The Committee Shuffle: How Soft Money Has Changed Hard Money Spending in Congressional Elections

The Committee Shuffle: How Soft Money Has Changed Hard Money Spending in Congressional Elections

by

Robin Kolodny Temple University

and

Diana Dwyre

California State University, Chico

State of the Parties Conference Ray C. Bliss Institute of Applied Politics

University of Akron October 17-19, 2001

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While American political parties have come to play a larger role in the financing of

federal elections over the past two decades (Aldrich 1995; Herrnson 1988, 2000; Dwyre and

Kolodny 2002), they have not always spent their money in the same ways. A number of factors

may drive changes in party spending habits. For instance, the level of resources a party has

clearly will determine how much it can spend, but it will also affect how efficiently it is able to

spend that money (Glasgow 2000; Herrnson 2000, 90; Jacobson 1985/86). Recently, the national

parties’ House and Senate campaign committees (the congressional campaign committees, or

CCCs) have dramatically shifted their spending patterns. We find that in the past few election

cycles, the CCCs are spending much less of their hard money directly on candidates than they

had in previous election cycles. Instead, they are transferring large amounts of hard money to

the state party federal election committees or allowing the parties’ national committees, the

Republican National Committee (RNC) and the Democratic National Committee (DNC) to

assume some critical hard money spending. What drives these significant changes in CCC

spending? While we do not have a definitive answer to this question, we have identified a

number of important variables that have been in constant flux since the 1996 election cycle when

changes in CCC spending behavior began. Here, we will investigate a number of intriguing

points which include: the rise of soft money spending for issue advocacy media advertisements,

the new status of independent expenditures for parties, confusion over the definition of

“coordination” for purposes of both issue advocacy (by individuals, committees, and parties) and

party coordinated spending, the disjointed nature of judicial participation in this regulatory

process more generally, and finally the slow movement by the FEC to clarify regulations

regarding soft and hard money spending by parties and groups.

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First, we must make the case for a change in spending patterns. We examine hard money

spending by all six national party committees for several election cycles and hard money

spending by state party committees in the aggregate. Next, we also look at how the rise of soft

money has changed party hard money spending patterns. While many observers have remarked

at the enormous growth in absolute dollars raised and spent, few have focused on how spending

within and between party committees has been effected. Finally, we discuss the events that may

explain recent behavior by the party committees and show us where to focus our attention for

future developments.

The Congressional Campaign Committees

Each party has a campaign committee responsible for electing its party members to each

chamber of Congress. They are: for the House, the Democratic Congressional Campaign

Committee (DCCC) and the National Republican Congressional Committee (NRCC); and for the

Senate, the Democratic Senatorial Campaign Committee (DSCC) and the National Republican

Senatorial Committee (NRSC). In the late 1970s the CCCs raised relatively little money,

particularly the Democrats, and spent much of it on incumbents in safe seats, who generally had

little trouble raising funds from other sources such as political action committees. If a party

wants to add to its numbers in Congress, however, it should direct resources to challengers and

open seat candidates who have a chance of winning and only to its incumbents who have a

chance of losing. Indeed, by the mid-1980s, the CCCs were raising more money and spending it

more efficiently to maximize their share of seats in Congress (Kolodny 1998; Dwyre 1994;

Jacobson 1985/86; Herrnson 2000). These strategic advancements were due in part to the

entrepreneurial activities of the DCCC’s Tony Coelho and the NRCC’s Guy Vander Jagt, who

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modernized their party committees and enforced a good deal of discipline on the process of

distributing resources that had been lacking in the past (Kolodny 1998).

In the 1990s, it is clear that the most important factor driving changes in the parties’

financial strategies and efforts to push the envelope with campaign techniques and spending is

the return to competitiveness in the congressional electoral environment. We know that the

political environment can influence the way the parties distribute their resources (Kolodny and

Dwyre 1998; also see Aldrich 1995; and Schlesinger 1991). Since 1994, control of the House

and Senate has been legitimately competitive. The new viability of the Republican Party at the

congressional level not only encouraged stepped up GOP electoral activity, it forced the

Democrats to retool their methods and fundamental assumptions about electoral politics. With

close margins in both the House and the Senate, both parties became more aggressive about

pursuing majorities in their chambers and focused the attention of their campaign committees

and incumbent members on the handful of truly competitive races. With control of the federal

government so closely contested, more money is required earlier in the election cycle to make

elections competitive, and resources are concentrated on the few truly close races as both parties

focus on their best opportunities for gaining additional seats.

