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Campaign Finance Reform
By Ciara Torres-Spelliscy – 01/21/11
“I have promises to keep, And miles to go before I sleep,” so wrote poet Robert Frost in 1923. These are words that should be ringing in the ears of elected officials one year after Citizens United. The by now infamous decision allows corporations and unions to spend unlimited amounts on political ads about candidates. One year later, corporate, securities and election laws across America remain largely unchanged. These laws must be fixed to catch up to the new reality of money in politics after Citizens United.
What is that reality? The mid-term election showed the perils of running tens of millions of new money through a disclosure system that is utterly broken. As the NYC Public Advocate noted in a post-election break down of the congressional elections, over 1/3 of the money spent in the federal election was anonymous. The reason a City official such as the Public Advocate cares about the vast spending on congressional races is he oversees the multi-billion dollar New York City pension system as a trustee. Part of his job requires him to be concerned that the interests of the pension as an investor are not being compromised by this political spending. He may be left wondering if some of that new money in politics is money from publicly traded companies traceable to pensioners’ investments, and whether that money should properly be going to retired New York City Fire Fighters and their widows, for example, instead of lining the pockets of a political consultant or enriching broadcasters who make a small fortune every election cycle on ad buys.
Shareholders large and small need to keep an eye on corporate political spending. As the Supreme Court said, such information is vital to the shareholders’ ability to check the actions of mangers and to determine whether the political spending is likely to lead to profitability. Unfortunately, most publicly-traded companies are not transparent when it comes to their political spending. This robs shareholders of their ability to exit an investment either because they fundamentally disagree with political choices of managers on deeply held ideological grounds or they think that corporate managers are foolishly wasting corporate assets which could be better spent on research and development or hiring a new employee.
Congress tried and failed to pass legislation in 2010 to bring transparency and shareholder consent into corporate political spending. There is slim hope that the new Congress will pick up the pieces and try again – federal solutions seem unlikely. In the states, Iowa was first to recognize that political spending needed some internals oversight from companies. In Iowa, they improved their law by requiring board approval of corporate political spending. Lawmakers across the nation should focus on the fact that 92% of Americans (according to polling by the New York Times) want more transparency in their elections.
Yet not every reform requires a change in the law. Rather, some of these changes could be accomplished by administrative rule makings. First, federal campaign finance regulations need to be tightened. Much could be gained if merely the directions on FEC Forms 5 and 9 were modified to require those who purchase political ads in federal elections to divulge their underlying donors. The SEC should also change companies’ annual and quarterly public reporting (Forms 10-K and 10-Q) to require periodic disclosure of political spending by publicly-traded companies. Furthermore, if political spending is going to be funneled through nonprofits, then the IRS needs the resources to track which nonprofits have abused their tax status and which are complying with the rules.
Meanwhile, back in the states, disclosure laws in both the campaign finance context and the corporate governance context need improvement. All states should require reporting of who is funding political ads. Interested legislators can refer to the Brennan Center’s Writing Reform to see how to structure these laws. And states also have nearly plenary power to change corporate laws to give shareholders a means to consent to political spending through a vote or they could adopt Iowa’s approach of board approval which is a step in the right direction.
Given how much remains to be done to respond to Citizens United after a full calendar year and a dark election, citizens must insist that our political leaders repair our broken systems – starting with providing more transparency. With the 2011 legislative sessions revving up around the country, the time to act is now.
Tags: Democracy, Campaign Finance Reform, Other Reforms, Disclosure
By ReformNY – 01/18/11
Crossposted from ReformNY
Following up on Governor Cuomo’s State of the State speech, a new poll by the Siena College Research Institute shows that there is bipartisan support for two key reform issues that are near and dear to us at ReformNY: public financing of elections and full disclosure of outside income and clients by legislators.
70 percent of those surveyed said they support establishing a system of public campaign financing for elections in New York. The effort has bipartisan support with 76 percent support of those who identified themselves as Democrats and 63 percent support by those who identified themselves as Republicans.
Faring even better, requiring full disclosure of legislators’ outside income and clients showed 84 percent support -- with 85 percent support among Democrats and 89 percent support among Republicans.
Less encouraging however, is the public’s expectation that these reforms are likely to become a reality this year – a clear sign of New Yorker’s disillusionment with their government. Only 16 percent believed passing the ethics bill this year is “very likely”, and 36 percent responded as “somewhat likely.” On the public financing of elections, 9 percent responded as “very likely” and 35 percent as “somewhat likely.”
