The old soft money

Introduction

Seven of every 10 dollars that state party and caucus committees received from the national parties during the 2001-2002 election cycle came in the form of “soft money” now banned under federal campaign finance law.

The six national party committees—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—sent more than $300 million to state party and caucus committees in the most recent two-year election period, according to federal records.

Most of that money—$217 million—was soft money, the unlimited donations to national party committees that often found their way into the states to pay for advertising and other political expenses. Under the Bipartisan Campaign Reform Act of 2002, national parties can no longer raise or spend soft money.

The $217 million dwarfed the $86 million in “hard money” sent to the states to be spent directly on federal elections.

While it was still legal, soft money flooded several key states in the 2001-2002 election cycle: Minnesota party committees received $18.2 million in national party soft money, while committees in Florida got $16.4 million and those in Missouri took in $14.2 million. Soft money also played an influential role in smaller states that hosted prominent races in 2002, including New Hampshire and South Dakota. Soft money transfers accounted for 60 percent of the total money raised for campaigns in the two states, where key U.S. Senate races attracted millions of dollars.

National party transfers often helped pay for television and radio ads, a crucial aspect of political campaigns. Due to federal rules on allocating a mixture of hard and soft money, state parties have been able to use more soft money to purchase advertising time than national parties.

Minding the gap

Differences in the way that state committees report such transfers meant that Center researchers could not always reconcile state totals with the amounts the national parties reported sending, information contained in filings with the Federal Election Commission. A handful of states, including Alaska, Michigan, New York and South Carolina have separate accounts for state parties with names such as “administrative” or “housekeeping.” Some report their finances to state authorities, while others are not required to do so.

In all, state party and caucus committees reported receiving $285 million in national party money, hard and soft, during 2001 and 2002. That’s nearly $16 million less than what the national parties reported sending, according to FEC records.

In South Carolina, for example, neither of the state Democratic or Republican party committees disclosed any of the soft money transfers from national parties, even though FEC reports indicate that $5.6 million flowed from Washington to the Palmetto State. That amount more than doubled the total contributions reported by South Carolina committees during 2001-2002.

At that time, South Carolina parties were not required to disclose donors to parties’ administrative accounts, but Gov. Mark Sanford signed a bill into law in 2003 that will require party committees to report on disclosure forms “the receipt of anything of value which totals in the aggregate five hundred dollars or more.” The law, which takes effect on Nov. 3, 2004, requires quarterly disclosure of contributions given for party “operation expenses.” Although the state’s definition of contribution may require a small change in the law, the state’s regulatory position is that parties will now have to report all contributions.

“Every quarter, everything,” said Cathy L. Hazelwood, assistant director and general counsel of the State Ethics Commission. “That was certainly the intent.”

The largest discrepancies came in a handful of states, many with administrative accounts. The Alaska Republican Party’s filings do not reflect $584,000 sent by the national party committees, while the Colorado Democratic Party’s reports do not contain $588,000 that the national parties report transferring to the committee. States often reported multiple national party transfers as a single transaction or recorded the transfer at a later date, making the reconciliation process difficult.

In Texas, the state GOP’s filing did not include $3.8 million in national party soft money transfers, while the state Democratic Party reported over $1 million more in soft money transfers than the national party filings indicate went to that committee. Texas law permits state party committees to accept corporate and labor union contributions, but only if they are used for operating costs or to pay for running an election. Such contributions go into a separate account and are reported to the state in separate filings.

The gap between what state and national parties reported mirrors a previous Center study of the 1999-2000 election cycle that found a similar margin of difference between party transfers. Discrepancies between state and national party filings almost always involved soft money, since hard money transfers are reported by the state parties to the FEC. Only one state, Connecticut, banned soft money party transfers outright during the 2001-2002 election cycle.

Without national party soft money, state parties face the task of replacing millions of dollars many committees had come to rely on. Under federal campaign finance law, state and local party committees can establish separate accounts, known as “Levin accounts” after their chief legislative sponsor, Sen. Carl Levin, D-Mich. These accounts can raise no more than $10,000 a year from each individual donor if the money is used to help pay for get-out-the-vote activities in connection with a federal election.

In addition, state party committees that are able to raise large amounts may continue to transfer money to other states as they did before, permitting donations that might be banned or restricted in one state to come into the system via a party committee in a state with more permissive rules.