The new soft money

Introduction

National political parties may be banned from raising “soft money” under a new campaign finance law, but partisan gubernatorial associations have gone on accepting unlimited contributions from many of the same corporate and labor union donors for use in statewide elections.

The Republican Governors Association and the Democratic Governors’ Association are both organized as 527 committees and legally are not affiliated with their respective national party committees. Because they are associations of elected state officials, they can accept the kind of soft money contributions that are no longer permitted at the federal level.

To do so, the RGA had to break away from the Republican National Committee late last year, when the Bipartisan Campaign Reform Act took effect, and create its own 527 account. The DGA has been a 527 committee since at least mid-2000, after a gradual separation from the Democratic National Committee that began in the 1990s.

This year, the two committees have raised more than $10.1 million combined, according to records filed with the Internal Revenue Service. The RGA has raised the most money in 2003 of any committee—$6.4 million through August 31—while the DGA is second with $3.7 million through June 30.

The money the two groups raise cannot be spent on federal elections, but it can be used for voter mobilization and party organization, as well as for direct contributions to gubernatorial candidates. Because they are not technically party committees, thanks to their separation from the national party structure, the DGA and RGA are not always treated as non-party committees at the state level, due to differences in state election laws.

The state-by-state rules allow the committees to retain a quasi-party role in some states like Mississippi, site of one of the three gubernatorial elections in 2003 (Kentucky and Louisiana are the others, in addition to California’s recall election). In Mississippi, the RGA has transferred $1,250,000 to its Mississippi affiliate committee to support Haley Barbour, who is challenging Democratic Gov. Ronnie Musgrove. The DGA has contributed $550,000 directly to Musgrove’s campaign.

The RGA has conducted at least one poll in Kentucky. A spokesman for Rep. Ernie Fletcher, Kentucky’s Republican candidate, refused to comment on the RGA’s involvement in Fletcher’s race.

“We don’t want to talk about that,” said Wes Irvin, Fletcher’s press secretary.

The RGA declined to comment about its expenditures. However, since Nov. 6, the group has spent at least $116,719 on political consulting, $232,112 on direct mail and $221,275 on polling, according to the Center’s analysis of IRS records.

Besides their direct contributions to gubernatorial candidates, which are subject to varying state limits, the governors associations fill a number of other roles in state elections. The DGA, for example, has provided technical assistance for Democratic gubernatorial campaigns, including voter turnout programs and phone banks, according to a DGA official. It also has paid for a small number of polls, and has a political staff that analyzes the data.

Prior to the RGA’s transition to 527 status, it filed financial reports with the Federal Election Commission as an affiliate of the RNC.

While now officially separate from the national parties, the two groups still enjoy wide recognition and have been able to get large contributions from the same corporations, unions and trade associations who often top the lists of donors to the national parties.

This year, the RGA has attracted six-figure donations from drug companies Pfizer Inc., Bristol-Myers Squibb Co., and GlaxoSmithKline and the Mississippi Band of Choctaw Indians, along with tens of thousands from financial services firms and energy companies.

Individual contributions to the RGA include $150,000 from Carl Lindner, chairman of American Financial Group and $25,000 from Sam Wyly, the Texas investor widely known for financing the 527 committee Republicans for Clean Air, which aired a $2.5 million ad campaign attacking Sen. John McCain of Arizona in the 2000 Republican presidential primaries. Mitchell Delk, the senior vice president for government relations at Freddie Mac, gave $150,000 to the RGA in October 2002, but the RGA issued a “reimbursement” in the same amount to Freddie Mac on June 10.

The DGA receives most of its contributions from corporations and labor unions. It began filing as a 527 with the IRS after Congress passed public disclosure legislation in 2000, and has amassed $21.8 million in contributions since then. Individual contributions made up less than six percent of the total during this period.

The top contributor to the DGA is the American Federation of State, County and Municipal Employees union, which represents state government workers. AFSCME has given $1,275,000. The next four largest donors also are labor unions, with tobacco company Philip Morris (now Altria) and drug maker Pfizer Inc. in the top ten. In advance of the Mississippi election this year, both the DGA and the RGA got $100,000 from car manufacturer Nissan’s Mississippi subsidiary, which had a highly publicized plant opening in May.

Many states have laws to prevent corporations and interest groups from contributing to candidates. But 527 committees such as the governors’ associations are unregulated and can accept unlimited contributions from any source. While governors’ associations have limits on their direct contributions to candidates under state laws, they can still raise money from sources that would otherwise be prohibited in certain states.

At least seven states, including Mississippi, restrict corporate contributions to candidates and allow unlimited PAC contributions. Eight other states have no limits on PAC contributions, but also allow unlimited corporate contributions. But corporations can give as much as they want to the DGA and RGA, which can in turn make unlimited contributions to candidates in states like California, Texas and Illinois.

Records show that the DGA has registered committees in at least seven states in either 2002 or 2003, while the RGA has created a Mississippi account this year. California’s upcoming recall election gives the DGA and RGA another platform, this time in a state with few limits on contributions. The DGA has offered financial and technical support to incumbent Gov. Gray Davis and is working with other Democratic governors to marshal additional resources. For its part, the RGA issued a press release welcoming Arnold Schwarzenegger into the race.

The California recall in particular could have implications for the 2004 presidential race. The DGA estimates that, because governors have the bully pulpit as well as extensive field operations to help get out the vote, controlling the state’s top seat can increase a presidential candidate’s percentage share of votes by 2 to 3 points.

John Sents is a student at University of Missouri-Columbia. He interned with the Center’s State Projects during summer 2003.