The Center for Public Integrity

State parties raised nearly $823 million in the 2001-2002 election cycle, bolstered by millions from labor unions, corporations, wealthy individuals and the national parties, according to a new study by the Center for Public Integrity. About 53 percent of the total went to Democrats and 47 percent went to Republicans.

The parties also reported spending more than $790 million during the same time period.

While Democrats out-raised the GOP at the state level, it was no contest at the national level, where Republicans were about even with Democrats in now-banned "soft money" contributions, but held a tremendous 2-1 advantage in hard money contributions.

The Center collected disclosure records from 229 state party and caucus committees over the past year, making it possible to calculate the combined total of state and national party contributions in an election cycle—more than $1.6 billion, a staggering amount, especially given that 2002 was an off-year, non-presidential election.

Federal law regulates the source and amount of contributions that the national parties—the Democratic National Committee, the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the Republican National Committee, the National Republican Senatorial Committee and the National Republican Congressional Committee—can receive. Such regulated money is known as federal or "hard" money. In the 2001-2002 election cycle, national parties could also receive unlimited donations, called "soft money," but the 2002 passage of the Bipartisan Campaign Reform Act ended that practice.

Of the $790 million spent by state political party and caucus committees during the 2001-2002 cycle, almost half went to a collection of strategists, pollsters and mailing houses that specialize in swaying voters.

Just 51 consulting firms accounted for about $346 million in spending, paced by Greer Margolis Mitchell Burns, a Democratic firm, and GOP consultant National Media Inc. Both worked on major races in key battleground areas in the mid-term elections. GMMB received $45.6 million and National Media got $41.6 million for their efforts.

Those totals include money that the consultants then use to buy air time from television broadcasters, cable outlets and radio stations. How much was impossible to determine—consulting firms are not obligated to disclose how they spend the money they get from political parties—and therefore how much the firms actually earned was also unclear.

It comes as little surprise that state parties rely so heavily on outside consultants, since few, if any, party operations are sophisticated enough or have the financial resources to support their own in-house media producers and mail houses. In addition, parties sometimes hire consultants with direct experience, including former executive directors and chairmen.

"As elections have become more sophisticated, you've seen the influence drop down from the federal to the state level," said Candice Nelson, director of the Campaign Management Institute at American University. The result, she said, is that consultants "are pretty much an entrenched part of the landscape of how elections are run in this country."

In the 2002 election cycle, 16 leadership committees—essentially political action committees run by elected politicians—in five states raised and spent more than $17 million.

State legislative leaders—senate and house majority and minority leaders, senate presidents and house speakers—are in high-profile positions and use these types of committees for several purposes, including helping candidates within their parties in key races throughout the state.

As part of the Party Lines study of state political parties, the Center for Public Integrity examined the role of leadership committees in a handful of states: Florida, New Jersey, Illinois, Virginia and New York. To help identify leadership committees in these states, the Center contacted legislative leaders, state money-in-politics research organizations and political journalists. To compile the financial data, the Center used the online disclosure databases provided by state campaign finance regulatory agencies.

Because contribution limits and disclosure rules vary greatly from state to state, it is difficult to track money raised and spent by committees connected to legislative leaders. In many cases, it's hard even to determine which lawmakers operate such committees. Often, leadership PACs have generic or ambiguous names shielding them from affiliated lawmakers, such as "Committee for a Responsible Government" or "New Majority Project."

In Florida, legislators have formed leadership committees and have used a loophole in state law to solicit contributions of up to $50,000 from corporations and lobbyists without having to reveal contributor identities on campaign finance disclosure filings. In New Jersey, on the other hand, leadership committees are defined by statute and connected to the same positions in each party, independent of the lawmaker who holds the office.

1867: Naval Appropriations Bill 

The first federal attempt to regulate campaign finance. Prohibited officers and employees of the government from soliciting money from naval yard workers.

1883: Civil Service Reform Act 
Extended the above rule to all federal civil service workers. Previously, government workers were expected to make campaign contributions in order to keep their jobs.

1905: Teddy Roosevelt's Message to Congress 
President Theodore Roosevelt proposed that "(a)ll contributions by corporations to any political committee or for any political purpose should be forbidden by law." The proposal, however, included no restrictions on campaign contributions from the people who owned and ran corporations. Roosevelt also called for public financing of federal candidates via their political parties.

