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March 13, 2013
House Ways and Means Committee
Delegate Sheila Hixson, Chair
Delegate Frank Turner, Vice Chair
HB 1499 - Campaign Finance Reform Act of 2013
Position: Favorable with Amendments
Position: Maryland PIRG supports passage of HB 1499, which includes important reforms to increase transparency in campaign finance, close loopholes that allow big donors and corporations outsized influence in politics, and enables local governments to introduce public financing of elections. We look forward to working with the committee on the subject of campaign contribution limits, reporting requirements for party caucuses, and limits on transfers between slates.
Problem: Special interest money has long played an outsized role in our politics, but since the 2010 Citizens United decision we’ve reached a new level of big, secret spending in our elections.
In 2012 we saw 32 mega-donors contribute as much money to Super PACs as 3.7 million small donors gave to the Obama and Romney campaigns combined. Here in Maryland, 100 percent of independent expenditures in Congressional races came from outside Maryland. That of course is not the case in for state and local races, but out of state groups did spend big on state and local campaigns in 2012.
Outside spending refers to spending by groups independent of campaigns or political parties. These outside groups are legally prohibited from coordinating with campaigns. Citizens United v. FEC and subsequent cases that relied on its holdings led to increases in outside spending in elections by removing a number of restrictions and/or prohibitions on corporate and union political activity. Outside spending may put pressure on candidates, ultimately making them more beholden to moneyed special interests than to the public interest.
Another problem with the current system is that large donors may receive preferred access to lawmakers, giving them greater opportunity to influence policy and undermining citizens’ faith in our democratic process. While Maryland has campaign contribution limits in place, business interests are able to avoid contribution limits by making multiple contributions with various subsidiaries.
Currently, even if an LLC is owned or controlled by the same individual or entity as another corporation, contributions made through the LLC are reported separately. In addition to allowing corporate interests to give more than individual citizens, it also makes the process less transparent.
For instance, over the past two years, St. John Properties, a series of corporations owned by developer Edward St. John, have provided $250,000 to politicians on both sides of the aisle. Racetrack owner and slots advocate William Rickman contributed over $130,000 since 1999 through 10 different LLCs and partnerships. Closing this loophole is a long overdue reform.
HB 1499 introduces several measures to help rebalance the power in our democracy.
One of the most important measures in this bill closes a major loophole in Maryland campaign finance law that allowed owners or managers of corporations to exceed campaign contribution limits by making contributions through limited liability companies.
Another important measure in HB 1499 would give counties the authority to establish public financing for local elections. Public financing encourages a system where they fundraise by connecting with their constituents, not special interests. Nine states currently have provisions for public funding of elections on some level, and in those states public funding is only increasing in popularity.
HB 1499 also includes several important reforms for slates. One is simply that a candidate must be actively running for an elected position in that election cycle. This loophole can be abused in to allow someone to join a slate, raise funds, and then simply transfer them to an active candidate running for office on that slate. The requirement introduced here will ensure that our elections are more transparent and that donors know whom they are actually supporting.
HB 1499 also increases reporting requirements for out-of-state political committees seeking to influence Maryland elections. Currently, out-of-state committees can spend freely in Maryland without reporting their contributions to the State Board of Elections or any other regulatory entity. This bill provides reporting requirements, although it does not impose the same limits on out-of-state committees as it does on in-state political committees. That is a measure that would further strengthen the bill and the integrity of Maryland elections.
Other transparency measures included in this bill include limiting cash contributions, which are much more difficult to track, to $100 or less; requiring that independent expenditures of $5,000 or more be reported within 48 hours; requiring central party committees to file campaign finance reports; and enabling the State Board of Elections to impose civil penalties on entities that break any of these campaign finance rules. Currently, the State Board of Elections must refer transgressions to the state prosecutor, who often cannot spare the resources to pursue every infraction.
Maryland PIRG suggests friendly amendments that we believe will strengthen the bill. The first is a simple issue of language regarding slate reform. The way the bill currently reads, an incumbent who has not filed for candidacy in an upcoming election can still be on a slate. This language can easily be altered to help ensure that all members of a slate are active candidates.
The bill also raises campaign contribution limits. The individual limit is lifted from $4,000 to $6,000, and the aggregate limit is more than doubled from $10,000 to $24,000. This dramatic increase, especially for aggregate limits, could serve to make our elections less democratic by continuing to encourage candidates to focus more on large donors.
HB 1499 would also index campaign contribution limits to inflation so that they would adjust automatically every year. This makes it less likely that the General Assembly will revisit and revise these limits in the future. This is another point where Maryland PIRG believes friendly amendments could strengthen the bill
Finally, under current law, independent expenditure committees report donors who contribute more than $51. This bill changes that reporting requirement so that they would only have to report donors contributing $10,000 or more. That increase seems extreme, and we believe there is some room to negotiate for a lower requirement for reporting that will still prove reasonable. For example, the REC requires that independent expenditure committees operating in federal elections report donors who contribute more than $250. We hope to work with the committee to determine a contribution amount that seems reasonable to all parties.
Conclusion: HB 1499 includes many necessary reforms for our campaign finance system that will serve to make our elections more transparent and democratic. Maryland PIRG supports these measures and looks forward to working with the committee to pass amendments to further strengthen the bill. We urge a favorable report with amendments.
*Update: The Campaign Finance Reform Act of 2013 (SB 1039/HB 1499) as passed reforms reporting requirements for independent expenditures, authorizes civil penalties for violations of campaign laws and closes the loophole that allows out of state political action committees and limited liability companies (LLCs) to make unlimited political contributions.
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