The public's desire for reform in Albany is clear. As we await the promised ethics bill, we hope that the Governor's office and the Legislature are paying close attention to what their constituents demand.
Tags: Democracy, Campaign Finance Reform, Disclosure, Public Financing, NY Reform
By Lawrence Norden – 12/08/10
The laws that govern money in politics in New York State are at least 30 years out of date. Meanwhile, the state has been embarrassed by the scandalous sight of jailed elected officials and a legislature which the public continues to regard with great suspicion. But as we urged in the New York Times, our new Governor Elect has a chance to finally change the way business is done in Albany by prioritizing ethics and campaign finance reforms.
Ethics reforms were nearly adopted under the Paterson Administration and the Assembly has passed campaign finance bills again and again only to see them flounder. But there is new hope in the Capitol because the incoming Governor made reform a central tenet of his election campaign. Therefore, Albany watchers predict that an ethics reform package is certain to be part of the Legislature’s early agenda come January. The Brennan Center has long argued that real campaign finance reform, with public financing as its centerpiece, is the best way to restore integrity and honesty to state government.
For these reasons, the Brennan Center sent a letter to Governor-elect Cuomo shortly after the election, urging him to keep small-donor based public financing and other campaign finance reforms at the top of his agenda. It will certainly be at the top of our agenda in the coming weeks and months. It's this simple: if there is any hope of changing the culture in Albany, we must change how we finance New York State elections.
Tags: Democracy, Campaign Finance Reform, NY Reform, Voting Rights & Elections
By Brennan Center for Justice – 11/16/10
The Brennan Center mourns the passing of Larry Hansen – Vice President of the Joyce Foundation in Chicago since 1994, and a one-of-a-kind leader in the movement to make American democracy work better. Larry enjoyed a long and distinguished career. Among his many accomplishments, he designed and built the Midwest Democracy Network, a coalition of state-based reform groups in Illinois, Ohio, Wisconsin, Michigan and Minnesota with which the Brennan Center works closely. In his determination to improve our democracy, he continually played a leadership role in the philanthropic community to envision and then support innovative and necessary reforms, including campaign finance reform and more recently, redistricting. Larry was a dear friend to many at the Brennan Center, and a strong and steadfast supporter of our work.
“In every conversation I had with Larry he would make me both laugh out loud and think seriously,” remembers Erika Wood, deputy director of the Democracy Program. “Larry was deeply committed to making sure our government worked for and represented all Americans. At the same time, he always made time to enjoy good conversation and company, and of course a good joke. He was a tremendous advocate and a very special colleague. It was an honor and a pleasure to work closely with him over the years."
Larry was an inspiration to all of us at the Brennan Center. His vision, leadership, wisdom and sense of humor will be greatly missed.
Tags: Democracy, Campaign Finance Reform, Redistricting, Justice
By Ciara Torres-Spelliscy – 10/19/10
So what’s it like to be a campaign finance reformer during the first election after Citizens United? Here’s a typical day:
10:00 am. The phone rings. It’s a reporter who wants to know about the spending in the midterm election. I point the reporter to www.opensecrets.org for federal elections and www.followthemoney.org for state elections.
“No, no. That’s not what I mean.” Complains the reporter. “I want to know about the secret money in the election.”
“Well that makes two of us.” I say and I settle in for a longer conversation. By 10:30 am, here’s what I try to explain:
Citizens United is the Supreme Court case which unleashed unlimited corporate expenditures in all future American elections. Citizens United didn’t make this spending secret. To the contrary, the Supreme Court voted 8-1 in favor of applying strong federal campaign finance disclosure and disclaimer rules to the plaintiff in the case, a 501(c)(4).
The secrecy came from a combination of Citizens United’s trashing of the previous federal corporate PAC requirement and decades old disclosure loopholes. In 2004 and 2008, nonprofits accounted for hundreds of millions of dollars of political spending –usually in the form of sham issue ads which pre-Citizens United were the primary legal way for corporate treasury money to come into a federal race. This year is different. Now straight up “vote for bob” election ads can be funded by corporations-- both for-profit and non-profit.
If a for-profit wants to spend secretively, then they can send their dollars through a non-profit who will do the political spending for them. Because of the way our elections and tax code interact, such spending is undetectable. When it comes to federal political ads, the FEC only requires reporting of earmarked donations. This enables Alice in Wonderland filings at the FEC where a $1 million ad buy is magically supplied by no listed donors. The IRS doesn’t require 501(c)(4)s or (c)(6)s to report their donors publicly. Only 527s are subject to public reporting of their donor bases over a certain threshold. This makes 501(c)(4)s or (c)(6)s the perfect way to hide a for-profit corporate role in this election.