1907: Tillman Act 
Prohibited corporations and nationally chartered (interstate) banks from making direct financial contributions to federal candidates. However, weak enforcement mechanisms made the Act unenforceable.

1910: Federal Corrupt Practices Act 
Established disclosure requirements for U.S. House candidates. Legislation in 1911 extended requirements to cover U.S. Senate candidates and established expenditure limits for House and Senate campaigns. Lacking mechanisms for verification and enforcement, these measures proved meaningless.

1925: Federal Corrupt Practices Act (Revised) 
Codified and revised previous campaign reform legislation regarding expenditure limits and disclosure. Served as basic federal campaign finance law until 1971. However, with power of enforcement vested in Congress, the Act was routinely ignored.

Party Lines is the product of on-going work obtaining and analyzing the money raised and spent by state Democratic and Republican political party and caucus committees. The Center for Public Integrity maintains a database of party and caucus contributions and expenditures from all 50 states.

The database includes contribution and expenditure data reported to state and federal agencies by political party and caucus committees in all 50 states. During the 2004 election cycle the Center tracked 232 committees, compiling more than 400,000 contribution records totaling more than $735 million and nearly 420,000 expenditure records covering $755 million. For the 2001-2002 election cycle, the Center kept tabs on 229 state party and caucus committees; a data set housing more than 356,000 contribution records totaling nearly $823 million and nearly 422,000 expenditure records covering $790 million.

State and federal accounts

The data for this report comes from state and federal sources: State party and caucus committees file periodic reports with state regulators, and all 100 major party committees also maintain federal accounts that are reported to the Federal Election Commission. Federal accounts are used to pay for expenses that benefit at least one federal candidate. Contributions to federal accounts are subject to federal election limits.

The Center's database includes both types of filings and researchers ensured that the two sets of data did not repeat each other. In several states, state party filings included some or all of the information contained in a party committee's federal account as well. In those cases, the Center dealt with duplicative entries by removing identical records from the state filings. In this manner, the database reflects the contents of state and federal accounts.

Seven of every 10 dollars that state party and caucus committees received from the national parties during the 2001-2002 election cycle came in the form of "soft money" now banned under federal campaign finance law.

The six national party committees—the Democratic National Committee, the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the Republican National Committee, the National Republican Senatorial Committee and the National Republican Congressional Committee—sent more than $300 million to state party and caucus committees in the most recent two-year election period, according to federal records.

Most of that money—$217 million—was soft money, the unlimited donations to national party committees that often found their way into the states to pay for advertising and other political expenses. Under the Bipartisan Campaign Reform Act of 2002, national parties can no longer raise or spend soft money.

The $217 million dwarfed the $86 million in "hard money" sent to the states to be spent directly on federal elections.

While it was still legal, soft money flooded several key states in the 2001-2002 election cycle: Minnesota party committees received $18.2 million in national party soft money, while committees in Florida got $16.4 million and those in Missouri took in $14.2 million. Soft money also played an influential role in smaller states that hosted prominent races in 2002, including New Hampshire and South Dakota. Soft money transfers accounted for 60 percent of the total money raised for campaigns in the two states, where key U.S. Senate races attracted millions of dollars.

National party transfers often helped pay for television and radio ads, a crucial aspect of political campaigns. Due to federal rules on allocating a mixture of hard and soft money, state parties have been able to use more soft money to purchase advertising time than national parties.

The National Republican Senatorial Committee sent more unregulated soft money to the Republican Party of Florida than to any other state party this election cycle, despite the fact there is no Senate race there this year.

The NRSC, which aids party candidates running for U.S. Senate, transferred a total of $3.2 million from its soft money account over five days to the soft money account of the Republican Party of Florida. Soon after each transfer, the Florida GOP transferred slightly lesser amounts of federally regulated hard money $2.7 million in all back to the NRSC in Washington. On three separate occasions, the funds moved on the same day, records show.

While Florida does not have a Senate race, the contest between Democrat Bill McBride and Gov. Jeb Bush, the Republican incumbent and brother of President George W. Bush, is a close race.

The transactions between the NRSC in Washington and the Republican Party of Florida are beneficial on both sides. Under Florida election law, direct contributions to candidates are limited, but there are no limits on soft money transfers to the state parties.

