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Campaign Finance Overview (last updated February 2, 2003) (back to top) Under the new campaign-finance system that took effect after the November 2002 general election, candidates for federal elections are more restricted in their use of non-federal funds, aka "soft money," that their political parties previously could spend on their behalf without much regulation. Political candidates now have to rely even more on money raised and spent according to the "hard" federal guidelines that they previously could effectively sidestep. The Bipartisan Campaign Reform Act of 2002, which was signed into law on March 27, 2002, ended the unregulated use of non-federal funds by prohibiting national party committees from soliciting soft money and also by prohibiting state and local party committees from spending soft money in connection with federal elections. Banning soft money's influence was the centerpiece of the campaign-finance reform legislation sponsored by Senators John McCain (R-Arizona) and Russell Feingold (D-Wisconsin). At the same time, the BCRA raised contribution limits so that individuals contribute greater amounts to a candidate's campaign. Individuals can now contribute $2,000 to an individual candidate's campaign per election (previously $1,000) and can contribute up to $95,000 every two years (previously $25,000 a year). The BCRA also includes a so-called "Millionaires Amendment," which relaxes such contribution limits for a candidate facing a self-financed candidate. Once an opponent spends personal funds above a certain threshold ($350,000 for the House, and a varying threshold dependent on the size of the state for the Senate), House and Senate candidates get the benefits of higher contribution limits. Moreover, Senate candidates can have their national and state party committees make unlimited coordinated expenditures on their behalf once their opponents' spending exceeds the threshold by ten times. Republicans have generally raised more hard money than Democrats, especially in the 1996 and 2000 presidential campaigns. In 2001, the Republican and Democratic National Committees raised $82 million and $46.5 million, respectively. Over the 1990s, both parties took advantage of the hard/soft money distinction and raised comparable amounts of unregulated non-federal funds. Parties used this soft money to free up hard money that would otherwise be spent on expenses, such as overhead and voter drives, which benefit individual candidates as well as the overall party.  
 Express advocacy, the "magic words" of Buckley v. Valeo (last updated January 28, 2002) Crafting political campaign advertising around "issues," rather than directly soliciting a vote for a specific candidate, can enable one to avoid federal campaign-finance spending limits. Most federal courts define express advocacy by a strict test limited to whether campaign advertising contains the so-called "magic words" listed in a Supreme Court case. In that case, Buckley v. Valeo, 424 U.S. 1 (1975), the Supreme Court ruled that campaign ads in federal elections are subject to restrictions only if they "in express terms advocate the election or defeat of a clearly identified candidate for federal office." Limits thus apply, as referenced in a footnote to the Buckley case, to "communications containing express words of advocacy of election or defeat, such as 'vote for,' 'elect,' 'support,' 'cast your ballot for,' 'Smith for Congress,' 'vote against,' 'defeat,' 'reject.'" The Supreme Court was concerned here about not cutting too much into First Amendment rights of free speech. The Supreme Court opened up the definition of express advocacy slightly when it applied the Buckley test for the first time in 1986, when it considered a newsletter that urged people to vote for pro-life candidates. Holding that the newsletter was express advocacy and thus subject to federal limits, the Supreme Court wrote, "The Edition cannot be regarded as a mere discussion of public issues that by their nature raise the names of certain politicians. Rather, it provides in effect an explicit directive: vote for these (named) candidates. The fact that this message is marginally less direct than 'Vote for Smith' does not change its essential nature. The edition goes beyond issue discussion to express electoral advocacy." Since these Supreme Court cases, federal courts have tried to determine whether advertisements are express advocacy subject to federal limits as applied by the Federal Election Commission. Most courts have adopted a strict approach that defines express advocacy as only those advertisements including the "magic words" identified in Buckley. As the First Circuit Court of Appeals wrote in the case of Faucher v. Federal Election Commission, 928 F.2d 468 (1991), "trying to discern when issue advocacy in a voter guide crosses the threshold and becomes express advocacy invites just the sort of constitutional questions the [Supreme] Court sought to avoid in adopting the bright-line express advocacy test in Buckley." The Ninth Circuit Court of Appeals, however, rejected such a narrow approach as "eviscerating the Federal Election Campaign Act." Instead, that court