Do I know that for-profits are spending in this election? Only if they are spending through transparent PACs. Otherwise I’m as much in the dark about this apocryphal election as any other voter. I’m waiting for a whistle blower to fess up, but I fear they will have the discipline to keep us all in the dark. Now that the President is calling out the potential for foreign money to flow through these nonprofits, I fear that the wagons are circled and we never know who funded this election.
More than any election since Watergate, this midterm is looking like a win for obfuscation and a loss for transparency. It did not have to be this way. What’s standing between the American voter and transparency are changes in the U.S. Code. We can change (1) the election code, (2) the securities code and/or (3) the tax code.
Option 1. The cleanest way to get at this transparency problem is by amending the Federal Election Campaign Act (FECA). Reforms like those embodied in the DISCLOSE Act would get at this issue by reforming the type of information that the FEC requires from political spenders. The reform that might have the most impact would be a requirement to name top funders in the ad itself. So we wouldn’t have any more “Citizens for Better Medicare” bought to us secretly by the pharmaceutical industry or “Americans Working for Real Change” brought to us covertly by business interests. These two examples are real groups. The DISCLOSE Act can still be adopted by Congress in the lame duck session.
Option 2. Because some of the money flowing through the trade association is likely from publicly traded companies, this raises a host of corporate law issues as well. The first tier agency problem is shareholders do not know that corporate money is being sent a political trade association. Then, once the money is in the trade association’s hands, the donor company loses control over how it is spent. In other words, shareholder investments may be leaking into the political system in ways that offer the shareholder zero say. And the problem is compounded because of the lack of transparency. Not only do shareholders have no vote, in most cases, they will be utterly clueless that the spending has happened. All this spending could damage shareholder value. This could be addressed by the Shareholder Protection Act which would require shareholder approval before publicly-traded corporation can spend money on politics. Furthermore, corporations are required by the Act to report where they have spent the money. Again, the Congress can still adopt this bill in the lame duck session.
Option 3. We could change the tax code to require public disclosure of entities who fund partisan, political campaign ads through 501(c)(4)s or 501(c)(6)s. This has not been explored by Congress post-Citizens United. This fix was briefly on the table in 2000 when public disclosure was mandated for 527s. Chairman Max Baucus already has asked the IRS to investigate whether certain nonprofits are abusing their tax status. But the question is bigger that the actions of a handful of bad apples. He also has the authority to hold hearings on the deeper issue of what electioneering disclosure should be adopted across the board to nonprofits after this dark election.
It is not too late to act. We still have time to fix this problem before the 2012 election. Because the only thing that could be worse than all of this secret political spending in a midterm congressional elections is for the same thing to happen on an even grander scale in a presidential election.
I hang up the phone. At 11:00 am it rings again. It’s another inquiry about the secret spending in the midterm. I take a sip of coffee. I repeat the facts that I know and the facts I don’t know. I pray that the story gets to enough staffers on the Hill so that we change our law in time.
Ciara Torres-Spelliscy is Counsel at the Brennan Center for Justice at NYU School of Law and Adjunct Professor at Rutgers University.
Tags: Democracy, Campaign Finance Reform
By Ciara Torres-Spelliscy – 07/28/10
Yesterday the threat of filibuster in the Senate killed — at least for the moment — a transparency bill the country both needs and wants. This is another example of how the continual threat — and use — of the filibuster is bringing our democracy to a halt. Tuesday’s victim? Americans who might want to know who is funding political ads in our elections.
The Constitution set up two different houses of Congress, and each governed by different rules. The House is designed for speed. The Senate, by contrast, has a different design which by its very nature slows down the pace of legislation and encourages deliberation — that’s why its members are older, serve longer, staggered terms, and why power is dispersed among committee chairs instead of being concentrated in the majority leader. As a former Senate staffer, I have seen firsthand how the Senate counters the impulsiveness of the House.
But, while debate and compromise make our country’s laws better, an overused minority veto makes progression impossible. The filibuster was never intended to be a tool for permanently derailing every piece of legislation. In recent years, the filibuster — and even the threat of a filibuster — has morphed from the exception to the rule, preventing the Senate from addressing critical policies, even those that the voters demand.
