Campaign finance debate headed to LegislatureFight whether to legalize corporate money expected
By Laylan Copelin, Austin American-Statesman
Saturday, November 27, 2004
The issue of corporate money in campaigns is about to veer from secret testimony in grand jury chambers to public debate in the halls of the Legislature. The go-to lawyer for Texas Republicans, Andy Taylor, said he will lobby to legalize -- and limit -- corporate donations to candidates when lawmakers return to Austin in January. He also wants state lawmakers to adopt the legal theory -- the so-called magic words test -- that he used to keep one of his clients, the Texas Association of Business, from identifying the corporations who paid for $1.9 million in issue ads mailed to voters in 2002.
"You can call that the pro-corruption bill," cracked one critic, Craig McDonald of Texans for Public Justice, a group that monitors campaign finances. "I'm surprised they think they can get away with legalizing what is now illegal."
McDonald is a member of a coalition of consumer associations and self-described government watchdog groups lobbying to strengthen the ban against corporate money in politics and to restrict "sham" issue ads in the final weeks of state campaigns.
Questions about whether such money and ads are legal came to a head after the final, frenzied weeks of the 2002 legislative campaigns. So far, those questions have spawned two years of criminal investigations, several indictments and lawsuits, and political controversy from Austin to Washington, D.C.
Now lawmakers, particularly House Speaker Tom Craddick, R-Midland, face the politically thorny question of whether to change the state's campaign finance laws while a grand jury continues to investigate him and others accused of violating the current laws -- or delay debate until Travis County District Attorney Ronnie Earle has concluded his investigation. At the heart of that question is whether the century-old ban against corporate contributions is antiquated and should be repealed. The federal government and 22 states have similar bans. Other states, such as California, allow corporations to give money to candidates.
Taylor declined to name his client who will push for changes because they have not finalized a contract.
Craddick has declined to say what he might do during next year's legislative session.
Austin political consultant Bill Miller, who often advises Craddick, said he couldn't speculate on whether the Legislature would address campaign finances: "You can make a case for either side of that coin."
On one hand, the Legislature could look like it's putting the controversy behind it if lawmakers take up the issue.
On the other hand, changing the rules before the judicial system has spoken might appear self-serving. The criminal charges and civil lawsuits would be resolved under the law as it was in 2002, but legalizing corporate money, critics contend, might influence jurors.
Rep. Phil King, a Weatherford Republican and Craddick lieutenant, said he is urging the speaker to name a high-profile committee of Democrats and Republicans to address campaign finance reform. King said elected officials, candidates and the lobbyists who support them need the election law clarified.
"Ronnie Earle should be the first witness," King said. "He should tell us how the law should be changed."
A century-old law
In 1903, the Legislature prohibited corporations from donating money to candidates because many feared the amassed wealth of corporations, particularly railroads, could dominate elections.
Corporations, however, are allowed to spend money to create and run political action committees that, in turn, raise money from employees to give to politicians.
For the 2002 elections, U.S. House Majority Leader Tom DeLay, R-Sugar Land, created Texans for a Republican Majority, which spent at least $600,000 in corporate money on consultants, pollsters, phone banks and other campaign-related costs that DeLay's lieutenants argued were administrative overhead for the PAC and, thus, legal.
In September, a Travis County grand jury indicted three DeLay lieutenants and eight corporate donors, charging them with illegally raising or accepting corporate donations that were used to help individual candidates.
The felony indictments included charges that two PAC officials laundered $190,000 of corporate money into legal donations to candidates.
During the same election, the Texas Association of Business spent $1.9 million from unnamed corporate donors to distribute what it called issue ads that touted the candidates it supported and criticized the ones it opposed. TAB officials argue they can keep their donors secret because the ads did not use the so-called magic words -- "elect," "support" or "oppose," for example -- in ads targeted for a couple dozen legislative campaigns.
Using those words constitutes direct support for a candidate that would not be legal with corporate money.
Earle is still investigating whether that $1.9 million was an illegal campaign expenditure.
