Order Code IB87020
CRS Issue Brief for Congress
Received through the CRS Web
Campaign Financing
Updated May 3, 2001
Joseph E. Cantor
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Evolution of the Current System
Campaign Finance Practices and Related Issues
Longstanding Issues: Overall Costs, Funding Sources, and Competition
Increased Campaign Costs
PACs and Other Sources of Campaign Funds
Competitiveness in Elections
Today’s Paramount Issue: Perceived Loopholes in Current Law
Bundling
Soft Money
Independent Expenditures
Issue Advocacy
Policy Options
Proposals on Longstanding Issues
Campaign Spending Limits and Government Incentives or Benefits
Changing the Balance Among Funding Sources
Promoting Electoral Competition
Proposals to Close Perceived Loopholes in Current Law
Bundling
Independent Expenditures
Soft Money
Issue Advocacy
Legislative Action in Congress
107th Congress
LEGISLATION
FOR ADDITIONAL READING
CRS Issue Briefs
CRS Reports

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Campaign Financing
SUMMARY
Concerns over financing federal elections
Although concerns had long been rising over
have become a seemingly perennial aspect of
soft money in federal elections, the widespread
our political system, centered on the enduring
and growing use of soft money for so-called
issues of high campaign costs and reliance on
issue advocacy since 1996 has raised questions
interest groups for needed campaign funds.
over the integrity of current regulations and
the feasibility of any limits on campaign
Rising election costs have long fostered a
money.
sense in some quarters that spending is out of
control, with too much time spent raising
In the 105th Congress, the first Congress
funds and elections “bought and sold.” Debate
after 1996, the House debated reform twice.
has also focused on the role of interest groups
First, it considered a GOP-leadership bill and
in campaign funding, especially through politi-
three narrower measures under suspension of
cal action committees (PACs).
rules, passing a foreign national contribution
ban and an FEC disclosure/enforcement bill
The differences in perceptions of the
and defeating the leadership bill and the
campaign finance system have long been
Paycheck Protection Act. In response to a
compounded by different reform approaches of
discharge petition drive, the House renewed
the major parties. Democrats have tended to
consideration of the issue, in a lengthy process
favor more regulation, with spending limits
focused on the “freshman bipartisan bill,” 11
and some form of public funding or benefits a
substitutes, and a constitutional amendment.
part of their past proposals. Republicans have
Debate ended with passage of the Shays-
generally opposed such limits and public
Meehan bill. The Senate debated the
funding.
companion McCain-Feingold bill three times,
all ending in failed cloture votes.
The Democratic majority in the
101st-103rd Congresses passed bills with
In the first session of the 106th Congress,
spending limits, benefits, and PAC and
the House passed the Shays-Meehan bill, but
loophole curbs. The 101st and 103rd Congress
Senate debate ended after two failed cloture
bills were not reconciled; a 102nd Congress
votes. In the second session, Congress did
conference bill was vetoed. Reformers in the
agree on an aspect of campaign reform, in
104th Congress sought a similar measure but
passing P.L. 106-230, to require disclosure by
failed on a Senate cloture vote; House
certain tax-exempt political organizations
Republicans offered a bill giving parties and
organized under section 527 of the Internal
local citizens a greater role, which was
Revenue Code. Such groups exist to influence
defeated, as was a Democratic alternative.
elections, but many had not been required to
disclose to the Federal Election Commission.
The 1996 elections marked a turning
point, when the focus of the debate shifted
Reform supporters in the 107th Congress
from further restrictions on already-regulated
vowed a renewed effort. On April 2, the
spending and funding sources to activities
Senate passed S. 27 (McCain-Feingold), as
largely or entirely outside federal election law
amended, following a two week debate.
regulation and disclosure requirements.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On May 1, the House Administration Committee held the second in a series of
campaign finance reform hearings, in the wake of the Senate’s April passage of S. 27, the
McCain-Feingold bill. Supporters of that bill and its House companion, H.R. 380 (Shays-
Meehan), urged the House to pass a bill by Memorial Day. Chairman Ney predicted the
Committee would report a bill to the House by the end of June, while House Majority Leader
Armey has said he expected the House to act on the issue before the August recess.
