Money in Politics This Week

The Brennan Center regularly compiles 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.

NEW YORK

U.S. and NY Attorneys Testify at Moreland Commission’s First Hearing

The Moreland Commission to Investigate Public Corruption held its first hearing in New York City on Tuesday. The Commission, composed of district attorneys, law professors and private sector lawyers, was appointed by Governor Cuomo to investigate corruption in the state legislature. Federal prosecutors, state district attorneys, reform organizations, and members of the general public testified at the hearing. Preet Bharara, the U.S. Attorney for the Southern District of New York who is leading the corruption cases against lawmakers caught taking bribes earlier this year, was the first speaker. He decried the “unacceptable level” of corruption in Albany. Under new policies, his office will use civil forfeiture to prevent convicted public officials from collecting a tax-payer funded pension. Loretta Lynch, U.S. Attorney for the Eastern District of New York, called for greater financial disclosure by legislators to reduce the potential for conflicts of interest. Manhattan District Attorney Cyrus Vance Jr. recommended changes to state laws that would ease the burden for prosecutors trying corruption cases.

Good Government Groups, NYC City Councilman Ask Moreland Commission to Consider Comprehensive Campaign Finance Reform

Good-government groups and a New York City Councilman were also present at the Moreland Commission hearing on Tuesday. Republican Eric Ulrich (CD-32) testified about the benefits of the city’s public matching system, which reform organizations have been pushing as a model for the state. The small donor matching system, which provides $6 for every $1 raised by a candidate up to $175, allowed Ulrich to effectively compete against an incumbent by building a broad base of grassroots support, he said. In a State Senate race however, his prospects were diminished due to the influence of large contributors. Following Ulrich, Larry Norden and Ian Vandewalker at the Brennan Center for Justice informed the Commission that comprehensive campaign finance reform was necessary to address the scale of corruption in Albany. They singled out 14 tax credits in their analysis that are reauthorized every few years to the benefit of industries that make significant campaign contributions. Bill Samuels, co-founder of Effective NY, urged the Commission to examine campaign contributions by groups using limited liability corporations to evade donation limits. Samuels also requested further investigation into political party “housekeeping accounts,” which have become a means for transferring contributions to party-favored candidates.

NYC Public Financing System Kept Focus on Constituents

Although outside spending played a role in New York City’s first citywide election since the Citizens United decision, Mark Schmitt argues in the New Republic that public financing helped keep the focus on small donors. Public financing allowed candidates like Scott Stringer and Joe Lhota to compete against well-known, self-financed millionaires. Unlike many jurisdictions throughout the country, the city requires outside groups to make detailed disclosures of their donations and expenditures, with data available online. In total dollar terms, the ratio of candidate spending to outside dollars in New York City was $105 million to $12.7 million—over eight to one. By contrast, in the 2012 U.S. Senate races, this ratio was only two to one. Even with the ever-increasing threat of independent expenditures, almost all candidates participated in the public financing program, likely because the amplification of grassroots support through public matching funds is an effective way to defend against independent spending.

Primary Winners, Common Cause Praise Public Financing Model

Around 10 victors from the City Council primary election held a press conference outside City Hall with Common Cause/NY on Monday. Susan Lerner, executive director at Common Cause/NY, said that the races demonstrated that New York City’s public campaign financing model works well and should be adopted by the state. The attendees pointed out that the influence of  independent spenders like Jobs for New York, a group backed by real estate developers, was blunted by the public funding system. City Council nominees including Ben Kallos (CD-05), Margaret Chin (CD-01), Laurie Cumbo (CD-35), Mark Levine (CD-07) and Carlos Menchaca (CD-38) were present to show their support for the City’s campaign finance system. Kallos emphasized that public campaign financing allows “idealist candidates who are reformers to get elected without being in debt to the very special interest we are running against.”

Post-Star Commends Moreland Commission’s Investigation

The Post-Star in Glens Falls, New York, commended the work of the Moreland Commission to Investigate Public Corruption in an editorial last week. Legislators in Albany perform public service part-time from January to June each year and are allowed the hold employment positions at law firms, companies and government agencies. In early September, the commission requested state lawmakers provide information regarding outside employment if they were compensated more than $20,000 in 2012, as well as a description of the work performed. “It is a level of transparency that is long overdue and would immediately expose any patronage going on in Albany,” the Post-Star stated.

