All states require disclosure of contributions to state political parties, but not all require the same information from donors. Some also permit state parties to maintain separate administrative accounts that need not always be disclosed (see methodology for more information).

The study found a familiar pattern among the top donors to state party and caucus committees: many of the same labor unions, corporations, associations and wealthy individuals that inhabit the top ranks of national donors do double-duty in the states. But the Center also found donors who appear to restrict their giving to the state level.

To come up with the top donors, the Center included both their federal and non-federal contributions.

Top contributors

Labor unions dominated the list of top non-party donors to state parties, providing at least $41 million, mostly to Democratic committees. AFSCME, the union representing state and local government workers, poured $5 million into state party and caucus committees, ahead of the Service Employees International Union ($4.9 million) and the National Education Association ($4.6 million). Those three unions, along with the International Brotherhood of Electrical Workers, accounted for 43 percent of all labor union contributions.

Nearly all of the top 20 organizational contributors—consisting of unions, trial lawyers and abortion-rights groups—gave most of their money to Democratic committees. AT&T Corp., which ranked twelfth, gave about 61 percent of its $1.6 million to Republican committees (other party committees and candidates were among the largest overall donors to state parties, but the Center’s analysis treats them separately from union, corporate and individual contributors).

Union contributions were especially significant in the Democrats’ success in Illinois, where former U.S. Rep. Rod Blagojevich became the first Democratic governor in 30 years: 33 different unions contributed to Democratic committees in Illinois, led by SEIU’s $163,000 and another $147,000 from the electrical workers. In California, where then-Gov. Gray Davis won a second term in 2002, the SEIU poured nearly $879,000 into Democratic party and caucus committees, second only to $1.2 million in contributions by the NEA and its state affiliates.

While GOP committees had no single donors to match the most generous labor unions, they could count a number of wealthy individuals and their businesses. Houston home builder Bob Perry split his $1,155,000 among Republican committees in Texas, Louisiana and Arkansas.

Perry was one of two individuals to contribute more than $1 million to state parties in 2001-2002; the other was James E. Pederson, a real estate developer and chairman of the Arizona Democratic Party, to which he donated nearly $3.7 million. That figure dwarfs the $417,400 that he has given to federal candidates and parties since 1997, according to FEC records. Neither Pederson nor party executive director Paul Hegarty responded to a telephone message seeking comment.

In addition to Perry and Pederson, at least 123 other individuals contributed $100,000 or more to state party and caucus committees. They included Sen. Jon Corzine, D-N.J., who gave $421,200; California construction executive and owner of the San Diego Chargers football team Alexander G. Spanos ($355,000) and author Stephen King ($150,000).

Some donors worked both sides of the aisle, spreading money to both parties. Brewer Anheuser-Busch contributed to 23 different Democratic state committees and another 23 Republican committees, often each party in the same state. SBC Communications Inc., one of the Baby Bells, split its $928,000 almost equally between GOP and Democratic recipients.

Business interests figured heavily among the leading contributors, according to the Center’s analysis. Financial, insurance and real estate donors combined to give nearly $59 million to state parties and caucus committees, with real estate interests alone accounting for $22 million of that figure. Lawyers and lobbyists contributed $39.7 million.

Lawyers accounted for nearly $20 million in contributions to Democratic committees in Florida, New Jersey and in Texas, where 96.6 percent of all Lone Star state lawyer donations went to Democratic committees. Houston and other Texas cities are home to some of the Democratic Party’s most generous trial lawyers, and the issue of “tort reform”—placing limits on jury awards to plaintiffs—has loomed large in the state. Only Alabama had a higher percentage of lawyer money going to Democrats—99.5 percent—than Texas. Among the top states for contributions from the legal community, only Illinois and Ohio saw a roughly even split between donations to Republican and Democratic party committees from lawyers.

Pharmaceutical manufacturers, a key Republican ally at the national level, also were generous to state party committees. GOP committees in 40 states received some money from drug makers, their PACs and employees, with the most going to New Jersey, Florida, Tennessee and New York. Georgia, New York and New Jersey were the only three states in which Democratic committees received more than $35,000 from the pharmaceutical industry.