defined express advocacy more broadly in Federal Election Commission v. Furgatch, 807 F.2d 857 (1987), to include speech which "when read as whole, and with limited reference to external events, be susceptible of no other reasonable interpretation but as an exhortation to vote for or against a specific candidate." In 1995, the Federal Election Commission promulgated new regulations that tried to incorporate the broader Furgatch definition of express advocacy. However, several courts have held that these regulations are unconstitutional and continue to apply the strict "magic words" approach. On January 4, 2000, the district court for the Eastern District of Virginia held that the regulation was "blatantly unconstitutional" and issued an injunction preventing the FEC from enforcing the Furgatch definition against anyone in the United States, saying that it was "unwilling to perpetuate the state of uncertainty faced across the land by potential participants in the public arena." Given the narrow definition of express advocacy now even more firmly in place, state political parties can use soft money and money raised from corporations or unions that would otherwise be banned for such issue advertising. Individuals or groups - other than candidates or political parties - can also sponsor advertising and avoid limits on contributions by meeting the "magic words" test. Sources: The Federal Election Commission's website, on-line here contains a collection of selected court case abstracts. Key cases include Buckley v. Valeo, 424 U.S. 1 (1975), Faucher v. Federal Election Commission, 928 F.2d 468 (1st. Cir 1991), Federal Election Commission v. Furgatch, 807 F.2d 857 (9th Cir. 1987), and Virginia Society for Human Life v. FEC (E.D. Va. January 4, 2000). Campaign Finance Reform, edited by Anthony Corrado et al. (The Brookings Institution Press, 1997). How did soft money come about? (last updated 9/16/01) The Federal Election Campaign Act is not explicit on whether nonfederal party funds can be used for fund federal elections. Instead, whether soft money is permitted has been determined by the Federal Election Commission that interprets and enforces federal campaign laws. Soft money emerged with a 1978 FEC opinion that allowed state party funds to be used for voter registration and turnout drives in federal campaigns. This opinion reversed one made just two years earlier; that 1976 opinion had opened the door slightly for soft money by allowing some state party money to be used for some administrative costs of federal campaigns. Some have challenged the FEC's rulings in court, but such challenges have not met with any substantive success. In 1976, the Illinois Republican State Central Committee asked the FEC for guidance on how to allocate nonfederal and federally regulated funds in paying some of their general overhead and operating expenses, as well as voter registration and turnout drives that would benefit both federal and nonfederal candidates. The committee also wanted to know how it could use corporate and labor contributions that were permitted under Illinois law but not under federal law. In a 4-2 vote, the FEC decided that the Illinois Republican State Central Committee could use some of its funds for overhead and general campaign expenses in a 1:2 ratio favoring state campaigns. The committee had asked whether ratios favoring state campaigns even more would be permissible, but the FEC decided that "Federal offices should be given proportionately more weight, and not be equated on a one-to-one basis with, for example, State legislative offices." At the same time, the FEC decided that the committee could not use state party funds for voter registration or turnout drives because federal law specifically prohibited a political party from using funds raised from a corporation or union for federal campaigns. Thus, Advisory Opinion 1976-72 opened the door for federal candidates to shift some campaign administrative costs from the funds raised under federal guidelines to the funds raised by state political parties. The decision was bipartisan, as was the opposition. Democrats Robert Tiernan and Thomas Harris, and Republicans Vernon Thompson and William Springer voted for the decision, and Democrat Neil Staebler and Republican Joan Aikens were in opposition, Staebler largely for states' rights issues. Two years later, the Republican State Committee of Kansas asked the FEC to revisit the voter registration/turnout drive question. And this time, the two Republican commissioners who had been in the majority beforehand switched their votes and joined Staebler and Aikens in allowing the use of state funds for federal voter registration drives. Democrat commissioner Thomas Harris took the unusual step of filing a written dissent. He called the new majority opinion "clearly impermissible" under federal law. He also pointed out that Thompson's switch was particularly "puzzling" since he had written the position in 1976 that he was now reversing. "This sort of unexplained and inexplicable change of position on an important issue, which was carefully examined and decided two years ago, confuses those covered by the Act and discredits the Commission," Harris wrote. Over