FEC Annual Report 1995

Federal Election Commission Annua1Report1995 Federal Election Commission Washington, DC 20463 Commissioners Lee Ann Elliott, Chairman John Warren McGarry, Vice Chairman Joan D. Aikens, Commissioner Danny L. McDonald, Commissioner Scott E. Thomas, Commissioner Statutory Officers John C. Surina, Staff Director Lawrence M. Noble, General Counsel Lynne A. McFarland, Inspector General The Annual Report is prepared by: Louise D. Wides, Assistant Staff Director, Information Division Stephanie Fitzgerald, Editor, Information Division Deborah Levenson, Writer, Information Division Robert W. Biersack, Supervisory Statistician, Data Division R. Blake Lange, Chart Design, Administrative Division FEDERAL ElECTION COMMISSION WASHINGTON, D.C. 20463 OFFICE OF THE CHAIRMAN June 1, 1996 The President of the United States The United States Senate The united States House of Representatives Dear Mr. President, Senators and Representatives: We are pleased to submit for your information the 21st Annual Report of the Federal Election Commission, pursuant to 2 u.s.c. S438(a)(9). The Annual Report 1995 describes the activities performed by the Commission in the Iast-cilendar year. The report also includes the legislative recommendations the Commission has adopted and transmitted to the President and the Congress for consideration. Most of these have been recommended by the Commission in previous years •. It is our belief that these recommendations, if enacted, would assist the Commission in carrying out its responsibilities in a more efficient manner. This report documents the rapidly increasing demands on Commission resources brought about by record numbers of federal candidates and campaign expenditures. Despite new Commission initiatives to handle filings, audits,· and enforcement matters more efficiently, the Commission remains overwhelmed by a growing enforcement case load and by. massive amounts of data flowing from record election activity. The current system of reporting requirements and contribution prohibitions and limitations, and the resulting audit artd enforcement mechanisms required. to administer these provisions, are complex. The Commission remains in urgent need of additional resources to meet those responsibilities. Respectfully, ~~~Chairman Table of Contents Introduction 1 Chapter Five The Commission 33 Chapter One Commissioners 33 Keeping the Public Informed 3 Office of Equal Employment Opportunity Public Disclosure 3 and Special Programs 33 Educational Outreach 5 Ethics 33 National Clearinghouse Inspector General 33 on Election Administration 7 Computer Upgrade 33 The FEC's Budget 34 Chapter Two Chapter Six Interpretation and Enforcement Legislative Recommendations 39 of the Law 9 Regulations 9 Advisory Opinions 9 Chapter Seven Enforcement 10 Campaign Finance Statistics 63 Appendices 75 Chapter Three 1. Biographies of Commissioners Legal Issues 13 and Officers 75 Massachusetts Citizens for Life 2. Chronology of Events 79 Rulemakings 13 3. FEC Organization Chart 83 Coordinated Party Expenditures 17 4. FEC Offices 85 National Committee Status 17 5. Statistics on Commission Operations 89 Disclaimers 17 6. 1995 Federal Register Notices 93 Definition of Member· 18 7. Corporate and Labor Personal Use of Campaign Funds 19 Communications and Facilities 95 Major-Purpose Test 20 Corporate Reimbursement Schemes 21 Campaign Loans 21 Earmarking 22 Constitutionality of Commission 22 Five-Year Statute of Limitations 23 Prosecutorial Discretion 24 Litigation vs. Legislation 24 Federal Preemption 25 Chapter Four Presidential Public Funding 27 Shortfall in Fund 27 Certification of Matching Funds 27 CD ROM Technology 28 New Public Funding Regulations 28 Rulemaking Petition on Electoral College Expenditures · 30 Repayment of Public Funds 30 Introduction 1 During its 20th anniversary year, the Commission personal expenses.2 The new regulations differentiate continued to safeguard the integrity of federal legitimate campaign and officeholder expenses elections. Established in the wake of the Watergate (which may be paid for with campaign funds) from scandal to administer and enforce the Federal personal use expenses, which are those expenses Election Campaign Act, the Commission marked its that would exist irrespective of campaign or anniversary by publishing a 40-page report that officeholder duties. Personal use expenses may not explored key campaign finance issues, trends and be paid for with campaign funds. The new regulations statistics. Two major rulemakings distinguished the also list examples of personal use expenses. anniversary year, as did the agency's response to In the public funding arena, the Commission government-wide budget cuts and a shortfall in the certified initial payments of public matching funds for Presidential Election Campaign Fund. 10 eligible 1996 Presidential candidates. 