Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag#moNeYpolitics and #fairelex.

CAMPAIGN FINANCE REFORM AND ETHICS NEWS

NEW YORK

Brennan Center Testifies at NY Attorney General’s Hearing on Dark Money

Last year, Reform NY informed readers about new regulatory proposals by New York State Attorney General Eric Schneiderman to enhance the disclosure of expenditures and donations by political groups masquerading as non-profits. The new regulations would require all non-profits, including 501(c)(4)s — that spend at least $10,000 annually to influence state or local elections in New York — to file itemized schedules of expenses and contributions greater than $100. The disclosures will subsequently be available to the public. At a hearing held on the matter this Tuesday in Lower Manhattan, three mayoral contenders — City Council speaker Christine Quinn, Public Advocate Bill DeBlasio, and former New York City Comptroller Bill Thompson — along with a host of good-government groups testified in support of the rules. “Many of these groups have names that are nearly incomprehensible,” Schneiderman said regarding the numerous 501(c)(4)s with dubious names. "It would be funny to set up a fake game show: put the name up and then have people guess what the organization actually cares about," Quinn added. David Earley, counsel at the Brennan Center for Justice, testified on the organization’s behalf. “At least $317 million was spent in the most recent election cycle by groups that conceal their donors,” he stated. Although federal law requires the disclosure of donors whose funds are employed for “express advocacy and electioneering communications, toothless rules adopted by the FEC have eviscerated this requirement, allowing most politically active 501(c)(4)s to avoid publicly reporting any of their donors,” according to Early. The Brennan Center further assured that the proposed regulations meet legal muster and rest on firm constitutional ground.

The New York Times Editorializes In Favor of Corporate Disclosure

Schneiderman is not the only one pushing for disclosure. Reform NY reported last week about New York State Comptroller Thomas DiNapoli, who is seeking disclosure of political contributions from corporations that the state pension fund holds stock in. DiNapoli has filed suit against Qualcomm, a computer chip producer, requesting information regarding its political involvement. Delaware law gives shareholders the right to inspect the books and records of a corporation for such information, and the New York State pension fund holds $378 million shares in the company. This week, The New York Times has come out in favor of DiNapoli’s effort. “It is bad enough that the flow of political money into American campaigns grows bigger by the year — the 2012 elections were the costliest ever. It’s even worse when the public is to be kept in the dark about who’s doing the spending. Big stockholders like New York’s pension funds can bring much-needed openness to a murky process.”

Siena Poll: Support for Campaign Finance Reform Still Strong and Wide

In the New Year, New Yorkers appear to support Governor Andrew Cuomo’s third year agenda by broad margins, with 71 percent viewing him as favorable, according to the latest Siena College poll. On the issue of campaign finance reform, New Yorkers demonstrate consistent support for the idea once again across various demographics. When asked about a statewide plan to adopt “a system of public campaign financing in New York that would limit the size of political contributions to candidates and use state money to match smaller contributions made to candidates for state offices,” 59 percent of voters backed the idea and only 36 percent opposed it. A majority of New York City residents, suburbanites and upstate dwellers, as well a large swath of voters across all age groups, races and religions showed support for the initiative. Disclosure of campaign donations above $500 within 48 hours received even greater approval from voters, with 79 percent behind it and merely 18 percent against. The Siena Research Institute report summed it up well: “While Republicans are closely divided on public campaign financing, it is supported by a majority of independents and two-thirds of Democrats, and more than three-quarters of voters from every party support quick disclosure of contributions greater than $500.”

NATIONAL

Senators Murkowski and Wyden Initiate Bipartisan Disclosure Proposal

Senator Lisa Murkowski (R-AK) and Senator Ron Wyden (D-OR) are undertaking a new legislative initiative to make federal elections more transparent and accountable. The measure would require any organization spending $500 or more on federal political activity to disclose its donors in “real time,” and at every point from “candidacy to advocacy.” It would also require “joint regulations and guidance” from the Internal Revenue Service and the Federal Election Commission to close the legal loopholes that enable dark-money campaign operations. Currently, the FEC is stymied by partisan gridlock and the IRS considers 501(c)(4) political groups to be “social welfare” non-profits. The consequences are evident: for Karl Rove’s Crossroads GPS, which spent $70 million this election cycle, still has the ability to keep its donors secret. Both lawmakers complain that decision-making in Congress “is often colored by the prospect of facing $5 million in anonymous attacks ads if a member of Congress crosses an economically powerful interest ... The anonymity of much of this spending encourages ads that lower the level of political discourse and makes it harder, not easier, for Americans to make informed decisions.” Senator Murkowski is the first Republican in the Senate to support robust disclosure. She deserves much praise for her conviction to challenge partisan deadlock and her courage to stand up to mega donors.

