Memo to Government Accountability Board

Invited remarks regarding expectations of GAB

Presented: January 28, 2008
Posted: February 1, 2008

TO: Government Accountability Board

FROM: Mike McCabe, Executive Director, Wisconsin Democracy Campaign

SUBJECT: Invited remarks for January 28, 2008 meeting regarding expectations of GAB

Thank you for giving us this opportunity to present you with our hopes and expectations with respect to the Government Accountability Board’s role in the areas of campaign finance and lobbying regulation, election administration and ethics enforcement. We commend you on the work you’ve already done to get the new agency up and running, and we wish you well as you embark on the daunting task of reviewing all of the existing internal operating procedures, guidelines, rules, orders and formal opinions of the Elections Board and Ethics Board, as you are required by law to do within the first year of the GAB’s existence.

Issues that we believe deserve special attention from the Board include:

Statewide voter registration system

In the area of election administration, the greatest ongoing challenge facing the GAB is the creation of a computerized statewide voter registration system that works properly and facilitates voting in state elections. Although light can now be seen at the end of the tunnel, this is a mission not yet accomplished. We are pleased that an agreement was reached ending the state’s contract with Accenture. This was an important step. But the software Accenture created for this system still is fundamentally flawed, and you face the still-formidable challenge of fixing it and making it as workable as possible in the short term and eventually replacing it with something worthy of Wisconsin over the long haul.

Enforcement of law requiring disclosure of donors’ employer information

The state law requiring disclosure of the occupation and employer of any donor who gives more than $100 to a candidate for state office is the heart and soul of our campaign finance disclosure system. Without this information, the public is denied valuable insight into the economic interests of campaign contributors and citizens have no way of evaluating a donor’s possible motivation for financially supporting a candidate.

A donation of over $100 that is not accompanied by the legally required employer information is an illegal donation, and should be treated as such. We believe campaigns should be required to return such donations after they have been given some reasonable period of time to obtain the required information.

However, recent efforts by the Elections Board to promulgate a rule requiring the return of donations under certain circumstances should be reviewed and redirected by the GAB. The Elections Board’s rule established $250 as the contribution threshold triggering enforcement of compliance with this law. This approach effectively relaxes state law. The GAB’s enforcement policy should be consistent with state law, requiring disclosure of the occupation and employer of any donor who gives more than $100.

We have observed over the years the reporting of many large donations for which there is no employer information furnished for the contributor. We also have observed many $100-plus donations for which information is provided that clearly does not comply with either the spirit or letter of the law. For example, we commonly see large donations on campaign finance reports accompanied with no employer listed for the contributor and only a vague title such as “consultant” or “self-employed” or “business owner.” Other common occupations we’ve encountered include “president” or “vice president” or “CEO” or “investor.” Without knowing the nature of the business or what kind of consulting is being done or what is being invested in, the public has nothing to go on to evaluate these donations. We urge the GAB and its staff to be on the lookout for this kind of shoddy disclosure.

Enforcement of campaign contribution limits

The Democracy Campaign annually brought to the attention of the Elections Board a list of individuals who, according to the campaign finance reports filed with the Board, had violated state law by making more than $10,000 in donations to state candidates in a calendar year. The Board’s response over the years was marked with inconsistency. Sometimes nothing was done. Other times the Board would suggest ways the donor could be made to appear in compliance with the law – such as offering to assign excess donations to a spouse. To the extent enforcement action was ever taken, it was sporadic and excessively lenient. Consequently, an unmistakable message was sent to big donors: Feel free to ignore these laws, because nothing much will happen to you if you do. The result was more donors breaking the law, more flagrantly.

For years, we were told by leaders of both the Elections Board and Ethics Board that they did not want to rely on punishment of violators to promote compliance of campaign finance and ethics rules, but rather preferred to “educate” the individuals and organizations they regulated about their responsibilities under the law. The Elections Board’s approach to enforcement of the $10,000 annual limit on donations is illustrative of the failure of this practice.

In retrospect, this “education” really amounted to accommodation and appeasement, which led to more and more brazen behavior, which was further accommodated and appeased, which bred even more disrespect for the law. This created a downward spiral into a political cesspool that necessitated criminal probes which culminated in a parade of top political leaders into courtrooms and, in some cases, into jail cells – no thanks, by the way, to either the Elections Board or Ethics Board, neither of which conducted investigations when alerted to apparent wrongdoing.

If you wish to educate those you are responsible for regulating, the best educational tool is swift and sure enforcement . . . and swift and certain and substantial penalties for violations. An unmistakable message needs to be sent to all participants in the political process – that our laws need to be obeyed and there will be serious consequences for failure to do so.