the next few years, the FEC legalized other forms of soft money and gave state parties broad discretion in how to allocate funds between federal and state campaigns. The 1978 opinion also survived challenges by Common Cause, an electoral watchdog organization. Common Cause asked the FEC in 1984 to reverse the 1978 opinion; the FEC denied the petition in 1986 with a 4-2 vote. Common Cause then challenged this denial in federal court. In August 1987, Federal District Judge Thomas Flannery upheld the FEC's 1978 opinion as not arbitrary or improper. On the other hand, he said that the FEC had failed to provide any guidance on the proper distribution of state party funds between federal and state campaigns, and ordered them to do so. A year later, the FEC still had not done so, and Flannery ordered the FEC to report on its progress every 90 days. Finally, in 1990, the FEC issued new soft money regulations that took effect on January 1, 1991. These regulations required disclosure of soft money and set formulas to determine how various organizations could allocate moneys between federal and state campaigns. But they did not set limits on the raising or use of soft money fundraising, which opened the door for even greater use of soft money in federal campaigns. It is unclear whether a change in commissioners or FEC rules - rather than the kind of legislative reform sought by people such as Senator John McCain - could now reverse the 1978 opinion and thus eliminate or minimize soft money. Members of Congress and President Clinton petitioned the FEC in 1997 to eliminate soft money through administrative rulemaking procedures (this is what President Jeb Bartlet tried to do in the first season of the West Wing), but some question whether the FEC has this authority. The FEC published a Notice of Proposed Rulemaking in July 1998 that would change soft-money procedures, but is still considering comments and alternative rules. Sources: Federal Election Commission Annual Reports, available through the FEC's website, available here. Campaign Finance Reform, edited by Anthony Corrado et al. (The Brookings Institution Press, 1997). Brooks Jackson, Broken Promise: why the Federal Election Commission failed (Twentieth Century Fund, Inc., 1990). Common Cause v. Federal Election Commission, 692 F.Supp. 1391 (D.D.C. 1987). Common Cause v. Federal Election Commission, 692 F.Supp. 1397 (D.D.C. 1988). The Federal Election Commission (last updated August 2001) Created in 1975, the Federal Election Commission is the independent regulatory agency charged with administering and enforcing the federal campaign finance law. It has jurisdiction over the financing of campaigns for the U.S. House and Senate, and for the presidency and vice-presidency and it includes public disclosure of how funds are raised and spent, restrictions on contributions and expenditures, and the public financing of presidential campaigns. The FEC is led by six commissioners who are appointed by the president, subject to Senate approval,. No more than three commissioners may belong to the same political party, according to federal law codified at 2 USC 437c(a)(1). The commissioners elect two members each year to act as chairman and vice-chairman. The FEC's structure and composition has often been a source of political and legal controversy in the agency's existence. Originally, Congress played various roles in appointing commissioners to the FEC, but this was declared unconstitutional in the 1976 case of Buckley v. Valeo. The FEC was then reconstituted with six voting members nominated by the president and confirmed by the Senate, with the Clerk of the House and the Secretary of the Senate serving as ex officio members with no voting powers. In 1993, the presence of such ex officio members was declared an unconstitutional violation of the separation of powers by the D.C. Circuit Court of Appeals. The FEC has since been reconstituted into its current format of six members, all of whom are appointed by the president and serve six-year terms. Still, critics of the FEC call it toothless, too constrained by the Congress that it must regulate, and designed to be ineffective. They have called for proposals such as giving the FEC multiyear budgeting so that it is less subject to political retaliation and changing the number of commissioners to avoid the deadlock that can come with a 3-3 split when there are no provisions for tie-breaking. Currently, the six members of the commission are a mixture of long-term members and relative newcomers. Two members have served since the 1980s, but the other four have become commissioners since 1998. The current members are, in order of their length of service, Danny McDonald (since 1981), Scott Thomas (since 1986), David Mason (since 1998), Karl Sandstrom (since 1998), Darryl Wold (since 1998), and Bradley Smith (since 2000). Sources: A useful primer on the Federal Election Commission is available at the FEC's website here. Campaign Finance Reform, edited by Anthony Corrado et al. (The Brookings Institution Press, 1997). Brooks Jackson, Broken Promise: why the Federal Election Commission failed (Twentieth Century Fund, Inc., 1990). |
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