The legal and regulatory context effects the way parties spend their money as well. For

instance, a 1996 court decision in Colorado Republican Federal Campaign Committee v.

Federal Election Commission allowed parties to make unlimited independent expenditures for or

against a candidate. Just as important was the 1995 decision FEC v. Christian Action Network.

This case enabled the court to explain just how far issue advocacy advertisements could go and

still not be counted as express advocacy (West 2000:39-61). Parties now saw in graphic terms

how their soft money could be spent effectively on issue ads beginning with the 1996 elections.

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Changes in the interpretation of the campaign finance laws also may alter party spending

patterns. For instance, the parties’ stepped-up use of soft money has increased significantly the

amount of money the national parties are able to direct to targeted congressional races as they

have found new ways to spend this relatively easy-to-raise money. Soft money is easier to raise

than hard money because it may be raised from virtually any source and in any amount and may

be spent in unlimited amounts, although only on restricted activities. During the late 1990s and

into the 2000 election, soft money has enabled the parties to spend millions of dollars to run

issue advocacy advertisements and conduct voter mobilization activities to promote their

candidates (Dwyre and Kolodny 2002). Issue ads are ads that closely resemble regular

campaign ads, but they do not actually call for a candidate’s election or defeat. Thus since they

are not considered to be campaign communications, they may be paid for using unregulated soft

money. That parties have found ways to spend their millions of soft dollars helps explain why

they are now able to spend such great amounts on media advertising, that the state parties are

newly invigorated by funds from the national parties, and that candidates themselves are

sometimes outspent by their parties.

We now turn to an examination of recent changes in party spending. We argue that the

critical factor in the change in party spending has been the national parties’ use of soft money for

issue advocacy campaigns. Since the parties began engaging in issue advocacy activity in

earnest in 1996, they have altered dramatically how they spend their hard money. Where once

the party committees tried to maximize the amount of hard money they spent directly on

candidate races (through direct contributions and coordinated expenditures), parties have now

decided that spending unlimited soft dollars--on issue advocacy campaigns and on state-led

grassroots organization efforts--shores up their electoral positions better than direct hard money

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spending. Consequently, the national party committees try to spend their hard dollars in

combination with soft dollars (they are required to spend hard and soft money together) or

transfer their hard dollars to state parties who then spend them on behalf of the candidates. We

hypothesize that national party committees believe that transferring hard dollars (which they can

do without any limitations other than disclosure) to state party federal accounts allows the

national party committees to legitimately claim that they have not coordinated their activities

with candidates. This non-coordination, in turn, makes it possible for the national committees to

spend unlimited hard money on independent expenditures and unlimited soft money on issue

advocacy activities.

Changes in Congressional Campaign Committees Spending Strategies

First, we consider each method of party hard money activity and document the dramatic

changes in party spending in recent election cycles. Then we will discuss the possible causes of

these changes. Hard, or federal money is the money that national parties must raise in limited

increments: no more than $20,000 per year from an individual or $15,000 per year from a

political action committee. National party committees may not raise hard money from

corporations, labor unions, federal contractors or foreign nationals, and party hard money

activity must be fully disclosed to the public through reporting to the Federal Election

Commission (FEC), which posts the reports and summaries of party receipts and expenditures on

its web site. Conversely, party soft money which has virtually no restrictions on donor types (at

the national level) or amounts, may not be used for expenses associated with a direct role in the

outcome of an election for national office. Soft money may be used for “party-building”

activities including generic party advertising, get-out-the-vote drives and routine administrative

expenses borne by any organization (e.g., the cost of office space, equipment, supplies and

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employees). Most important, soft money contributions to parties are not limited and soft money

activity is not subject to the same strict disclosure requirements as hard money. We consider

each method of party hard money spending in turn.

Contributions to Candidates

Parties may give direct cash contributions to candidates in limited amounts: the national

party may contribute up to $5,000 per election (primary, general, run-off, and special) to a House

candidate and $17,500 to each Senate candidate per election along with an additional $5,000

from the state party organization. Figure 1 shows that since 1988, all four CCCs have moved

away from using direct contributions to candidates as a primary disbursement strategy. Direct

contributions are expressed as a percentage of total hard money disbursements in this figure.1

The two senatorial campaign committees have never had very high levels of their disbursements

go to direct contributions: the NRSC has remained at around 1% while the DSCC has declined

from a high of 2.6% in the 1988 cycle to a low of 2000’s 0.7%. In some cycles, the low

percentage is a function of the limit of $17,500 (a number that has remained the same since 1974

and is not indexed for inflation) in 33 to 34 Senate races per cycle (between $577,500 and

