Independent Expenditures: The New Money in California Politics

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Executive Summary

Money fuels politics. Traditionally, political supporters and special interests channeled money to candidates and their parties as direct contributions and lobbying. But since the first campaign contribution limits were enacted in the 1970s, political money has increasingly taken the form of so-called Independent Expenditures (IEs), political campaign spending that is not coordinated with a candidate’s official campaign.

Though IEs have only received significant national attention in the wake of the U.S. Supreme Court’s Citizens United v. FEC ruling in 2010, they have been a growing factor in California politics since Proposition 34 (2000) limited direct contributions to candidates. In that time, total independent expenditures in legislative races have increased by a factor of 60, and those in statewide candidate elections by a factor of 55. In the 2010 election alone, over $80 million was spent independently on political campaigns.

This report examines the $220 million in independent expenditures spent on candidate races in California between 2000 and late May 2012, focusing on the 106 organizations and committees that spent all but $25 million of it. We dissected the races that attracted the most money, the groups who spent it, and their donors.

We identify a dramatic increase in IEs from the 2000-02 to 2004-06 election cycles and a substantial increase between the 2004-06 and 2008-10 cycles. We also find that labor unions are the largest source of independent spending, focusing primarily on governor’s races. Labor-backed committees spent nearly 50% of all IEs and unions made 75% of all donations to IE committees larger than $1 million. Business-backed and political committees each spent 12.5% of IEs. Finally, the report identifies a number of inadequacies in the current IE disclosure and publication system.

Other specific findings include the following: 

  • Fewer Donors, Larger Donations. In 2010 alone, approximately 100,000 groups and individuals donated more than $550 million directly to candidates (excluding self-funding by candidates), with a $250 median contribution. But since 2000, fewer than 6,000 groups and individuals donated $573 million to IE committees that spent the most on candidate elections, with a $5,000 median contribution.
  • Union-Backed Committees Outspend. Spending over $90 million, union-backed IE committees spent three times more than their nearest competitors (business and business-backed committees, $27.7 million, and political committees, $27.5 million). Labor-backed committees spent nearly 50% of all IEs and unions made 75% of all donations to IE committees larger than $1 million.
  • Governor is Top Target. Since 2000, the Governor’s seat was the target of $76 million in independent spending, drawing almost 40% of all IEs. Unions allocated almost two-thirds of their independent expenditures ($56 million) to governor’s races.
  • Corporations Rank Lower. Chevron, the largest corporate contributor to IE committees, ranks 28th among all donors. Seven unions are among the top ten.

We conclude with a discussion of how the state can effectively balance the freedom to engage in political speech and the inherent benefit in providing the electorate with information about the sources of funding of political speech. We recommend several reforms that would enable the state to deliver accurate and usable information to the public, increase transparency, and improve enforcement of campaign finance violations. Those recommendations include redesigning the state’s current disclosure website, requiring an accountable principal officer for IE committees, and requiring more stringent disclosure to help voters identify original sources of political funding.

Introduction

Money fuels politics. Traditionally, political supporters and special interests channeled money to candidates and their parties as direct contributions and lobbying. But since the first campaign contribution limits were enacted in the 1970s, political money has increasingly taken the form of so-called Independent Expenditures (IEs), political campaign spending that is not coordinated with a candidate’s official campaign. Though IEs have only received significant national attention in the wake of the U.S. Supreme Court’s Citizens United v. FEC ruling in 2010, they have been a growing factor in California politics since Proposition 34 (2000) limited direct contributions to candidates. In that time, total independent expenditures in legislative races have increased by a factor of 60, and those in statewide candidate elections by a factor of 55.i In the 2010 election alone, over $80 million was spent independently on political campaigns.

This report examines the $220 million in independent expenditures spent on candidate races in California between 2000 and late May 2012, focusing on the 106 organizations and committees that spent all but $25 million of it. We examine the races that attracted the most money, the groups who spent it, and their donors. We identify a dramatic increase in IEs from the 2000-02 to 2004-06 election cycles and a substantial increase between the 2004-06 and 2008-10 cycles. 

We find that labor unions are the largest source of independent spending, focusing primarily on governor’s races. Labor-backed committees spent 50% of all categorized IEs and unions made 75% of all donations to IE committees larger than $1 million. Finally, the report identifies a number of inadequacies in the current IE disclosure and publication system. In particular, current rules allow committee layering where an intermediate political committee handles the money between a donor and the IE spender. Committee layering obscures the identity of an expenditure’s original funder from voters (although we have not observed such layering among the largest spenders). While we recognize that modern campaigns, particularly in California, are extremely expensive and depend on independent expenditures, we propose several reforms that would improve their disclosure and transparency.