Regulation of electioneering communications

Interest group-funded “issue ads” – the unregulated and undisclosed spending on election communications designed to influence election outcomes without explicitly calling for the election or defeat of candidates – have effectively rendered Wisconsin’s campaign contribution limits, campaign disclosure requirements and the state ban on corporate donations meaningless.In 2006, special interests spent an estimated $15 million on undisclosed and unregulated electioneering communications, including more than $9 million in the governor’s race alone.

A 1999 state Supreme Court decision invited the Elections Board to require disclosure of “issue ads” sponsors and funders, and instead the Board chose to punt. Rather than embracing transparency – by alerting the public about who is spending money on issue ads and thereby sidestepping the state’s longstanding contribution limits and disclosure requirements – the Board adopted a rule formalizing the loophole for interest groups, the so-called “magic words test.” And then in 2001, the Board compounded its error by extending the same privileges to the state’s political parties. The GAB should revisit both of these decisions.

The decision of the United States Supreme Court in FEC v. Wisconsin Right to Life, Inc. (WRTL II) held that the federal ban on using corporate treasury funds for “electioneering communications,” as defined in the federal Bipartisan Campaign Reform Act (BCRA), was unconstitutional as applied to the plaintiff – a corporation – because the plaintiffs’ advertisements were not express advocacy or its functional equivalent. Technically, the ruling applies only to the particular ads reviewed in WRTL II, but it is widely recognized to have a broader impact. Indeed, the Federal Election Commission recently approved a new rule carving out an exemption from BCRA’s restriction on corporate funding of electioneering communications, based on the WRTL II decision. It is important to note, however, that WRTL II did not consider, let alone invalidate, the application of reporting and disclosure requirements to such communications paid for with corporate funds, and the FEC rule did not change those requirements.

The Court effectively ruled that funding restrictions can only apply to ads that are express advocacy or the “functional equivalent” of express advocacy. The Court provided some guidance as to whether an ad is the “functional equivalent of express advocacy,” beginning with the statement that it must be “susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.” The Court’s application of its “no reasonable interpretation test” to the Wisconsin Right to Life ads establishes a framework for determining whether an ad is subject to BCRA’s funding restrictions.

Describing the ads at issue and why they are not covered, the Court wrote: “First, their content is consistent with that of a genuine issue ad: The ads focus on a legislative issue, take a position on the issue, exhort the public to adopt that position, and urge the public to contact public officials with respect to the matter. Second, their content lacks indicia of express advocacy. The ads do not mention an election, candidacy, political party, or challenger; and they do not take a position on a candidate’s character, qualifications, or fitness for office.”

On November 20, 2007, the Federal Election Commission adopted regulations implementing the Court’s decision. In relevant part, the new regulations create a “safe harbor” for any corporate or union electioneering communication that:

(1) Does not mention any election, candidacy, political party, opposing candidate, or voting by the general public;

(2) Does not take a position on any candidate’s or officeholder’s character, qualifications, or fitness for office; and

(3) Either:

(i) Focuses on a legislative, executive or judicial matter or issue; and

(A) Urges a candidate to take a particular position or action with respect to the matter or issue, or

(B) Urges the public to adopt a particular position and to contact the candidate with respect to the matter or issue; or

(ii) Proposes a commercial transaction, such as purchase of a book, video, or other product or service, or such as attendance (for a fee) at a film exhibition or other event.

The new regulations also provide that the FEC will consider on a case-by-case basis whether, on balance, a communication that does not qualify for the safe harbor is susceptible of no reasonable interpretation other than as an appeal to vote for or against a clearly identified federal candidate, by considering whether the ad has “indicia of express advocacy” and is susceptible to interpretation other than as such an appeal. The FEC explains:

(1) A communication includes indicia of express advocacy if it:

(i) Mentions any election, candidacy, political party, opposing candidate, or voting by the general public; or

(ii) Takes a position on any candidate’s or officeholder’s character, qualifications, or fitness for office.

(2) Content that would support a determination that a communication has an interpretation other than as an appeal to vote for or against a clearly identified Federal candidate includes content that:

(i) Focuses on a public policy issue and either urges a candidate to take a position on the issue or urges the public to contact the candidate about the issue; or

(ii) Proposes a commercial transaction, such as purchase of a book, video or other product or service, or such as attendance (for a fee) at a film exhibition or other event; or

(iii) Includes a call to action or other appeal that interpreted in conjunction with the rest of the communication urges an action other than voting for or against or contributing to a clearly identified Federal candidate or political party.

(3) In interpreting a communication under paragraph (a), any doubt will be resolved in favor of permitting the communication.

Under current Wisconsin law, corporations are prohibited from making “disbursements,” defined in state law as a “purchase, payment . . . made for political purposes.” An act is for “political purposes” when it is “done for the purpose of influencing the election or nomination for election of any individual to state or local office . . . .”