$595,000 total possible).2 Still, both the NRSC and DSCC reduced their total contributions to

about half of that allowed by law in the 1998 and 2000 cycles. The House committees have

behaved differently, giving around 5% of their disbursements as contributions in the late 1980s

to 2000’s level of around 1%. The change for the DCCC has been especially dramatic, with their

1992 high of 6.6% declining steadily to 1.2% in 2000. Of course, since direct contributions to

1 The percentages represent the dollar amount of contributions made in a given election cycle divided by the dollar amount of total disbursements for that same election cycle. 2 The Senatorial committees may also make contributions to House campaigns of no more than $5000 per election. This sometimes happens at the suggestion of the head of the House CCC, usually in exchange for some other committee’s assistance for Senate candidates.

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candidates are limited to $5,000 for House or $17,500 for Senate per election and are not

adjusted to increase with inflation, as the parties raise and then spend more hard money, the

proportion of that money that they spend on direct contributions would naturally go down.3 Yet

this decline in spending for direct contributions to candidates also indicates a move away from

this type of spending by the CCCs.

[Figure 1 about here]

Coordinated Expenditures

Party committees also may make coordinated expenditures. Coordinated expenditures

are hard money expenditures that the parties make on a candidate’s behalf with the candidates’

knowledge and consent. Parties use coordinated spending to pay for things such as polling,

campaign ads or campaign literature. The 1974 Federal Election Campaign Act amendments set

the amount of coordinated expenditures for U.S. House candidates at $10,000, plus an

adjustment pegged to the Consumer Price Index for the national party and the same amount for

the relevant state party. By 2000, the House coordinated expenditure limit had increased to

$33,780, for a total of $67,560 from both party organizations—the national party committee and

the state party committee (Federal Election Commission 2000). For Senate races, coordinated

expenditures are calculated based on state population and ranged in 2000 from a low of $135,120

for the least populous states to a high of $3.3 million for California (ibid.).

3 As is the case for the Senatorial committees, there is an absolute limit of direct contributions for House committees of $5000 per election (normally two per cycle – primary and general) and a maximum number of races at 435. If a party ran a candidate in each district, they could theoretically contribute $4.3 million in direct contributions. Neither House CCC has come close to this amount.

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One of us (Kolodny) has argued that the invention of “agency agreements” between the

CCCs and the national and state party committees was the key event that election observers

credited with the invigoration of the CCCs in the past 20 years. The Supreme Court, in Federal

Election Commission v. Democratic Senatorial Campaign Committee et. al (1981) allowed the

NRSC to continue their practice of acting as an agent for either or both the national and state

committees to spend the coordinated expenditures provided for in the law. In the majority

opinion, Justice Byron White wrote: “Nothing in the statute suggests that a state committee may

not designate another committee to be its alter ego and to act on its behalf” (Federal Election

Commission v. Democratic Senatorial Campaign Committee et al; Kolodny 1998: 137-143).

Agency agreements for coordinated expenditures rapidly became the signature technique for the

CCCs’ financial role in congressional elections starting with the 1982 cycle. Our findings about

how CCCs now engage in coordinated expenditures suggest the end of agency agreements and

ask us to question who is an “alter ego” for whom.

The coordinated expenditure data in Figure 2 show an even more dramatic shift than

CCC contribution spending. All four of the campaign committees hit a six-cycle low in the

proportion of their disbursements made through coordinated expenditures in 2000. The dramatic

decline in coordinated expenditures began in the 1996 election cycle for all four committees, the

first cycle in which the use of soft money became widespread. In the 1996 cycle, the NRSC

essentially stopped making coordinated expenditures, and by 1998 the DSCC had as well

(showing the most dramatic decline in coordinated expenditures from a 1994 high of 46% of all

disbursements). The DCCC and NRCC have continued with some coordinated expenditures

(around 5% of total disbursements), but this is a real drop for both organizations, especially the

DCCC. Since coordinated expenditures are indexed to inflation, there is no natural inclination

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for spending in this area to decline as a proportion of overall spending, as was the case with

contributions. Something else is at work here.


