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Money transfers between PACs and Political Parties – McCain Feingold Loophole

A National Strategy Funds State Political Monopolies

Money transfers between PACs and Political Parties – McCain Feingold Loophole

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By his third year as chairman of the Alabama Republican organization, Mike Hubbard believed his party had just about everything it needed to win control of the State Legislature.

He had a plan: an 88-page playbook for the 2010 campaign, with detailed, district-by-district budgets and precise voter turnout targets. He had candidates: doctors, lawyers and small-business owners, most of them political novices recruited with an eye toward the anti-establishment fervor roiling the country.

What Mr. Hubbard did not have was enough money. Alabama law barred corporations, deep-pocketed natural allies for state Republicans, from giving more than $500 to candidates and parties — a limit that did not apply to the state’s unions.

So began a nationwide quest for cash that would take Mr. Hubbard, plan in hand, to the Republican Parties in states like Florida and Ohio, to a wealthy Texan who was one of the country’s biggest Republican givers and to a Washington organization that would provide checks from dozens of out-of-state corporations, among them Exxon Mobil, Google, Facebook and Altria.

Exploiting a loophole in the state law and a network of political action committees in Alabama and Washington, Mr. Hubbard shuffled hundreds of thousands of out-of-state dollars into the Republican organization in Alabama, vastly outraising the state Democratic Party. On Election Day, Republicans won majorities in both the State Senate and House of Representatives for the first time since Reconstruction — and Alabama joined the rapidly growing fraternity of states where government is controlled by a single political party, now the largest it has been in more than half a century.

Alabama’s transformation was the product, in part, of a sophisticated political apparatus designed to channel political money from around the country into states where conditions were ripe for Republican takeover. In 2010, the effort achieved striking success, moving a dozen states to sole Republican control, including presidential swing states like Ohio and Pennsylvania.

In 2012, a resurgent Democratic version — financed chiefly by labor unions and wealthy liberal donors rather than corporations — began to catch up, spearheading Democratic takeovers in Minnesota and Colorado.

Their combined work has helped remake the nation’s political landscape. Republicans or Democrats control both the legislature and the governor’s office in 36 states, the most in 60 years. Twenty-three states are now solely controlled by Republicans, and 13 solely by Democrats. In two others — New York and Washington — one chamber is jointly controlled.

In some states, the shifts are largely organic, the product of Latino immigration, economic transformation and other demographic forces. But elsewhere, the strategic deployment of campaign cash has helped consultants and donors accelerate or arrest states’ natural drift toward one party or the other, defying national election trends or voter registration advantages.

“People who want to see policies enacted, and see things tried, are moving their activity to the states, and away from Washington,” said Ed Gillespie, a longtime Republican strategist who has played a central role in efforts to swing state legislatures to Republican control. “There is a sense that you can get things done.”

Their party’s success has empowered Republican lawmakers in dozens of states to redraw legislative districts on both the state and federal levels, potentially ensuring their party’s control of the United States House of Representatives for the rest of the decade.

But those successes are also paving the way for what amounts to a vast, real-world experiment in lawmaking: At a time when Washington appears hopelessly divided and gridlocked, elected officials in one-party states have aggressively reshaped government policy, whether legalizing same-sex marriage and marijuana, abolishing taxes and regulations, or restricting guns or labor unions.

Their labors have propelled Democratic- and Republican-controlled states in starkly divergent directions. California, where the state capital is controlled entirely by Democrats, has expanded the range of nonphysicians who can perform surgical abortions, while states held by Republicans, like Texas, Oklahoma and Kansas, passed new limits.

In Connecticut, dominated by Democrats, lawmakers approved legislation that for the first time allowed citizens to register on Election Day to vote. But in North Carolina, Republicans, who control state government for the first time in more than a century, have outlawed same-day registration and passed some of the most stringent voter identification rules in the country.

Colorado, held by Democrats, has limited magazines in weapons to 15 rounds and required background checks for private gun sales, while Kansas, where Republicans enjoy legislative supermajorities, passed a rule opening most city and county buildings to people carrying weapons.