Money in Politics and Independent Expenditures

Influencing Election and Policy Outcomes

Large political expenditures, either as direct contributions or independent expenditures, allow interests like unions or corporations to influence policy outcomes in two key ways. First, independent spending helps them obtain desired outcomes at the ballot box (either via passing a favorable measure or electing an official who already shares the interest’s point of view). Second, independent spending predisposes elected officials to favor the interest, either out of gratitude for the past, desire to curry more money in the future, or fear of political retribution. 

Apart from the disproportionate ability of wealth to obtain preferred election outcomes, the resulting influence by campaign funders on the officials they help elect is particularly troubling. Although extensive research over the past five decades has not confirmed that contributions and expenditures ensure specific legislative outcomes or benefits for donors,ii researchers argue this absence of effects is to be expected because many of the influence pathways do not leave an observable data trail.iii Interests exercise much of their influence to preserve the status quo, which reflects the existing balance of powers, rather than to implement reform. A bill that never comes to a vote because of an interests sway over a legislative committee chairman does not register as influence exercised in most political science surveys. Even more important than a bill’s passage is its composition, during which, well-positioned special interests can water down regulation, insert poison pill clauses, or ensure favorable definitions. Their influence even distorts the selection of topics that legislatures consider.iv 

While one has a right to promote his or her political views, the current system flagrantly belies the American faith in political equality by directly translating economic power into political power. This influence of wealthy interests or the perception thereof has the additional effect of destroying the public’s trust in government.v Although this influence remains difficult to quantify, a recent survey of all 50 state legislatures found that on average, members viewed contributions as exercising a substantial influence on legislative activity.vi

Independent Expenditures and Contributions

Defining Independent Expenditures

According  to  the  Fair  Political  Practices  Commission (FPPC), a state government agency, An independent expenditure is an expenditure for a communication that expressly advocates the nomination, election or defeat of a clearly identified candidate or ballot measure that is not made toor at the behest ofan officeholder, candidate, or committee. Independent spenders may not legally coordinate their activity with the campaign they support.vii

With the independent expenditure designation comes a prohibition on coordination between spender and candidate, diminishing the threat of quid pro quo corruption trading of money for specific votes in which government is acknowledged to have a compelling interest.viii Minimizing that threat was the U.S. Supreme Court’s primary criteria when it drew the distinction between contributions and independent expenditures in Citizens United v. FEC.ix In that decision, the Court narrowed what constitutes corruption for purposes of campaign finance law from ’sale of access and obtaining undue influence to quid pro quo transactions. Not posing that threat, IEs ostensibly merit greater protection from government interference than traditional campaign contributions.

To believe that no coordination or communication occurs between the Political Action Committees (PACs) that make independent expenditures to benefit a campaign and the campaign itself stretches the very bounds of credulity, particularly when in California and nationally, these PACs are often specific to a candidate. But even if a campaign does not closely direct these expenditures, a candidate who knows the finances and operation of these independent expenditure committees will have a decent idea about where the monetary support is coming from and who to thank or fear later. Because independent expen-ditures are not limited, buying influence, through IEs can be as or more effective than doing so through direct contributions. After spending on the candidate’s behalf, if a donor chooses to, he can expect to lobby the elected official he supported more effectively. 

IEs compared to contributions

Relative to direct contributions made to candidates, their committees, and political parties, independent expenditures are much more often the province of large donors. One hundred thousand groups and individuals were responsible for the more than $550 million in political contributions in 2010 (excluding self-funding by candidates), with a $250 median contribution. But the $573 million given to committees that spent the most independent money on candidate elections since 2000 was contributed by less than six thousand distinct individuals and groups, with the median contribution of $5000.x 

Independent expenditures are not unequivocally more effective. On one hand, due to sheer magnitude, independent spending unhampered by limits can potentially be more influential than direct contributions. Independent expenditures can be large enough to make credible threats of withholding supportive ad campaigns from candidates or funding negative campaigns against them. For instance, this leverage might allow a union, corporation, or other interest to threaten to spend millions against an incumbent’s reelection campaign if he does not promote their agenda, a much more powerful deterrent than threatening to withhold the maximum contribution of $20,000 or to give it to his opponent.

On the other hand, independent expenditures prevent candidates from controlling the spending and messaging associated with the expenditure. Ads resulting from independent spending can be out of line with the official campaign’s message, thereby weakening its ultimate value to the campaign. 

Independent Expenditure Trends

Unlike California, 24 other states and the federal government limited or prohibited independent expenditures by corporations and unions until recently.xi With Citizens United effectively eliminating such regulations, California’s experience with independent spending may provide a glimpse into the future of political finance in the country. Figure 1 illustrates that in terms of money committed, lobbying is the overall dominant method of obtaining political influence in California, as it is on the federal level. Together, contributions to candidates and ballot measure campaigns comprise a similar portion of the spending. Independent expenditures, meanwhile, constitute a much smaller portion of overall political spending.

However, the distribution of political money in Figure 1 does not capture the rapid rise of independent expenditures since 2006. As Figure 2 indicates (also see Figure 4), IEs comprised a larger portion of overall political spending in the most recent election cycle, a trend that may continue in the future.

