How the parties worked the law and got their mojo back

by Bob Biersack on February 19, 2016

Are the parties being starved to death?

Loyalists on both sides of the aisle have said so, citing a series of legislative moves and court decisions in recent years that took away the parties’ ability to raise unlimited “soft money” and allowed other groups to do so instead. The shrinking presence of the parties, which by necessity must occupy a middle ground, brings more negative, polarizing politics, they warn. Their solution: allow parties to reel in larger contributions so they can compete with outside spending groups.

Congress quietly acted on this argument in late 2014 when it used a government funding bill to create new party accounts that can take in hundreds of thousands of dollars to cover certain broadly-defined expenses.

But the parties also have adapted to the new environment by creating ways for their wealthiest donors to give them more money as well as to capture some of the newly unregulated funding.

Joint fundraising committees, or JFCs, for instance, allow many candidates, party committees, and leadership and sometimes other PACs to raise money together from people who would be likely to support at least one member of the group. Donors can give to a number of participating groups by writing one check, and the groups get to connect with donors they might not have reached otherwise.

Donors can’t use JFCs to give more than the existing legal limit to any one candidate or other committee. No more than $2,700 of a donor’s gift, per election, can go to any specific candidate, no more than $33,400 per year to a national party committee, and no more than $10,000 per year to any state party. The funds must be redistributed if those limits are exceeded.

Seems pretty straightforward, right? Ha. The JFC is no exception to the rule of innovation in the campaign fundraising game. Money that might have been allocated to one committee can wind up elsewhere. For example, there’s no limit on the amount of federal funds that can be transferred from a state party committee to the national party — nor is there a cap on transfers between parties in different states. Upshot: Contributions originally reported as going to one state party can easily end up in a different state, or in the national party’s account, because the first state was free to transfer the funds.

Prior to 2014 this was a relatively modest problem, because there was less at stake; individuals were subject to an overall limit on how much they could give to all candidates, parties and PACs combined. For example, in 2012 the Obama Victory Fund raised more than $450 million, distributed among President Obama’s re-election campaign, the Democratic National Committee and state Democratic parties in at least 10 states that were identified as participants. No individual could give the maximum $10,000 to more than four of these state parties, though, because the overall contribution limit for all state and local parties and PACs combined was $46,200 for the full 2011–2012 cycle. (The limit would be about $47,700 in 2016 if it still existed.) The theoretical limit on a donation to the Obama Victory Committee, then, was $75,800 ($2,500 for the primary and $2,500 for the general to the Obama campaign, $10,000 each to four state parties and $30,800 to the DNC). The success of this JFC came from the large number of people who made contributions, rather than the size of the contributions.

But with the Supreme Court’s 2014 decision in McCutcheon v. FEC, those overall limits were tossed out. According to the court, free speech (read: political check-writing) rights took precedence as long as per-candidate and per-committee limits remained in place to prevent corruption. As a result, individuals theoretically now can give the maximum permitted to every state party in the U.S., in addition to maxing out to the national party and to as many candidate campaigns as they’d like.

Hillary Victory Fund — a joint fundraising effort between the Clinton campaign, the DNC and thirty-two state parties around the nation — provides the starkest picture of that decision’s effect. It reported taking in $26.9 million during 2015 and has thus far transferred $7.4 million to the participants. The largest single contributions to this joint effort are not $86,000 (which would have been roughly the limit had the rules not been struck down) but rather $358,400 –including $2,700 to the Clinton campaign for the primary and $2,700 for the general along with $33,400 to the DNC and as much as $320,000 to state party committees.

These contributions would seem to have improved the financial health of many state party organizations that would never have received support from many of their donors without the JFC process.

But the way the contributions were used tells another story. Virtually none of the $1.86 million given to state parties so far spent more than one night with its designated recipient. In nearly every case, all of the funds given to state parties by the Hillary Victory Fund were immediately sent to the DNC. This structure has allowed a small number of elite Democratic donors to give hundreds of thousands of dollars to the DNC for the purpose of affecting the presidential campaign. (Aspects of this pattern have been reported by the Alaska Dispatch News, Huffington Post, Bloomberg and others.

No one involved in the process — not donors, fundraisers or party officials — can be surprised by this turn of events, which amounts to a circumvention of existing contribution limits.

A table (found in the original report) shows each of the transfers from Hillary Victory to state parties and their subsequent transfers to the DNC. Only two of the 65 entries appear on the Victory list but not on the DNC list, and one of those was made on Dec. 31 so likely will be seen on the monthly report covering January, which is due Feb. 20.

Twenty-four individuals gave at least $320,000 to the JFC through the end of 2015, contributing a total of $8.2 million. That’s 30 percent of the Victory Fund’s total receipts thus far.

