Why Mitch wants Rudy’s money

Introduction

Before calling it quits, New York Mayor Rudolph Giuliani had raised more than $19 million for his Republican Senate campaign against Democrat Hillary Rodham Clinton. The Giuliani campaign, after paying remaining bills and returning $2.8 million in general election funds to contributors, will be left with more than $3 million.

Senator Mitch McConnell, R-Ky., chairman of the National Republican Senatorial Committee, has already hinted that the residual funds could be turned over to his committee, where they could then be used for “indirect expenditures” on behalf of the New York GOP’s recently anointed challenger, Representative Rick Lazio of Long Island.

Most of us might not realize that the $3 million is worth more to McConnell than the usual millions he raises in soft money for the National Republican Senatorial Committee. Why? Because Giuliani’s money is “hard money,” raised in federally regulated increments of $1,000 (the maximum amount allowed) from individuals. And the senatorial committee needs hard and soft money to run issue ads, including ones that the NRSC will run to help Lazio. It is actually hard money that dictates the amount of soft money that can be spent on such “indirect expenditures.” In short, the more hard money you have, the more soft money issue ads you can run.

As with many loopholes in the campaign finance system, this takes a bit of explaining. Issue ad campaigns by political party committees, such as the National Republican Senatorial Committee, must be paid for with a combination of hard dollars (limited, reported contributions to political parties and candidates) and soft dollars (unlimited, reported contributions to parties).

Ratio: 65 percent hard money, 35 percent soft

The FECs ratio for a presidential election cycle is 65 percent hard money, 35 percent soft money. The formula was implemented to ensure that political parties would not abuse soft money contributions and to protect against unlimited donations becoming the sole means of funding political campaigns. The high premium placed on hard money in the context of issue ads means that a $3 million “hard money” infusion from Giuliani would be a windfall for the National Republican Senatorial Committee. Were the NRSC to receive such a lump sum, it would be able to vastly increase its efforts on behalf of Lazio and other candidates in hotly contested races. According to media buyers in the senatorial campaigns, both parties are expected to spend close to $600,000 per week on behalf of their candidates.

Large amounts of hard money are difficult for political parties to raise because of the federal cap placed on those donations during a given election cycle ($20,000 from individuals, $15,000 from political action committees). According to federal law, excess campaign funds, such as Giuliani’s, can be transferred without limit to a state or federal party committee, such as the National Republican Senatorial Committee or a state Republican Party organization. Giuliani cannot directly transfer his campaign contributions to Lazio, but the mayor could make a personal contribution to Lazio’s campaign of no more than $1,000.

“Giuliani, who quit the Senate race May 19, remains mum on the issue of the excess campaign cash, and while he has indicated that he intends to be “helpful” to Lazio, has not made any announcement as to exactly how much financial support he intends to throw behind his successor. The New York Times reported June 3 that Giuliani, upon returning approximately $3 million raised for his general election campaign (as required by law), has provided his donors with pre-addressed envelopes that will help his patrons recycle their money to Lazio’s campaign. Giuliani is under no obligation to give any of his money away; he could keep it for future political campaigns or could donate the entire amount to charity.”

Lazio could receive nearly $2 million

While Giuliani’s hard money can be used to increase NRSC issue ads on behalf of Lazio, the state Republican organization and the national Republican Party can also each spend up to $929,355 on “coordinated campaigns” with a specific candidate. Thus, were Giuliani to split his money between the New York and national GOP accounts (such as the NRSC or the Republican National Committee), Lazio could receive close to $2 million in direct support for administrative, polling and direct mailing costs, without needing the pretense of party-run, non-specific issue ads that can only indirectly promote his candidacy.

The NRSC also has control over a joint fund-raising committee coordinated with Giulianis campaign, the Giuliani Victory Committee, which raised primarily soft money (Hillary Rodham Clinton has a similar soft money account as well). While the party would not be able to use that account’s funds to directly assist Lazio’s campaign, it would be able to spend it on issue ads and other expenditures that would indirectly benefit Lazio. The joint fund-raising committee had raised nearly $700,000 through the end of March.

In addition, as reported by the Long Island newspaper Newsday on May 23, Giuliani could donate up to $69,000 each to all 62 New York county Republican committees, which combined with the state GOP could spend approximately $5.3 million of hard money on behalf of Lazio.

Should the New York mayor decide not to transfer his remaining funds to the NRSC or to the state GOP committees, his final option would be to return the donations to his contributors, although such an option is unlikely because of the cost and time commitment involved in returning donations. He could also request that the refunded contributions be donated to Lazio or to the state or national Republican Party organizations.

Lazio began his nascent campaign against the first lady by denouncing her as a liberal outsider, while claiming that voters in the state, “want someone who speaks from the center for common sense New Yorkers.” Ironically, Lazio’s success might depend a great deal on a conservative senator from Kentucky.