Campaign Finance 101: How big money influences our politics, and how small money could be an answer

By: - September 30, 2020 7:25 am

Money is everywhere in American politics.

It funds the campaign ads interrupting your streaming service, the glossy brochures clogging your mailbox, as well as the incessant buzzing of text messages imploring you to vote.

That money comes in all shapes and sizes, from your neighbor with a spare $10 all the way to the powerful interest groups who spend millions of dollars to fund an entire campaign.

Elected officials will argue that the contributions that interest groups make to candidates, whether it’s Planned Parenthood, a police union, or a fossil fuel company, are not intended to buy support. 

Instead, it’s the other way around, they argue. Interest groups, seeing a like-minded politician, will invest in an ally.

But it’s hard not to see the conflict when policies that help big donors are favored by politicians, and policies that hurt those groups are ignored, impacting such issues as gambling and worker’s compensation or such industries as insurance and natural gas.

So how does this many-tentacled system work, and why should you care?

The basics

Candidates who run for office set up a campaign committee, to accept donations and spend that money on staff, ads, and any other political efforts.

For an outside group seeking to influence an election, the easiest way to fund an election is to form a political action committee, or PAC. These groups, funded by individuals, using voluntary and publicly reported donations, can then spend that money to influence the outcome of an election —- win or lose. 

For example, groups with PACs active in Pennsylvania include everyone from natural gas and steel corporations to teachers’ and coal miners’ unions. There are even PACs representing campground owners and deer farmers.

“But what about Citizens United?” you might ask. Yes, that landmark 2011 U.S. Supreme Court decision allows corporations and labor to make unlimited donations.

But that money — think a corporation’s revenues or union dues —  can’t flow directly into a campaign committee or PAC. Instead, they can only be spent “without cooperation or consultation” of a candidate or their allies, under state and federal law.

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Such spending is known as an independent expenditure, and can include many of the TV ads and mailers you are so familiar with.

This outside spending is easier to hide by using charitable groups — such as the many different types of 501(c) nonprofits — that are allowed under federal tax law.

All other PACs have to reveal their donors, But nonprofits under federal law are not required to disclose donors. So if a corporation, organization or union donates its money to a nonprofit that can run political ads, there is no disclosure.

Those nonprofits, say, a 501(c)4, which takes its name from the section of the tax law authorizing it, can then spend millions on ads or mailers without ever revealing the original source of the cash. This is what is often referred to as dark money, and it is becoming more common.

This was all enabled by the Citizens United decision. But just as five of the court’s justices approved of unlimited spending, they wrote that such spending should be contingent on disclosure.

“This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages,” the decision reads.

Unlimited spending

The dark money is even more attractive in federal races because it means a group can spend without limits. Federal law limits individual donations to $2,800 per candidate, per election, and $5,000 for PACs.

But in Pennsylvania, it’s the “Wild West,” according to Gov. Tom Wolf. Under state law, there are no limits on the amount of money that can be donated or spent by individuals, political action committees, or state parties on campaigning.

Wolf made the observation at an August press conference where he called for reforming Pennsylvania’s campaign finance law.

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Pennsylvania’s empty restrictions are not unique, either. According to the Campaign Finance Institute, as of 2018, 10 other states did not have limits on donations or spending.

All campaign finance data is collected by Pennsylvania’s Department of State, which  also audits a small number of candidates every year for compliance, and can investigate apparent violations.

But enforcement of the laws falls to the state attorney general and local district attorneys.

… And what does unlimited spending look like?

Despite Wolf’s call for change, his own record shows how a shrewd fundraiser can use Pennsylvania’s lax laws.

Since 2013, the York businessman has raised $71.7 million and spent $70.6 million, according to a Capital-Star analysis of campaign finance data.

About one in every seven of those dollars he raised came from his own pocket, particularly in the lead up to Wolf declaring his candidacy in 2013. 

In August, Wolf acknowledged the irony of asking for reform measured against his own record.

“I recognize I didn’t unilaterally disarm,” Wolf said of his fundraising. “I made full use of the campaign laws in place in Pennsylvania. But it gave me a really good perspective on how desperately we need to change that.”

His spending numbers are big, but not record-setting. Former Democratic Gov. Ed Rendell, first elected in 2002, raised almost $80 million midway through in his second term.

Meanwhile, two PACs dedicated to electing Republicans to the House and Senate, the HRCC and SRCC, have raised $48 million since 2013. While lawmakers contributed to that total, it also does not account for any money raised and spent independently, which could account for millions more.

And all that still won’t include millions more in independent expenditures by opaquely-named organizations such as Pennsylvania Fund for Change — a Democratic group linked to Philadelphia trial lawyers— or Commonwealth Leaders Fund — a Republican group linked to school choice advocates.

How to follow the money

Pennsylvania’s Department of State, which collects the forms, posts them online here. You can search by candidate, PAC or donor using the different forms.

(In this reporter’s experience, the fewer search terms you use, the better.)

Any individual or PAC who has donated at least $51 to an individual candidate or PAC will show up on the campaign finance forms.

People and PACs who have donated $250 or more will show up in a second section. Individuals who donate over this threshold must also reveal their occupation.

If you don’t want to search for yourself, there are also some useful tools on the web, such as Follow the Money

Independent expenditures will also be reported to the state. You can find those here. But sometimes, spending will come from a group that hasn’t even filed paperwork yet with the state.

When will the forms start showing up?

Candidates for statewide office — attorney general, auditor general, and treasurer — and anyone who donated to those campaigns must file a report six weeks before the election.

Otherwise, candidates running for the state legislature do not have to file until the 2nd Friday before Election Day.

But there is a loophole which could delay viewing these reports. Pennsylvania is one of seven states that does  not require campaigns to submit their campaign finance reports electronically. That can lead to delays in processing and uploading the fundraising data to the state’s website.

Bills to require electronic reporting have advanced in the General Assembly this session, but nothing has reached Wolf’s desk.

The fine for a late report is minimal, maxing out at $250.

What could be changed?

In his call for reform, Wolf advocated for more transparency and limits on donations. Other states’ limits have varied from as low as $1,000 per candidate, per election to more than $25,000.

During his 2014 campaign, he called for a $5,000 limit on individual contributions. He also called for public election financing at the time, but Wolf did not include such a call this fall.

Public financing usually means that candidates for office receive matching grants, funded by tax money, for small donations they receive, up to a certain limit. In Florida, for example, donations of up to $250 are matched by the state.

These matching grants often go hand in hand with a hard cap on total spending during the course of the campaign.

For example, in Arizona, a candidate must raise $5 contributions from at least 200 people. Then, the state will provide up to $22,800 to a legislative candidate. 

A professor who’s studied Arizona’s politics before and after they passed public financing found the law increased candidates’ interactions with voters.

That $22,800 is then the maximum that candidates can spend or raise.

The downside is that there is no guarantee your opponent would use the system, so they could outspend you many times over.

Such matching systems, campaign finance reform advocates say, is the best for maximizing people power.

“It really does change the way we think about small dollar donors,” said Aaron McKean, an attorney at the Campaign Legal Center, a nonprofit that works to limit money in politics. “It gives them a little more power in that transaction to get the attention of candidates.”

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Stephen Caruso
Stephen Caruso

Stephen Caruso is a former senior reporter with Pennsylvania Capital-Star. Before working with the Capital-Star he covered Pennsylvania state government for The PLS Reporter.