Interviews with more than 50 donors, strategists and elected officials involved with those efforts, along with a review of thousands of pages of public records, revealed how the Democratic and Republican state machines share an array of strategies and goals.

Both sides rely on interlocking networks of political action committees, party organizations and nonprofit groups, often based in states with forgiving campaign finance rules, that work in concert to raise contributions and shuffle money to thousands of local races around the country. In some states, liberal or conservative donors have established political nonprofits that function like shadow parties, often exempt from the contribution limits or disclosure requirements that apply to candidates and traditional parties.

Not unlike a political version of Cayman Islands banks, the networks allow political strategists to sidestep regulations and obscure the source of funds. Campaign contributions that would be banned or restricted in one state can be sent to a state where the rules allow money to flow more freely, often scrubbed of the identity of the original donor. Some groups work behind the scenes to orchestrate “money bombs” of smaller contributions from hundreds of different donors, allowing the groups to provide candidates with large doses of cash — fingerprint-free — even in states with low contribution limits.

Both networks arose to help Democrats and Republicans skirt the McCain-Feingold campaign-finance law, which sharply cut the flow of money from national parties to the states. But over the last three years they have been turbocharged by the Supreme Court’s Citizens United decision, which made it easier in many states for unions, corporations and the wealthy to pool money for large independent expenditures.

Today, state and even local races increasingly are financed by checks written hundreds or thousands of miles away. A five-figure contribution from a Colorado energy executive passes through a bank account registered in Pennsylvania, where it is mixed with money that ends up in the campaign coffers of an attorney general candidate in Iowa. Business money raised in Michigan, where corporate contributions to candidates are banned, fuels campaigns in Florida and Maine, where such contributions are legal.

Much of the money passes through a handful of Washington-based organizations: From 2006 to 2010, the volume of campaign cash flowing from Beltway-based groups to state parties and candidates almost doubled, to $139 million from $79 million, according to an analysis by The New York Times of data collected by the National Institute on Money in State Politics.

That figure is widely expected to grow in this year’s midterm elections: Strategists say donors are persuaded that dollars spent in relatively low-budget state elections can go further in advancing their agenda than money burned in the ceaseless trench warfare of Washington.

“The donors are saying there’s nothing going to happen in Washington anytime soon,” said Robert McKay, chairman of the Democracy Alliance, an elite club of liberal donors around the country that has been closely involved in efforts to move swing states into the Democratic column. “But conversely, progressive ideas can be hampered — or be promoted — at the state level.”

A Rare Opportunity

In early 2010, a little-known group called the Republican State Leadership Committee approached Mr. Gillespie, the party strategist.

Once part of the Republican National Committee, the group was forced by McCain-Feingold to reorganize as an independent organization, and had built up a respectable record of electing Republican state officials. But with furor growing over President Obama’s health care law, officials at the leadership committee believed they had a rare opportunity to topple Democratic majorities around the country.

Mr. Gillespie had a sterling résumé in Republican politics, with stints as head of the Republican National Committee and as chairman of the Virginia Republican Party. He was also a founder of one of Washington’s top lobbying firms, with an enviable Rolodex and deep ties to the Beltway’s trade associations.

Mr. Gillespie came on as chairman and chief rainmaker. Armed with PowerPoint slides showing long lists of likely pickup opportunities, he took his pitch to Wall Street investors in New York, energy executives in Dallas and dozens of corporate government relations offices in Washington.

Republicans could do more than just flip a few state legislatures, he told them. They could use their new statehouse majorities to build a firewall in the United States House of Representatives: congressional districts so favorably drawn for Republicans that the party’s House majority would endure for a decade.

“It was three yards and a cloud of dust,” Mr. Gillespie said of his hunt for dollars. “It was a constant working, and working, and working until it broke through.” (Mr. Gillespie is now talking about making his own bid for elected office, a run for the United States Senate in Virginia.)

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