McDonald said there was widespread cheating during the 2002 elections, when Republicans won every statewide office and control of the state Legislature. Republican lawmakers later approved a Delay-backed congressional map that has helped the GOP seize a larger share of the state's U.S. House delegation; Republicans now hold 21 of the 31 seats.
Taylor said ambiguous election laws have not kept up with changes in campaign practices.
"No one can figure out when corporate money is appropriate or not," Taylor said. "I think the most important reform is clarity of what is allowed and what is prohibited."
How other states cope
Other states have found that there is no simple way to deal with corporate donations and no magic fix for problems in the way campaigns are funded.
In California, corporations and individuals can give up to $3,200 to legislative candidates and $21,600 to a gubernatorial candidate per election.
Bob Stern has helped write many of California's campaign finance laws at the Los Angeles-based Center for Governmental Studies.
He said the lack of a corporate ban has not been a concern in the state: "We just don't have a lot of corporations giving big chunks of money."
Yet he said he's noticed a trend of corporations trying to disguise their contributions, particularly in judicial contests, by running them through business associations.
At the other end of the spectrum, Connecticut has banned the exchange of money between national and state parties -- the basis of the $190,000 laundering allegation in Texas -- to reduce out-of-state influence.
That state also limits money flowing to and from corporate and union PACs "to make our campaigns more competitive and to limit the influence of special interests on our elections," said Jeffrey Garfield, executive director of the state Elections Enforcement Commission. Yet Connecticut has its own loophole for political money -- unlimited money flowing from so-called Leadership PACs created by state officials, that they dole out to candidates.
In North Carolina this summer, the General Assembly passed legislation that prohibits corporations, trade associations and unions from pouring unlimited money into issue advocacy campaigns meant to influence state elections after newspapers reported that six-figure corporate donations bankrolled a political radio ad war.
To sidestep opposition, the law was passed in one day -- the last day of the session.
With a full slate of statewide campaigns, including a gubernatorial contest, looming in 2006, two issues will likely dominate any debate about campaign finance reform next year: whether to allow corporate donations and how to deal with so-called issue ads that criticize or support candidates.
Taylor said corporations should be allowed to give money directly to Texas candidates, but it could be capped at $1,000 or $5,000 per corporation, for example, to limit the political impact of any one business interest.
McDonald said corporate interests already dominate Texas elections by spending 68 cents of every political dollar. That money is given by corporate executives or employees through their PACs. He said spending corporate profits or shareholders' money, even if capped, would just make it easier to raise large sums.
"I think that idea would lock in the current (pro-business) majority running the Legislature," McDonald said. "It would wipe out any competition from Democrats, consumers, labor unions and 'small d' Democrats."
Clean Up Texas Politics, the coalition that includes McDonald's group, wants to tighten the corporate ban by making clear that expenses for consultants, phone banks, pollsters and other campaign activities are not considered a PAC's administrative overhead that can be paid by a corporation.
McDonald and Taylor also disagree about how to deal with anonymously funded issue ads that mention candidates.
At question is whether an ad is a political piece that can be regulated by the state or an issue ad that is protected free speech that does not expressly advocate the election or defeat of a candidate.
McDonald favors implementing a state version of McCain-Feingold, the federal campaign finance law barring special-interest groups from using unlimited corporate or union money for radio or TV ads that mention a federal candidate and are targeted at a candidate's district during the final weeks of an election.
Yet even that attempt pushed campaign money to new sources -- the so-called 527s used unlimited donations from individuals to air political commercials in the final weeks of the 2004 campaign.
The Texas version of McCain-Feingold, McDonald said, should ban corporate or union-funded phone banks and direct mail, in addition to broadcast ads, and limit the money individuals could give for campaign activity by special interest groups.
Taylor disagrees, saying McCain-Feingold infringes on the free speech rights of corporations.
"Either everybody has a constitutional right to speak their mind or not," he said.
Instead of limiting free speech, Taylor said he'd prefer disclosure of donors. "This notion that corporate money is dirty and evil and that personal money is the be-all, end-all is probably not true in the 21st century," Taylor said.