Independent Expenditures

As a result of the Supreme Court’s decision in Colorado Republican Federal Campaign

Committee v. Federal Election Commission (116 S.Ct. 2309, 1996), political party committees

have been permitted to make independent expenditures since 1996. Independent expenditures

are hard money dollars spent to conduct express advocacy activities for the election or defeat of

a candidate but without the candidate’s knowledge or consent. Express advocacy refers to

activities that clearly and unambiguously advocate the election or defeat of a candidate. The

Supreme Court held in Buckley v. Valeo (1976) that “explicit words of advocacy of election or

defeat” are required to avoid unconstitutional vagueness and provide First Amendment

protection to political speech that does not expressly advocate the election or defeat of a

candidate. In a footnote, the Court indicated that the following terms satisfied their strict express

advocacy test: “’vote for,’ ‘elect,’ ‘support,’ ‘cast your ballot for,’ ‘Smith for Congress,’ vote

against,’ ‘defeat,’ ‘reject’” (Buckley v. Valeo, 424 U.S. at 44 n. 52).4 These have become known

as the “magic words” of express advocacy. If a communication does not contain such words and

it is instead an “issue advocacy” communication (i.e., a discussion of some policy issue), it is not

considered to be “in connection with” a federal election (as long as there is no coordination with

a candidate or his or her campaign). Such issue advocacy communications, therefore, are not

subject to FECA regulations, and sponsors of these communications may pay for them using

4 While the Court did not indicate whether this list was exhaustive, most legal, political and scholarly observers do not regard it as so.

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virtually unregulated funds, including with funds from sources (such as corporations or labor

unions) and in amounts prohibited by the FECA.

The advantage of making hard money independent expenditures, rather than spending

soft money, is that the parties may spend as much as they like on independent expenditures to

expressly advocate the election or defeat of a candidate, allowing parties to send loud and clear

messages to help their candidates win. With soft money, the parties cannot directly say such

things as “vote for” or “vote against” some candidate. What is surprising is how little use the

CCCs have made of this opportunity to make unlimited independent expenditures. As Figure 3

shows, the NRSC made a significant effort to spend independently in 1996, using 14.7% of its

total hard money disbursements for this purpose. Since that cycle, however, none of the CCCs

(including the NRSC) have made as significant use of this type of spending. In the 2000 cycle,

the only CCC to make an effort at independent spending was the DCCC, using 3.9% of its total

disbursements for this purpose.5


Given these modest amounts, it is unlikely that the new legality of independent

expenditures accounts for the drop in contributions and coordinated expenditures, but this

hypothesis will be tested next. Indeed, independent expenditures must be paid for with hard

money, which is difficult to raise because it must be raised in small, limited increments.

Independent expenditures and the sources of the money raised to pay for them also must be

reported to the Federal Election Commission, so large party expenditures are quite transparent

and may reflect badly on the candidate they are intended to help. Moreover, the parties cannot

coordinate such spending with their candidates, making it difficult to separate independent

5 The DCCC spent this money solely on phone banks for GOTV calls in 38 competitive races one week or less before the elections.

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spending from other party efforts. Indeed, the authors of the original FECA did not believe that

political parties were capable of true independence from the candidates they nominated (even if

such a nomination was obtained despite or apart from the party establishment such as through an

open primary). And party operatives have noted that they had great difficulty keeping their

independent expenditure activities separate from their other spending activities.6

Direct Hard Money Spending by the CCCs: Contributions, Coordinated and Independent Expenditures When we combine the CCC’s three direct methods of spending on congressional

candidates, we find strong evidence that there has been significant decline in all direct hard

money spending on candidates. Figure 4 shows that independent expenditures do seem to

compensate somewhat for the decline of coordinated expenditures, but the trend lines in this

figure and in Figure 2 are surprisingly similar. Clearly, other factors are responsible for these

dramatic shifts in party spending strategies. The first factor that comes to mind is the role of soft

money in the CCC’s contemporary spending strategies. We will explore how and why the

national parties’ increased use of soft money has shifted their hard money spending strategies.

First, however, we begin with an examination of the national parties’ transfers of both hard and

soft money to state and local party committees.


National Party Transfers to the States

Party committees are permitted to make unlimited transfers of hard money to other party

committees. Yet until recently the national congressional campaign committees had not

transferred much to state and local party committees. Figure 5 tells an amazing story. During

6 The issue of what “coordination” means has been problematic for the parties. The NRSC moved a staff dedicated to independent expenditures in 1996 out of their party headquarters to

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the 1993-1994 election cycle (the first cycle with reliable figures for transfers), the CCCs

transferred almost no money to the state and local parties. However, starting in 1996, the two

Democratic committees (the DSCC and the DCCC) began to send more of their hard money to

the states. Just over 15% of total disbursements went to state parties in 1996 from the

Democratic congressional campaign committees, and by 1998, the Republican committees began

to make such transfers. The DSCC, however, transferred a full 34% of its hard money

disbursements to state parties in 1998, increasing that amount to over 58% by 2000. All of the

CCCs increased their hard money transfers to the states to significant levels in 2000.


