Campaign finance

Sections

Links

Tipsheets

Section I: Local campaigns & NJ ELEC

So, you want to start writing kick-ass stories about all of the underhanded campaign fundraising you just know is happening in your towns?

Good, you’re going to have to want it really, really badly. Because in order to write these stories, you’re going to have to be willing to spend a considerable amount of time entering data from poorly-scrawled and rarely examined public documents. The very fact that these documents are open to the public and available through any computer with an internet connection, however, makes these invaluable. Most candidates also realize that very few of their constituents, much less journalists, know where or how to find these documents.

You’re going to learn how.

The first thing to understand is that New Jersey’s election laws require candidates, or anyone raising money in hopes of becoming a candidate for public office, to declare to the state where they get their money from and how they spend it.

Most of the background reading you’ll need is contained on the Web site for the Election Law Enforcement Commission (ELEC). You can find it at: http://www.elec.state.nj.us/. If you’re having trouble sleeping at night, you could try reading the manual ELEC compiles for candidates on the requirements of the law.

Here’s a quick and dirty summary. Candidates raising funds more than six months before an election must file with ELEC on the first quarterly filing date after they receive their first donation. The filing dates generally fall about the 15th of the months of January, April, July and October.

It usually takes a couple of weeks for all of the forms to be scanned and make their way to the internet. For local, municipal and county candidates, ELEC will simply post PDF scans of the actual report on its site. For state offices, you can at least search ELEC’s database, making it a little easier. Once the PDFs for local candidates are there, however, you can print them off to review or enter into the campaign finance database.

You should also note that if candidates only begin to collect funds within six months of the election for which they are running, the first report they file will be the 29-day pre-election report. All candidates file this report, and then they then must file 11 days before an election and 20 days after.

If money remains in a candidate’s warchest more than 20 days after an election, the candidate must either a) continue to report quarterly or b) roll that money into a committee for his or her reelection and begin reporting quarterly for that new campaign.

Essentially, this means candidates who raise too much money to spend it all in one campaign should generally be filing every three months between elections. This creates a huge paper trail for clever reporters to follow.

Before you’re able to search the ELEC Web database successfully, you will need to get IT to install Java on your computer’s Web browser. Call the Help desk at x4400 and ask them to get it done. Have your desk supervisor sign off on this for you with an e-mail. Without Java, you will be stuck.

Once you have Java installed, to start reading the reports, go to the ELEC Web site. On the right-hand column, you will see a section head entitled “Search”. Under that, click on the link to “View reports”. If you’re interested in looking at reports for an elected official (rather than a party organization), click the link to “View a Candidate/Committee Report”.

At this point, the easiest thing to do is to look at how many candidates you could potentially incorporate into your database. On the search screen, click on the drop-down menu for location. Scroll down to Passaic County (or Bergen County) and find the name of your municipality. Click the search button and this will return a list of all the candidates who have raised money for campaigns back to mid-1999.

One thing you have to realize about a lot of computer-assisted reporting is that you need to make some fairly arbitrary decisions about what data is relevant to you. Since the ELEC Web site only holds files back to 1999, you may wish to just use 2000-a nice round number–as the cut-off date for your database. If, however, your mayor or freeholders entered office in the late-1990s, you may want to include those earlier campaigns as well. You need to make that decision and explain it in any resulting stories. If you want to get reports pre-1999, you’ll need to request them from ELEC under the Open Public Records Act. Be forewarned, if you go too far back, this can get costly and time-consuming. For the right story, it may very well be worth it.

You also need to decide which elections you’re most interested in looking at.

Now, you may have noticed that ELEC has what it advertises as a “Searchable Campaign Finance Database” on its site. That database, however, only applies to statewide races as I mentioned earlier. If, like me, you’re interested in examining municipal campaign spending, you have to build your own database.

You can now start to print out the raw reports that you’ll need to use to start to fill such a database with numbers. You’ll want to organize your paper files a little bit to make the data entry easiest. Start by creating a section of your files for each year. Then, you’ll create a single manilla file folder for each candidate for that year’s election.

Search through the ELEC database for all the reports for that candidate for that year. For example, look for Jose Torres’ 2006 mayoral campaign reports. Because the ELEC interface is a little buggy, you can only print the reports out one at a time. When you have them all done in hard copy, put them in the manilla folder for that candidate. On the front of the folder, write out the dates for each report. As you enter them into the database, you can check it off as an easy way to track your data entry.

Once you print out the forms, the first one you’ll look for is the D-1 report. This form acts to create and organize a campaign committee. This also designates the campaign’s officers, whether they be chair, treasurer or other officials. These are important to note to see if patronage jobs go to campaign officials after a successful election.

