FEDERAL ELECTION COMMISSION Washington, DC 20463 August 12, 2005 MEMORANDUM TO: The Commission General Counsel Staff Director Public Information Press Office Public Records FROM: Mai T. Dinhvkt6\ Assistant G~n~~ounsel SUBJECT: Supplemental Materials for the August 4, 2005 Hearing Attached please find supplemental documents regarding the August 4, 2005 hearing on (1) the Definition of Federal Election Activity and (2) State, District and Local Party Committee Payment of Certain Salaries and Wages. The close of the period for submitting supplemental documents for the record was August 11, 2005. Attachments cc: Associate General Counsel for Policy Congressional Affairs Officer Executive Assistants -----_. -_. ---- , . Association of I State Democratic I ~hairs 1 it. I I Marl< Brewer President August 9, 2005 " I Mr. LanyNonon General Counsel Federal Election Commission 999 E Street, N.W. Washington, DC 20463 1) Re: Supplementary Testimony Dear Mr. Norton: . On behalf ofthe Association ofState Democratic Chairs, I want to thank the Commission for the opportunitY to testify at its hearing on August 4th regarding the defmition offederal election activity and state party allocation ofsalaries. The regulations that the Commission ultimately adopts on these subjects will have a direct and substantial impact on state and local poiitical.party committees. Because ofthe major impact these regulations will have, I would li:ke to request that the Commission extend the period from seven days to thirty days in which testimony can be supplemented. I would also like to extend an invitation to the Commission to attend and to take testimony from additional state party representatives at the next meeting of the ASDC. Any new regulations adopted by the Connnission should be infonned by state party experience with the law. The Commission should be aware ofthe financial costs and operational consequences ofthe regulatory choices that it will be tmlcing. When the regulations now being reconsidered were fir.st adopted, the Commission was acting tmder a rigid statutory deadline to complete the rulemaking. As a resul~ the Commission was unable to undertake an extenslve factual inquiry into the consequences ofits proposed rules. The Commission now has that opportUnity. By conducting a fulltr investigation prior to promulgating new regulations, the Commission can assure that the administrative record wen supports its regulatory decisions. Absent such inquiry, the Conunission runs the risk. of the promulgating regulations that are deficient for the same reasons that its present regulationS were found legally wanting by the District Court in Shays \I. Federal Elecrion Commission. The Commission's consideration of this request is appreciated. ~:rurs, Mark Brewer 430 SOUTH CAPITOL STREET, S.E. • WASHINGTON, DC 20003 ..~. Information Submitted by Chairman Thomas for the Record in FEC Rulemaking on Definitions ofTerms Explaining Coverage of"Federal Election Activity" August 8, 2005 One ofthe assumptions underlying some comments or testimony received is that the state and local parties are suffering under BCRA. While some party activists may be frustrated by the new law's added requirements, comparisons of2000 cycle and 2004 cycle financial activity don't seem to support the view that the law is in fact constraining party efforts. I have focused on Democratic party activity, and in particular on MI Democratic party activity, since our sole witness associated with a state party was from MI. In overall terms, in the 2000 cycle Democratic state and local parties reported about $140 million infederal disbursements. In the 2004 cycle they increased that amount by almost $14 million to a total ofabout $153.7 million. (Incidentally, Republican state and local parties showed almost no change in overall federal disbursements, going from about $165.8 million in the 2000 cycle to about $164.1 million in the 2004 cycle.) FEC Press Release, Party Financial Activity, March 2, 2005, p.5 (Attachment 1). Similarly, in its recent report, the Center for Public Integrity (CPI) reviewed overall receipts ofstate parties (Republican plus Democratic; federal plus nonfederal). CPI noted that state parties took in $65 million less in the 2004 cycle than in the 2000 cycle, but once the reduction in transfers from national parties was taken into account (about $303 million less in 2004), the state parties themselves had indeed raised $128 million more in the 2004 cycle than in the 2000 cycle. See "McCain-Feingold Changes State Party Spending," May 26, 2005, http://www.publicintegrity.orglpartylines/report.aspx?aid=690&sid=300 (Attachment 2); FEC Press Release, Party Financial Activity, May 15, 2001, pp. 8, 9 (Attachment 3); FEC Press Release, Party Financial Activity, March 2, 2005, p. 21 (Attachment 1). Looking just at Michigan, the State Democratic Party reported spending about $10.7 million for federal activity in the 2000 cycle, but increased to a level of about $13.8 million in the 2004 cycle. FEC Press Release, Party Financial Activity, Mar. 2, 2005, p. 22 (Attachment 1). 