Figure 1. $7.8 Billion in Political Spending in California 2000-12Mxii 82 (independent exp)
Figure 2. $1.4 Billion in Political Spending in California 2009-10xiii 83 (independent exp)

Obscuring the Sources: The Drawback of IEs

In addition to the greater amounts of money that can flow as independent expenditures compared to direct contributions in a given race, IEs tend to obfuscate their original funding sources from voters to a greater degree. They tend to flow through intermediate committees more often than contributions, sometimes for practical reasons of aggregating support, sometimes to obscure politically charged donors names from the average voter. As this report will show, the use of committees for aggregating funding is a prevalent phenomenon in independent expenditures. In California, the anonymous donations that have been receiving attention at the federal level are uncommon. Still, most voters will not expend the effort of tracing monies through expenditure reports to identify original donors, particularly when committees are layered, with one or more transferring money between donors and spenders.

While direct contributions typically result in electoral advertising labeled as being sponsored by a candidate’s campaign, advertising purchased by independent expenditures displays the paying political committee as its sponsor, a committee whose name often reveals nothing about the interests behind it (e.g. Californians for a Better Government or Opportunity PAC). In some advertisements, the top two donors are also listed, though these too may be committees with vague names. But by its very nature, IE-funded political communication introduces an additional variable for voters to evaluate besides substance: the source of the message. This burdens the voter with determining the motivations and credibility of the sponsors. That burden is lighter when a candidate sponsors his own communication. 

This obfuscation (whether intentional or incidental) presents a major impediment to transparency in campaign finance, not only for the public, but even for good governance groups that attempt to untangle the flows of money. For example, the National Institute on Money in State Politics reports that ideology/single issue committees are the largest independent spenders in California.xiv But a closer look reveals that most of these ‘single issue groups receive the majority, if not all, of their funding from labor unions, thus underplaying the role that unions play in California politics.xv Lack of effective disclosure of advertising sponsorship condemns average Californians to ignorance about the special interests that will have sway over elected officials.

Methodology

Definitions: Donor, Spender, Target

For the purposes of this report, we focus on three roles associated with independent expenditures. The target of independent spending is the candidate mentioned in the purchased advertising. Whether the ad supports or opposes a candidate, he or she is marked the target or recipient of that spending. We identify the target of a negative ad rather than its true beneficiary as the target of the spending because the actual candidate benefiting from the advertising sometimes cannot be identified, either because the office is non-partisan or it is a primary election.xvi 

The spender, often a Political Action Committee (PAC) or Independent Expenditure Committee (IEC), is the entity actually making the expenditure by purchasing advertisement and filing appropriate forms with the Secretary of State. The spender is the middle man between the donor who funds the spender and the target. Most donors fall into one of four categories: unions, businesses, individuals, and Native American tribes. In some cases, the donor and the spender are the essentially same entity: the California Correctional Peace Officers Association makes a great deal of its independent expenditures through its own PAC, for which it is the source of virtually all donations.

Not all money leaves a spender as an independent expenditure. One of the largest independent spenders, Alliance for a Better California, spent less than 15% of its $46 million accumulated receipts on independent expenditures, channeling the rest towards contributions and ballot measures. 

Data Collection, Cleaning, Aggregation, and Tagging

The data used in this report was obtained from the Reform Division of the Secretary of State. In addition to instituting contribution limits, Prop. 34 expanded disclosure requirements for all political spending, mandating that all independent expenditures greater than $1,000 made within 90 days of an election be reported within 24 hours to the Secretary of State, who maintains the records in a database accessible through the Cal-Access website (cal-access.sos.ca.gov).

We obtained a snapshot of the Cal-Access database current as of May 19, 2012. We isolated independent expenditures by culling only expenditures reported on the F465 form and eliminating committees that only spent on ballot measures (which use the same F465 form). We then eliminated duplicate transactions arising from redundant amendments to previously filed reports.xvii We supplemented these records with PDF copies of actual submitted reports to identify targets of expenditures that were missing in the database. To the expenditures from the F465 forms, we added a small number of Electioneering Communications expenditures (ECs).xviii These are essentially IEs that do not contain express advocacy terms such as vote for or defeat, and occur within 30 days (for primaries) or 60 days (for general elections).

