Check-Bundling Tactic Hides Special Interest Clout

Refusal to consider real reform will let problem get worse

March 8, 2004

Madison - Campaign contributions to legislative candidates through a fundraising tactic that conceals large special interest contributions from the public grew by 89 percent between 1998 and 2002, a Wisconsin Democracy Campaign analysis shows.

Large individual campaign contributions made through so-called "conduits" to legislative candidates increased from $1.17 million in the 1998 election cycle to $2.22 million in the 2002 election cycle, and it is likely they will reach $2.7 million in the 2004 legislative elections.

That is due in part because the Republican-controlled Legislature and Democratic Governor James Doyle have refused to support and consider balanced, comprehensive campaign finance reform before the Legislature’s current floor session ends this week. The original Senate Bill 12, which was dumped last week, would have placed limits on conduit contributions to candidates.

The problem with conduits is they allow wealthy special interests and candidates to hide their cozy relationship from the general public. Special interests can pass candidates fat checks that do not appear on the candidate’s campaign finance report. Instead they are recorded as smaller, relatively indistinct contributions from numerous individuals.

Conduits are set up by corporations, professional associations, political parties and other special interests to collect contributions from individuals, bundle them together and send one large check to the candidate. Accompanying the check is a letter that identifies the individual donors and the organization’s name so the candidate clearly knows the special interest that is trying to buy influence.

For instance, Senate Majority Leader Mary Panzer received a check in August 2002 from the Chiropractic Health Information and Education conduit representing contributions from 17 chiropractors ranging from $75 to $510. But the bundled donations made for a much more influential $3,498 contribution.

"One thing voters ought to watch out for in the upcoming election is candidates who proclaim they are free from special interest influence because they will not accept PAC contributions. They’re deceiving voters unless they also refuse conduit contributions and large contributions from fellow candidates who do accept special interest money," WDC executive director Mike McCabe said.

The WDC analysis shows conduits are surpassing political action committees (PACs) as the preferred method to quickly infuse candidates in targeted races with huge amounts of special interest contributions in the homestretch of the election, as well as bombard elected officials with contributions when they are voting on public policy, particularly the state’s two-year budget.

In the end the sway these conduit contributions hold over candidates and elected officials is a key reason wealthy special interests get the policy perks or protection from spending cuts they want and the general public sees a bigger tax burden and no solutions to the problems they face including job security and affordable health care.

While there are limits on the amount individuals and PACs can contribute to candidates and political parties, a loophole in Wisconsin’s antiquated campaign finance laws allowed the creation of conduits to bypass individual and PAC contribution limits.

Here are some of the WDC’s findings involving conduit contributions and their recipients:

  • Conduits are increasing the amount of money they send to candidates, while PAC contributions have remained relatively flat (see Chart 1 below).

In 1999-2000 conduit contributions began to surpass PAC contributions. The surge in conduit contributions is occurring because PACs are subject to limits on the amount of money they can give to a legislative candidate - $500 to an Assembly candidate every two years and $1,000 to a Senate candidate every four years. Each Assembly candidate may only accept $7,763 in PAC money every two years and each Senate candidate only $15,525 every four years. Meanwhile, conduits can give and candidates can accept unlimited amounts of conduit contributions.

Chart 1

Total Conduit and PAC Contributions to Legislative Candidates
  • Conduits allow wealthy special interests located outside the candidate’s district or even outside of Wisconsin to steal the outcome of an election from the voters those candidates are elected to serve.

For example, in 2002 158 of 189 legislative candidates who received conduit contributions accepted more than half of them from contributors outside of their districts. Overall legislative candidates accepted six times more out-of-district conduit contributions than in-district - $1.92 million versus $297,763. Finally 15 legislators received more than $25,000 in conduit contributions in 2002, the vast majority from contributors outside their districts (see Appendix). Three newly elected GOP state senators received more than $100,000 from conduits, most of which came from people who could not vote for them.

  • Republican legislative candidates benefit substantially more from conduit contributions than do Democratic candidates. During the last five election cycles from 1993-2002, Republican legislative candidates received between two times and 4.3 times more large individual contributions through conduits than Democrats.

Chart 2

Conduit Contributions to Republican and Democratic Legislative Candidates

All told Republican legislative candidates accepted $5.8 million in large individual contributions from conduits - three times more than the $1.9 million accepted by Democratic candidates from 1993-2002.

The top conduit for legislative candidates is the state Republican Party’s Majority GOP Conduit, which doled out more than $2 million to GOP legislative candidates from 1993-2002 (see Table 1 below). It also was the top-giving conduit in each of the last five election cycles. Other top conduits for the 10-year period were conduits representing chiropractors, builders, realtors and bankers.

Table 1
Large Individual Conduit Contributions to Legislative Candidates*
1993 - 2002

CONDUIT AMOUNT
Majority GOP Conduit (State Republican Party) $2,041,083
Chiropractic Health Information & Education $566,781
Builders Direct Fund $357,238
Realtors Direct Givers Program $310,351
Alliance of Bankers for WI $239,822
Direct Givers of Waukesha County (County Republican Party) $214,448
WICPA Legislative Involvement Fund (Accountants) $166,085
WI Med Direct/Physicians for Better Government $142,997
Tavern League Direct Givers $131,465
Capitol Gains Club (WI Manufacturers & Commerce) $120,890
WI Optometric Association $110,000

* Table shows conduits whose contributions totals exceed $100,000.

As Republican legislative candidates in total are the leading recipients of conduit money, so it follows that the roster of top conduit recipients is dominated by GOP Assembly and Senate candidates (see Table 2 below). Most of the candidates who have received more than $100,000 from conduits were involved in a targeted race, special election or a recall at least once between 1993 and 2002.