The next thing you’ll want to look at is all of the information from the R-1 forms. The R-1 form allows you to keep track of the overall finances of a campaign. Under New Jersey law, candidates are only required to disclose the identities of donors who give more than $300 in a campaign (until last year, that threshhold was $400). Many candidates collect thousands of dollars from people who only can afford to give in small increments. These people you’ll never know. This is good because it allows you to focus on the heavy-hitter donors who control a lot of municipal business. You still, however, want to know how much a candidate is getting in little bits.

Note the date stamped on the front of the report. This indicates when ELEC received it from the candidate.

You’re going to learn a lot more about the political players in your towns by looking through Schedule A of the R-1 report. You’ll all of a sudden start to undersatnd the relationships between developers, real estate brokers and municipal governance. You’ll understand how a developer got the ear of the mayor for some cockamamie scheme when you see how much he donated to the last campaign. This is where the real relationships are spelled out.

Now we change lanes from the fund-raising to the spending aspect of the campaigns. The rest of these R-1 forms, starting with 1(D), look at who the candidate is paying and why.

You also want to look at donors who gave too much to a candidate by looking at the Adjustment Schedule. The candidates are only allowed to accept $2,600 from any individual or business over the course of a campaign. Of course, some donors will “accidentally” give too much money. When they do, the candidate is obligated to return the amount over the limit. This is useful for seeing who is maxing out on their donation limits and how timely the candidate is about returning money.

The caveat to all of this that you have to understand not only the ever-changing contribution limits that ELEC sets on poltiical donors, but you also have to look for the loopholes candidates use. Never assume that just because it looks like one company gave your candidate $30,000 that it is necessarily over the limits. Talk to the donor, and to the candidate to see how it was actually given. It may have been five individuals from the same partnership who gave personal checks, but the candidate’s campaign treasurer reported it as one lump sum. Ask for an explanation, and make them give you copies of the checks to prove it. And understand that even if you uncover something really egregious, ELEC is notorious for its lax enforcement. The very, very few candidates that it does penalize for violating the election law are often fined tiny amounts, usually about six years after they won re-election anyway. Still, it wouldn’t hurt for you to look and see if any of your politicians have been spanked for being caught with a hand in the cookie jar.

Finally, you’ll want to see what other candidates your candidate is donating to by examining Schedule 3(D). This is an indicator of which candidates are power brokers in regional politics and which ones are just begging for crumbs from the big boys.

This can get complicated pretty quickly, but for larger towns, it’s definitely worth the (extensive) investment of time to database your campaign finances. This can help you suss out trends over time and add up running totals without flipping through dozens of reports. Consider using this database template to start tracking your candidates. It requires a basic knowledge of Microsoft Access. The research reporter will be happy to help you get started.

-Tom Meagher, Dec. 2006

Section II: Federal campaign fundraising

Adapted from notes taken at IRE’s Following the money trails seminar on Jan. 21, 2006, run by The New York Times‘ Aron Pilhofer and Ron Nixon.

Aron has three pet peeves when it comes to campaign finances:

  1. The assumption that all politicians are greedy
  2. The assumption that all donations are evil
  3. The assumption that money equals corruption

That having been said, it is still very fruitful to understand who is giving money to politicians and why.

The way to cover campaign finances is to start early, convince your editors that it is important, and avoid being a stenographer. Lead the coverage, don’t respond to soundbites.

Keep in mind that this is a complex topic. Money is flowing everywhere, and increasingly it’s going from state parties to the federal party apparatus and back. There’s a lot to keep track of. We need to understand this as much as we can, because our sources are more sophisticated than us, and they know it.

Things have changed a lot since 1988, when soft money came in vogue. Democrats innovated this loophole, and the Republicans mastered it. Soft money is money raised by party committees for “party-building purposes”, or for activities not directly related to elections. The money was spent on issue ads and state parties.

Eventually, in later years, soft-money was disclosed to the FEC. Then “political non-profits” emerged.

The Bipartisan Campaign Reform Act of 2002 created this atmosphere. The act, known as McCain-Feingold by the media and wonks and called “BCRA” (pronounced Bick-ra), works as it was intended, but 527s were one of its unintended consequences. BCRA does not ban issue ads. It bans funding from corporate or union sources for issue ads. It indexes (and raises) contribution limits to inflation. It creates a new source of funding for state parties. “Levin funds” or “soft money lite” can be raised only from individuals, in $10,000 increments, by state county and local parties. Depending on state law, corporations can donate. The money cannot be transferred, and it must be used for very specific purposes. It also enacts criminal penalties for knowingly breaking the law.

Bundling, the legal grouping of donations by company, is allowed. To have somone else donate for you, and then reimbursing them, is illegal. When you see someone donating with a suspicious job title, call them to see how much they’re donating. Bush has mastered the art of networking donors.