For analytical practicality, we focused just on committees that spent more than $100,000. Of the $220 million spent on candidate elections since 2000, these 106 spenders contributed all but approximately $25 million ($193.7 million, or nearly 90%).xix Finally, for the top 75 groups in the remaining list, we manually aggregated clearly associated committees (e.g. CSCSE Political Committee and CSCSE Small Contributor Committee).xx Based on its name, self-representation on its website when available, and major donors, we coded each committee by sector as either business, education labor, combined labor, public safety labor, other labor, professional, advocacy group, political, or uncategorized. Business includes committees representing corporations and other businesses; professional committees represent individual professionals such as lawyers or doctors. The combined labor classification means that the committee combines organizations from multiple sectors of labor (i.e. a group supported by the CTA, SEIU, and CCPOA).xxi

Data and Analysis

Aggregate Analysis of Spending

Broken out by sector, the top independent spenders in candidate elections are unions or union-backed committees. Spending over $90 million, union-backed political committees spent three times more than their nearest competitors (business and business-backed groups, $27.7 million, and political groups,xxii $27.5 million), and just $15 million less than every other category of spender combined. Unions allocated almost two-thirds of their independent expenditures ($56 million) to governor’s races, and another one-sixth ($15.8 million) to Assembly races. In contrast, professional, business, and advocacy groups spent virtually no money on governor’s races, focusing

Figure 3. Independent Expenditures, 2000-2011, by 106 Committees Spending More than $100,000, by Sector and Race Type

84 (independent exp)

instead on the legislature, and to some degree, other statewide races. Aggregating the top spenders across all sectors over the past 12 years, the Governor’s seat was the target of $76 million in independent spending, drawing almost 40% of all independent expenditures since 2000. The vast majority of the remainder was split between the State Assembly ($49 million), State Senate ($33 million), and other statewide races such as Lieutenant Governor and Attorney General ($29 million). 

Because governor’s races received the largest portion of IE spending, total expenditures are the largest in off-year elections (i.e. 2006, 2010), during which governor’s races are held. While 2005′s special

Figure 4. IE Spending by Year 85 (independent exp)

election saw over $100 million in independent spending on ballot measures, there was little opportunity for independent spending in candidate elections. Most notably, the dramatic rise of IE’s from 2000 to 2004 and 2002 to 2006 is nothing short of an explosion.

Targets

Figure 5 shows the top 25 targets of spending between 2000 and 2010. Together, they attracted $113 million (as of the time of data collection, there were no major IEs in 2011 or 2012). For this report, we individually examined the three races that have seen the most independent expenditures since 2000: the 2010 governor’s race, 2006 governor’s race, and 2010 state superintendent race. We examine those races independent spenders and their top donors.

1. 2010 Governor’s Race: Jerry Brown and Meg Whitman

The 2010 Governor’s race drew a combined $44.3 million in independent expenditures. All but $4.5 million of it benefited Jerry Brown, partially offsetting the $144 million that Meg Whitman donated to her own campaign.xxiii Whitman’s self-funding enabled her official committee to outspend Brown’s official committee $159 million to $36 million. In this case, the independent spending restored some funding balance.

Figure 5. 25 Targets Attracting the Most Spending, 2000-2010. 86 (independent exp)
Figure 6. Independent Expenditures Supporting Jerry Brown 87 (independent exp)

Of the top 10 spenders in the race, nine spent in support of Jerry Brown or against Meg Whitman (listed in Figure 6), with only the Republican Party making large expenditures on Whitman’s behalf ($2 million).xxiv Aside from the Democratic Party, all of the top 10 spenders backing Brown were unions and union-backed committees (California Working Families and Working Californians are funded by California State Council of Service Employees, State Building & Construction Trades Council, the California Professional Firefighters PAC, California Teachers Association (CTA), and California Electrical Workers Association; Alliance for a Better California 2010′s funding also came from a variety of public labor unions, led by AFL-CIO). Using committees whose names do not signal their donors affiliations not only underestimates unions spending on Brown by $11 million, but also obscures the influence of organizations like California Professional Firefighters and California Electrical Workers Association.

2. 2006 Governor’s Race: Phil Angelides and Arnold Schwarzenegger

The 2006 governor’s race drew the second highest level of independent spending. Virtually all of the $26 million in independent spending benefited Democrat Phil Angelides, who was campaigning against incumbent Republican Arnold Schwarzenegger. Support and opposition advertising were relatively balanced with $15.5 million spent supporting Angelides million and $10 million opposing Schwarzenegger (the remaining $1 million benefited Schwarzenegger). The IE spending heavily tipped the overall financial balance of the campaigns in Angelides’s favor because Schwarzenegger’s official campaign outspent Angelides’s by only $7 million. A month before the election, Schwarzenegger led Angelides by 9.2% in the polls and this gap may have led to the IE spending imbalance.xxv Schwarzenegger’s supporters most likely felt confident enough to allocate resources to other critical races like Propositions 86 and 87.

Figure 7. Independent Expenditures Supporting Phil Angelides 88 (independent exp)

In this race, intermediate committees played an even larger role than four years later, most of their funding coming from unions and a single wealthy family. Californians for a Better Government ($9.8 million), combined money from the Tsakopoulos family ($8.7 million),xxvi and the California Teachers Association ($1 million). Alliance for a Better California, representing a variety of unions with CTA topping its donor list,xxvii spent another $5.2 million on Angelides. Strengthening Our Lives Through Education, Community Action, and Civic Participation, spent $3 million on the race and was also funded almost entirely by three unions (CTA, Service Employees International Union (SEIU), and CSCSE). Finally, Let’s Rebuild California and Neighborhoods United also received most of their funding from CSCSE and other unions. 