Leading the list was former Assembly Speaker Scott Jensen, a Waukesha Republican and potential candidate for governor in 2002, followed by former GOP Senator Peggy Rosenzweig of Wauwautosa and former Republican state Representative Rick Skindrud of Mount Horeb.

Table 2
Top Legislative Recipients of Large Individual Conduit Contributions*
1993 - 2002

CANDIDATE OFFICE PARTY AMOUNT
Jensen, Scott R A98 R $256,261
Rosenzweig, Peggy S05 R $254,346
Skindrud, Rick A79 R $207,491
Lazich, Mary S28 R $199,788
Stepp, Cathy S21 R $166,582
Mistele, Nancy S27 R $150,378
Harsdorf, Sheila S10 R $149,057
Petak, George S21 R $145,142
Zien, David S23 R $143,325
Brown, Ronald W S31 R $141,995
Leibham, Joseph S09 R $141,072
Drzewiecki, Gary S30 R $126,576
Shibilski, Kevin S24 D $122,078
Foti, Steven S38 R $117,230
Plache, Kimberly S21 D $115,099
Kapanke, Dan S32 R $101,324
Barry, Jonathan S27 R $100,172

* Table shows recipients who received more than $100,000 in conduit contributions

  • The heaviest concentrations of large individual conduit contributions often are made to legislative leaders about the time the Legislature makes key policy decisions on issues the special interest behind the conduit has a stake in.

For instance, last June when the proposed 2003-05 state budget was before the Legislature, Assembly Speaker John Gard, whose influence over policy is second only to the governor, received $13,550 through conduits from wealthy special interests, the most conduit contributions of any legislator that month. Between March 31 when the state’s proposed two-year capital budget was sent to the Joint Finance Committee and June 30, Gard accepted $7,150 in large individual contributions from the construction industry. The industry’s key budget concerns were the state’s construction budget and spending on road projects.

While those contributions flowed in, the Republican version of the state budget crafted by Gard and other majority GOP leaders increased the governor’s proposed 2003-05 state construction budget by nearly $85 million or 16 percent, from $533.9 million to $618.4 million; revived 99 road projects worth $250 million delayed by the governor; and added four new major construction projects worth $500 million.

Senator Alberta Darling, a River Hills Republican who is co-chair of the Joint Finance Committee, received $9,234 in large individual contributions through conduits between March 24 and June 4 while her committee was acting on the proposed 2003-05 state budget. Conduits representing health professionals, institutions and insurers sent her $4,334 and backers of Milwaukee’s Parental School Choice Program gave her $2,250.

In turn the committee voted down a $77 million a year assessment on health maintenance organizations, awarded the hospital industry’s lobbying group a $750,000 no-bid data collection contract and rejected the governor’s plan to draw $200 million from a fund that provides supplemental medical malpractice coverage for health professionals to help repair the budget deficit. The committee also inserted a proposal to lift participation and eligibility limits on the number of schools and pupils who can participate in the school choice program.

Toward this cause, the Fund for Choices in Education conduit was the top-giving conduit to legislative Republicans at $12,450 in large individual contributions between February 20, 2003 and June 30, 2003 when they worked on the budget.

In addition to the health care and construction industry conduits mentioned earlier, two other top-giving conduits to legislative Republicans were ones representing the Tavern League of Wisconsin and the Wisconsin Beer Distributors Association which contributed $7,490 to Senate and Assembly Republicans when the budget was in play, including $5,915 to four members of the budget-writing Finance Committee, Gard and Assembly Majority Leader Steve Foti.

At the same time, the committee inserted a plan ultimately approved by the Legislature that prohibits police from cracking down on illegal video gambling in taverns, and transfers enforcement authority to Department of Revenue tax collectors. The tavern industry says the change was needed to promote uniform enforcement of the law, but critics claim it substantially reduces resources needed to find and remove the machines.

Appendix

Top Recipients of Conduit Contributions in 2002*

Legislator Office Party In-District
Conduit
Contributions
Percentage
In
Out-District
Conduit
Contributions
Percentage
Out
Total
Conduit
Contributions
Stepp, Cathy S21 R $4,330.00 2.60% $162,251.96 97.40% $166,581.96
Brown, Ronald W S31 R $4,295.00 3.02% $137,700.00 96.98% $141,995.00
Leibham, Joseph S09 R $13,357.00 11.11% $106,865.00 88.89% $120,222.00
Jensen, Scott R A98 R $5,990.00 7.43% $74,614.00 92.57% $80,604.00
Williams, Mary A87 R $400.00 0.66% $60,604.88 99.34% $61,004.88
Wood, Jeffrey S A67 R $850.00 1.46% $57,564.59 98.54% $58,414.59
Towns, Debi A43 R $2,560.00 4.98% $48,828.60 95.02% $51,388.60
Van Roy, Karl A90 R $993.00 1.98% $49,086.48 98.02% $50,079.48
Reynolds, Tom S05 R $5,866.00 13.23% $38,467.00 86.77% $44,333.00
Gard, John A89 R $4,175.00 9.62% $39,203.00 90.38% $43,378.00
Foti, Steven A38 R $5,250.00 13.03% $35,050.00 86.97% $40,300.00
Kanavas, Theodore J S33 R $10,855.00 31.75% $23,338.00 68.25% $34,193.00
Weber, Becky A05 R $1,300.00 4.08% $30,595.00 95.92% $31,895.00
Erpenbach, Jon S27 D $8,095.00 30.04% $18,849.38 69.96% $26,944.38
Zien, David S23 R $4,885.00 18.25% $21,876.71 81.75% $26,761.71

* Legislators who received more than $25,000 in large individual conduit contributions.