This dramatic increase in CCC hard money transfers to state and local parties clearly

helps explain why the CCCs have decreased their direct spending on congressional candidates—

as more money goes out the door to the states, there is less to spend directly on candidates. Why

did the CCCs begin to transfer significant sums to the state parties, and just what did the state

parties do with all this money?

Soft Money, Hard Money, and State Parties

The central reason that the national parties transferred so much hard money to state

parties is that many states are a more hospitable environment for spending soft money. The

national parties may spend soft money in a variety of ways. Party activities that affect only state

or local elections may be paid for exclusively with soft money if the relevant state’s law permits.

Yet party activities that affect both federal and state/local elections (e.g., overhead expenses for

running the party, GOTV drives that support both federal and state/local candidates, or generic

party communications that support the party generally, such as “Vote Republican, For a

prove the “independence” of the operation. (Corrado 1997; Campaigns & Elections 1998a.)

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Change”) must be paid for with a combination of hard and soft money according to ratios set by

the FEC and the respective state’s campaign finance regulations. Moreover, parties must use a

combination of hard and soft money to pay for issue advocacy ads, since the FEC considers this

to be a generic party-building function, and not purely issue advocacy ads such as those

conducted by individuals and interest groups (Biersack 2001).

During presidential election years, the national committees (RNC and DNC) must pay for

these activities with 65 percent hard money and 35 percent soft money when spending money

themselves instead of through state parties. In non-presidential years, the ratio is 60 percent hard

and 40 percent soft money. The CCCs’ mix must be a minimum of 65% hard money in all

election years, though the percentage may be adjusted upward depending on actual

disbursements (11 CFR 106.5). Depending on the mix of federal and nonfederal activity,

different hard and soft money ratios may apply to other party activities such as soft money

fundraising (Dwyre and Kolodny 2002). The proportion of federal races on a state’s general

election ballot combined with state campaign finance laws governing the raising and spending of

soft money determine the hard/soft money ratios for state political parties.7 Typically a state’s

ratio will allow for more soft money spending than the national party’s ratio, so the national

parties often transfer hard and soft money to a state party to take advantage of the more

favorable state ratio. Since party committees are permitted to transfer unlimited amounts of

money to other party committees under the law, these spending arrangements do not violate

FECA contribution limits. Figure 6 shows the dramatic increase in national party soft money

transfers to state parties. Combined with the significant increase in hard money transfers shown

7 In all states except Connecticut and Alaska, which ban soft money, party activities that affect both federal and state/local elections and party issue advocacy ads must be paid for with a combination of hard and soft money according to ratios set by the FEC.

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in Figure 5, it is clear that the national party CCCs did much of their spending through the state

parties. Indeed, David Magleby reports that “congressional party senior staff indicated [in

interviews] that national to state transfers represent well over 90 percent of what they spend for

congressional candidates” (Magleby 2001, 21).


These national party transfers to state parties have come under a great deal of criticism

and are seen by many as a loophole in the federal law that should be closed. Indeed, once

national party soft money is transferred to a state party committee, it is extremely difficult to

trace exactly how that money is eventually spent. The national committees disclose this money

to the FEC as transfers to state parties, but each state has different reporting requirements and

different rules regarding soft money use, making expenditures difficult to track (Dwyre 1996;

Morehouse 2000).

This need to combine soft money with hard money in order to spend it on federal

campaign activities has been a real motivating factor behind the recent changes in national and

state party spending patterns. The national parties are spending less hard money, and

consequently the state parties have increased their hard money spending, in order to comply with

the matching requirements that allow the parties to spend their abundant supplies of soft money

on activities during elections such as voter mobilization efforts, mail campaigns and issue

advocacy ads.

State Party Spending on Federal Candidates

Yet the state parties also are spending the hard money transferred from the national party

committees directly on candidates in federal elections. State parties spend about 3% of their total

federal hard money disbursements on contributions to candidates, with the notable exception of

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1998 when their spending was extraordinary. Figure 7 gives the details. In addition, state parties

are spending more on coordinated expenditures on behalf of congressional candidates than they

ever have before, as Figure 8 indicates. This shows that the state parties are one place where the

decline of coordinated expenditures by the CCCs has been offset. Although state party

committees have the legal status to spend coordinated expenditures, agency agreements had

virtually eliminated this type of spending by them. Before the recent spate of transfers from the

national party committees to the state parties, most state parties did not have the funds to make

coordinated expenditures (or the desire to raise money for them for congressional candidates).



