Way back in May of 2004, I co-authored an article in this magazine that warned state and local parties about the new minefield of campaign finance created by the then-recently enacted Bipartisan Campaign Reform Act (BCRA). Today, these effects still linger for state and local parties, and under the new campaign finance regime it’s only getting worse.

Let’s start with some history. In our piece from 2004, we outlined some of the difficult regulatory challenges that faced state and local parties based upon the new law, including the severe restrictions on fundraising for such committees, the requirements that much of their activities be paid for with federally permissible funds—including non-federal activity—and a whole host of new, complicated regulations that were designed to make sure state and local party committees could not become the next great loophole in campaign finance.

While we didn’t predict the practical effects of BCRA on party committees, we closed the piece by noting that “complying will become increasingly difficult for state and local parties, the very organizations least equipped to deal with it.” In his 2008 book about political parties, Professor Ray La Raja prophetically captured the quandary of the state party committees.

“Political parties adapt and survive,” he wrote, “but the Byzantine regulatory structure weakens parties relative to other groups by imposing costly regulatory burdens uniquely on parties, while providing incentives for wealthy nonparty groups to enter the fray of campaigns.”

While the laws regulating outside groups have been evaporating, the rules for state parties are moving in a different direction. Recent attempts by the Republican National Committee to revisit BCRA in court have failed and the Federal Election Commission (FEC) was recently forced by a federal court to further tighten the rules that require state parties to spend federal funds on activities in connection with state and local elections.

State and Local Parties: An Endangered Species?

As feared, the regulatory structure created by BCRA has severely weakened party committees in several ways. First, it has restricted the ability of national committees, as well as candidates and officeholders, to contribute and solicit state-regulated funds to party committees. Those committees have lost an incredibly important source of revenue that was reinvested by the parties into basic infrastructure and professional staff.

In the late 1990s, prior to the passage of BCRA, party committees invested significant sums in the improvement and professionalization of state and local party committees so that they could be effective grassroots organizations year-round, and not merely serve as bank accounts for the national committees and for federal candidates before a general election. BCRA has gone a long way to undermine these efforts, and party committees have had to abandon several programs and cut staff levels to keep their doors open. As the average Super PAC and presidential candidate command tens of millions of dollars of revenue in a given month, the average Democratic state party committee raised less than $500,000 (excluding internal party transfers) for the entire 2011 calendar year.

Secondly, the rules devised by BCRA for state party committees, and the FEC’s regulations promulgated to enforce the law, permeate every aspect of a state party’s operation, including campaign activities for state and local candidates. The situation has been further exacerbated by the fact that reform groups have sued the FEC no less than three times to force the commission to write even stricter rules in this area.

Recent rules by the FEC, which took effect for the 2012 election cycle, have essentially federalized all communications by a party committee, regardless of what candidates are featured in the advertisement. For example, if a state party committee wanted to air a television ad that urges viewers to “Vote Smith for Governor,” a state party must pay for these advertisements entirely with federal funds under the new FEC regulations. Common sense dictates that such advertisements would be subject to state law; most state laws are still less restrictive as to the source and amounts of funds that may be contributed to state party committees. This creates no incentive for state and local candidates to work with state party organizations, or the parties themselves for that matter, to fund any communications in connection with state and local elections.

Third, the waning revenue of parties, combined with the increasing complexity of the FEC’s regulations, has created the perfect storm of non-compliance by state party committees. It is no coincidence that party committees are overwhelmingly more likely to be audited or fined by the FEC for compliance violations than ordinary PACs or candidate committees. Of course, the lack of resources, and the inability of parties to invest in compliance, makes this a vicious cycle.

The Role of Outside Groups

As of the end of 2011, right on the heels of a presidential election year, the average Democratic state party committee had approximately $98,000 in net federal cash on hand, and the average Republican state party committee had approximately $124,000 of federal cash on hand in their accounts. These sums are paltry compared to the fundraising numbers being put up by candidates, outside groups and Super PACs. As of early June, 14 Super PACs had spent over $1 million in independent expenditures in connection with the presidential election, and four Super PACs have raised in excess of $10 million in the election cycle.

The proliferation of Super PACs has further led to the likely demise of state and local party committees. Donors who may have contributed to the party are beginning to divert their contributions to independent Super PACs, which have essentially no regulations to worry about other than to maintain their independence with party committees and candidates and file disclosure reports with the FEC. Unlike party committees, these PACs can spend any type of funds, in any amount, on activities that advocate the election or defeat of federal candidates.

In contrast, state party committees are limited in the type of funds and are limited in the amount they can spend in coordination with their candidates. Although parties could choose to run independent ads with federal funds, the party structure, combined with the lack of resources, makes it impractical for state parties to engage in independent advocacy. The increase in independent spending, which is usually characterized by negative attack advertising, combined with the regulatory suffocation of state and local party spending, will only serve to accelerate the trend of decreasing party identification and the balkanization of American politics that is becoming so evident.

How to Fix It

Party committees play a vital role in our political system as the organizations that best support the grassroots goals of American political parties. Getting back to grassroots party politics provides the necessary balance to the increasingly bitter and negative media game being played by outside groups with millions of dollars of unregulated monies, which has fed an increasing distrust in American politics.

The primary goal of BCRA was to cut off the ability of national party committees and candidates to fund the non-federal activities of state and local party committees. This should have been BCRA’s ending point. It is clear that overreaching into state and local elections by federal laws has created an over-complicated system for state parties that threatens to destroy their relevance in both federal and state elections. It is time to consider partially or fully lifting the expenditure limits for party committees to allow them to provide more direct support to candidates.

Under the current system, party committees can support candidates without limit only if they undertake those activities without coordinating them with candidates, or, in the case of certain grassroots activities, if they use volunteers to undertake those activities. These additional requirements make no sense from a regulatory perspective and do not serve any purpose other than to create obstacles in the relationship between candidates and their political parties.

I am not suggesting that BCRA should be completely repealed. There was clearly some merit in regulating the soft money practices that were occurring at the national and congressional levels prior to its passage. In addition, BCRA’s disclosure provisions for outside organization spending should be enhanced.

It is time for Congress to acknowledge that state party committees are overregulated and that BCRA simply went too far. Due to recent court decisions, Congress cannot do much to regulate outside groups. However, it can restore state and local parties to a more level playing field and reestablish their vital role in the American political system.

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