Continuing the deregulatory trend?

Continuing the deregulatory trend?
There's still significant campaign finance activity happening at both the state and federal levels.

As we speed towards the 2014 midterms, federal and state elections will likely see another cycle with significant participation by groups that can spend unlimited funds and accept unlimited contributions from all sources, including from corporations and labor unions.

Immediately after the now infamous Citizens United and decisions, campaign finance regulators scrambled to fill in the necessary gaps to ensure that independent spending was covered by its disclosure regime.

In the time since, most states have successfully passed disclosure legislation to capture independent spending by corporations and outside groups. However, there is still significant legal activity going on at both the federal and state levels regarding campaign finance laws. This activity is sure to have a major impact on the 2014 elections and beyond.

Super PACs will continue to permeate state elections

While all states are subject to the Citizens United decision, not all states have to adhere to the decision, which required the FEC to allow Super PACs, since it was decided by the Court of Appeals for the D.C. Circuit. Still, several state regulators have paved the way for Super PACs, despite limits and prohibitions in state statutes regarding incoming PAC contributions.

Since Citizens United, multiple states have adopted the Super PAC form through campaign finance rulings by the campaign finance regulator (these states include Colorado, Massachusetts, Kentucky, Wisconsin and Vermont), while others have been forced to permit Super PACs through the courts (these states include New Jersey, West Virginia, Montana, Hawaii, Illinois and New Mexico).

Other states still refuse to allow unlimited contributions from any source and I would expect there will be additional litigation in states that hold out on allowing Super PACs. The bottom line is Super PACs are here to stay.

States will continue to dismantle contribution limits

During the 1990s and early 2000s, many states began to pass campaign finance reform legislation, including lower contribution limits, new prohibitions on corporate and union contributions, and expanded disclosure for issue advocacy communications. In the last few years, we’ve seen the exact opposite happening—state contribution limits are rising, or disappearing altogether.

It is not clear whether this deregulatory turn is a response to Citizens United, or more a reflection of the fact that Republicans have taken control of a majority of state legislatures. While it may appear as though Republican control was instrumental in the repeal of certain contribution limits in Alabama and Florida, the Maryland legislature, with a Democratic majority, also raised its contribution limits. Connecticut has effectively doubled its limits, and Arizona has attempted to nearly quadruple them, depending on the outcome of ongoing litigation. Legislatures in both of those states are controlled by Democrats.

McCutcheon could have a major impact on state law

A pending Supreme Court case, McCutcheon v. FEC may significantly impact not only federal law, but could affect several states as well. In McCutcheon, a wealthy campaign donor challenged the constitutionality of the federal aggregate limits that an individual contributor may donate to all federal campaigns, party committees and PACs (not including Super PACs).

If the Supreme Court strikes down these limits, laws regarding aggregate donor limits in nine states, and the District of Columbia, will likely be unconstitutional as well. Although some court observers have suggested the McCutcheon case could be used to strike down all contribution limits, that’s highly unlikely.

Groups will continue to push disclosure for nonprofits

This year, we may see the resolution of a longstanding lawsuit brought by Maryland Rep. Chris Van Hollen (D), which challenged the failure of the FEC to require groups to disclose donors on issue advocacy disclosure reports. This has allowed nonprofits, such as 501(c)(4) organizations, to run aggressive issue advocacy ads without disclosing donors and without triggering political committee status, which would also trigger disclosure of the organization’s donors and finances.

If Van Hollen prevails, there will likely be a significantly smaller amount of issue advertising by nonprofits at the federal level for the 2014 election as this model is only appealing to the extent that these organizations can avoid donor disclosure.

This issue is also related to the recent IRS controversy regarding 501(c)(4) organizations and their ability to engage in partisan political activity without being considered a political organization. This fight is about donor disclosure, and the ability of 501(c)(4) organizations to engage in the maximum amount of political activity without any donor disclosure will be a major battleground for the foreseeable future. I believe it’s highly unlikely that Congress will wade into this battle by changing the standards for nonprofit participation itself.

Time for congressional action?

As Super PACs continue to raise and spend unlimited, albeit disclosed, funds on independent expenditure activities, it remains to be seen whether Congress will somehow act to respond to the political consequences of this PAC surge. Congress could respond to increased outside spending, or otherwise empower party committees to spend funds on behalf of its candidates. Any efforts to deregulate contribution and spending limits will surely be complicated by a revisiting of recent battles over the Disclose Act, which failed on partisan lines in response to the Citizens United ruling.

While those who favor campaign regulation have won victories on the disclosure front in recent years, other trends have been decidedly in the deregulatory direction. All signs indicate that this trend will continue.

Neil Reiff is a founding member of the firm Sandler, Reiff, Young & Lamb and a former general counsel at the Democratic National Committee.  

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