BACKGROUND AND ANALYSIS
Evolution of the Current System
Today’s federal campaign finance law evolved during the 1970s out of five major
statutes and a paramount Supreme Court case. That case not only affected earlier statutes,
but it continues to shape the dialogue on campaign finance reform.
The 1971 Federal Election Campaign Act (FECA), as amended in 1974, 1976, and 1979,
imposed limits on contributions, required disclosure of campaign receipts and expenditures,
and set up the Federal Election Commission (FEC) as a central administrative and
enforcement agency. The Revenue Act of 1971 inaugurated public funding of presidential
general elections, with funding of primaries and nominating conventions added by the 1974
FECA Amendments. The latter also imposed certain expenditure limits, struck down by the
Supreme Court’s landmark Buckley v. Valeo ruling [424 U.S. 1 (1976)].
In the Buckley ruling, the Court upheld the Act’s limitations on contributions as
appropriate legislative tools to guard against the reality or appearance of improper influence
stemming from candidates’ dependence on large campaign contributions. However, Buckley
invalidated the Act’s limitations on independent expenditures, on candidate expenditures from
personal funds, and on overall campaign expenditures. These provisions, the Court ruled,
placed direct and substantial restrictions on the ability of candidates, citizens, and associations
to engage in protected First Amendment rights. The Court saw no danger of corruption
arising from large expenditures, as it did from large contributions, which alone could justify
the First Amendment restrictions involved. Only voluntary limits could be sustained, perhaps
in exchange for government benefits. Such a plan was specifically upheld in the existing
presidential public funding system, as a contractual agreement between the government and
the candidate. The Court’s dichotomous ruling, allowing limits on contributions but striking
down mandatory limits on expenditures, has shaped subsequent campaign finance practices
and laws, as well as the debate over campaign finance reforms.
Campaign Finance Practices and Related Issues
Since the mid-1970s, the limits on contributions by individuals, political action
committees (PACs), and parties, and an absence of congressional spending limits, have
governed the flow of money in congressional elections. Throughout the 1980s and much of
the 1990s, the two paramount issues raised by campaign finance practices were the
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phenomena of, first, rising campaign costs and the large amounts of money needed for
elections and, second, the substantial reliance on PACs as a source of funding. Concerns
were also voiced, by political scientists and the Republican congressional minority, over a
third issue: the level of electoral competition, as affected by finance practices.
Since 1996, the debate has shifted considerably to a focus on the perceived loopholes
in current law (a source of increasing debate since the mid-1980s). The PAC issue has been
greatly supplanted by more fundamental issues of election regulation, with observers finding
new appreciation for the limited, disclosed nature of PAC funds. Concerns over competition
have abated since Republicans won control of Congress in 1994, despite the perceived
incumbency bias in the finance system. The issue of high campaign costs and the concomitant
need for vast resources continues to underlie the debate, but even this has been almost
overshadowed by concerns over the system’s perceived loopholes. Although these practices
are (largely) presumably legal, they may violate the law’s spirit, raising a basic question of
whether money in elections can, let alone should, be regulated.
Longstanding Issues: Overall Costs, Funding Sources, and
Competition
Increased Campaign Costs. Since first being systematically compiled in the 1970s,
campaign expenditures have risen substantially, even exceeding the overall rise in the cost of
living. Campaign finance authority Herbert Alexander estimated that $540 million was spent
on all elections in the U.S. in 1976, rising to $4 billion in 1996. No comparable figure exists
for 2000 yet.
Aggregate costs of House and Senate campaigns increased eightfold between 1976 and
2000, from $115.5 million to $975.3 million, while the cost of living rose by threefold.
Campaign costs for average winning candidates, a useful measure of the real cost of seeking
office, show an increase in the House from $87,000 in 1976 to $816,000 in 2000; a winning
Senate race went from $609,000 in 1976 to $7.0 million in 2000.
The above data are cited by many as evidence that our democratic system of government
has suffered as election costs have grown to levels often considered exorbitant. Specifically,
it is argued that officeholders must spend too much time raising money, at the expense of their
public duties and communicating with constituents. The high cost of elections and the
perception that they are “bought and sold” are seen as contributing to public cynicism about
the political process. Some express concern that spiraling campaign costs has resulted in
more wealthy individuals seeking office or determining election winners, denying
opportunities for service to those lacking adequate resources or contacts. Others see a
correlation between excessive, available money and the perceived increased reliance on
sophisticated, often negative media advertising.
