USAT, NYT on skirting federal campaign donation limits (creatively)

How do potential presidential candidates circumvent donation-limiting federal campaign laws? Let us count the ways. There’s the federal PAC way. There’s also the state PAC way.

USA Today recently reported on these work-arounds and their use by a number of possible presidential aspirants. From that report:

Six prominent Republicans considering challenging President Obama in 2012 have raised millions in campaign accounts that allow them to get around federal campaign laws that limit presidential fundraising.

By law, presidential contenders cannot collect money for the race until they establish an exploratory or a presidential fundraising committee.

However, Republicans and Democrats in recent elections have raised money in separate accounts — known as political action committees (PACs) — to build campaign organizations. It is not illegal.

The six have used their PACS to pay for activities such as political consulting, staff and travel that can advance their White House ambitions. They are Mississippi Gov. Haley Barbour, former House speaker Newt Gingrich, former Arkansas governor Mike Huckabee, former Alaska governor Sarah Palin, Minnesota Gov. Tim Pawlenty and former Massachusetts governor Mitt Romney.

While politicians establish such PACs purportedly to support like-minded candidates around the country, according to USA Today’s analysis of campaign finance reports they’ve been sort of stingy in that regard:

Roughly $1 of every $10 of federal PAC money raised by the six potential GOP contenders has been spent on contributions to federal candidates and committees through Nov. 22.

In addition to federal PACs, USA Today notes in passing that Romney and Barbour have also set up PACs “in states that allow their PACs to receive corporate donations” and states that have no donation limits, something the New York Times’s Michael Luo explored at length in an excellent report back in November.

Why, Luo asked in his lede, would the former governor of Massachusetts have a PAC in Alabama? Because, wrote Luo:

[Alabama] has among the most permissive campaign finance rules in the nation, allowing contributions of unlimited size from individuals and corporations.

As a result, the Alabama affiliate of Mr. Romney’s federal PAC, Free and Strong America, has raised more than $440,000 this year, with many of the contributions amounting to tens of thousands of dollars each.

Yet it has donated $21,500 — less than 5 percent of what it has raised — to state and local candidates in Alabama, for which these state PACs are ostensibly intended…

Instead, a vast majority of the just over $300,000 Mr. Romney’s Alabama PAC has reported spending this year has been directed back to the Boston headquarters of Free and Strong America, paying for, among other expenses, a significant part of the salaries of Mr. Romney’s political staff, who will almost certainly form the core of his presidential campaign if he decides to run.

Romney’s PAC setup, Luo reported, essentially “allows him to tiptoe around federal campaign finance limits.” (Or, as Politico put in in a simiar report in August on Romney’s “crafty financing,” it’s an “end run around the federal campaign finance rules,” providing “Romney’s most loyal and generous backers with multiple opportunities to grease the gears of his political machine.”)

More from Luo:

It also illustrates how potential candidates willing to be creative with the nation’s Rube Goldberg-like campaign finance system can manipulate it to their greatest benefit — and Mr. Romney has been by far the most assertive in this approach among those believed to be weighing bids for the Republican nomination.

Luo walked readers through the mechanics of Romney’s creativity and explained how, while not new, it is news:

The use of leadership PACs by potential presidential candidates is not new, but the elaborate architecture of state and federal PACs Mr. Romney has set up is unusual, campaign finance lawyers said. Mr. Romney leaned on a similar setup before his last presidential run as well.

Having the state PACs subsidize a significant part of his federal PAC’s expenses enables Mr. Romney to maintain a larger political operation in Boston than he could if he were restricted to the capped donations his federal committee can accept.

The offloading of expenses on the state PACs also allows Mr. Romney’s federal PAC to be more generous with the money it distributes to federal candidates, who might be counted on for favors down the road.

Mr. Romney’s committees in the three states that do not restrict donations to these kinds of organizations, essentially gives him a flexible pot of “soft money” — or unregulated contributions — before he formally decides to run and becomes subject to strict federal limits on political donations.

These PACs, wrote Luo, “must be careful not to cross over into actually footing the bill for a presidential candidacy”—against the law!— a line which he says that Romney and others are “testing.” And why not? The FEC, Luo wrote, “tends to give [PACs] the benefit of the doubt on these kinds of questions.” Not to mention that the six-member FEC—politically deadlocked with three Republicans and three Democrats—has been, as described in a recent Daily Beast column, unusually “quiet” during a time of record campaign spending.

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Liz Cox Barrett is a writer at CJR. Tags: , , , ,