Before we turn to a detailed discussion of the coordinated expenditure phenomenon, we

must mention that party independent expenditures by the state parties have risen also, though the

trade off with the national parties does not seem to be happening. Figure 9 shows that state

parties have been using independent expenditures as a way to spend hard money on federal

candidates. The Democrats have steadily increased the amount they spend, while the Republican

pattern has been a bit more erratic. Still, states are spending consistent amounts this way, while

the several CCCs (the NRCC in particular) have either never spent this way or spent

independently in certain election cycles and stopped altogether in others.


The Committee Shuffle: State and National Committees Spend for the CCCs

To this point, we have established that the CCCs have reduced their direct spending for

candidates in the form of direct contributions, coordinated expenditures and independent

expenditures. We have also shown that hard money transfers to state parties have risen

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dramatically and that rules regarding how soft money is spent are responsible for this. But we

are still missing a full picture of how CCCs spend their money, especially since we know that all

four committees have increased their soft and hard money spending in aggregate terms, and that

at least the DSCC and DCCC have increased their hard money in real terms (Dwyre and

Kolodny 2002). Looking at the individual disclosure forms for each of the CCCs, we can

explain more precisely how the spending of hard money has changed. When party committees

declare disbursements, they must account for the following categories: operating expenses

(including those mixed with soft money), transfers to party committees, direct contributions,

independent expenditures, coordinated expenditures, loans repaid and made, refunds of

contributions and other expenditures. The FEC reports contributions, coordinated and

independent expenditures on their summary tables. The other categories give us the full story.

Figure 10 shows the proportion of hard money disbursements spent on operating

expenditures by the four party committees. The data are only for the last three election cycles

(the data prior to that is difficult to find at this time), but it is clear that after adjustments in 1998,

all CCCs have lowered their hard money spending on operating expenditures. Why? They are

making better use of soft money mixes to pay for their administrative costs. Operating expenses

include salaries for permanent staff, rent, supplies, routine office expenses and fundraising

expenses. Table 1 shows how soft money expenditures for operating expenses have increased

along with hard money expenditures. Since the proportion of expenses being paid for with soft

dollars has risen, the proportion of hard money needing to go to such expenses has also

decreased, especially in 2000.


[Table 1 about here]

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Since we have established that CCCs are not spending their excess hard money (freed up

by soft dollars) directly on candidates, we must focus once again on transfers to other

committees. Figure 5 showed the percentage of hard money transferred to state parties. Figure

11 shows how much hard money was transferred to all party committees: state parties, the

national committee (RNC or DNC) or the other party CCC. Although Figure 11 is somewhat

incomplete, because it reports only transfers out and does not deduct money that is transferred in

to those committees from other committees, it still tells us something interesting. While transfers

to state committees account for nearly all transfers made by the two Democratic CCCs (the

DSCC and DCCC), state party transfers are almost non-existent for the Republican CCCs.

Instead, the Republican CCCs appear to be transferring money to the RNC or to each other. As

we shall now see, the state party and national committee behavior taken together get us closer to

understanding the CCCs’ new behavior.


Who Spends on Candidates?

Figure 12 shows that when all congressional direct spending is added together, the overall

level of spending is remarkably stable, with the exception of Democratic coordinated

expenditures in 2000, which is below the levels of the previous two cycles. Clearly, the drop in

CCC hard money expenditures is compensated for by the other related committees. How and

why does this happen?


As we have already established, the CCCs appear to have disbanded agency agreements

for coordinated expenditures made with state and national committees as a primary means of

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funding campaign expenses for candidates.8 Indeed, it appears that the national party CCCs

have all but abandoned the use of coordinated expenditures in order to be able to legitimately

claim that they are not coordinating activities with their congressional candidates, a requirement

for party independent expenditures and for national party soft money issue advocacy spending.

During the 1996 presidential election the Democratic Party was accused of improperly

coordinating its issue advocacy ads with the Clinton campaign. Although the FEC dropped its

case against the DNC for coordinating its issue ads with the Clinton campaign, the national

parties appear to operate under the assumption that such coordination is not permissible.

Interviews with media consultants during the election revealed that the national parties were

careful to not hire the same media firm to make hard money campaign ads and soft money issue

advocacy ads for the same congressional candidate (Oxman 2001).

