SECRET MONEY IN STATE AND LOCAL ELECTIONS FACILITATES CORRUPTION

The growth of secret money in state and local elections means that voters know less and less about who is working to influence their votes and the outcomes of their elections. Secret money is money spent by organizations that do not have to report their funding sources. Therefore, it is referred to as “dark” money. Most of this money is spent by social welfare non-profits (i.e., 501(c)(4) organizations) and trade or industry associations (e.g., the Chamber of Commerce or the Pharmaceutical Research and Manufacturers of America association, 501(c)(6) organizations). Based on the Supreme Court’s Citizens United decision, these groups can spend unlimited amounts of money on advertising and other campaign activities as long as it is independent of a candidate’s campaign, although the independence of such spending is often very questionable.

As I noted in my previous post, big money may have more impact in state and local elections than in federal ones. For example, a race for school board or a state’s public utilities commission costs much less than a race for federal office and gets much less media coverage. State ballot questions are also frequent targets of dark money spending. In such low-cost, low-information elections, it can be relatively easy to sway voters, particularly in non-partisan elections where party affiliation does not serve as a guidepost for voters.

These elections can have significant financial consequences, often for a narrow but economically significant constituency. A utility commission, for example, makes decisions that can effect energy corporations’ profits and homeowners’ electricity rates. Dark money at the state and local levels frequently comes from corporations and other special interests that have a direct and immediate stake in the outcome of the election, whereas at the federal level the outside spending tends to be more ideologically or party focused.

For less than $100,000, a corporation or wealthy individual can have a significant impact on a state or local election. When there is a significant self-interest at stake, this is a modest business expense. On the other hand, for state or local candidates or community groups, such sums are dauntingly large.

By using dark money for its campaign spending, the corporation or wealthy individual can hide its identity so voters don’t know who is trying to influence their votes or about the self-interested nature of the spending. And a growing portion of the big money in state and local elections is dark money. The ability to significantly affect or even dominate an election with high stakes but without public transparency means significant conflicts of interest can be hidden and outright corruption is facilitated. [1]

The Brennan Center for Justice recently studied outside campaign spending (i.e., spending not by a candidate’s own campaign organization) in six diverse states with almost a fifth of the U.S. population (Alaska, Arizona, California, Colorado, Maine, and Massachusetts). [2] It examined dozens of state and local elections in these states. It found that the amount of dark money spent in 2014 was 38 times what was spent in 2006, a rate of increase greater than that for federal elections. It also found that in 2006 76% of the outside spending was fully transparent – that the true identities of the donors was known to voters as they voted. In 2014, only 29% of outside spending was fully transparent.

In Arizona’s 2014 election for two utility commissioners, $3.2 million was spent by dark money groups. This was more than double what all six candidates’ campaigns combined spent and was almost 50 times the amount of dark money spent in the 2012 election. After the election, it was learned that the source of the money was the state’s largest private utility, Arizona Public Service, which didn’t like the state’s requirement that it buy power from homeowners’ solar panels that the homeowners didn’t need. (This is called net metering.) After the candidates the dark money supported were elected, the Commission shifted its stance from actively encouraging homeowner-generated solar power to making it more costly for homeowners.

In Mountain View, CA, a group calling itself the Neighborhood Empowerment Coalition spent $83,000 in dark money in the 2014 city council election. This was more than half of the combined total of what all nine candidates’ campaigns spent. Land use and housing policy were prominent issues in the election in this community where property values and rents have soared. After the election, the voters learned that the coalition was funded by a PAC linked to the country’s largest property owners association and its goal was to prevent the establishment of rent control. The newly elected councilors did not enact rent control.

In the Utah attorney general’s race in 2012, after the election it was learned that an aide to the winner had arranged for payday lenders to fund $450,000 in dark money advertising in exchange for a promise to shield them from consumer protection laws. The attorney general resigned after less than a year in office due to this and other revelations.

Compounding the problem of dark money is the recent growth of “gray” money. This is money spent by organizations such as Political Action Committees (PACs) that are required to disclose their donors, but where the identities of the true donors are hidden. PACs can receive donations from other PACs or organizations and sometimes these organizations are set up to obscure identification of the original donor. Donations can pass through a succession of multiple organizations to obfuscate the true source. This is political money laundering. Furthermore, some of these donor organizations may be “dark” organizations that do not have to disclose their donors. Donations from dark organizations to PACs have grown from less than $200,000 in 2006 to $9.2 million in 2014 in the six states studied by the Brennan Center. Gray money grew from 15% of all outside spending in 2006 to 59% in 2014. [3]

The impact of big money and dark money in state and local elections is undermining democracy by allowing special interests to impact election outcomes and to do so secretly. The potential for outright corruption is clear.

In my next post, I will share some effective steps that can be taken now to address the problems of big money and dark money in state and local elections; ones that can be taken within the constraints of current Supreme Court decisions (e.g., Citizens United and McCutcheon).

[1]       Lee, C., & Norden, L., 6/25/16, “The secret power behind local elections,” The New York Times

[2]       Lee, C., Valde, K., Brickner, B.T., & Keith, D., 2016, “Secret spending in the states,” The Brennan Center for Justice, New York University School of Law (https://www.brennancenter.org/sites/default/files/analysis/Secret_Spending_in_the_States.pdf)

[3]       Lee, C., Valde, K., Brickner, B.T., & Keith, D., 2016, see above