Since contribution limits to the party committees are annual, each of these donors can still give hundreds of thousands of dollars more to the DNC. If the pattern set in the last quarter of 2015 continues through the rest of the cycle, these donors and perhaps others like them will have effectively contributed at least $315,000 each, and potentially twice that, to the DNC, in spite of the contribution “limit” of $33,400 per year to the national party committee.

The independent spender

Beyond JFCs, congressional leaders and party officials have helped create and staff a network of “outside” groups that use the system’s new financial flexibility for activities that parallel the goals of the traditional party committees.

On the Democratic side, the group primarily focused on presidential campaigns is Priorities USA Action, originally formed in 2012 to support the Obama re-election campaign. Now identified as the primary super PAC backing the Clinton campaign, Priorities is guided and operated by a number of former party officials and Clinton supporters including Guy Cecil and Harold Ickes. Of the $41 million raised by the group in 2015, about $29 million (71 percent) came from 15 individuals who contributed $1 million or more to the effort. Not surprisingly, the list includes many names that also are among the largest donors to the Hillary Victory Fund, including George Soros who has given $7 million to Priorities USA, Haim and Cheryl Saban whose combined total is $5 million, Herbert Sandler, Donald Sussman and Laure Woods who have contributed about $2.5 million each, and J.B. and Mary Kathryn Pritzker whose contributions to Priorities total $1.8 million.

For Senate campaigns, Senate Majority PAC is managed and operated by a group of former Democratic Senate staffers and advisors, many at one time affiliated with Minority Leader Harry Reid (D-Nev.). Major donors to this effort in 2014 included Fred Eychaner and James Simons, who contributed $5 million each toward the $67 million raised overall by the group. The largest donor thus far in the current cycle is Jon Stryker, who gave $250,000 early in 2015. Stryker and Eychaner also appear on the Hillary Victory top donor list.

On the House side, the Democratic vehicle is House Majority PAC, founded in 2011 by former Democratic Congressional Campaign Committee staffer Alixandria Lapp. All of the senior staff members identified by House Majority are described as former DCCC officials or consultants. Major donors to the group during the 2014 cycle include Eychaner, who gave $3 million; Simons, who gave $2 million; Sussman, who gave $1.5 million; and Stryker, who gave $1 million.

These organizations, guided and operated by former party officials and funded by the same individuals and organizations that fund the Democratic party, tend to behave, well, like the party. Independent expenditures made in 2014 House and Senate races by House Majority PAC and Senate Majority PAC very closely tracked the independent expenditures made by the DSCC and DCCC. The largest concentration of DSCC independent spending, for example, happened in North Carolina, Iowa, Colorado, Arkansas, Alaska, and Louisiana. Senate Majority PAC also focused on North Carolina, Arkansas, Colorado, and Iowa, while it also spent heavily in Kentucky. Similarly, while there are many more races on the House side, four of the top eight races in terms of independent expenditures by the DCCC also appear high on the list of House Majority PAC.

There isn’t much indication that the tone or content of these outside efforts differed from the party’s approach either. The independent expenditures made directly by the Democratic party committees in 2014 (and earlier) races were overwhelmingly negative — attack ads aimed at Republican opponents in the targeted races. Spending by the “outside” groups aligned with the parties followed the same pattern of attack.

Of course, similar efforts are underway on the Republican side. Well established outside groups like American Crossroads were created by Republican party veterans and have spent their copious funds in ways very consistent with mainstream Republican party priorities; Crossroads is led by a former chief of staff to Senate Majority Leader Mitch McConnell (R-Ky.). Last year, using the model of the Dems’ Senate Majority PAC, McConnell allies set up another super PAC, the Senate Leadership Fund, to work closely with Crossroads and protect the GOP majority.

In addition, several of the largest JFCs working thus far in 2015 are affiliated with particular Republican House leaders, such as House Speaker Paul Ryan (R-Wis.). Team Ryan raises funds jointly with the National Republican Congressional Committee, Prosperity Action Inc. (Ryan’s leadership PAC), and his campaign. House Majority Leader Kevin McCarthy (R-Calif.) has a similar effort called the McCarthy Victory Fund. The table below shows receipts of the national party committees and their primary “outside” group (there are different approaches to this which include 501c(4) groups whose financing is far less transparent).

In the end, then, creative party operatives have effectively accomplished what advocates of fewer financial restrictions have been calling for — virtually unlimited contributions to the parties and their offspring used to further their electoral goals. The upshot? Shifts in the role of the parties and the polarization of the political process likely aren’t caused by a campaign finance system biased against them.

The table below shows receipts of each of the national party committees and their primary “outside” groups.


Originally published at www.opensecrets.org on February 19, 2016.

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