A little-used campaign finance rule

Introduction

State, district and county political party committees throughout the country are largely shunning a new kind of federal campaign money, according to a Center for Public Integrity analysis of Federal Election Commission data covering the first nineteen months of the 2004 election cycle. With only weeks left in the campaign season, preliminary data already shows how parties are adjusting to—and struggling with—new campaign finance rules.

So-called Levin funds, a creation of the Bipartisan Campaign Reform Act of 2002, are named after Michigan Democratic Sen. Carl Levin, who introduced an amendment to BCRA to lessen the impact on state and local party committees of BCRA’s ban on unlimited “soft-money” contributions. The amendment allows such committees to receive up to $10,000 from individuals to pay for certain limited federal election activities such as voter registration and get-out-the-vote efforts.

When the amendment was first introduced, several lawmakers and watchdog organizations—including the Center for Public Integrity—warned that the Senate had simply introduced a large loophole through which significant sums of money would flow. Bob Ney, a republican representative from Ohio, mockingly dubbed them “the $30 million dollar loophole,” a figure he arrived at by multiplying the $10,000 contribution limit by the nation’s 3,000 counties. The Center for Public Integrity, in a 2002 report, predicted an explosion of new local party committees created to absorb the deluge of $10,000 contributions.

It hasn’t turned out that way. In fact, according to a Center analysis of FEC data, from January 2003 to July 2004 only 14 state and two county party committees in 12 states reported raising Levin funds. The total amounts raised are less than impressive: $1.4 million. Democratic Party committees raised almost three-quarters of the total.

Why the reluctance to use Levin funds? Mike Lavigne, chief of staff of the Texas Democratic Party, describes them as “a pretty big bother” and “some of the more difficult money that we have.”

The funds are a bureaucratic bear to manage. Although they can be used on voter registration, voter identification and get-out-the-vote efforts, they cannot be used to pay for public messages that refer to U.S. House, Senate or presidential candidates. They cannot be used to pay for the services of employees who spend more than 25 percent of their compensated time on federal election-related activities. Nor can they be spent on broadcast communications that are in any way tied to a federal election.

State laws govern who can make Levin fund donations. Generally, any “person” can donate, including individuals, political action committees, corporations and labor unions. Although federal law sets a $10,000 cap on donations, if a state sets a lower limit, the state law takes precedence. Parties cannot jointly raise or transfer Levin funds between each other. National parties and federal candidates and officeholders are forbidden to raise or spend Levin funds.

The states that did raise funds received the money from a wide range of potential sources, with corporations, business associations, labor unions and their affiliated political committees contributing about 59 percent of the total and individuals contributing the other 41 percent. Most of the individuals contributing the $10,000 maximum have been regular donors in the last several election cycles.

California raised more Levin funds than all other states combined; four party committees in California accounted for $808,180, or nearly 60 percent of the total. California also boasts the only two county party committees reporting Levin fund contributions—the Republican Central Committee of Orange County and the Los Angeles County Democratic Central Committee.

The states raising the most Levin funds have relatively permissive campaign finance laws. California law, for example, allows individuals, political action committees, corporations and labor unions to make unlimited contributions to state parties for purposes other than contributing to particular state candidates. Arizona, which ranks a distant second among all states with $138,000 in Levin fund contributions, permits unlimited donations from individuals and PACs. Georgia and Illinois, ranking third and fourth with $112,400 and $100,000 respectively, allow all sources to make unlimited contributions.

More work, greater expense

After putting them through a trial run this election cycle, party committees are in a position to evaluate the merits of Levin funds. Judging from the sums raised in so few states, it’s not surprising that reactions are mixed.

Mike Lavigne says that Levin funds have added costs to his party’s operations. “If anything, it’s just caused us to have to spend more money on maintaining our money and raising it,” he told the Center.

Mike Vallante, executive director of the California Republican Party, is also wary of the new administrative burdens. “It’s definitely more work and more filing and a greater expense to have to deal with it,” he said.

The FEC data reviewed by the Center illustrates the problems parties are having in adjusting to the new rules. For example, the records show that at least two party committees received Levin contributions that exceeded BCRA limits.

The California Republicans, Vallante said, are making the best of the new system and will continue to raise and spend Levin funds. “We don’t particularly like it, but it’s a fact of life that we’ve got to deal with,” he told the Center. “We’ll continue to deal with it and use it as necessary to get our stuff done.”

Lavigne and the Texas Democrats share this pragmatic attitude. “We’re going to aggressively try to raise all kinds of money,” he said. “Regardless of what they call it we’re going to try to raise it.”