An examination of the individual coordinated expenditures made on behalf of

congressional candidates reveals that the CCC transfers to the state parties for coordinated

expenditures were often quite transparent. For instance, in 1998 the DCCC transferred $22,880

in hard money to the Hawaii Democratic Party, and then the Hawaii Democratic Party made a

coordinated expenditure on behalf of a congressional candidate in the exact same amount. More

often than not, however, the CCCs transferred far more in hard money to a state party than that

state party spent on coordinated expenditures. This additional hard money was often used by a

state party in combination with CCC-transferred soft money to conduct voter mobilization and

issue advocacy activities.9 The DSCC transferred $1,086,217 in hard money and $1,357,317 in

soft money to the Kentucky Democratic Party, and the state party spent only $383,700 for

8 We will not focus on contributions at this time, as the amounts are quite small compared with other types of spending.

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coordinated expenditures in 1998. The rest of the money transferred from DSCC was probably

spent in combination with soft money on voter mobilization and issue ads or transferred to other

states.

The parties’ national committees (the Democratic National Committee and the

Republican National Committee) also transfer money to the state parties. Indeed, as the DSCC

was transferring all of that money to the Kentucky Democratic Party in 1998, the DNC also

transferred $113,603 in hard money and $526,939 in soft money to the state party. These

national committee transfers increase the amount of money going to state parties who can use it

for coordinated expenditures and therefore help the national parties avoid coordinating with

congressional candidates in races where they want to spend soft money on issue advocacy ads.

The NRCC and the RNC actually appear to have divided up responsibility for the competitive

congressional races in 1998. In at least four cases, the RNC made significant hard and soft

money transfers to state parties where the NRCC made no transfers at all. Additionally, the RNC

has begun making coordinated expenditures on behalf of congressional candidates directly,

further freeing the Republican CCCs from any spending that requires coordination. In 2000, the

RNC made a total of $10,133,833 in coordinated expenditures to five House candidates and 16

Senate candidates in 17 states.

Understanding CCC Strategy

Unfortunately, we cannot say with certainty why the CCCs effectively ended coordinated

expenditures, although recent interviews with party operatives confirm that the demands of

mixing soft money with hard certainly explain much of what has happened. Our research has

turned up a number of promising avenues for further inquiry that might explain why CCCs have

9 A former CCC employee in the 2000 cycle confirmed this on the condition that it not be

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changed their hard money strategies. These avenues include: the disposition of a pending court

case RNC v. FEC; the disposition of the Colorado II case; and the issuance of new federal

regulations concerning the definition of “coordination” by the FEC.

RNC v. FEC

This case originated in 1995. The RNC asked the FEC to investigate the DNC’s

nationwide media campaign highlighting their proposals on health care issues which was

allegedly paid for entirely with money from nonfederal. The RNC argued that FEC regulations

prohibited this practice when committees had both federal and non-federal accounts as it must

allocate expenses between the two.10 Since the FEC needs the votes of four of the six

commissioners to investigate a complaint, the case was closed for lack of the requisite votes

(FEC Record, June 1998). In the spring of 1998, the RNC adopted the “if you can’t beat them,

join them” view when it filed a lawsuit against the FEC asking that the FEC be barred from

enforcing its policy of demanding a hard/soft money mix for issue ads (FEC Record, June 1998).

The RNC wanted to be treated like any other political committee making issue ads by using soft

money to pay for the ads entirely. According to CQ Weekly Report, the suit also seeks to “erase

the FEC’s bar on coordination of issue ads with any federal candidates unless the money used is

regulated hard money…”(CQ 1998, p. 1112). The case was later consolidated with a similar

case by the Ohio Democratic Party (ODP) against the FEC and moved to the U.S. Court of

Appeals for the District of Columbia. Both the RNC and the ODP wished to obtain a

preliminary injunction from the court to prevent the FEC from enforcing the hard/soft money

mix regulations during the 1998 campaign. The RNC had argued that “if forced to follow the

FEC’s regulation, it would have ‘to divert hard money from federal, candidate support,’” while

directly attributed.