The latest casualty of the Senate filibuster was the DISCLOSE Act, which would have ensured that corporate and union political spending on future federal elections (including this fall’s upcoming election) was fully disclosed to voters. The act also would have banned foreign-owned companies from spending in U.S. elections and kept TARP recipients and large federal contractors from running campaign ads. Now, thanks to the threat of filibuster, all of these doors are wide open to abuse.
After the Supreme Court granted corporations and unions the constitutional ability to spend their treasury funds on elections in the Citizens United case last winter, polls of likely voters showed that approximately 80 percent the American public vehemently disagreed with the decision and wanted Congress to enact legislative remedies. What did the voters want? According to the polling, significant majorities from across the political spectrum wanted foreign corporate dollars to stay out of U.S. elections, shareholders to have a say on how their investments were used in politics, pay-to-play politics to stop, and real transparency of where political money was coming from. The same polls showed majorities also support the Fair Elections model of funding campaigns to empower voters and small donors over big special interest money. Happily, even in the wake of the defeat of the DISCLOSE Act, other reform options — such as the Shareholder Protection Act and the Fair Elections Now Act — remain alive for Congress to embrace as responses to Citizens United.
Read the rest at The Hill's Congress Blog.
Tags: Democracy, Campaign Finance Reform, Other Reforms, Disclosure
By Ciara Torres-Spelliscy – 07/06/10
The confirmation hearings for Supreme Court nominee Elena Kagan provided a miniature seminar on constitutional law. Kagan was asked over 500 questions and she discussed topics as diverse as gun rights to partial birth abortion. But front and center has been the January 2010 Supreme court case, Citizens United v. FEC. This was the case that granted corporations the same right to spend money on elections as a living, breathing human being.
Both Republicans and Democrats on the Senate Judiciary Committee – who will determine Ms. Kagan’s professional fate – appeared to be largely talking past her when they referenced Citizens United. For Republicans, the case is about an absolutist view of the First Amendment, which equates corporate money and individual speech. Several Republican Senators took the opportunity to repeat Senator Mitch McConnell’s debunked claim that Kagan urged book bans or would censor literature.
Meanwhile, Democrats harped on the Citizens United case as an example of a conservative Court run amuck and a danger to the integrity of the democratic process by unleashing free-spending corporations and unions into the political environment. In particular, Senator Franken among others, worried aloud that as Congress tries to adopt new environmental reforms, consumer protections or regulations of Wall St., lawmakers may be reluctant to anger corporate CEOs with buckets of money to throw into future elections.
Throughout the hearings, Solicitor General Kagan performed the common dance for judicial nominees, pledging fidelity to all Supreme Court precedents no matter how far afield from her own preferences any particular holding may be. Through most of the hearings, it was difficult for viewers to discern how Ms. Kagan personally feels about the underlying legal and social issues.
Ms. Kagan, though, may have inadvertently revealed her personal beliefs when she suggested the Court wrongly decided the Citizens United case. Ms. Kagan argued this case for the government as Solicitor General last September but nonetheless carefully provided the obligatory observation that the Court’s Citizens United opinion – which rejected her own argument on behalf of the government – is established precedent, and, that she would, of course, respect it as such. Asked whether she agreed with the government’s position in the case, she responded “[a]t least for me when I prepare a case for argument, the first person I convince is myself.” In other words, when she argued to the Supreme Court that they should follow over 60 years of federal law to keep corporate dollars out of elections, she meant it.
Thinking Citizens United is wrongly decided puts nominee Kagan in the mainstream of Americans. Polls conducted after Citizens United was decided, suggest 80% of Americans think the case was wrongly decided. The same polls show 72% of Americans want reforms to limit corporate spending, 85% of Americans want to keep foreign-owned corporations from spending on American elections, 80% of voters want shareholders to have the right to vote on future corporate political spending before managers spend corporate funds on elections, and voters support the public financing by a margin of two to one. The polls found these beliefs were held by Republicans, Democrats and independents.
Pending legislation would address Americans’ concerns about Citizens United. The DISCLOSE Act (H.R. 5175) would stop electioneering by certain foreign-owned corporations and would require more transparency with respect to political expenditures; the Shareholder Protection Act (H.R. 4790) would give shareholders a vote on future corporate political spending by managers. And the Fair Elections Now Act (H.R. 1826) would provide public financing for congressional candidates thereby empowering voters, by putting power to fund elections in the hands of small donors. Of course there is a great deal of resistance to these bills by special interests, but Congress needs to show some fortitude in marshalling them to the President’s desk for signature.