While the top industry givers spread their money across many states, other industries devoted most of their attention to a few key locations. The gambling industry, which consists of casinos, racetracks and other betting venues, concentrated most of its $5.5 million in contributions within three states: Florida, California and Nevada. Party committees in those three states received more than $1 million each. In Florida, the largest donors were horse and dog racetrack operations such as Gulfstream Park and the Palm Beach Kennel Club, along with the Miccosukee and Seminole Indian tribes, which operate casinos. Indian tribes dominated the list of California gambling-related donors and casinos led the pack in Nevada.

Parties in five other states—Missouri, Illinois, New Jersey, Arizona and New Mexico—received at least $100,000 from gambling-related interests, including racetrack owners and companies that make equipment or provide services for gambling operations.

A helping hand

Some state parties reached out to party organizations outside their states to find resources to help candidates, especially federal candidates. Democrats in South Dakota needed every dollar they could find in 2002 to help U.S. Sen. Tim Johnson defend his seat against a challenge from then-Rep. John Thune. Five state Democratic Party committees sent valuable “hard dollars” to South Dakota’s Democratic Party during the 2001-2002 cycle, and four of those states got non-federal money from South Dakota, often more than they gave.

“We were concerned that we would run short on hard money, so we were actively seeking it out,” said Bret Healy, a political consultant who served as executive director of the state Democratic Party in 2002.

Healy found willing partners in California, Florida, Kansas, Michigan, Minnesota, New York and Virginia where state party committees combined to send a total of $1,101,800 in hard money to South Dakota between June 2001 and August 2002. In return, those committees received a total of $1,178,750 in soft money from South Dakota.

The generosity of other state parties was such that Healy was able to dole out hard money to other states as the election approached. Party committees in Massachusetts, Montana and Louisiana got a total of $204,667 from South Dakota between Sept. 25 and Oct. 31, 2002.

In a telephone interview, Healy said that the transfers between state parties were a common practice dating to the mid-1990s. “The premium for hard money had been there for several cycles. We moved money amongst state parties in the 2000 cycle, so it’s not a great big new thing.”

The transactions are a state-level twist on a practice that was common on the national level when party committees were still allowed to raise soft money. National parties seeking hard money would transfer soft money to state party committees, which could be spent with fewer restrictions on electioneering, who would then send a smaller amount back in hard money. The difference would be the state party’s gain on the transaction. Take Florida, for example. In 2001-2002, the National Republican Senatorial Committee sent nearly $5.6 million in soft money to Florida’s Republican Party—despite the lack of a Senate race in Florida in 2002. In turn, Florida’s GOP sent $5,475,000 in hard money to the NRSC during the same period—money that could be used with far fewer restrictions. (See National GOP Exchanges Soft Money for Hard in Florida.)

Florida’s Republican Party also was able to send money to state party committees in California, Georgia, Michigan, New Jersey, Ohio, South Carolina and South Dakota making it one of the more prolific state party sources.

Democratic state parties benefited from the run-up to the 2004 presidential election, as presidential candidates doled out more than $1.2 million from their campaigns or political action committees. The Iowa Democratic Party received the most money, garnering $269,000 from committees affiliated with Sens. John Edwards, N.C.; John Kerry, Mass.; Joe Lieberman, Conn.; Rep. Richard A. Gephardt, Mo.; and former Gov. Howard Dean of Vermont. Kerry donated the most, a total of $421,703 in cash and equipment, while Dean, who dropped out of the race after winning only the Vermont primary, gave the least, $19,000.

Across borders

In some smaller states, party fundraisers went well beyond state lines to find contributors. The national fundraising networks that have been built by political professionals over the past 25 years have paid off for state parties, especially for states that may not have a lot of homegrown wealth. Outside money became a major factor in small states that hosted major races in 2002, including New Hampshire, South Dakota and Arkansas.

Both major party committees in New Hampshire raised at least 95 percent of their contributions from outside the state, records show. The Democratic State Committee brought in $11.4 million from beyond New Hampshire, while the state GOP’s total of outside money was $8.6 million. In fact, all of the state party committees that raised more than 90 percent of their funds from outside state lines are located in less-populated states: in addition to New Hampshire and South Dakota, Rhode Island, Mississippi and Arkansas saw one or more party committee get at least nine of every 10 dollars from beyond its borders. Much of the outside money came in the form of national party donations.