24 federally registered local Democratic parties in MI reported a total ofabout $3 million (federal disbursements plus the nonfederal share ofallocable activity) during the 2000 cycle, but 34 (10 more) federally registered Democratic local parties in MI reported a total ofabout $5.8 million (almost twice as much) during the 2004 cycle. Spreadsheet from FEC Database Showing MI Local Party Spending (Attachment 4). The CPI report, supra (Attachment 2), which adds both federal and nonfederal activity for Republicans and Democrats, shows that MI parties raised about $28 million for the 2002 cycle, but increased receipts to about S35 million in the post-BCRA 2004 cycle. (An effort to compare the 2000 cycle combined Republican and Democratic federal and nonfederal activity in MI with the 2004 activity suggests there was a drop-off. The Michigan Campaign Finance Network's "Citizen's Guide to Michigan Campaign Finance," pp. 12-13 (Attachment 5) indicates-after netting out intra-committee allocation transfers and national party soft money-that about $7 million more was raised by MI party committees in the 2000 cycle than in the 2004 cycle. The Democratic party committees, though, increased their receipts by about $2 million in the 2004 cycle, whereas the Republican party committees decreased their receipts by about $9 million. (Attachment 2.) It would be particularly helpful to assess whether VR, Voter ID (VID), and GOTV were constrained by the BCRA rules. One might first look at reported allocable party activity. It is apparent that federally reported allocable activity for Democratic state parties has gone down dramatically. Whereas the 2000 cycle showed a total ofabout $264 million, the 2004 cycle showed a total ofonly about $59 million. Spreadsheet from FEC Database Showing Democratic State Party Allocation and Other Federal Spending (Attachment 6). Since most VR, VID, and GOTV would have been shown in this category in the 2000 cycle, this, at first blush, suggests a drop-off in such activity. But even this evidence may not show a withering ofthese functions: First, the bulk ofthis reduction can be attributed to the fact that the practice of transferring funds from the national party committees to Democratic state parties to pay for allocable 'issue ads' mentioning federal candidates has been largely eliminated by BCRA. (In the 2000 cycle, national party soft money transfers to Democratic state and local parties totaled about $135.8 million, but in the 2004 cycle, after BCRA, there was none ofthis transfer activity. Meanwhile, the hard money transfers from Democratic national parties to state and local parties also went down, though less dramatically, from $77.6 million in the 2000 cycle, to about $66 million in the 2004 cycle. FEC Press Release, Party Financial Activity, May 15,2001, pp. 8,9 (Attachment 3); FEC Press Release, Party Financial Activity, March 2,2005, p. 21 (Atttachment 1).) The $147.4 million decrease in national party transfers probably corresponds to the changed practice regarding 'issue ads,' and accounts for most ofthe drop-off in allocable activity at the state party level. Second, after BCRA, most state party VR, VID, and GOTV is reported in a different category for Federal Election Activity (FEA). As Attachment 6 shows, while allocable activity ofDemocratic state parties was declining, other federal spending was increasing. This latter category went from $34.7 million in the 2000 cycle to about $139.5 million in the 2004 cycle. Focusing on the MI State Democratic Party, our FEC Database shows that in the 2000 cycle, about $8 million ($5 million soft; $3 million hard) can be identified as non­ advertising in the allocable activity category. See Attachment 7. Some ofthis would have been for administrative expenses, so it is impossible to know how much ofthis 2 amount was spent for VR, VID, and GOTV. By comparison, in the 2004 cycle, the MI State Democratic Party reported about $4.8 million in FEA. Id. At least we knO\\' this would not have included administrative expenses. Thus, although there may have been some drop-offin VR, VID, and GOTV, it probably was not dramatic. Ultimately, it is difficult to pinpoint how much VR, VID, and GOTV (i.e., activity other than 'issue ads') the state parties undertook in 2000 and whether such capability declined in relative tenns in the 2004 cycle. However, the CFI report, supra, analyzed this activity at the state party level in the 2002 election cycle and compared the 2004 cycle. It indicates that spending for such activity (Republican plus Democratic; federal plus nonfederal) went up from $44.1 million in the 2002 cycle (pre BCRA) to $71.4 million in the 2004 cycle. In sum, the foregoing research suggests that, by most measurements, state and local party campaign finance has not been inhibited by BCRA. It suggests that such committees have adapted well to the need to raise federally permissible funds.