The Rural Patriot

August 21, 2006

New York State Soft Money Loophole

Filed under: New York State — theruralpatriot @ 9:22 am

Since 1999, $53.2M of “soft money” donations have been given to NY political parties.  Soft money contributions are to be used for party building activities, housekeeping accounts, activities geared to “make the party stronger”, and for non-election activities.  “But, the New York law defining these purposes is so weak, the contributions effectively aid campaigns.” 

“The drafters of New York State law were not blindsided by the soft money loophole, they created it by setting a whole class of political contributions outside of all of the normal rules of the game,” said Megan Quattlebaum, Associate Director of Common Cause New York.  “New Yorks campaign finance laws were literally made to be broken, and political parties, wealthy individuals and special interests take advantage of that fact every day.  Our political leaders must thoroughly reform our campaign finance system and shut this loophole down,” she said. 

But, here is the “party-building/housekeeping account” loophole –  N.Y. Election Law 14-124:

The contribution and receipt limits of this article shall not apply to monies received and expenditures made by a party committee or constituted committee to maintain a permanent headquarters and staff and carry on ordinary activities which are not for the express purpose of promoting the candidacy of specific candidates.

This type of contribution can be of an unlimited size.

“Parties are not supposed to use the money to support particular candidates, but this legal barrier does not hold up in practice.  New York’s campaign finance law was literally made to be broken.”

The top NY recipients since 1999 are:

1. Republican State Committee: $18.4 million.
2. Republican Senate Campaign Committee (2 accounts): $9.2 million.
3. Democratic State Committee: $6.5 million.
4. Conservative Party: $6 million.
5. Democratic Assembly Campaign Committee: $4.9 million.

Since 1999, only $45,118, or .1% has been used to fund voter outreach/registration programs.  The largest category of expenditure was the undefined “Other” category, coming in at $18.18M.  Second largest category was Payroll/Wages at $9.179M.

From Common Cause’s recently released 41 page report:  “The Life of the Party:  Hard Facts on Soft Money in New York State”:

*Since 1999, businesses have given $32,176,987, or 60.5% of all soft money contributions; individuals have given $10,435,074, or 19.6%; unions have given $4,830,818, or 9.1%.

*Soft money donations are given in amounts that dwarf what would be legal if the funds were given to candidates, despite the fact that NY State has remarkably high limits on contributions.

*Elected Officials and candidates for state offices have been involved in raising soft money, further blurring the lines between campaign and non-campaign fundraising.

*Just two Counties – New York (Manhattan) and Albany, and the District of Columbia were the source of over 55% of all soft money raised since 1999.

*The top five contributions raised by the top five party committees are given by a “who’s who” list of New York’s political players.

*Over 93% of the total amount of soft money received since 1999 ($49.5M of the total $53.2M) is raised by the top ten Soft Money Recipients.”

New York State Election law dictates that individual contributions to a political candidate or committee may not exceed an aggregate total of $150,000/year; business contributions cannot exceed an aggregate total of $5,000/year.  Political committees may not accept more than $84,400/year from an individual, and $5,000/year from a business.  Remember, however, that soft money contributions have no dollar limit attached.  Here are some examples of large soft money contributions:

*A $705,750 check from New York City Mayor Michael Bloomberg, a billionaire, to the Republican State Committee in 2001. Over the last five years, Bloomberg has given the committee $2.1 million.

*A $2.05 million donation from the Greater New York Hospital Association, over the last seven years, to various Democratic and Republican committees. Legislators have wrangled recently over reimbursement rates given to hospitals and whether to close some facilities.

*A $1.2 million donation from the powerful health-care workers union, SEIU 1199, over the last seven years to various committees. Union members won about $1 billion in pay raises under a health-care law enacted in 2002.

*A total of $440,000 from Kawasaki Rail Car, over the last six years, to several Republican committees. Kawasaki won a contract in 2003 to build new subway cars for the Metropolitan Transportation Authority, a state-controlled agency that oversees mass transit in greater New York, according to the report.

99% of New Yorker residents do not donate to a state-level campaign.  That leaves the remaining 1% who contribute, and about one third of them are contributing $50,000 or more at a time. 

The report contains concerns related to “pay to play” type corruption:

Just as troubling to a functioning democracy as classic quid pro quo corruption is the danger that officeholders will decide issues not on the merits or desires of their constituencies, but according to the wishes of those who have made large financial contrbutions valued by the officeholder.  Even if it occurs only occasionally, the potential for such undue influence is manifest.  And unlike straight cash-for-votes transactions, such corruption is neither easily detected nor practical to criminalize.  The best means of prevention is to identify and to remove the temptation.  The evidence [in this opinion] … convincingly demonstrates that soft money contributions to political parties carry with them just such temptation.

Governor George Pataki and the democratically-led Assembly support a ban on soft money; however, the republican-led Senate have resisted efforts for the ban.  Common Cause, in their report, is calling for a full reform of New York State’s campaign finance laws.

As we have noted throughout this report, even the regulated, “hard” money portion of New York State campaign finance law is incredibly weak.  State leaders must undertake a thoroughgoing reform of the entire campaign finance system by among other things:

* Dramatically lowering contribution limits.
* Closing the legal entities loophole.
* Closing the limited liability corporation loophole.
* Expading disclosure
* Strengthening enforcement
* Limiting the use of campaign contributions to those activities directly involved in campaigning.
* Finally, the state should create a system of voluntary public financing of elections.

… “Among our campaign finance law’s many disgraceful elements, soft money must be ranked as the most egregious.  It is a $53 million loophole that renders the regulations we do have functionally meaningless.”

“The same considerations that led the Congress to remove the taint of soft money from federal electons should lead our state legislature to ban soft money in New York.”

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