3 The total, Foremost among the Commission's $37.4 million, was the highest amount ever certified accomplishments during 1995 were two new for January payments. Candidates raised more rulemakings. The first, precipitated by the Supreme money earlier in their campaigns than their Court's 1986 decision in FEC v. Massachusetts predecessors had in past Presidential election cycles Citizens for Life, Inc. (MCFL), clarified the meaning of partly because the primaries were held earlier in 1996 "express advocacy"1 and exempted certain nonprofit than in past Presidential election cycles. Earlier corporations from the ban on corporate expenditures. primaries, coupled with low reserves in the The definition is based on the 1976 landmark case, Presidential Election Campaign Fund, caused a cash Buckley v. Valeo, and a 1986 court of appeals case, flow problem in the Fund. The result was that FEC v. Furgatch. In Buckley, the Supreme Court gave campaigns would receive only 60 percent of their specific examples of words that constitute express January certifications. 4 advocacy. The revised regulatory definition of express As the agency prepared for a Presidential election advocacy continues to treat this explicit wording as cycle, it suffered a 5 percent or $1.4 million rescission per se express advocacy. It also incorporates of its FY 1995 budget. Spending restraints imposed language from the Furgatch opinion, which urged earlier in the year, when the FEC feared losing 10 taking into account all elements of a communication percent of its budget, cushioned the adverse impact and, to a limited degree, the context of external of the cut. The net effect of the rescission, however, events, in determining the existence of express was a reduction in outreach programs and. a program advocacy. designed to expedite work. With regard to the exemption for certain nonprofit Although shut down in November because of the corporations, the MCFL decision permitted certain government-wide furlough, the FEC was one of nonprofit corporations, whose only purpose is several agencies that received their FY 1996 promoting political ideas, to make independent appropriations later that month. Because the 1996 expenditures without violating the ban on corporate appropriation of $26.5 million was only $800,000 expenditures. The new rules incorporate that decision more than the agency's FY 1995 appropriation and by providing specific criteria for determining which because Congress earmarked funds for corporations qualify for the exemption. computerization, the agency began to reduce its staff The other rulemaking clarified the statutory ban on candidates' use of excess campaign funds to pay for 2 2 U.S. C. §439a. 3 In 1996, an eleventh candidate, Alan Keyes, also quali fied for public matching funds. 1 "Express advocacy" refers to a communication that 4 By April1996, however, the replenished Fund provided expressly advocates the election or defeat of a clearly iden candidates with their full entitlement, including sums that tified candidate for federal office. had been temporarily held back in January through March. 2 and severely cut nonpersonnel expenses as it headed into the Presidential election cycle. The cuts meant further reductions in service and backlogs in agency work. The chapters that follow document the Commission's work during calendar year 1995. 3 Chapter One Keeping the Public Informed "Dedicated to keeping the public informed." This With regard to electronic filing, the new law autho was the Commission's motto to mark its twentieth rizes the Commission to permit committees to file year. Since its inception, the Commission has pro reports by means of computer disk or other electronic vided information to both the general public and the format on a voluntary basis. Since electronic filing will regulated community. "Keeping the public informed" be done on a voluntary basis, some committees will serves two purposes. It helps to create an educated choose to continue to file their reports on paper. The electorate, and it promotes compliance with the cam FEC will also make computerized images of these paign finance law. reports. The information from these reports and those Both the public disclosure program and the filed electronically will be entered into the FEC's data agency's educational outreach efforts promote com base, as was done before the new law. Once the FEC pliance. Public scrutiny of campaign finance records establishes communications links with the Clerk of the encourages the regulated community to comply with House and individual state elections offices, those the law, while educational outreach to the regulated offices will also be able to retrieve computerized

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