Georgia’s Senate Democratic Campaign Committee, a legislative caucus organization, had the highest percentage of outside money among committees that raised at least $100,000: 98.5 percent. The committee received exactly three contributions from donors within Georgia, totaling $47,368, while it took in nearly $3.1 million from Florida, New York, Texas and Washington, D.C.

Considering only individual donors, the percentage of out of state money drops sharply for many committees. Still, people residing outside New Hampshire accounted for 63 percent of all individual contributions to that state’s Democratic Party during 2001 and 2002, and Idaho’s Democratic Party got 76 percent of its total individual donations from people listing addresses outside Idaho in the same period.

New Hampshire’s state party and caucus committees raised more than $21 million during the two years—more than party operations in Illinois and Virginia—due to the presence of a competitive U.S. Senate race in the state. The out-of-state money that a prominent election or candidate can bring into a small state can transform a race, said Vermont Republican Party Chairman Jim Barnett.

“In a tiny state like this, it doesn’t take much to change the course of an election,” Barnett said, citing reports that the presidential candidacy of former Gov. Howard Dean had helped to attract out of state donors to the Vermont Democratic Party.

States with competitive or high-profile races in 2002 raised the most money through their party and caucus committees, led by Florida, where the two state parties pulled in a combined $89.4 million during 2001 and 2002. New Jersey, which had a 2001 gubernatorial election, and California, which saw an expensive governor’s race in 2002, ranked second and third, respectively. Next came three states with major U.S. Senate races in 2002: Minnesota, Missouri and Texas, followed by New York and Ohio.

Spending patterns

Spending by party committees followed a similar pattern: Florida, California, Minnesota, New Jersey and Georgia were the top five states for party and caucus spending, with Florida’s $89 million far out-distancing the rest. In order to analyze how state party and caucus committees spent more than $790 million in 2001-2002, the Center assigned each expenditure a code to identify its specific purpose. The records also were placed into broader spending categories, such as “Media,” “Candidate Support,” and “Administrative.” Although many records did not include a specific purpose, some patterns did emerge. In its analysis, the Center excluded money transferred between accounts of the same committee and also excluded loan and mortgage payments.

As the central nervous system for federal, state and local politicians and activists, state party committees spent millions to maintain an infrastructure that includes employees, offices and equipment. But the largest expenses for state party and caucus committees, the Center found, were for voter communication and outreach, especially advertisements and mailings.

More than a third of the money spent went toward broadcast advertisements and direct mail, two major vehicles to spread the word about candidates and attract donors. Television and radio advertisements and production costs totaled at least $179 million, or 23 percent of the total spent. Party and caucus committees spent more than $123 million, or 16 percent, on direct mail, including postage costs for mailings and other related services.

Not surprisingly, the top recipients of state party and caucus committee spending were media consultants that purchase advertising time. The Democratic firm Greer Margolis Mitchell Burns was paid just under $46 million by state parties in 2001-2002, more than any other recipient. National Media Inc., a GOP firm that also works for congressional and national candidates and committees, collected $42 million during the same period, and the next leading recipient, the U.S. Postal Service, was nearly $17 million behind. Nine of the top ten non-party recipients were media, direct mail or fundraising consultants.

Other expenses paled in comparison to advertising and mailing costs. No other sub-category accounted for more than 6 percent of the total spent. Although most state legislatures were redistricting during 2001 and 2002, and some of the battles were hard fought, including in Texas, Colorado and Georgia, the amount of money specifically labeled as redistricting-related by committees was just $1.6 million.

State party and caucus committees passed $47 million in actual contributions to state and federal candidates, with $8.9 million more in in-kind services provided (parties in a number of states pay for office space, salaries or other expenses incurred by candidates and their campaigns).

State committees with federal accounts reported transferring nearly $158 million to their own federal accounts, but records filed with the FEC suggest that figure is less than what the federal accounts reported receiving.