Once again, nine of the top ten spenders in this election supported the Democratic candidate, with the sources of six of those spenders obscured from the average voter. Aside from the Democratic Party (contributing $4 million) and the Tsakopoulos family, virtually all of the $26 million can be traced to unions, but only some of it overtly 

3. 2010 Superintendent’s Race: Tom Torlakson, Larry Aceves, and Gloria Romero

In terms of IE spending, Tom Torlakson’s successful bid for California Superintendent of Public Instruction against Larry Aceves and Gloria Romero comes in third place. As a three-way contest in which each candidate received significant backing, the race attracted far more IE spending than other superintendent’s races. Instead of aligning as they normally would,xxviii the school administration union split from the teachers union, leading to an intense contest. Despite previously attracting only $22,000 in independent spending, the 2010 superintendent’s race saw nearly $7 million in independent spending, with CTA (backing Torlakson) spending $3.3 million and the Association of California School Administrators (backing Aceves) spending $2.2 million. The 2010 superintendent’s race illustrates how political divisions within interests can lead to outsized spending in normally low-cost races. 

Spenders

According to FPPC regulations, any individual or entity that makes independent expenditures totaling $1,000 or more in a calendar year to support or oppose state

Figure 8. Top 10 Independent Spenders 89 (independent exp)

or local candidates or ballot measures is considered an IE committee.xxix Thus if a wealthy individual, for example, makes such an expenditure, he or she would then be considered an IE Committee, and would be obligated to file a disclosure report with the Secretary of State. In most cases, however, would-be spenders establish dedicated entities to carry out this activity. Some represent a single organization, while others pool money from multiple like-minded sources. This pooling effect makes it impossible establish a direct link from a particular donor to any single expenditure.

Additionally, most committees tendency to spend money in other ways as well as candidate contributions or ballot measure contributions further complicates establishing direct links between original donors and independent expenditures for interested observers. 

1. Political Parties

Democratic Party (#1: $12.7 million). The vast majority of the Democratic Party’s independent spending targeted the 2006 and 2010 governor’s races (over $11.3 million). The remainder was split between a variety of state and local positions such as County Supervisor Mark Ridley-Thomas ($193,975 supporting) and State Senators Neil Soto and Jenny Oropeza ($220,378 supporting and $182,297 opposing, respectively).

Note: Dark red and dark blue indicate spending to support Republican and Democrat candidates, respectively. Light red and light blue indicate spending against Democrat and Republican candidates respectively presumably in support of the other party’s candidates. However, some of those expenditures may have occurred in primary elections, thereby calling into question the direct beneficiary, and thus the party label.

Republican Party (#6: $7.3 million).  The Republican Party spent a third of its money on two Governor’s races (over $2.7 million). It spent $1.6 million against Kamala Harris in the 2010 Attorney General’s race and divided the remainder on a variety of state level races. 

2. Unions

California State Council of Service Employees (#5: $7.7 million). CSCSE spent broadly across various state-level positions, focusing on Governor’s ($4.9 million), State Senate ($1.4 million), and State Assembly races ($1.2 million). Like most unions, CSCSE opposed Republican candidates in almost every case.

California  Correctional  Peace  Officers  Association (#7: $6.4 million). CCPOA spread its money with a similar distribution across Governor’s ($3.3 million), State Senate ($1.8 million), and State Assembly races ($1.4 million). Though the CCPOA favors Democrats in its independent spending ($5.3 million to $1.1 million), the union is unusual in lending substantial support to Republican candidates.

Figure 9. Top spending aggregation committees, their donors and targets 90 (independent exp)

3. Committees

Of the top 10 spenders, six committees with over $47 million dollars in combined independent spending have names that provide little indication of the interests behind the group or their ultimate political aim.

The top 10 spenders take a variety of strategies, with some committees forming to spend in a single race (e.g. California Working Families) and others (e.g. Jobs PAC) spending in multiple races over multiple election cycles. It also shows that unions and affiliated committees primarily target governor’s races while businesses rely on IEs more in legislative races. 78% of the $82 million that these 10 committees spent went to Democrats.

Donors: who funds independent expenditures

Most independent spenders collect money from other donors (although a number of unions such as CTA largely spend their own money, and are therefore simultaneously spenders and donors). Donors, then, are the special interests that seek to influence politics. Figure 10 lists the top donors to IE spenders. These numbers are not themselves independent expenditures and are classified as contributions, donations to IE committees. These contributions totaled over $700 million, of which less than $200 million was deployed on IEs and ECs.

Unions are the largest contributors to IE spenders. In fact, unions occupy the top seven slots, while the first

Figure 10. Top 25 Contributors to IE Spenders 2000-2012 91 (independent exp)

corporation, Chevron, ranks 28th. The top 10 unions donated nearly 40% of all funds given to groups that spend independently on candidates.