State parties were extremely dependent on federal soft money, because the states could use it more efficiently. Before Levin funds, there were no prohibitions on donors or amounts to giving soft money. State parties now all have federal committees. Levin funds were not really used in 2004. Through BCRA, state parties will be required to spend federal hard money, or Levin funds, on state party activities, such as voter registration.

The biggest new development in several years is the creation of the 527 organization. These groups can take as much money as they want, don’t have to disclose anything and can spend it however they like, all perfectly legally.

Political nonprofits

Political nonprofits:

  • 501c3 - charitable organization
  • 501c4 - lobbying and public education
  • 501c5 - union
  • 501c6 - business leagues, chambers of commerce
  • 527 groups

Political nonprofits can engage in some level of political activity. They can not, however, engage in express advocacy, which means sending out communications that say “Vote for or against Candidate X”.

Nonprofits are all the rage these days.

501c committee types:
- front groups for unions and corporations
- membership groups such as the NRA or AFL-CIO
- Issue groups: MoveOn.org
- mobilization groups
- religious groups

How much do they spend on elections? A lot. 501cs can not make donations directly to a candidate. 527s can. If Congress reins in 527s, a lot of money will shift to 501cs, which will be bad for reporters. Organizations have a lot of different nonprofit statuses and, thus, a lot of different wallets.
The Sierra Club has 501c3, 501c4, a federal political action committee (PAC) and a 527.

501c3 allows a limited amount of lobbying, and it has to be mission-oriented. There is no “electioneering” activity and no “express advocacy”. The primary public record for this group is the IRS Form 990.

501c4s, 501c5s and 501c6s

These groups have no limits on lobbying. They have some limits on “electioneering” activity (they can’t spend corporat or union money within 30 to 60 days before an election). They are no permitted to perform any “express advocacy”. The public records for these groups are the IRS Form 990 and the lobbying disclosure forms and the FEC.

527s

Pre-2000, 527s were not required to disclose spending; they had no limits on electioneering; they had no limits on funding sources; they had no limits on contribution amounts; they were only forbidden from “express advocacy” in federal campaigns.

Then a law was passed to reform 527s. After the year 2000, 527s were forced to have some disclosure to the IRS, primarily in the Form 990 and in 8871 and 8872 forms.

Post-BCRA, 527s were limited on the amount of funding they could receive from individual donors and had some limits on electioneering.

Today, under the new, new, new 527 laws (post-2002), the 527 must disclose assets over $50,000 electronically to the IRS, there was an exemption for state funding and they were not required to file 990s any longer.

527s are a product of a loophole and not themselves a loophole. It was caused by the way difference in the way the IRS and FEC define a political committee. It is tax-exempt as a political committee because of IRS regulations. The term 527 comes from the section of the tax code under which political committees and PACS are granted tax exempt status. It’s an automatic status. You just have to declare the committee’s existence by filing with the FEC. There is no approval necessary. The IRS defines political committee as any group meant to influence policy or policy makers. The FEC defines a political committee as meant to advocate for federal candidaes. State law defines a committee as meant for state candidates. 527 committees advocate for neither state nor federal candidates and thus slip through the loophole.

501c organizations have many advantages:

Their money is largely undisclosed. Their individual donors are anonymous. The disclosure that is required is delayed until after elections. There are few restrictions on money.

They also have disadvantages:

Political activity cannot be their “primary purpose”. They must have an IRS-approved “exempt purpose”. There are tax implications for large donors - a gift tax. IRS will audit and strip tax status of 501cs that abuse the system. You have to be approved to get 501c status.

PACs are regulated by the FEC. They are allowed to give money to candidates and to go engage in “express advocacy”. 527s cannot engage in “express advocacy” but are not regulated by the FEC.

Donations to 527s are restricted to $2,000 per individual, per election.

527s have to file with the IRS on the federal election schedule - quarterly on even years and semi-annually on odd years.

Who has to file?

- Any political entity engaged in politically-related activity not required to file with their state or FEC, must file with the IRS.

- These groups do not have to be formal or incorporated. A bank account can be considered a 527.

Either they file with the IRS, or the money is income and they must pay taxes on it.

The IRS has an online database with 23,000 groups listed, but only 600 to date (Jan. 2006), are true 527s. The data is very dirty and the IRS does not clean it in any way. The Center for Public Integrity does have a 527 database. The 527 is often based in DC or Virginia. It has a lot of cash. If you think you find one, go to the state and look for a similarly-named committee or state PAC. Corporations are donating to 527s that are trying to elect state and local governments. 527s may begin to shift their efforts more toward voter turnout and state AG races.

