Democrats may try to curb 527s

Senate Democrats are considering placing curbs on soft-money 527 groups amid evidence that they are beginning to lose the political advantage these largely unregulated funds have given them over Republicans.

This is a move Democrats had strenuously opposed during the last Congress, when they were believed to benefit from the lion’s share of 527 money, but now there is evidence that more of the money from these groups, named for a clause in the tax code, is flowing to the GOP.

Meanwhile, the second-ranking Senate Democrat, Assistant Majority Leader Dick Durbin (Ill.), is planning to introduce legislation in the next few weeks that would provide public funding for congressional candidates who qualify. He will unveil his bill in mid-March alongside Rep. John Tierney (D-Mass.), who has introduced similar legislation in the last several Congresses.

House Speaker Nancy Pelosi (D-Calif.) has weighed in by announcing that she supports public funding of congressional races, an idea that has not received serious consideration since 1993. And influential Democratic chairmen such as Appropriations Chairman David Obey (Wis.) and Financial Services Chairman Barney Frank (Mass.) also support it.

Senate Rules Committee Chairwoman Dianne Feinstein (D-Calif.) is expected to hold hearings on a broad array of potential campaign-finance reforms. She will look closely at the activities of 527 groups, which exploited a loophole in election law to raise more than $500 million in unregulated political funds in the last four years.

“I promised a group of people that we would do some hearings on it,” said Feinstein. “We’ll take a look at the 527, what it is today and where it appears to be going. I’d like to know exactly what 527s are doing. My exposure to them is necessarily limited, as it is for most members. It’s when you have a 527 weighing in against you that you want to know where this money is coming from.”

Senate Majority Leader Harry Reid (D-Nev.) has also said he is open to supporting new regulations for 527 groups, which can raise unlimited amounts of money to spend on federal elections. Reid, however, said that proposed legislation must be viewed with other proposals, such as restrictions on non-profit advocacy groups that have ramped up their spending in national races.

“We have to look at all of it — it can’t be the only one,” Reid said of 527 reform. “As long as it’s part of an overall package on campaign-finance reform.”

Though Democrats are approaching 527s cautiously, that they are approaching it at all represents a policy shift.

“The whole dynamic on the 527 issue obviously has changed,” said Meredith McGehee, the policy director of the Campaign Legal Center, who played a central advocacy role when Congress last passed landmark campaign reform in 2002.

While Democrats overwhelmingly supported the 2002 legislation, they have largely opposed efforts since then to curb 527s. 

“The last time, those of us who supported efforts to deal with 527s got most of our support from the Republican side,” said McGehee. “What we’ve heard subsequent to the election is that Democrats were rethinking where they were on 527s because they were not getting the bang for the buck they expected and it was an equal-opportunity problem. Some Democrats are beginning to question whether Republicans may be better off in the long term [unless the law is changed].”

In the 2006 election cycle, the Republican Governors Association (RGA) raised significantly more money than any 527 group, according to Political Money Line, a nonpartisan group that tracks political spending. The RGA raised $42 million, nearly $14 million more than the second-biggest group, the Democratic Governors Association. The fourth-richest 527 was the Republican State Leadership Committee, which pulled in $19 million.

The conservative Club for Growth, which raised $6.4 million, ranked 10th among 527s in the last cycle. The Economic Freedom Fund, which also advocates for lower taxes and less government regulation, raked in over $5 million.

Steve Weissman, the associate director for policy at the Campaign Finance Institute, another group tallying political spending, said that Republican gains are less dramatic when 527s that spend money for state elections are set aside.

He said that 527s concentrating on federal races gave more than twice as much to Democrats than Republicans in the last election cycle. But he said the disparity was even wider in the run-up to the 2004 election, when Democratic-allied groups outspent GOP-allied groups by a three-to-one ratio.

Advocates of reform such as Joan Claybrook, the president of Public Citizen, said there is pressure on Democratic leaders to act because many newly elected lawmakers had signed pledges to “clean up Congress,” to reduce the influence of lobbyists, and to provide public financing to candidates who agree not to accept public contributions.

Publicly financed campaigns and 527 reform go hand in hand because groups that have the ability to spend millions in unregulated funds threaten to overwhelm candidates who vow to abide by clean election laws. 

“I’m real happy about it,” said Claybrook of Democrats’ new willingness to review 527 reform. “They were resistant in the past. I’m really pleased that they’re reconsidering that.”

Claybrook said that many new members won election to Congress in November because “the public was disgusted with lobbyists controlling the process.”

Howard Gantman, Feinstein’s spokesman on the Rules Committee, said his boss would work with Durbin on public financing legislation and explore ways to reduce the costs of campaigning.

“We’re going to be looking at a number of issues. The issue she is most focused on is high cost of TV advertising in federal campaigns,” he said. “Sen. Feinstein believes the airwaves are public airwaves and there should be a way to get more information about candidates to the public.”

Gantman said she would also look at reforming leadership political action committees, which lawmakers use to distribute funds to their colleagues, and reforming the presidential public financing system.

Sen. Russ Feingold (D-Wis.) has introduced legislation that would restructure presidential public financing for the 2012 election as well as legislation that would require that Senate candidates file electronic campaign finance reports, which are easier to review than paper forms.