Disscussion

Independent spending has become a major factor in California politics. Unrestricted by spending or contribution limits, independent expenditures present an attractive option for a variety of political interests, though unions have used them most heavily to date. With outright bans and limits on IEs ruled unconstitutional, IEs allow particularly wealthy interests to leverage that wealth politiisscussioncally. Although a large portion of IEs occur in contests for the governor’s seat, IEs now appear widely among statewide races, legislative races, and even local races ($5 million has been spent in city and county races since 2000).

As the majority opinion of the Citizens United decision noted, re-affirming past decisions, there is an inherent benefit in providing the electorate with information about the sources of funding of political speech.xxxi This information creates a context that allows the voters to have a better understanding of the political forces at play and make informed decisions at the ballot box. Transparency in campaign finance is valuable for the same reason that government transparency and information accessibility is valuable: sunlight heals.

But the state’s current independent expenditure disclosure system is inadequate for that task. Presently, political communication that is funded by independent expenditures must display the name of the committee sponsoring the communication. Broad-casting or mass mailing advertisement must also show the top two donors if they contribute more than $50,000 to the committee.xxxii But other forms require only displaying the committee name, which as we illustrate above, often offers no hint as to the original funding sources.

Candidates who benefit from the spending, however, typically have more information than voters about who is spending to support or oppose them. In practice, there is an imbalance of information between voters and politicians. This is true even in the case of committees that pool money from many donors and spend on multiple candidates, such as Jobs PAC or Alliance for a Better California, where donations cannot be matched to a candidate. The organizations that sponsor the PACs (e.g. Chamber of Commerce in the case of Jobs PAC) can channel their members specific concerns to politicians in ways that are opaque to voters. We highlight three reforms that will improve transparency in regards to independent expenditures. 

Reform 1: Improving Cal-Access Reporting and Enforcement

There are a number of steps that would improve disclosure of IE spending. One place to begin: The byzantine Cal-Access website that serves as a portal for all state campaign finance data. Currently, the website is both insufficiently known and too cumbersome to effectively inform the public. The FPPC or the Secretary of State which operates Cal-Access could promote the site more prominently through earned or paid media. If the public is unaware that this information exists, disclosure requirements largely go to waste. 

The website itself and the underlying data collection process require improvement. The interface allows access to some individual items of information (e.g. how much Jerry Brown’s 2010 campaign committee received in contributions). However, it is difficult to impossible to conduct useful analysis through the website or obtain most types of aggregate data (e.g. how much public sector unions or even just CTA contributed to and spent in support of Jerry Brown in 2010). Research across multiple election cycles is nearly impossible with the website’s current interface.

Because its organization simply mirrors the reports filed by political committees, the user must contend with unintuitive search criteria that often require information unavailable to the user: committee names as they appear in public advertising are often insufficient to identify actual entities as they are listed on the website (multiple committees may have the same or very similar names); individual transactions are separated unnecessarily; and the interface does not allow users to combine election cycles.

Perhaps most vexing are interface design flaws that mislead the unwary user. For example, the summary information for committees is presented as for an entire two-year cycle but only reflects information for the most recent year, which in some cases can be dramatically different. In one such instance, Alliance for a Better California is listed as having spent $7 million in 2006, while it actually spent a total $42 million in the entire 2005-06 cycle (not displayed on the site). Only by compiling individual expenditure data can one compute that $42 million figure. 

Even obtaining the actual database containing this information does not fully solve the problem, as the data is riddled with errors and omissions and its organization is unnecessarily complex. Some of the issues stem from conflicting information on reports filed with the Secretary of State, and the complete lack of verification of reported information. For example, total expenditures in filed reports often do not match itemized expenditures, and system managers do not know how their own database figures are computed.xxxiii This lack of verification and error control likely stems from the present institutional division between the Secretary of State who collects the reports and the FPPC, which enforces compliance with disclosure rules. In short, an intuitive and flexible website connecting to an accurate database would go a long way in clarifying campaign finance to any Californian who sought the information. 

Reform 2: Enforcement – Principal Officer Liability

 A recent FPPC memo noted the need for a Principal Officer to be associated with every committee. The Principal Officer would be ultimately accountable for the committee’s activities.xxxiv Disclosure rules are only as meaningful as they are enforced. This is particularly difficult for temporary committees, active for only several months before closing. By the time FPPC discovers violations or discrepancies, there is no one to hold accountable. If a committee was required to declare a Principal Officer when it is created, the person could be held accountable after the committee terminates its operation. Along with other en-forcement rules, this reform would strengthen existing regulation. 

Reform 3: Disclose Act-like Reforms

A serious inadequacy of current IE disclosure rules is that, in many cases, IE communications need only display the sponsoring committee’s name, which often yields no information about the interest promoting the candidate. Even for the advertising forms that require the top two donors of the committee to be also listed, these can be political committees with similarly uninformative names, rather than the actual organizations like corporations, individuals, or unions where the contribution originates. 