State committees also sent $23.6 million to the national parties, of which $19 million were “hard dollars” raised under federal limits. For example, the Michigan Democratic Party sent nearly $1.6 million in hard money to the national parties, and 30 other state party committees shipped at least $100,000 to the national parties. In return, national party committees sent millions of dollars, mostly in soft money now banned under federal law, to state committees.

State campaigns

In some instances, state parties become de facto campaign committees for gubernatorial and other statewide candidates. In Florida, incumbent Gov. Jeb Bush, the brother of the president, was seeking a second term in 2002 behind a unified Republican Party. Democrats, meanwhile, had a primary fight between former U.S. Attorney General Janet Reno and Tampa attorney Bill McBride, with McBride eventually winning the nomination.

Under Florida law, statewide candidates can receive public matching funds if they agree to spending limits. McBride accepted the public money, and even though Bush did not, both state parties came to the assistance of the candidates. The Florida Democratic Party spent nearly $2 million paying the salaries of McBride campaign staffers, while the Florida Republican Party spent $2.9 million on salaries, consultants, polling and other services for the Bush campaign.

Other state parties act through surrogate political committees, sending hundreds of thousands of dollars to them in advance of an election, making it difficult to connect the dots on exact party spending practices. In Arizona, both the state Democratic and Republican parties funded state PACs with names like Our Children’s Future and Arizona First. The former received $1.26 million from the state Democratic Party, while the latter got $1.43 million from the state GOP.

Sporting events played a role in the operation of state parties, records show. At least $690,248 was spent on golf-related activities, mostly fundraising events. Both Florida state parties used baseball games between the New York Yankees and the Florida Marlins as venues for fundraisers, spending $5,805.66 on tickets to those games. Republican parties in Ohio and Nebraska purchased tickets to Ohio State and Nebraska college football games, respectively.

The top spending caucus committee was New York’s Senate Republican Campaign Committee, which spent $8.8 million. Ohio’s House Republican Campaign Committee ranked second with $7.1 million, while the Republican Senate Campaign Committee ranked sixth with $5 million. The Ohio GOP added to its majorities in both houses of the state legislature in 2002 and Republicans won all five statewide races. Pennsylvania and New Jersey also saw active caucus committees.

Many states permit political parties and caucus committees to give hundreds of thousands of dollars to state candidates, and 13 state committees gave at least $1 million directly to the campaigns of office-seekers at the state level. The Democratic state party in California topped the list with $2.9 million in candidate contributions, followed by the Alabama Democratic Party, which shelled out $2.3 million. Most state party and caucus committees spent less than 50 percent of their money on direct candidate contributions, a reflection of the costs of fundraising, purchasing advertising and administrative expenses that parties face. Republican parties in Iowa and Illinois, for example, each spent less than 5 percent of their total in direct candidate contributions.

The future

But the ability of parties to pay for expensive television ads, polls and other items has been curtailed by the 2002 federal campaign finance laws, current and former party officials say, injecting a degree of uncertainty into the process. The Center is in the process of studying state party finances during 2003, the first full year that the Bipartisan Campaign Reform Act was in effect, for its impact on state parties and caucus committees. That report will be released later this year.

Proponents of BCRA say it was crafted to permit state parties to continue to play an important role in politics while ensuring that their impact on federal elections is financed by contributions raised under federal limits. For example, the law permits state and local party committees to raise contributions of up to $10,000 from individuals for special “Levin accounts,” named for their primary congressional sponsor, Michigan Democratic Sen. Carl Levin. These Levin funds could be used to defray the cost of get-out-the-vote efforts that would benefit federal candidates, but could not be used for advertising. Some state parties have already begun raising this type of money.

This much is certain: without the national party soft money that has fed state parties for nearly a decade, state committees will have to rely on their own networks of donors and perhaps on each other. Nothing in the new federal law prevents state parties from exchanging money, even hard money for soft money, or from accepting donations from groups that cannot give directly to federal candidates but meet state guidelines. Hancock, the former Missouri Republican Party executive director who stepped down in early 2003, predicted that groups that were not bound by state disclosure requirements would make up for the spending that state parties would have done with national party soft money.

“I think we’ll look back fondly at 2002 and think, look what we could do,” he said. “Remember those days?”

This project is funded by the Pew Charitable Trusts, the Ford Foundation and the Joyce Foundation.