report released by
NORTH CAROLINA ALLIANCE FOR DEMOCRACY
February 25, 1999
MILLIONS SPENT BY FARMERS FOR FAIRNESS
PROMPTS CALL FOR “ISSUE AD” REGULATION
Campaign finance reformers today called upon the state legislature to act quickly to “modernize” North Carolina’s election laws in response to a federal court ruling and “the threat posed by wealthy special interests using new ways to overwhelm North Carolina politics with their money.”
The N.C. Alliance for Democracy sent letters to legislative leaders urging passage of a measure that would include regulating so-called “issue ads” run within 60 days of an election. Issue ads have become an increasingly popular way for corporations and others to influence elections, yet avoid regulation because they stop short of using such words as “vote for” or “defeat.”
As Exhibit A for their case, reformers made public the most recent disclosure report for the hog industry trade group, Farmers for Fairness. It shows that the corporate-funded group spent $3.2 million, including $2.6 million for media advertisements, from June 1, 1997 to May 31, 1998.
No PAC or political party in North Carolina spent as much money in the same time period.
During hearings last year by the state Board of Elections, Farmers for Fairness media strategist Carter Wrenn testified that the group spent $10,000 a week against Rep. Cindy Watson. It also ran ads attacking Rep. Richard Morgan, Rep. Bobby Ray Hall and other legislators it opposed. The text of the ads was shaped by polls asking voters which message made them more or less likely to vote for the targeted candidate. The disclosure report shows FFF spent $118,000 on polls.
The Board of Elections ruled that the advocacy of Farmers for Fairness should be financed by a regulated political committee supported by non-corporate contributions. FFF has asked a federal court to overturn the Board’s decision, contending that even if its purpose was to affect an election, the content of its ads comply with the definition of issue advocacy and their costs can be paid for by tax-deductible dues from FFF’s corporate members. A decision by Judge Earl Britt is expected soon.
Last week, the Fourth Circuit Court of Appeals ruled that North Carolina’s ban on corporate spending on elections is unconstitutional because it doesn’t distinguish between various types of corporations. The Court did not tell the state legislature how to draw those distinctions, but did say it must allow leeway for “nonprofits that present a minimal risk of distorting the political process.”
“The Court’s ruling is being misinterpreted as a green light for corporate contributions,” said Warren Murphy, president of NCAD. “The Court specifically says a state’s ban on direct and indirect political spending by for-profit corporations has been upheld by the U.S. Supreme Court.
“We’re also concerned that the ruling will open a flood gate of political spending by front groups, like Farmers for Fairness. A nonprofit set up by a few millionaires can pose more than ‘a minimal risk’ to the integrity of the political process – and give its donors tax breaks, or back-door public financing.”
NCAD asks legislative leaders to adopt language in the federal McCain-Feingold bill that would create a new bright-line test for issue ads. If they run within 60 days of an election and focus on a candidate, they should be financed just like a regular political ad, even if they don’t say “defeat.”
“We should plug the loopholes,” said Murphy. “But the best remedy is to create an alternative for candidates to run independent of special-interest money. We need a publicly financed Clean Election program that would give them a way to challenge the polluters’ money in whatever way it flows.
The following letter from the North Carolina Alliance for Democracy accompanied the above release:
February 25, 1999
The Honorable Marc Basnight
The Honorable Jim Black
The Honorable Patrick Ballantine
The Honorable Leo Daughtry
North Carolina General Assembly
Raleigh, North Carolina 27601
On behalf of our 50 member groups and the millions of individuals across North Carolina who believe our campaign finance system is broken, I urge you to use the opportunity of the recent ruling by the U.S. Fourth Circuit Court of Appeals to make major repairs in our election law.
The urgency for action is made even more plain by the latest financial report of Farmers for Fairness, the nonprofit front group for the state’s biggest hog operators. The report, obtained by Democracy South, shows that Farmers for Fairness spent a total of $3.2 million from June 1, 1997 to May 31, 1998, including $2.6 million for “media buys” and $118,000 for “polling.” That is more money than any PAC or party spent in our state during the same period.