National Rifle Association: Lobbying and Campaign Muscle
Following the tragic incident in Newtown, Connecticut, the National Rifle Association is flexing its lobbying muscle to ensure that gun control remains off the political agenda in the New Year. The NRA has enlisted high profile firms including Forbes-Tate and the C2 Group on the Democratic side and GOP heavyweights like Crossroads Strategies, SNR Denton and Shockey Scofield Solutions, and an in-house team of K Streeters like Chris Cox and James Baker. Of the 435 members of the House, 205 received contributions from the NRA during their last campaign. Of these Representatives, 29 garnered more than $4,000 from the NRA. The list of top recipients includes Eric Cantor (R-VA) and Jim Matheson (D-UT), both ardent opponents of gun laws. In the Senate, 42 out of the 100 members have received donations from the NRA this past election cycle—an average of $6,067 contribution per member. Eleven Senators earned more than $7,500 from the NRA, including Senate Minority Leader Mitch McConnell (R-KY) and Roy Blunt (R-MO).

New Data on Presidential Campaign Contributions

New analysis by the Campaign Finance Institute reveals the numbers behind the plethora of contributions during the 2012 Presidential election. President Obama’s campaign committee raised $782 million in 2011-12, compared to $494 million by Governor Romney. When the joint fundraising committees and the two national party committees are considered, Obama’s contributions come to $1.1 billion, while Romney’s increase to $1.0 billion. Although small donors are becoming more common due to the ease of electronic contributions, both candidates were still heavily dependent upon big donors. The Obama campaign raised 39 percent of its money from donors that gave $1,000 or more, while the Romney campaign earned 66 percent of its funds from these contributors. At the other end, 28 percent of Obama’s donations were from small donors (those who gave $200 or less). Small donors accounted for 12 percent of Romney’s campaign contributions. 

Judicial Election Spending Rises Dramatically After Citizens United

The ramifications of the Citizens United decision were not constrained to the Presidential election; they were also felt in judicial races around the country. A record $29.7 million was spent on ads in State Supreme Court elections, and more than half of this money came in the form of independent spending. This flood of campaign cash from narrowly oriented groups may generate conflicts of interest, and already threatens to erode public confidence in an impartial judiciary. The Center for American Progress compiled a list of judges in 2012 that raised and spent $1 million or more, or had more than $1 million spent on their behalf by independent groups. In North Carolina, the state’s public financing program was overwhelmed by money from the Chamber of Commerce and Americans for Prosperity, as well as tobacco companies. Overall independent groups spent $2.5 million on the North Carolina Supreme Court race. The Republican State Leadership Committee, which helped draft the recent redistricting maps for the state, donated $1 million to Justice Paul Newby. The Supreme Court is set to hear a challenge to those maps this year. In Michigan Supreme Court races, the Michigan Association of Realtors spent $400,000 on ads for Justices Stephen Markman and Brian Zahra after both joined a 2011 opinion that made it easier for mortgage companies to foreclose on homeowners. Meanwhile the Democratic Party spent $5 million supporting Justice Bridget Mary McCormack. Her campaign also collected more than $600,000 with the help of large donations from unions.

