LWV Money in Politics

Focus of Supreme Court and Free Speech

• Campaigns develop messages• Money is required to coordinate messaging and pay for the

advertising

System of campaign finance must protect campaign speech• Rights of an individual candidate to disseminate her message• Rights of her donors to express their own views through her

message• Rights of others to make election expenditures independent of the

candidates• Rights of others to advocate in support or opposition to public policy

issues• Campaign speech (as opposed to campaign finance) is central to

democracy and what the First Amendment is designed to protect

League Position

A system of financing of political campaigns should ensure:

• Public’s right to know

• Equitable competition among candidates

• Prevent undue influence and corruption

• Enhance voter participation

League Position

Our position does not answer whether all or some political activity constitutes free speech protected under the First Amendment. It does not balance First Amendment interests of candidates, donors, independent spenders and issue advocates against the interest in equitable competition, undue influence and enhanced voter participation

Shifts in Supreme Court Opinion about Money in

Politics

Prior to 1970

• Campaign finance regulations were weak.

• The Court avoided First Amendment issues in any challenges.

Federal Election Campaign Act of 1971 (FECA)

extensively amended 1974

• Limited contributions & expenditures• Imposed spending caps• Continued ban on contributions by corporations

and labor unions (including express advocacy expenditures) but contained an exception for media corporations

• Created Federal Elections Commission (FEC)• Established Presidential Public Financing

system

Buckley v Valeo 1976

• Contribution limitations were upheld on the grounds there was a governmental interest in preventing corruption or the appearance of corruption.

• Struck down limitation on self funding (no corruption)

• Struck down regulation of uncoordinated independent expenditures (no gift to candidate, therefore no corruption)

FEC v Mass. Citizens for Life (MCFL) 1986

Court found an exception for expenditures by nonprofit, non-stock corporations created for the purpose of political advocacy that do not engage in business activities

Austin v. Michigan Chamber of Commerce 1990

Upheld ban on corporate campaign expenditures. Court found that the prohibition on corporate expenditures was narrowly tailored—business corporations’ political speech was not banned but merely channeled into PACs.

Bipartispan Campaign Reform Act (BCRA) 2002

McCain-Feingold• Regulated soft money (unlimited contributions to

political parties for party building activities)• Barred independent “electioneering

communications” made shortly before elections• Labor unions, membership organizations and

corporations may incur “communication costs” in connection with educating their members

• Aggregate contribution limit

McConnell v. FEC 2003

• Court upheld key provisions of BCRA: “we have recognized a concern not confined to bribery of public officials, but extending to the broader threat from politicians too compliant with the wishes of large contributors.”

• Upheld ban on communications preceding an election as eroding public confidence in the process through the appearance of corruption.

Wisconsin Right to Life v. FEC 2007

Found BCRA unconstitutional to prohibited as “electioneering communications” issue ads by 501c4 corporation.

Davis v. FEC (2008)

Court rejected that Congress may regulate campaign finance in order to ensure a level playing field

Citizens United v. FEC 2010

• Found corporate funded express advocacy (electioneering communications) is protected speech under the First Amendment.

• Reversed 2003 ban on communications preceding election

• Reaffirmed corruption can only be found in quid pro quo, which does not happen with independent expenditures.

• First Amendment protection extends to corporations.

Arizona Free Enterprise Club’s Freedom Club PAC v. Bennett 2011

Upheld public funding, but struck down giving publicly funded candidates additional funds if expenditures by a privately funded opponent exceed a certain level (level playing field again rejected)

McCutcheon v. FEC (2014)

Ruled aggregate limits on a person’s campaign contributions violated First Amendment guarantee of free speech

Corruption as defined in 1976-2010 Supreme Court Decisions

• Quid pro quo AND appearance of quid pro quo (Buckley)

• Distortion of the political process through undue influence on officeholders (MCL & Austin) and undue access to officeholders (McConnell)

• Political equity—concerns about undue influence and access—failure of legislators to be responsive to the average voter’s interests.

Current Court Rulings

• Citizens United and subsequent decisions narrowed definition of corruption to quid pro quo as the only justification for restricting campaign contributions.