Meanwhile, the NRSC is able to transfer the hard dollars from Florida to battleground states around the country. The stakes in this year's midterm election are particularly high given that Democrats hold a majority in the Senate by a single vote.According to state records, the top recipient of the state GOP's money* is the MPGH Agency, a Falls Church, Va., political communications consulting firm that has been producing advertising for Jeb Bush. The firm received a little over $8 million through August, according to state campaign spending records.

Gaps in state disclosure laws, incomplete reporting and problems obtaining campaign finance reports make it difficult to track the money coming in and out of state political party coffers.

These disclosure flaws could pose even more serious problems if national political parties rely more heavily on their state affiliates after federal soft money is banned under the Bipartisan Campaign Reform Act.

As part of a year-long study of contributions and expenditures reported by political party committees in all 50 states, the Center for Public Integrity, the Center for Responsive Politics and the National Institute on Money in State Politics created a comprehensive database based on campaign finance records filed with state agencies. The study also found that those records in the states are rife with flaws that make public accessibility and accountability difficult.

Among the most serious problems were:

• Millions of dollars in contributions and expenditures that were not reported due to loopholes in state disclosure laws.


• Handwritten reports, missing details that are legally required, incorrect information and state agencies ill-equipped to monitor the content of committee filings are problems in nearly every state. This results in poor quality of the information that is available.


• In at least 30 states, significant problems exist for simply obtaining campaign finance reports from state agencies.


• Electronic databases, which states have increasingly adopted to make public access to records easier, have not improved the quality of campaign finance reporting.

"We're pushing many problems from the national level to the state level where state agencies are ill equipped to deal with it," said Ray LaRaja, a political science professor at the University of Massachusetts who has studied state political parties.

Among the 50 states, only Connecticut has a campaign finance law that prevents the national parties from flooding its elections with transfers of unregulated, soft money donations.

Like the Bipartisan Campaign Reform Act, which will take effect after the November 2002 elections, Connecticut's law bans all corporate and union contributions and limits the amount individuals and political actions committees (PACs) can give. Connecticut's law explicitly bans soft money transfers to state parties under the guise of "party building activities" from the "nonfederal accounts" (that is, the accounts that fall outside the regulatory authority of the Federal Election Commission) maintained by the half-dozen party committees of the national Democratic and Republican parties.

While the Bipartisan Campaign Reform Act closes the soft money loophole at the federal level, without state laws like Connecticut's that bar transfers into states from non-federal accounts, money will still be able to move across state lines.

Alaska is a case in point.

A group called Campaign Finance Reform Now! gathered signatures from more than 32,000 Alaska voters for a ballot initiative that threatened to cut politicians off from most of their campaign cash sources. Unless the legislature passed a similar reform measure, Alaskans would have decided the issue for themselves in the voting booth.

In 1996—two years before the Connecticut bill was enacted—the Alaska state legislature passed a campaign finance reform measure that was the strictest in the nation, and imposed a complete ban on direct corporate and union contributions to parties and candidates. Moreover, it lowered from $1,000 to $500 the annual limit on contributions from an individual or PAC to a candidate, and placed a $5,000 limit on individual contributions to political parties.

Campaign funds in the U.S. political party system are divided into two categories—"federal" and "non-federal." Federal "hard" money is spent on campaigns for federal office. Contributions are limited and disclosed. The McCain-Feingold election reform law actually doubles the amount of hard money an individual can contribute in an election.

Non-federal money is supposed to be used to elect state and local officials and is regulated by state laws. It is also used to fund the "grass roots" activities of political parties. Since it is not regulated at the federal level, non-federal money is not supposed to be used to influence federal elections. When it is used for that purpose, it commonly becomes known as "soft money."

Soft money was born in 1978 when the Federal Elections Commission gave the Kansas Republican State Committee permission to use corporate and union funds (both legal under state law) to pay for a voter drive benefiting both state and federal candidates. The FEC allowed the state party to use a combination of federal money and non-federal money to pay for the drive.

The exemption was granted with good intentions. Following the post-Watergate campaign finance reforms, many state party committees became strapped for cash. The reforms made it more difficult to raise money for traditional party building activities—like voter registration drives—that inevitably benefit both state and federal candidates.

The national party organizations, like the Democratic National Committee and the Republican National Committee, began setting up non-federal accounts of their own. The accounts allowed corporations and labor unions to make unlimited contributions to national parties, something that is strictly illegal under the hard money system.