Maine Clean Elections at Risk of Getting Axed

Maine was the first state in the country to adopt a full public financing system following voter approval of the Maine Clean Elections Act of 1996. Under the law, legislative and gubernatorial candidates are provided with public funds for their campaigns if they can collect the required number of small donations. In the 2012 state legislative elections, 62 percent of candidates opted into Clean Election funds even in the face of heavy attack ad spending by independent, third-party organizations. Despite the program’s popularity, Governor Paul LePage’s budget proposal seeks to cut $4 million in disbursements from the Maine Clean Elections fund over the next four years. According to Andrew Bossie, executive director of Maine Citizens for Clean Elections, “the governor’s proposal to kill Clean Elections would ensure that big-money special interests dominate our elections in 2014. Maine citizens demanded Clean Elections to ensure that government is accountable to voters, not the highest bidding wealthy donors.”

Money in Politics This Week

CAMPAIGN FINANCE REFORM AND ETHICS NEWS

NEW YORK

State of the State: Gov. Cuomo Once Again Calls for Public Financing

In his 2013 Stateof the State Address on Wednesday, New York Governor Andrew Cuomo reemphasized his support for comprehensive reform of the state’s campaign finance laws including effective disclosure, lower contribution limits, and public financing. The Governor asserted that public financing would strengthen small donors and embolden them to participate in the electoral process. “It works well in New York City, it will work well in New York State,” Cuomo stated. Cuomo proposed requiring all political and lobbying contributions over $500 to be disclosed within 48 hours. The Governor also announced plans to lower contribution limits across the board. Currently, New York has the highest limits for political contributions among states that bother to limit them at all. Our representatives in Albany are also far too dependent on a few large donors, but the Governor’s plan would give regular New Yorkers are stronger voice than they have now.

Ed Koch and Peter Zimroth Support Reform in New York Daily News

In a recent op-ed in the New York Daily News, former New York City Mayor Ed Koch and former New York City Corporation Counsel Peter Zimroth ask Albany to empower small donors. The current campaign finance system in New York, they argue, breeds cynicism and distances citizens from their government. Sky-high contribution limits — $41,000 for statewide races in the general election — mean that candidates spend more time courting big donors, who in turn exercise disproportionate influence over policy-making. “The end result is that the vast majority of citizens who can’t afford to make big donations feel shut out, and in many cases actually are.” Both Koch and Zimroth view New York City’s small donor matching funds system as a good model for financing state elections. Several good government organizations have supported this reform initiative for decades. However, for the first time, the New York business community is joining in. Prominent New Yorkers in business, finance, real estate and philanthropy, are coming together under the banner of NY LEAD. “They are fed up with elected officials not doing the people’s business and sick of reading about corrupt state officials being indicted. And as the ones on the receiving end of so many fund-raising pleas, they know that elected officials are spending too much time courting big donors and not enough time doing the people’s business.”

State Comptroller Files Suit Against Qualcomm for Political Records
Last year, we informed Reform NY readers about Attorney General Eric Schneiderman’s effort to crackdown on non-profit 501(c) groups engaging in secretive political spending. Last week, we learned that New York State Comptroller, Thomas P. DiNapoli, is seeking disclosure of political contributions from corporations in the state pension fund. DiNapoli is obligated to protect the value of the pension fund’s investments, which include $378 million shares in tech giant Qualcomm. The pension fund requested information about Qualcomm’s political spending through letters and shareholder resolutions. After failing to receive a response, DiNapoli filed suit against the firm in Delaware, seeking to examine corporate accounts for contributions to non-profits that do not report their donors. “Without disclosure, there is no way to know whether corporate funds are being used in ways that go against shareholder interests,” DiNapoli said in astatement released last Thursday. “How is the spending raising the bottom line of the company?” he added on YNN on Monday.

NATIONAL

DISCLOSE Act Re-introduced in Congress

On the first day of the 113^th Congress, Representative Chris Van Hollen (D-MD) re-introduced the DISCLOSE Act, calling it a “first step to clean up the secret money in politics.” The legislation would require all corporations, unions and Super PACs to report campaign expenditures in excess of $10,000. Reform is desperately needed after more than $213 million in undisclosed spending by organizations with anodyne names like the “Coalition to Protect Seniors” and “Citizens for Strength and Security” during the 2012 general election cycle. David Early, counsel at the Brennan Center, explains in The Hill that the DISCLOSE Act rests on firm constitutional ground. The Supreme Court has commended disclosure, stating that it allows voters to be better informed about the messages they receive and holds elected officials accountable for their actions. According to the Supreme Court, “disclosure requirements may burden the ability to speak, but they impose no ceiling on campaign-related activities and do not prevent anyone from speaking.” It is beyond time for these secret spenders to come out of the shadows.