Solicitor General Kagan will likely soon be Justice Kagan. But after Congress completes its work on her nomination, it should turn quickly to the task at hand of passing the legislation that will respond to Citizens United. In reviewing these new laws, hopefully the new Supreme Court will have an opportunity to temper Citizens United’s excesses so that corporations can participate in meaningful ways without burying the electoral system under a dump truck of money.
Tags: Democracy, Campaign Finance Reform, Other Reforms, Disclosure, Public Financing
By Mimi Murray Digby Marziani – 06/30/10
RNC v. FEC: A Win for Democracy
With the General McChrystal saga, World Cup second round, Elena Kagan confirmation hearings, and imminent financial reform all making news before a long holiday weekend, you could be forgiven for missing a seemingly sleepy move by the Supreme Court on the last day of its term. On Tuesday, in a terse, two sentence order, the Court summarily affirmed the lower court’s decision in Republican National Committee v. Federal Election Commission (a.k.a., “RNC v. FEC”), thereby refusing to consider the newest challenge to campaign finance regulations. While this order has not made headlines, it represents a small but important victory for our democratic process.
The RNC case was brought shortly after the 2008 elections as a mid-term fundraising strategy by members of the Republican Party. The challengers sought to overturn the so-called “soft-money ban” of the 2002 McCain-Feingold campaign finance reform law, barring national political parties from accepting or spending unregulated campaign cash. Currently, the parties can only accept and spend “hard money” – contributions that comply with federal limitations on the amount (individuals can donate no more than $30,400) and on the source (corporations and unions are prohibited from donating). The plaintiffs argued that these regulations “severely restrict[] the ability of political parties to finance political activities” in a manner that unconstitutionally burdened their political rights.
There are two particularly striking things about this claim. First, it’s wrong on the numbers – the parties have just as much money as they had before McCain-Feingold. Empirical data from recent elections shows that political parties have had no trouble meeting and surpassing their pre-reform fundraising totals on hard money alone. To do so, both parties have substantially increased their reliance on small contributions, thereby broadening and diversifying their donor base. This result was predicted in McConnell – rather than suppressing political activity, the Court explained, the soft-money ban would simply require “political committees to raise funds from a greater number of persons.” And it makes perfect sense: When parties were allowed to ask corporations and wealthy individuals for multi-million dollar soft-money checks, why would they have bothered to solicit $20 bucks from your typical, less-endowed voter?
Second, it was a blatant attempt to take a second bite at the apple. The Supreme Court rejected this same undue burden argument just seven years ago in McConnell v. FEC. There, a five-to-four majority found that the government’s compelling interest in combating both actual and perceived corruption in the democratic process justified the “limited burdens” imposed by the hard-money restrictions. The Court pointed to 100,000 plus pages of factual record demonstrating that large soft-money donations to political parties had been routinely used to buy preferential influence over federal elected officials. For example, there were undisputed accounts that members of Congress, obligated to appease large soft-money donors, would manipulate the legislative calendar to successfully block proposed legislation. Such influence-peddling represented a clear end-run around limits on contributions directly to candidates – limitations that have been upheld for decades because they combat corruption. As the Court concluded, if these soft-money abuses were allowed to continue, “the cynical assumption that large donors call the tune could jeopardize the willingness of voters to take part in democratic governance.”
Indeed, given the law and these facts, you would also be excused for asking why the Republican National Committee thought it could successfully re-litigate McConnell in the first place. The answer, unfortunately, has much to do with the composition of the Court. Since the arrival of Chief Justice John Roberts and Justice Samuel Alito in 2005, the Court has heard four challenges to campaign finance laws – and, each time, has struck down key provisions. As my colleague Monica Youn put it, “the newly constituted majority has moved with stunning haste to dismantle decades-old safeguards intended to limit the effect of special interest money in politics.” Citizens United, decided earlier this year, marked a climax – there, by declaring that corporations have a First Amendment right to spend freely in elections, the Court rendered unconstitutional over 60 years of federal law and flatly overturned one of its own precedents.
And so, reform advocates breathed a sigh of relief when the Court refrained from reconsidering its previous ruling. This means that the national parties will fundraise under the hard-money restrictions in the 2010 mid-term elections. As a result, we can celebrate continued incentives for small-donor participation and safeguards against political corruption. Undoubtedly, a win for democracy – and for all of us.
Tags: Democracy, Campaign Finance Reform, Other Reforms
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