The recently proposed California Disclose Act would have required the direct, in-ad disclosure of a committee’s Identifiable Contributors and would have been a first step to addressing this problem (although its definition of Identifiable Contributors was not sufficiently specific). It would have required concluding political ads with the logo and name of the top three contributors. Unfortunately, it failed to pass the State Legislature. 

Conclusion

Independent spending is on the rise. There has been a dramatic increase in IEs from the 2000-02 to 2004-06 election cycles and a substantial increase between the 2004-06 and 2008-10 cycles. In the current legal climate, contribution limits are more likely to survive court review, and independent expenditures are likely to gain greater prominence in the near future. Although in some ways a less effective source of political influence than direct campaign contributions, IEs allow wealthy interests to leverage their economic power in key races. We find that labor unions are the largest source of independent spending, focusing primarily on governor’s races. Labor-backed com-mittees spent 50% of all categorized IEs and 75% of all donations greater than $1 million to IE committees came from unions.

As a result, enforced, effective disclosure rules are essential for a well-functioning democracy. Given the inadequacies in the current IE disclosure and publication system such as the tolerance of errors and omissions in the filing process and committee layering that obscures the identities of original donors from the voters prompt reform of the independent expenditure disclosure and publishing process in California is imperative.

 

Works Cited [+ Expand]

i Jones, Ethan. Bill Analysis of AB 481 (2012). August 31, 2012. Web. <http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0451-0500/ab_481_cfa_20120830_181747_asm_comm.html>. Retrieved 2 Oct. 2012.

iiA 2003 survey of the literature found that most studies did not find a link between contributions and legislative results (Stephen Ansolabehere, et al. “Why Is There So Little Money in U.S. Politics” Journal of Economic Perspectives. Vol. 17, 1 (Winter 2003). pp. 105-130). For example, a historical analysis of aggregate stock prices during legal reform that limited or expanded the ability of corporations to contribute money to political candidates on the federal level (FECA, BCRA) found that allowing corporations to set up PACs and make political donations has at best a trace effect on the value of these firms (Stephen Ansolabehere, et al. Campaign finance regulations and the return on investment from campaign contributions.2004. p. 15. Web. ( http://scholar.harvard.edu/jsnyder/files/8._cf.return.regs__0.pdf>. Retrieved 29 Sept. 2012; see also Raymond J. La Raja and Brian F. Schaffner. “The (Non-)Effects of Campaign Finance Spending Bans on Macro Political Outcomes: Evidence From the States.” Social Science Research Network. March 2012). For a different view, see Thomas Stratmann. “Some talk: Money in politics. A (partial) review of the literature.” Public Choice. Vol. 124. 2005. pp. 135156.

iii Powell, Lynda W. The Influence of Campaign Contributions in State Legislatures in Influence of Campaign Contributions in State Legislatures: the effects of institutions and politics. University of Michigan Press. 2012; p. 18. 

iv Lessig, Lawrence. Republic, Lost: How Money Corrupts Congress–and a Plan to Stop It. Hachette Digital, Inc.: 2011, pp.148-54, provides an excellent discussion of the evidence. At the federal level, the disconnect between the public’s priorities and lobbying interests priorities is striking. For example, in 2008, while the public was most concerned with public safety, economy, taxes, and education, it was healthcare provision, environmental regulations and transportation regulation that were lobbied most actively (Frank R. Baumgartner et al. Lobbying and Policy Change: Who Wins, Who Loses, and Why. University of Chicago Press: 2009, p. 258).

v Trust in Government. Gallup.com. Web. <http://www.gallup.com/poll/5392/trust-government.aspx>. Retrieved 11 Oct. 2012. Although the poll does not ask about the reason behind the falling approval rating, there are compelling reasons to think the influence of money plays a substantial role (supra note iv).

vi Supra note iii.

vii California Form 461. FPPC. March 2011. Web. <http://www.fppc.ca.gov/forms/2011/461.pdf>. Retrieved 13 Oct. 2012.

viii E.g. McConnell v. FEC (2003) (see Richard Briffault. Corporations, Corruption, and Complexity: Campaign Finance After Citizens United. CORNELL JOURNAL OF LAW AND PUBLIC POLICY, Vol. 20, 2010)

ixAs the summary of the opinion notes, That speakers may have influence over or access to elected officials does not mean that those officials are corrupt. (Syllabus for Citizens United v. Federal Election Commission. Supreme Court of the United States, Reporter of Decisions. 2010. Web. <http://www.law.cornell.edu/supct/html/08-205.ZS.html>. Retrieved 12 Oct. 2012).

x $5000 is the average contribution to groups that made independent expenditures. As noted below, many of the committees making IEs also spend their money in other ways.

xi Life After Citizens United. National Conference of State Legislatures. 4 Jan. 2011. Web. < http://www.ncsl.org/legislatures- elections/elections/citizens-united-and-the-states.aspx>. Retrieved 15 Oct. 2012.