Fiscal Cliff Deal Preserves Huge Tax Breaks for Powerful Interests

As Congress welcomed the New Year by barely averting the fiscal cliff, special interests made sure their kickbacks were not sacrificed in the process. Tax levels reverted to higher rates for payroll taxes, but NASCAR, Hollywood, mining companies, renewable energy firms and U.S. multinationals all preserved or expanded their tax breaks and subsidies. The American Tax Payer Relief Act included several deductions and credits for favored industries. General Electric was one of the biggest winners. Section 322 of the bill allows multinationals to shift profits to offshore financial subsidiaries and thus avoid paying U.S. corporate income taxes. This exception played a central role in GE paying $0 in taxes in 2011 even with $5.1 billion in U.S. profits. GE’s PAC contributed $2,000 to Senator Max Baucus, the chief architect of the fiscal cliff bill, for a total of $10,000 for the election cycle. The legislation also extends tax breaks for racetrack owners estimated at $43 million, a provision that was presented in 2011 in the Motorsports Fairness and Permanency Act, sponsored by Senator Debbie Stabenow (D-MI) and Representative Vern Buchanan (R-FL). In 2012, Buchanan received more than $530,000 from the automotive industry, while Stabenow received $430,000.

Obama’s Inauguration Flush With Mega-Contributions

In 2008 candidate Obama touted his efforts to “change business as usual in Washington” by establishing strict rules for the inauguration ceremony; corporate donations were prohibited; individual contributions were limited to $50,000 and the amount donated by each contributor was identified immediately. This year the practice has dramatically changed. Obama’s inaugural committee has accepted contributions from major corporations including AT&T, Microsoft and Financial Innovations, offering them perks in return. Caps on donations have been lifted as well. Furthermore, donors will only be made public 90 days after the event. As the Obama administration gears up for a second term, advisers say that their team is focused on the federal budget deficit, gun violence and immigration — not campaign finance reform, despite Obama’s enthusiasm for it on the website reddit last year. The administration has yet to replace five members of the Federal Election Commission who are serving expired terms, and has retracted an executive order requiring companies with federal contracts to disclose their political spending. According to Larry Noble, former general counsel to the FEC, the administration fails to realize that its legislative agenda will not succeed without changing the “campaign finance system that puts enormous power behind special interests.”

SEC Considers New Rule to Disclose Corporate Political Expenditures

The U.S Securities and Exchange Commission plans to consider a new rule this year requiring publicly traded corporations to release information about the use of corporate resources for political activities. Ian Vandewalker, counsel at the Brennan Center, explains in the Huffington Post that “corporations are not required to tell their shareholders anything about the political spending that corporate management decides to engage in. This leaves the company's investors in the dark about whether political expenditures benefit or hurt the bottom line.” Furthermore, since corporations can donate unlimited sums to tax exempt 501(c) organizations, which in turn spend millions on elections without disclosing their donors, voters remain ignorant about the real source of the political advertising they get bombarded with. Nearly 77 percent of Americans support a requirement that companies publicly reveal their contributions to political organizations. The SEC has admirably completed the first hurdle to bring corporate political expenditures out of the darkness. With a complete rule, the SEC can protect investors by providing them with financial information necessary for investing responsibly.

American Tradition Partnership Loses Another Key Court Decision

The American Tradition Partnership, an anti-environmentalist non-profit that has been engaged in an ongoing dispute with the state of Montana over its failure to file regular reports regarding its donors and expenditures, lost another key court decision last Friday. The State District Court Judge Jeffery Sherlock of Helena adopted Montana’s proposed finding that ATP acted as a political committee in 2008, and therefore must report its donors and expenditures. Sherlock ruled that members and officers of ATP used its corporate, nonprofit status “as a subterfuge to avoid compliance with state disclosure and disclaimer laws during the 2008 Montana election cycle.” Montana’s Commissioner of Political Practices, Jim Murry, stated that he will seek financial penalties against ATP for the legal violations.