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Monday, March 07, 2005

Proposed 527 Legislation and the Schwarzenegger Connection

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Tuesday morning, the Senate Rules Committee takes up S. 271, a bill designed to close the 527 loophole that allowed a handful of rich folks to pour hundreds of millions of dollars into last year's presidential election. Senators McCain and Feingold are among the experts scheduled to testify before the committee, which is chaired by a recent convert to the importance of 527 regulation, Senator Trent Lott.

S. 271 would close the 527 loophole by automatically converting every 527 into a federal PAC – and thus subject to the same $5,000 limit and disclosure requirements as a PAC – unless the 527 meets one of several exceptions. The exceptions only exempt those 527s which raise very little money (less than $25,000 annually) or whose activity relates exclusively to state or local elections, candidates, constitutional amendments, or ballot initiatives.

The exception for 527s which deal exclusively with state issues would exempt the Citizens to Save California ballot committee (CSC), which was formed in January to pursue Gov. Schwarzenegger's ballot agenda by some of his closest confederates, and is a de facto 527.

Interestingly, Tuesday is also the day for Governor Arnold Schwarzenegger's fundraiser at the St. Regis Hotel in D.C. As Dean Murphy reports in The New York Times, a complaint filed by TheRestofUs.org against Schwarzenegger and CSC remains pending before California's Fair Political Practices Commission as the Governor travels to New York and D.C. to ask the big money boys for some bucks. The complaint is based on FPPC Regulation 18530.9, which states that the same limits which apply to candidates apply to the committees which they control.

In other words, if a candidate is subject to limits, any committees a candidate controls are or can be subject to the same limits. Of course, that seems like common sense to most folks, especially those that don't have friends that can give $1.5 million to a ballot committee without batting an eye, as Univision CEO Jerry Perenchio recently did to CSC.

CSC has filed a lawsuit against the Fair Political Practices Commission, the State of California's official campaign finance watchdog, claiming that FPPC Reg 18530.9 is unconstitutional. However, the Supreme Court's upholding of a similar federal law suggests that CSC's argument is on shaky ground.

The Bipartisan Campaign Reform Act (BCRA, also known as McCain-Feingold), did much the same thing for federal candidates as Reg 18530.9 does for California candidates, stating that if a federal candidate raises, directs, or spends any money for any state ballot committee, that that committee would be subject to the same limits that applied to the candidate.

Unfortunately for CSC and fortunately for the rest of us, the United States Supreme Court held in McConnell v. FEC that no one "seriously questions the ban" on unlimited donations to candidates or the committees that they control. The Federal Election Commission said much the same thing in an advisory letter to Arizona Rep. Jeff Flake, who wanted to play an influential role on a ballot committee in Arizona that planned to raise money in unlimited chunks.

From the standpoint of a member of California's congressional delegation like Rep. John Doolittle or David Dreier, who oppose Schwarzenegger's redistricting plans, the cap on donations to Schwarzenegger-controlled CSC makes sense. Without the cap on donations, Doolittle and Dreier would be at an even bigger disadvantage in raising and spending funds for committees that oppose Schwarzenegger's redistricting agenda.

If the FPPC finds that Arnold significantly influences CSC (see page 13 for Section 82016 of the Political Reform Act), the committee will have to return the big bucks it has illegally raised.

But, even if S. 271 becomes law and closes the 527 loophole at the federal level, the mega-wealthy will still be able to dominate the ballot initiative process at the state level by giving millions to ballot committees actually not controlled by candidates. The answer to this problem is not to throw the baby out with the bathwater, but to take campaign finance reform to its next logical step: a limit on contributions to ballot committees.

Rich folks don't have any more right to dominate the ballot initiative process, by which the public makes laws, than they do to dominate the election process, by which the public chooses representatives to make the laws. While not a final solution, the proposed 527 law and FPPC Reg 18530.9 both take steps towards creating a level playing field for ordinary Americans to take part in the political process.

Read more about TheRestofUs.org's complaint and the lawsuit filed by Governor Schwarzenegger and his allies against the FPPC.

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