The Center for Public Integrity

Nearly half the states received a failing grade for the campaign finance disclosure required of state-level political party organizations, according to an exhaustive analysis by the Center for Public Integrity released today.

The poor disclosure at the state level will become an even more critical issue when the Bipartisan Campaign Reform Act goes into effect in November, as corporations and other special interests divert huge contributions from the national parties to the states.

The three-month study found that loopholes, widely divergent reporting standards and weak enforcement allow millions of dollars in political contributions and expenditures at the state level to go undisclosed to the public.

State-wide political parties raise and spend millions of dollars each year to help get their candidates elected to public office. They pay for everything from campaign workers' salaries to expensive television and radio advertising. But in 15 states, parties are not required to disclose all the contributions they receive. In 24 states, when parties make expenditures on behalf of a candidate, they do not have to identify that candidate.

Such key information—which the Federal Election Commission (FEC) requires state parties to report when money is spent to support candidates for federal office—is not disclosed by all parties at the state level.

The Center analyzed state requirements regarding public access to documents, thoroughness of financial information and other important standards for keeping the public informed about how elections are paid for.

This study is part of the Center's "State Secrets" project—funded by a grant from The Pew Charitable Trusts—which tracked $570 million in contributions to and expenditures by 225 major state-level political organizations in all 50 states.

The Center for Public Integrity conducted a nationwide survey of state agencies that collect and monitor campaign finance reports. The survey focused on the reporting, filing, public access and enforcement of campaign finance reports filed by state-wide political party committees. Each of the 23 questions used in the survey had multiple-choice answers with numerical values. Answers that promote openness, accountability and public access were assigned higher values. The resulting total score for each state is listed below, including their ranking compared to other states.

Scores of 80 and higher are considered satisfactory to excellent. Scores of 60 to 79 are considered barely passing. Scores below 60 are considered failing.

Clicking on any state name will show how that state answered each question. 

Even where disclosure laws are among the strongest in the country, political party committees have succeeded in keeping millions of dollars in receipts off the books and hidden from public view.

In the 2000 election cycle, the Washington State Democratic Central Committee failed to properly report nearly $6 million in soft money transferred to from national parties during the 2000 elections, the Center for Public Integrity reported on June 25.

Yet Washington earned the second-highest ranking among the states in the Center's survey of campaign finance disclosure laws.

The Washington Public Disclosure Commission, the state election regulatory agency, has also found accounting problems at the Washington Republican State Committee. The PDC identified nearly $6 million in alleged illegal transfers from the Republican National Committee and affiliated committees to the state GOP, and has asked that Republicans turn the money over to the state's general fund.

The Center first documented the reporting discrepancies in "State Secrets" this summer. The study, conducted jointly with the Center for Responsive Politics and the National Institute for Money in State Politics, found that state parties raised $570 million in the 2000 elections, with nearly half of that coming in the form of unregulated, unlimited "soft money" transfers from the accounts of the national party committees.

Since the Republican National Committee and the Democratic National Committee must report soft money transfers to the Federal Election Commission, those federal records were analyzed, as well.

Four states explicitly permit political parties to maintain financial accounts where unlimited donations can be received with no disclosure to the public. And a total of 18 states allow party organizations to shield some aspect of their financial activity – the identity of donors or how money is spent – from public inspection.

Even by conservative estimates, millions of dollars in political donations and expenditures go unreported each year by state political party organizations.

Alaska, Michigan, Ohio and South Carolina state election regulations make explicit exceptions to disclosure requirements for any money earmarked for so-called operating or administrative expenses. The exception is a gaping loophole that permits parties and donors to avoid public scrutiny.

Party organizations use money in their operating accounts to pay for routine administrative expenses – staff salaries, maintenance and other day-to-day costs. The definition of an operating expense has expanded over the years to include spending that promotes the party and its platform, but, technically, does not endorse an individual candidate.

In other states, such as Iowa, operating accounts may not be mentioned in statutes, but officials know they exist. Some states — including Kentucky, Maryland, New York, Rhode Island, Tennessee, Texas,Washington and Wyoming — actually know about the operating accounts and call on party organizations to disclose contributions and spending to and from the accounts. Nonetheless, vaguely drafted laws often allow political organizations to avoid reporting millions of dollars simply by declaring that the money was raised and spent, ironically enough, on “non-political” activities

Federal campaign finance laws are generally considered to be the standard against which similar laws in the states are measured. But the Center for Public Integrity survey shows four states—Washington, Oregon, California, and North Carolina—have more stringent laws than those used to govern federally regulated party committees. See FEC Report Card below.

Every state divides all its political dollars into non-federal and federal activity. Non-federal spending is used to help candidates for offices other than Congress and the president. Spending on candidates for governor, state legislature and local office is considered non-federal. That political activity is reported to state elections or ethics agencies.

Federal activity—spending to help candidates for Congress or the presidency —must be disclosed to the Federal Election Commission (FEC).

The Center surveyed the type of information political party committees must report to state oversight agencies. State reporting usually covers only non-federal spending. But state parties also participate in federal elections and are required to abide by FEC rules. To provide context, Center researchers applied its disclosure ranking survey questions to the federal law.

Why didn't the FEC get a perfect score?

The Center survey included 23 questions with weighted points totaling 100. It focused on five areas of campaign finance regulation: extent of disclosure of contributions and disclosure of expenditures; frequency of filing; barriers to access; and enforcement. The FEC laws received 87 points.

On the whole, federal law demands more than state law, though it would have ranked fifth in the nation, behind Oregon, Washington, California (which were tied), and North Carolina.

The FEC lost points on several questions:

In the 2000 elections, Democratic and Republican state party committees raised $570 million, with 46 percent comprised of soft money transfers from national party organizations, according to an unprecedented study of party activity at the state level.

The transfers of unregulated soft money from federal party committees to their state counterparts confirm a commonly held perception that state parties are used to launder soft money and influence presidential and congressional elections in a way never envisioned nor intended by federal election law. Of immediate concern to state parties is the fact that after the 2002 mid-term elections, those national soft money transfers will in effect be banned as a result of the passage of the Bipartisan Campaign Reform Act—more familiarly known as McCain-Feingold or Shays-Meehan, after its Senate and House sponsors. The act, which Congress passed and President George W. Bush signed earlier this year, bans soft money contributions at the federal level.

However, the Federal Election Commission is adopting rules that will allow members of Congress to raise soft money for state parties. The sponsors of the act claim this exemption is counter to the law and will create a huge loophole that simply transfers soft money activity from Washington to the states.

The year-long study of state parties' role in federal elections was conducted by the Center for Public Integrity, the Center for Responsive Politics and the National Institute on Money in State Politics. The end result is a unique, detailed roadmap of the party money system at the state level in American politics. Records used to compile the report were collected from elections officials in every state as well the FEC.