The Wisconsin Supreme Court, as reflected in its 1999 ruling, has clearly held that either the Legislature or the administrative agency responsible for rulemaking in this area – then the Elections Board and now the Government Accountability Board – has the authority to define whether certain “issue ads” amount to electioneering communications and should therefore be subject to regulation.

It also is clear that existing state administrative rules pertaining to electioneering communications are outdated and fail to account for the latest jurisprudence in this area, namely the 2003 U.S. Supreme Court ruling in McConnell v. FEC and the Court’s 2007 ruling in FEC v. WRTL.

We reiterate our strong belief that both the state Elections Board’s rule institutionalizing the antiquated “magic words test” and the later decision to permit state political parties to sponsor undisclosed and unregulated election communications should be revisited. We urge the GAB to consider a state rule modeled after the new FEC rule, along the lines of the following:

A disbursement (paid for with corporate treasury funds) for political purposes is permissible if it:

(1) Does not mention any election, candidacy, political party, opposing candidate, or voting by the general public;

(2) Does not take a position on any candidate’s or officeholder’s character, qualifications, or fitness for office; and

(3) Either:

(a) Focuses on a legislative or executive matter or issue; and

(i) Urges a candidate to take a particular position or action with respect to the matter or issue, or

(ii) Urges the public to adopt a particular position and to contact the candidate with respect to the matter or issue; or

(b) Proposes a commercial transaction, such as purchase of a book, video, or other product or service.

Corporations that make disbursements for political purposes are subject to disclosure and reporting requirements as defined in s. 11.06.

At a bare minimum, the GAB needs to reconsider the Elections Board’s 2001 decision to treat political parties the same as advocacy groups when it comes to the sponsorship of election-related communications. By legal definition and by their very nature, what political parties do is done for political purposes. Any ads they sponsor that identify a candidate for office or refer to a specific election should be subject to regulation. Any “safe harbor” carved out for legitimate grassroots lobbying or authentic issue advocacy should not apply to political parties.

Organizational culture, past practices and operating procedures

Both the Elections Board and Ethics Board were established during a more innocent period in Wisconsin’s political history, and the organizational culture and mode of operation of both agencies were reflective of that bygone era. Wisconsin’s political culture has changed dramatically in recent years, and the Government Accountability Board’s creation was a reaction to the culture shock that Wisconsinites experienced. The way the Government Accountability Board and its staff function needs to be in keeping with the new political realities in our state.

In dealing with all elements of the regulated community, both the Elections Board and Ethics Board were very accommodating. As its name implies, the new agency needs to replace this accommodation with stricter accountability. The old agencies reacted to events, and usually not very forcefully or effectively. That left emerging problems unaddressed and allowed them to fester. We all know where this eventually led. The GAB needs to be proactive. Trouble needs to be headed off at the pass.

Up to now, trouble has not been averted. A case in point is illustrated in the article that appeared last August in the Milwaukee Journal Sentinel quoting then-Elections Board director and now-GAB legal counsel Kevin Kennedy saying he believed campaign finance laws may have been violated in a case involving the financing of a public opinion poll. But near the end of the story is this: “The Elections Board is not looking into the matter because it typically acts only if it receives a complaint .”

The Elections Board had all the authority it needed to investigate and take enforcement action on its own initiative but in this case, as in so many other instances, did not lift a finger because no citizen gathered all the evidence and filed a formal complaint. This practice is like a police officer witnessing a crime but refusing to do anything unless a bystander investigates the crime scene and swears out an arrest warrant. This is one internal operating procedure the Government Accountability Board simply must change. If you have reason to believe laws may have been broken, gather the facts and take appropriate enforcement action if there’s fire where you saw smoke.

As for the particular case involving the financing of public opinion polling, we are unfamiliar with another case quite like this one. Because it was not done during an election season and the polling was done on a legislative issue rather than for campaign purposes, it is not clear to us that campaign finance laws were violated. However, despite Kevin Kennedy’s expressions of concern that such an arrangement may have been illegal, the Elections Board by its inaction signaled the regulated community that there is no problem with financing a poll with commingled funds from one or more interest groups and one or more registered candidate campaign committees. If a similar situation arises and someone does file a formal complaint, the respondent to that complaint surely will cite the old board’s inaction in arguing that such conduct was presumed to be permissible. That is why it behooves the GAB to review this and other such issues, determine whether any laws have been violated, and clarify rules if necessary so that all participants in the political process in Wisconsin know what is permitted and what is not.

One final thought: To the greatest extent possible, the GAB should set policies establishing standard penalties for violations of campaign finance, ethics and lobbying laws. The penalties established by the Board should take into account the severity of the violation and should grow more severe for repeat offenses. Most law violations can and should be handled routinely, with the Board empowering and directing its staff to impose penalties administratively. This would not only enhance consistency of enforcement action, but also would free the GAB to remain focused on the most significant matters to which it must attend.