You and I know – and the state Board of Elections has ruled – that a great deal of these funds were devoted to influencing election outcomes in our state. Nevertheless, Farmers for Fairness continues to hide behind the First Amendment and claim that its advertisements qualify as “issue advocacy” because they avoided the use of a few key words (“elect,” “defeat,” etc.) To add insult to injury, it has instructed its corporate members to take a tax deduction on all but $480,707 of the $3.2 million spent with their dues. Its accountant says this treatment of “media buys” as a deductible expense means the members get $1 million worth of ads for a net cost of only $575,000. Taxpayers make up the rest; this is back-door public financing for the political speech of the rich.
The Fourth Circuit’s ruling could make this situation worse, or it could be occasion for the General Assembly to modernize our election law to meet the threat posed by wealthy special interests using new ways to overwhelm North Carolina politics with their money. The ruling follows a pattern of federal court decisions that treat political spending as identical with speech, making it difficult to regulate the influence of big money in politics. The Court may say it is protecting speech for all, but its ruling offers new opportunities for the wealthy to use their money to buy a bullhorn that drowns out the views of ordinary people and the non-wealthy candidate.
The Court recognizes that North Carolina has a right, upheld by the Supreme Court, to ban for-profit corporations from making contributions, directly or indirectly, to candidates or parties. But it says the state must allow certain nonprofit corporations to engage in independent expenditure activity, since they “present a minimal risk of distorting the political process.” Unfortunately, the Court fails to recognize that a nonprofit – such as a trade group financed by a few wealthy individuals – can operate on a scale that poses a serious threat to the integrity of the political process.
There are two basic approaches to address the Court’s ruling: try to fashion new rules to regulate the flow of money, or focus on creating an alternative source of money for political speech that promotes competition and reduces the reliance on wealthy donors.
We encourage state lawmakers to pursue both avenues.
In repairing the weaknesses identified by the Court, legislators will need to define what type of nonprofit corporations can engage in independent expenditure activity. (There is no mandate to allow a nonprofit or any other corporation to make political contributions; latitude is only required for relatively minimal spending that is not coordinated with a candidate or party.) We urge you to follow the Court’s ruling closely to sanction this new area of political activity only for non-business sponsored nonprofits, with tax exempt status.
You will also need to redefine what constitutes a political committee and what type of political activity is appropriate for regulation. Here, we urge you not to fall in the trap of seeing all political speech as either express advocacy or issue advocacy. Electioneering activity that doesn’t use certain code words is still subject to regulation. The important distinction is whether the activity is aimed at supporting or opposing the election of a candidate or is only promoting discussion of issues, including issues associated with a candidate.
The best way to encompass electioneering activity within the purview of the state’s regulation is to follow the model of the McCain-Feingold or Shays-Mehan bills in Congress. This model does not restrain genuine issue advocacy, nor will it stop bogus issue ads. It provides a clear test to distinguish between the two and then requires that the bogus ads be financed through a political committee, subject to contribution limits and disclosure rules, just like other electioneering activity.
The key parts of this test for legitimate versus bogus issue advocacy include (a) is it within 60 days of an election, (b) does it name a candidate, (c) is it directed at the candidate’s electorate, (d) is it disseminated through paid media, and (e) does its content have no reasonable meaning other than to elect or defeat the candidate. The Brennan Center at the New York University School of Law has drafted statutory language for Wisconsin legislators that incorporates this test. We urge you to seek the help of their nationally recognized experts to fashion an appropriate statute for North Carolina.
We do not minimize the difficulty in rewriting our election law to meet the standards of the federal courts. This brings me to the other avenue we urge you to take. Given the increasingly permissive environment for wealthy special interests fostered by the courts, it is absolutely essential for North Carolina to develop a meaningful Clean Election fund to finance candidates who demonstrate strong support among voters, reject the money chase, and voluntarily accept spending limits. More than ever, we need financially independent candidates who can compete in today’s money-driven politics.
The U.S. Supreme Court has ruled that controls on political spending must be voluntary but can be linked to incentives, such as public financing for candidates who meet certain criteria to establish their base of support among voters. This is the foundation of the N.C. Clean Elections Act introduced last year by state Sen. Wib Gulley and sponsored by a dozen senators.
New statutes should be put in place to remedy the overly broad language in the current law. But the fundamental problem of big money’s corrupting influence in politics will not be adequately addressed until a Clean Election fund is created to challenge that influence by giving candidates an alternative path to represent the voters, rather than wealthy donors.
Thank you for your leadership. Please let me know if we can be of assistance.
Warren Murphy, President