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the ODP said “it would be able to spend more on issue advocacy advertisements and free up

federal funds to support the election of federal candidates if it did not have to follow the

allocation rule.”(Federal Election Commission 1999: 2). The injunction was denied twice, the

last time on appeal on November 6, 1998. However, the RNC and ODP refiled the case

immediately and it is currently on the court’s docket. Apparently the case has been assigned to a

very senior judge who has shown little interest in expediting the issues. (Moramarco 2001). It

may be that the RNC (and by extension other party committees) reasonably believed that they

might win their injunction, and therefore might have believed that minimizing their hard money

direct spending by sending it to the states would allow them to maximize their soft money

spending for issue ads if it could be done from Washington. Whatever their thinking, in light of

the outcome in Colorado II, the importance of deciding this case has increased.

FEC v. Colorado Republican Federal Campaign Committee (Colorado II)

Colorado I, decided in 1996, declared that political parties could make unlimited

independent expenditures on behalf of their candidates with 100% hard money provided that

they did not coordinate with the candidate whose election the party intended to help. Colorado

II, which was separated from the original case, asked the court to declare the limits on party

coordinated expenditures unconstitutional. The lower court did set aside coordinated

expenditure limits, equating coordinated expenditures with a candidate’s own expenditures

which cannot be limited according to Buckley v. Valeo (1976). On June 25, 2001, however, the

Supreme Court issued its decision disagreeing with the lower court and upholding the

constitutionality of the limits claiming that they prevent abuse in the system because the parties

are not only agents of the candidates, they are also agents of their contributors. The court felt

10 This was affirmed in the FEC’s Advisory Opinion 1995-25 filed by the RNC to run similar types of ads to influence congressional legislation in 1995 (Corrado 1997:214-216).

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that contributors would give money to the parties (under the generous limit of $20,000 from an

individual compared to $1,000 from an individual to a candidate) with the expectation that those

funds would be delivered directly to their preferred candidate (FEC Record 2001, p. 1-2).

The parties anticipated that the decision would be the opposite of what it was. They

believed that Colorado I set precedent and that the composition of the court favored them.

Although unlimited coordinated expenditures would take the CCCs’ focus away from soft money

issue ads, it is also clear that candidates vastly prefer the assistance they get from the parties in a

“coordinated” manner to the uncoordinated (and therefore unpredicitable) assistance found in

issue ads (Faucheux 1998; Magleby 2001). Perhaps the parties anticipated that winning this

court case and the previous one would create a new spending environment for them, justifying a

dramatic shift in who spends which monies.

New FEC Regulations on “Coordination”

A final angle is the promise of new federal regulations on what it means for a party to

“coordinate” with a candidate. On May 9, 2001, new regulations came into effect to define what

“coordinated general public political communications” meant for interest group entities in the

wake of the 1999 case Federal Election Commission v. The Christian Coalition. The court sided

mainly with the Christian Coalition and said that coordination between a candidate and a group

intending to help their election must be substantial in order for such activity to count as a

contribution to the campaign. So, the regulations are now more generous toward so-called non-

political, tax-exempt groups than toward the parties. These groups, as in the case of the

Christian Coalition, can spend unlimited amounts on issue advocacy campaigns. This case

declared that political communications were the focus and that will be important for political

parties. That is because the FEC said that it “notes that not all coordinated expenditures

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constitute communications. In fact, party committees may use their coordinated expenditure

limits to pay for many other types of expenses incurred by candidates, including staff costs,

polling, and other services.”(Federal Register, 2000). In this document, the FEC made it clear

that they were awaiting the outcome of “a pending Supreme Court case” (i.e., Colorado II)

before issuing new guidelines for party committees. If indeed the FEC uses the new regulations

on political communications as a guide for party committees, then it may find that overhead

expenses do not count against the party’s coordinated expenditure limit, possibly opening the

door for another way for party soft money to be spent or for such expenses to count as

independent expenditures (and therefore be unlimited). The FEC will need to revisit the matter

of revising the regulations, since both Colorado cases have now been decided.

Conclusion

The motivations of the CCCs in redirecting hard money are not entirely transparent to us. While

we have a good sense of what happened, we will need to conduct further research to find out

exactly why this happened. It does seem that one problem with our analysis is that it posits the

question from the perspective of the national party committees only. Perhaps the question we

should be asking is not why do party committees want to avoid coordinated expenditures as

much as why do the state parties to do more of it? It does beg the question of who is whose

agent, and our future research plans include giving a closer look to the particular state parties

whose level of soft and hard money transfers and expenditures in federal elections is particularly

high. Given that the 2002 election will include newly drawn districts in many places, and given

the probability that campaign finance issues will be low on the agenda in light of recent world

events, it is unlikely that parties will change their strategy much for the next cycle.

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References

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Documents

The Committee Shuffle: How Soft Money Has Changed Hard Money Spending in Congressional Elections