• The Supreme Court rejected distortion arguments “because elections and political participation are inherently about influence and access.”

• The Supreme Court found that “the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the first amendment.”

Evidence of Spending impacts on Electoral and Legislative Outcomes

Empirical study focused on 2012 election cycle and 2013 year in Congress and identified 3 major findings about impacts of independent spending on campaigns

• Increased pressure for fundraising because of the possibility a campaign would be targeted by outside groups.

• Candidates and campaigns complained that they often lost control of their message.

• Issue of coordination is murky. No evidence of illegal coordination however respondents believed that candidates “do engage in cooperation through a tapestry of signals”

Spending Impacts

In the legislative arena the empirical study found:

• Implied threat that independent spending will target incumbent in the next election if they do not support a particular position

• Amount of campaign contributions can affect agenda setting

Spending Impacts

• Academic Research• Isolating impacts of campaign financing is

challenging as elections are complex. One basic finding is that the more challengers spend, the more votes they receive. This finding says nothing about the source of funds, nor does it mean that challengers win.

• Most scholars agree that quid pro quo corruption related specifically to campaign contributions is relatively rare or rarely discovered.

PART I CONSENSUS QUESTIONS

Democratic Values and Interests with Respect to Financing Political Campaigns

The First Amendment

• Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Limits on Free Speech

• Content of speech can be limited if it is an incitement to violence or obscene and without any redeeming social value. (libel, slander, wrongful use of copyright material, fraudulent commercial speech)

• Means can be subjected to “reasonable” limits with respect to time, place and manner of expression. (noise ordinance, anti-littering laws, occupying public spaces)

Freedom of the Press

• Free speech and free press provide the same protections to speakers, writers, publishers, internet communications and advertising. The lone blogger and the New York Times are protected, even though one is an individual and the other a large, for-profit corporation

The right to hear

• Freedom of speech includes not only the right to speak, but it also protects the right to hear. The rights or identity of the speaker is not the only relevant consideration—the need for citizens in a democracy to hear full discussion of issues is also protected.

Court decision on first amendment restrictions asks three questions

• Is there significant or compelling governmental interest that justifies the limitation?

• Is the limitation the least restrictive means of protecting that governmental interest?

• Does the limitation apply too broadly?

Questions for Consideration

• Should the press have different rights than individuals? Campaign finance law has statutory exemptions for the press—allowing newspapers to spend money endorsing candidates.

• First Amendment freedoms belong to individuals. Are there limits when it comes to associations of individuals? (corporate versus individual rights)

Questions for Consideration

• Associations take many forms in American society. Do all these associations have the same or different rights under the First Amendment?

• Should there be limits on the quantity of speech? “More money allows for more speech” might mean that more people hear the ideas or it could be that some people just hear the same idea over and over. Large quantities of some speech may interfere or not allow for the speech of others.

Who Raises and Spends Political Money

Who Raises and Spends Political Money

CandidatesPolitical PartiesTraditional PACsSuper PACs527sIRS corporations qualified for nonprofit status 501(c)s

Candidates

• Federal limits on how much money candidates can receive and donate

• Required to disclose all expenditures

• Required to disclose donors

Political Parties

• Federal limits on how much money parties can receive and donate.

• Required to coordinate with candidates

• Required to disclose all expenditures

• Required to disclose donors

Traditional PACs

• Non party groups that solicit contributions from individuals and then use that money to make contributions to federal candidate’s campaigns. Created by FECA in 1971

• Subject to federal limits on how much money PAC can receive and donate

• Required to disclose all expenditures• Required to disclose donors

Super PACs

• Political action committees that accept money from individuals, corporations and unions so long as all expenditures are made independent of candidates and parties.

• No limits on fundraising or expenditures

• Required to disclose all expenditures

• Required to disclose donors

527s

• Political Committees organized under section 527 of the federal tax code. All political committees registered with the FEC are political organizations under Section 527 for IRS purposes. Not all of what IRS calls “527 organizations” are political committees in the FEC’s eyes.