Some other resources:

Look at your federal candidates’ “Statements of economic interest” by visiting The Center for Public Integrity’s Our Private Legislatures site. The forms, however, are notorious for incompleteness. The Center also has a great site on 527s.

For state campaign finance information, Follow the Money is a good resource. If you call the institute that runs it, they will help you with questions. Pilhofer, however, does not trust their special interest codes in their data.

TV stations maintain “ad buy reports” that are open to the public. You can go and view them to see which candidates are spending money in your market. Also, the Campaign Media Analysis Group keeps records of advertising spending. They have a paid Web site, but you can call them to ask how much money has been spent in your area.

Another helpful Web site is the Green Papers, although its author is, um, colorful.

A source: Larry Sabato at the University of Virginia’s Center for Politics has done a lot of work looking at “walking around” money or “get out the vote” money.

Also, look at the lobbyist disclosure forms. They will tell you what bills each lobbyist is working on. You can run the number of the bill through THOMAS to see what bill it is.

Taxpayer.net has a pretty big axe to grind, but the Taxpayers for Common Sense do great work on tracking earmarks, or pork, in federal spending.

The Washington Post maintains a database of every U.S. Congress vote since 1991.

Project Vote Smart lines up legislator’s votes with interest groups and issues to see where they match.

The FEC

The way to track federal campaign donations is through the Federal Election Commission. If you visit its website, it has all the forms that candidates must use to file. Read the instructions for Form 1, the statement of organization. Form 3 is the report of receipts and disbursements.

In the enforcement matters page, people can file complaints against candidates, and matters are shown under review. You can query results of closed complaints. The jewel of the site, however, is under Campaign Finance Reports and Data. You can download and look at electioneering disclosure reports.

When you make an “electioneering communcation” you have to disclose the donors who gave money. If they spend more than $10,000, they have to file with the FEC within 24 hours. An “electioneering communication” is a broadcast that in anyway identifies a federal candidate 30 days before a primary or 60 days before a general election.

But there are several pitfalls to looking at FEC data online:

  • The downloads are difficult.
  • They don’t have street addresses for donors.
  • What you know people as publicly may not be how their names are listed.
  • If you are going to use someone’s name, check, double check and triple check it. Then call them and check with them.
  • In regards to excess contributions: filings are frequently amended later with reimbursements, so make sure you check the amended filings.
  • In regards to lobbyists, when a company lobbies on its own behalf in the house, and is a registered lobbyist, its totals include how much it spent on external lobbyists as well. Beware.
  • Individuals donating at a group fundraiser will be listed in an organizational table with PACs.
  • Donors can give to a PAC, and earmark the money for a single candidate. It appears to come from the PAC, but it is counted by the FEC as coming from the individual.
  • The federal government recognizes an LLC as individuals, so a contribution as an LLC can go over the spending limit as long as its officers itemize their contributions.
  • The people who never show up in documents are the fundraisers who organize parties and dinners, but don’t themselves donate.

In thinking about stories to do on campaign finance, think “Who does it hurt and how does it hurt them?” An area ripe for reporting is the nexus between campaign contributions, transportation and contracts. Think about what stories you want to write. Don’t go on a fishing expedition through data. Think of what are the big issues. How will reports illustrate behind the scenes machinations? Who are the winners? Who are the losers? Start with the issues and move to the data.

For good stories, show the quid and the pro quo. Show donations, the likely effect and the letter between the donor and the candidate. This is a year-round issue, not just during election cycles.

One way to look at contributions is to put them on a timeline and see what day or week they spike. Then find the reason why.

To get the data, go to FEC.gov. Click on “Campaign Finance reports and data”. Use the Electronic Filing Report Retrieval system. Find and download the house or senate committee for the candidate you want. Every candidate committee has a unique ID number. Find the right ID number and track your candidate through year-end reports.

Derek Willis’ blog The Scoop offers a number of scripts to help you download FEC and amended filings. Be sure to look for amended filings.

The file you download will be a .fec file. Change the name to .txt. It is actually a comma-delimited text file (make sure that you get “Format documentation for downloads” in a .zip file). The resulting text file can be imported into Excel (starting with the 4th row). It is one spreadsheet of all expenditures and contributions. You can filter the columns and copy them into separate worksheets to make it easier.

Note that these are not the official filings, so things can change. The official filings are at ftp.fec.gov in the detailed files, but try the tutorial first. The memo fields are a hazard. Beware if anything is in it. Do not aggregate it because it is likely amended.

Read all the documentation you can get your hands on.

For help at the FEC, call Bob Biersack, its public information officer, at (202) 694-1220, or e-mail him at bbiersack@fec.gov. He is a data junkie and very helpful.