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June 1995 – Campaign Spending and Special Interest Influence on Upward Spiral in N.C.

June 20, 1995

Campaign Spending And Special Interest Influence On Upward Spiral

In N.C.As the state Senate debates major campaign finance reforms, a new report shows that the cost of winning a seat in the legislature — and the influence of special-interest money — are spiraling upward together.

Political action committees in North Carolina, tied largely to business interests, spent a record $5.1 million in the two years leading to the 1994 elections, new figures from the state board of elections reveal.

That’s a 62 percent jump over what the committees — called PACs — spent for the 1988 election, and seven times what they spent in 1976.

The biggest spenders were the committees sponsored by telephone companies, insurance firms, lawyers, medical groups, electric utilities, builders and realtors, and banks.

An analysis of the campaign reports by the non-partisan Institute for Southern Studies shows that most of the PAC money went to candidates for the state legislature. The same business interests are now lobbying legislators on such issues as telecommunications reform, tax breaks for insurance companies, a higher interest-rate ceiling for lenders, changes in restrictions on who can perform various medical procedures, tort reform, and a weakening of wetland protection and other environmental measures.

“PACs invested $50,000 a week for two years to help politicians get elected, and now they’re calling in their IOUs,” says Bob Hall, a research analyst for the Durham-based Institute. ” The typical Joe or Jane Voter has a tough time getting heard in this environment.”

“The ready flow of cash from PACs and wealthy donors into campaigns is also driving up the cost of elections, which makes candidates even more dependent on these well-endowed special interests,” says Hall. “It’s a vicious cycle.”

Based on reports at the board of elections, the Institute found that the cost of winning a seat in the legislature has jumped 5-fold since 1976, even after adjusting for inflation.

House members raised, on average, $1,925 to get elected in 1976 (or $5,063 in 1994 dollars) but had to raise S29,410 in 1994 to win. The price for a seat in the state Senate climbed from $3,263 in 1976 ($8,582 in 1994 dollars) to $42,048 in 1994. `

Ten members, led by freshman Rep. Charles B. Neely, Jr., a Raleigh corporate attorney, raised over $100,000 on their successful 1994 campaigns. Another 23 raised over $50,000.

According to Hall, legislative candidates took in a total of S9.2 million during the 1994 campaign and got a majority of their money from two sources: PACs and donors who contributed S500 or more.

“An analysis of these large donors shows that they are led by executives in the same seven business groups that top the list of PACs,” says Hall. “The notion of the citizen-legislator financed by barbecues and small donors is more fiction than fact.”

Institute researchers found that 31 percent of the $9 million come from PACs (directly or indirectly through other committees), and 22 percent came from individuals giving $500 or more. Another 14 percent came from candidates financing their own campaigns, led by state Senator John H. Carrington. Only 25 % of the funds raised by the candidates came from donors who gave $100 or less.

The report details how PAC money is “sprayed broadly, not simply among a few leaders.” Incumbents are favored, says Hall, but candidates of both parties, even those opposing each other for the same seat, get support.

Reforms passed by one Senate committee, and now before the appropriations committee, would address the spiraling cost of elections by placing a cap on campaign spending. Limits are set at between S30,000 and $135,000 depending on the candidate’s legislative district and opposition in a primary.

Because the U.S. Supreme Court recognizes political spending as a form of free speech, the limits must be voluntary. Under the bill in the state Senate, legislative candidates get a variety of incentives to encourage acceptance of the limits: (1) The ballot would designate candidates who abide by spending limits; (2) donors to those candidates could get a 75 percent tax credit on contributions of up to S100, a move to encourage more small donors; and (3) the campaigns could still take large donations, up to $2,000 per donor, while candidates not accepting spending limits could not take more than $500 from a contributor.

The bill also offers incentives to candidates for governor and lieutenant governor who accept strict spending limits, limits on the use of their personal wealth, and restrictions against negative ads attacking their opponents. Incentives include free TV time for ads and debates paid for by North Carolinians for Positive Campaigns, a newly created fund supported with private donations, grants, and a voluntary income tax check-off.

Proponents of campaign finance reform applaud the bill as “innovative,” although they argue the spending limits for legislative races are too high.

“Passage of these proposals would be a major breakthrough in controlling the skyrocketing cost of campaigns and the increased dependency on wealthy donors,” says Pete MacDowell, coordinator for the North Carolina Alliance for Democracy. The Alliance is a coalition of 32 groups that includes the League of Women Voters, Common Cause, the NC Council of Churches, and NC Fair Share.

“This is a chance for the legislature to move beyond posturing to positive action,” MacDowell urged. He noted that the bill contains a Republican-sponsored provision for term limits, passed by the House, as well as the Senate Democrats plan for spending limits. “We just hope this doesn’t get caught in the partisan cross fire and that the leadership of both parties recognizes how much the public wants an end to the way special interests dominate our political system.”

The Institute for Southern Studies, a member of the Alliance, has conducted research on campaign finance topics for more than a decade. Its current research is supported by grants from the Florence and John Schumann, Z. Smith Reynolds, and Arca foundations.

NOTE: The bill mentioned in this Report was tied to a requirement for Term Limits, and ended up dying in the Legislature.
This 1995 report is from the Institute for Southern Studies, the organization that gave rise to Democracy South.