• Become less prominent since 2004 as outside spending by Super Pacs and nonprofits has proliferated.

• No limits on fundraising or expenditures. May coordinate with candidates

• Disclose all expenditures to IRS not FEC• Disclose donors to IRS, not FEC – corporations may

donate

IRS corporations qualified for nonprofit status 501(c)s

• Social Welfare Organizations (c) (4)• Political activity cannot be their “primary

purpose.”• No limits on fundraising or expenditures. May

not coordinate with candidates• Required to disclose money expressly spent to

defeat or elect candidates. Do not disclose money spent on issues.

• Not required to disclose donors (dark money) – corporations may donate

IRS corporations qualified for nonprofit status 501(c)s

• Labor Unions (c) (5)• Political activity cannot be their “primary

purpose.”• No limits on fundraising or expenditures. May

not coordinate with candidates• Required to disclose money expressly spent to

defeat or elect candidates. Do not disclose money spent on issues

• Not required to disclose donors (dark money) unless above $5,000. Report to Department of Labor. Corporations may donate

IRS corporations qualified for nonprofit status 501(c)s

• Trade associations (c) (6)• Political activity cannot be their “primary

purpose.”• No limits on fundraising or expenditures. May

not coordinate with candidates• Required to disclose money expressly spent to

defeat or elect candidates. Do not disclose money spent on issues.

• Not required to disclose donors (dark money). Corporations may donate

Independent Spending or Outside Spending

• FEC defines independent expenditures as including only express advocacy urging the election or defeat of a candidate that is not coordinated with a candidate or a candidate’s campaign.

• Although unregulated and undisclosed money in politics is increasing, the vast majority of campaign expenditures are still made through political organizations regulated by the FEC. Independent expenditures may affect election outcomes by being focused on the few elections that are competitive.

What can be done about independent spending?

• Congress and the FEC have the authority to define what is independent spending. A strict definition that excludes spending by an organization started by a candidate’s family member or former staffer or the use of shared campaign consultants would cut down on independent expenditures

• Require donor disclosure. The Supreme Court has been clear that there is no constitutional right to make undisclosed political contributions.

• IRS could reform regulations for 501 (c)s

PART II CONSENSUS QUESTIONS

First Amendment Protections for Speakers and Activities in Political Campaigns

Options for Reforming Money in Politicsby Congress or the States

• Disclose sources of contributions and expenditures for independent and outside spending

• Tighten rules governing coordination in order to limit independent spending

• Small donor funded elections• Pay-to-play In political context this refers to

campaign contributions from those seeking government contracts to those responsible for awarding contracts.

Options for Reforming Money in PoliticsRegulatory Approaches

• More effective enforcement by the Federal Election Commission (FEC).

• Adopt Securities and Exchange Commission (SEC) rule governing corporate political expenditures to require public companies to disclose their political activities.

• Strengthen and enforce 501(c)(4) political activity rules—action by IRS.

Options for Reforming Money in PoliticsOther Approaches

• Overturn Buckley and/or Citizens United rulings by bringing cases to broaden definition of corruption

• Wait for ideological makeup on the Court to change

• Elect Members of Congress committed to reform

• Amend the U. S. Constitution to overturn rulings

ENFORCEMENT OF FEDERAL CAMPAIGN FINANCE LAW

• Federal Election Commission (FEC), an independent agency, was created in 1974.

• FEC has jurisdiction over civil enforcement of federal campaign finance law, authority to write regulations and responsibility for monitoring compliance.

• FY13, 81,600 campaign finance filings were received which disclosed almost 30 million financial transactions.

• There are more than 10,000 political committees and other filers. FY2016 funding is for 360 full-time positions.

FEC Enforcement Challenges

• Currently operating without key staff positions filled.

• Complex statutory mission with one of the smallest federal agency budgets. FY15 budget is $67.5M. FY16 request is $76.2M.

• Enforcement hamstrung by divided six-member Commission whose partisan votes consistently end in ties, resulting in stalemate.

PART III CONSENSUS QUESTIONS

Methods for Regulating Campaign

Finance to Protect the Democratic

Process