NATIONAL

Dark Money Groups May Have Violated IRS Rules

A Center for Responsive Politics investigation shows that a large contingent of dark money groups spent a significant portion of their resources on political efforts in defiance of the law. “Social welfare” organizations (501(c)(4)s) and industry trade groups (501(c)(6)) do not have to disclose their donors so long as the money they spend on elections doesn’t constitute a majority of their budget, according to a common interpretation of Internal Revenue Service (IRS) rules. The CRP merged separate datasets from the IRS and the Federal Election Commission to paint a complete picture of expenditures by such non-profits. The groups reported more than $51.6 million in political spending to the FEC, but only $24 million to the IRS over an identical timeframe. The discrepancy is because these entities channeled funds to other similar non-profits, allowing them to evade IRS disclosure rules. For example, the 60 Plus Association, which spent millions in 2012 supporting conservative candidates, received major donations from three non-profits: the Center to Protect Patient Rights, TC4 Trust and Free Enterprise America – two of which are now defunct. Yet these three organizations did not consider their donations to be political expenditures on their 990 IRS filings. If such hidden spending is taken into account, then nine groups, including the Crossroads GPS, American Action Fund, and Green Tech Action Fund, may be in danger of exceeding the legal IRS limit on political spending.

Virginia Gubernatorial Race Inviting Big Independent Spenders

The competitive race for governor in Virginia is inviting several outside groups into the political battle between Democratic businessmen Terry McAuliffe and Republican Attorney General Ken Cuccinelli. Citizens United, the group made famous by the Supreme Court’s Citizens United v. FEC decision, is the second biggest spender in the race, after the Republican Governors Association. It will launch a $375,000 advertisement campaign criticizing McAuliffe’s business record at his electric car start-up and his support for President Obama’s healthcare overhaul. The Ending Spending Action Fund, connected to Chicago Cubs owner and TDAmeritrade founder Joe Ricketts, will be spending $200,000 on ads opposing McAuliffe, including $10,800 to air 13 spots in northern Virginia. Meanwhile, the Northern Virginia Technology Council’s decision to endorse Cuccinelli was resisted by pro-McAuliffe legislators, who threatened that the group’s legislative concerns will be ignored in the state senate. “The response [from legislators] will be frigid and doors will be closed,” an email from state Senator Janet D. Howell (D-Fairfax) stated.

McCutcheon v. FEC Decision Could Allow Donors to Evade Individual Contribution Limits

In October, the U.S. Supreme Court is set to hear McCutcheon v. Federal Election Commission. The case, brought by prominent Alabama Republican donor Shaun McCutcheon, challenges the aggregate contribution limits for federal elections. Candidates are limited in terms of how much money they may accept from one individual. Individuals are also restricted by the total amount they may donate during an election cycle – currently the limit stands at $123,200 total for all candidate committees, PACs and political parties. Aggregate contribution limits prevent the circumvention of individual contribution limits in a process detailed by the Center for Responsive Politics. Leadership PACs and joint fundraising committees enable candidates and parties to hold fundraisers and split the proceeds as they wish, with money frequently going to party-favored candidates afterwards. Big donors already exert significant control over our elections. Poll after poll shows that Americans disfavor the heavy-handed influence of special interests and big donors on Congress. Only 646 donors in the 2012 election cycle reached the aggregate contribution limit of $117,000, providing a total of $93.4 million to candidates and committees in federal elections. And Shaun McCutcheon’s lawsuit threatens to amplify our representatives’ reliance on these mega-donors.

NJ Pay-to-Play Rules Don’t Stop Independent Spending

A Republican Governors Association fundraiser is being scrutinized by the New York Times after revelations that the organization made $1.7 million in expenditures in support of New Jersey Governor Chris Christie’s reelection campaign. The fundraiser, led by Christie, at the Liberty National Golf Course, involved individuals prohibited from making large contributions directly to the governor under New Jersey’s pay-to-play rules. Christie has helped the Republican Governors Association amass $1.65 million from donors in New Jersey, a third of which came from people and companies doing business with the state. Reform groups, such as Citizens Campaign, fear that the transactions allow contractors, lobbyists and major donors to circumvent pay-to-play rules. Christie’s competitor, state Senator Barbara Buono, has also benefited from outside spending. One New Jersey, a teachers’ union-backed organizations, which has been attacking Christie for vetoing a minimum wage increase and opposing higher taxes on the wealthy, has spent $2.8 million on radio and TV ads.