Campaign Finance Reform: 2002

Recent Developments
in Campaign Finance Regulation

Summary Analysis of Bipartisan Campaign Finance Reform Act Passed by House and Senate and Sent to President

by Trevor Potter and Kirk L. Jowers

The Shays-Meehan campaign finance bill, H.R. 2356, passed the Senate 60-40 Wednesday, March 20. The same bill had passed the House by a 240-189 vote on February 14, 2002. On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act of 2002 (BCRA), Public Law No. 107-155.The bill represents the most significant changes to campaign finance laws since those enacted after the Watergate scandal more than 25 years ago.

Provisions:

ban soft money contributions to the national political parties;
increase individual hard money contribution limits;
leave PAC contribution limits unchanged; and
restrict the ability of corporations (including non-profit corporations) and labor unions to run "electioneering" ads featuring the names and/or likenesses of candidates close to an election.

Soft Money Ban: The chief component of the bill is its ban on soft money—the term for donations made to national political party committees (e.g., the Democratic National Committee, Republican National Committee, and the Senatorial and Congressional campaign committees) in amounts and from sources (corporations and unions) not permitted in federal elections. Under prior law, parties may raise unlimited amounts of soft money, which they have been using not only for party-building activities such as get-out-the-vote efforts, candidate recruitment, and administrative expenses, but also for candidate-specific broadcast advertising. Under the bill parties will not be able to accept soft money after November 6, 2002, and must dispose of all soft money in their accounts by December 31, 2002.

Hard Money Increases: Hard money refers to funds raised and reported in accordance with federal election laws and regulations. Individuals will no longer be able to give soft money to national party committees. The new limits on hard money contributions by individuals are as follows:

Increases from $1,000 to $2,000 per candidate per election;
Remains $5,000 per year to a political action committee ("PAC");
Increases from $20,000 to $25,000 per national party committee (e.g., Democratic National Committee, Republican National Committee) per year;
Increases from $5,000 to $10,000 per state or local party committee per year; and
Increases the aggregate limit on individual contributions from $25,000 per year to $95,000 per two-year election cycle, of which only $37,500 may be contributed to candidates over the two years. The two-year election cycle starts on January 1 of odd-numbered years and extends to December 31 of even-numbered years.

The limits on PAC contributions to candidates and parties remain unchanged and are not indexed for inflation ($5,000 per candidate per election; $5,000 per outside PAC per year; $15,000 per national party committee per year; and $5,000 per state or local party committee per year). There are no annual aggregate limits on PACs.

Restrictions on Electioneering Communications: The bill prohibits corporations, trade associations, and labor organizations from financing "electioneering communications" within 60 days of a general election and 30 days of a primary election using "treasury money." An electioneering communication is one that refers to a clearly identified federal candidate and is targeted to the candidate's state or district. (A corporation's, trade association's or union's PAC may still run or finance such ads because its funds are, by definition, hard money). This provision also would require non-corporate or non-union persons or entities that spend in excess of $10,000 on electioneering communications during a calendar year to file disclosure reports listing the person(s) making or controlling the disbursements and the custodian of the records, all contributors who gave more than $1,000 to finance the communications, and those to whom disbursements of more than $200 have been made.

Coordination: The bill requires the FEC to issue new regulations that will ultimately determine the reach of the prohibition on corporations and unions coordinating campaign activities with federal candidates.

Impact: The bill's most predictable impact on the campaign finance world will be to enhance the relative influence of corporations, trade associations, and other organizations with large hard-money PACs, while diminishing the influence of entities that have relied primarily or solely on large soft-money contributions. It also should greatly mitigate the pressure many corporations and wealthy individuals feel to make large donations to the political parties in response to requests from Members of Congress and Executive Branch officials. However, pressure for smaller donations of hard dollars will increase in light of the higher individual contribution limits, especially in Washington.