December 2, 2002
Center for the Study of Democracy
Campaign Finance in the United States
Compiled by the National Democratic Institute
Campaign finance in the U.S. recently gained public attention with passage of the McCain-Feingold and Shays-Maheen bills in the House and Senate. The President signed legislation on March 27, 2002 prohibiting soft money contributions in national elections and raising the limits that individuals can spend for federal elections. Although this recent legislation represents a restructuring of the campaign finance system, many believe that it will not reform the amount of money that goes toward campaigns, even those at the federal level. This brief memo outlines current campaign finance laws and the changes that will occur in the next election cycle.
Congress created the Federal Election Commission (FEC) in 1975 to monitor and administer federal election financing under the Federal Election Campaign Act (FECA), passed in 1971. The duties of the FEC, which is an independent regulatory agency, are to disclose campaign finance information, to enforce the provisions of the law such as the limits and prohibitions on contributions, and to oversee the public funding of Presidential elections.
As a result of the new federal election law passed by the House and Senate in March 2002, restrictions have been placed on national party contributions and contributions to individual party candidates in federal elections. These restrictions limit the amount of money an individual can give to a candidate running for federal office.
Soft money is money that is given to political parties to be used for the parties' general purposes, rather than for a single candidate. Prior to the passage of Shays-Maheen, there was no limit on the amount of money that an individual or organization could give to a political party for such purposes. As a result, national parties could raise money from special interest groups and wealthy individuals and use that money in campaigns.
This has been referred to as the "soft money loophole" because,
while federal law regulated the amount an individual or group could
give to a candidate, it did not limit the amount of soft money a
party could receive. Thus, parties supporting candidates could fund
get-out-the-vote efforts and "issue ads" that benefited particular
candidates without the candidate having been funded directly- thus
averting restrictions on the amount of money a special interest or
individual could spend on campaigns.
Under the new law, known as the Bipartisan Campaign
Reform Act (BCRA), soft money has been banned at the federal level.
This means that the law now regulates the amount of money that can
be given to national party committees in a given year. While the
bill limits soft money, it also raised the amounts that individuals
can give to candidates and state and local political parties. The
total amount an individual can give per two-year election cycle to
influence federal elections is limited to ,000 and subject to
the following restrictions: an individual may not give more than
,500 to federal candidates and may only give ,000 per election
(primaries and general elections count as separate elections) to a
single candidate; an individual can give up to ,000 per party
committee per year; up to ,000 can be given to each state or
local party committee per year; and an individual can give ,000
to each Political Action Committee (PAC) per year. An individual
can give no more than ,500 per two-year cycle to national party
committees and PACs.
PACs may still contribute an unlimited amount of
money to party committees at the state level, but the law limits
the amount of money they may receive from various sources. For
example, PACs may only receive ,000 from multicandidate
committees and ,000 per year from other political committees, and
are limited to receiving ,000 per year from individuals.
The most controversial element of the new
legislation is that it requires that issue ads not be allowed to
run 60 days prior to elections. In the past, there was no limit to
the amount that a corporation or union, for example, could spend on
ads that featured candidates. Now, they will not be able to use
their money toward such ads.
Critics of the BCRA argue that placing restrictions
on soft money impedes free speech, since special interests are not
allowed to run such issue ads. In fact, the campaign finance
package is currently being challenged in the courts in two lawsuits
alleging violation of free speech rights. In addition, a coalition
of public interest groups is challenging the law for raising
hard-dollar contribution limits.
Many question how much the new law will affect
special interest funding of political campaigns. While soft money
for federal campaigns is regulated under the law, state laws allow
soft money to be raised. As a result many feel that instead of
reducing the amount of money raised for campaigns, the money will
be filtered through state parties instead of national parties. In
addition, there is no legislation regulating the amount of money
that one state party can transfer to another, which may serve to
undermine the effectiveness of campaign finance reform touted by
the new law.