xii Independent expenditure and lobbying figures come from CACS analysis of Secretary of State’s records; these do not include expenditures after spring of 2012. Contribution figures come from followthemoney.org; these include expenditures through the summer of 2012. 

xiii Independent expenditure figures come from CACS analysis of Secretary of State’s records. Contributions figures come from followthemoney.org. Lobbying figures are taken from Marc Lifsher. “$500 million spent on lobbying the Legislature last year.” 21 Feb. 2011 Web. < http://latimesblogs.latimes.com/money_co/2011/02/500-million-spent-on-lobbyist-the- legislature-last-year.html>. Retrieved 13 Oct. 2012. 

xiv http://www.followthemoney.org/database/StateGlance/state_ie_spenders.phtml’s=CA&y=2008 

xv This aggregation is not exclusive to union groups; business funded groups receive the same treatment.

xvi Although the vast majority of IEs occur in the general election, the primary database we used does not indicate when the spending occurred.

xvii Eliminating the amendment duplicates on the expenditure side necessarily introduces errors because the method of filing of amendments is not uniform in practice. Some refilled all expenditures on every amendment, while others simply filed the new expenditures. For each transaction, we used the values from the latest amendment available. However, if a transaction is not listed on the later amendment, we treated this as an omission, and assumed that the transaction actually existed but was not listed. Thus, if the absence in the later amendment was intended to mean that the transaction had not in fact occurred, that expenditure will be overcounted. An examination of a sample of transactions showed that these overcounting errors are much less frequent than the errors that would result from simply taking the values of the last amendment at face value.

xviii These were received from followthemoney.org who in turn obtained them from the Secretary of State.

xix We eliminated five committees that spent over $100,000 due to errors in the coding process. In order of largest to smallest expenditures these were Yocha Dehe Wintun Nation (#35), Altria, INC (#50), United Auburn Indian Community (#89), Athens Services (#90), and AARP (#93).

xx Because each committee obtains a new Filer ID each election cycle, sometimes with slightly varying names, these also had to be aggregated across election cycles.

xxi Most Uncategorized committees (36 total, none in the top 50 by total spending) were difficult to classify for lack of a website, telling name, or clear path of donors. As a matter of practicality, lower spending groups were not categorized, with no Uncategorized committees spending more than $510,000.

xxii Political Groups are created for the purpose of electing specific candidates, like Angelides 2006, the Democratic Party, and the Republican Party. Of course, their money ultimately comes from unions, businesses, etc.

xxiii  Virtually all of the major independent expenditures occurred during the general election, although the California Statewide Law Enforcement Association (Whitman’s second largest backer by IEs) spent several hundred thousand dollars during the primary season.

xxiv In a close 11th place, California Statewide Law Enforcement Association also spent $1.7 million supporting Whitman

xxv Battleground States Poll. The Wall Street Journal. 2008. Web. <http://online.wsj.com/public/resources/documents/info-flash06.htmlproject=elections06-ft&h=495&w=778&hasAd=1&mod=blogs>. Retrieved 12 Oct. 2012.

xxvi The Tsakopoulos family funded the group in three ways: Developer Angelo K. Tsakopoulos donated $6,130,000; his daughter and current US ambassador to Hungary Eleni Tsakopoulos donated 1,870,000; and the family development corporation, AKT Investments Inc, donated 700,000. 

xxvii See Figure 9 below.

xxviii Tucker, Jill. Teachers union may not sway schools chief race. San Francisco Chronicle. May 31, 2010. <http://www.sfgate.com/bayarea/article/Teachers-union-may-not-sway-schools-chief-race-3262715.php>. Retrieved 24 Aug.2012.

xxix Supra note vii.

xxx  Alliance for a Better California 2010 made additional independent expenditures $2.7 million for Jerry Brown in 2010.

xxxi Citizens United v. Federal Election Commission, Opinion of the Court. Supreme Court of the United States. 2010. Web. < http://www.supremecourt.gov/opinions/09pdf/08-205.pdf>. Retrieved 16 Oct. 2012. The opinion went on to say The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.

xxxii  Political Advertising Disclaimers. California Fair Political Practices Commission. Web.<http://www.fppc.ca.gov/IPmeetings/2012/PoliticalAdvertisingDisclaimersFactSheet.pdf>. Retrieved 12 Oct. 2012. An FPPC memo (Gary Winuk et al. Memo regarding Discussion of Independent Expenditures Legislative Reform Proposals. March 28, 2012. <http://www.fppc.ca.gov/agendas/04-12/15IndependentExpendituresLegislativeProposals.pdf>. Retrieved 12 Oct. 2012) interprets and cites statutory authority that is more clear.

xxxiii Personal communication with the Reform Division of the Secretary of State, July 19th, 2012.

xxxiv Winuk et al, Supra note xxxii. 

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