Not all observers view the high cost of elections with alarm. Many insist we do not
spend too much on elections and maybe don’t spend enough. They contrast the amount spent
on elections with that spent by government at all levels, noting that only a fraction of a
percent is spent to choose those who make vital decisions on the allocation of tax dollars.
Similarly, they contrast costs of elections with those on commercial advertising: the nation’s
two leading commercial advertisers, Proctor & Gamble and General Motors, spent more to
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promote their products in 1996 ($5 billion) than was spent on all U.S. elections. In such a
context, these observers contend, the costs of political dialogue may not be excessive.
High election costs are seen largely as a reflection of the paramount role of media in
modern elections. Increasingly high television costs and costs of fundraising in an era of
contribution limits require candidates to seek a broad base of small contributors—a
democratic, but time-consuming, expensive process—or to seek ever-larger contributions
from small groups of wealthy contributors. It has been argued that neither wealthy candidates
nor negative campaigning are new or increasing phenomena but merely that better disclosure
and television’s prevalence make us more aware of them. Finally, better-funded candidates
do not always win, as some recent elections show.
PACs and Other Sources of Campaign Funds. Issues stemming from rising
election expenses were, for much of the past two decades, linked to substantial candidate
reliance on PAC contributions. The perception that fundraising pressures might lead
candidates to tailor their appeals to the most affluent and narrowly “interested” sectors raised
perennial questions about the resulting quality of representation of the whole society. The
role of PACs, in itself and relative to other sources, became a major issue; in retrospect,
however, it appears that the issue was really about the role of interest groups and money in
elections, PACs being the most visible vehicle thereof. As discussed below, the PAC issue
per se has seemed greatly diminished by recent events, while concerns over interest group
money through other channels have grown.
Through the 1980s, statistics showed a significant increase in PAC importance. From
1974-1988, PACs grew in numbers from 608 to a high of 4,268, in contributions to House
and Senate candidates from $12.5 million to $147.8 million (a 400% rise in constant dollars),
and in relation to other sources from 16% of congressional campaign receipts to 34%. While
PACs remain a considerable force, data show a relative decline in their role since 1988: the
percentage of PAC money in total receipts dropped to 27% in 2000; PAC numbers dropped
to 3,907 in 2000; contributions to candidates rose somewhat in constant dollars ($243.1
million in 2000); and, after individual giving had been declining as a component (vis-a-vis
PACs), some leveling off has occurred, with individuals giving 56% of Senate and 53% of
House receipts in 2000, for example.
Despite aggregate data on the relative decline of PACs, they still provide a considerable
share in various subgroups. For example, in 2000, House candidates got 36% of their funds
from PACs; House incumbents received 42%. To critics, PACs raise troubling issues in the
campaign financing debate: Are policymakers beholden to special interests for election help,
impairing their ability to make policy choices in the national interest? Do PACs overshadow
average citizens, particularly in Members’ states and districts? Does the appearance of quid
pro quo relationships between special interest givers and politician recipients, whether or not
they actually exist, seriously undermine public confidence in the political system?
PAC defenders view them as reflecting the nation’s historic pluralism, representing not
a monolithic force but a wide variety of interests. Rather than overshadowing individual
citizens, these observers see them merely as groups of such citizens, giving voice to many
who were previously uninvolved. PACs are seen as promoting, not hindering, electoral
competition, by funding challengers in closely contested races. In terms of influencing
legislative votes, donations are seen more as rewards for past votes than as inducements to
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alter future ones. Defenders also challenge the presumed dichotomy between special and
national interest, viewing the latter as simply the sum total of the former. PACs, they argue,
afford clearer knowledge of how interest groups promote their agendas, particularly
noteworthy in light of the flood of unregulated and undisclosed money since 1996.
Competitiveness in Elections. Many view the campaign finance system in terms
of a general imbalance in resources between incumbents and challengers, as evidenced by a
spending ratio of more than 3.5:1 in recent House and some 2:1 in recent Senate elections.
(In 2000, there was a much closer ratio in the House, with an average expenditure of
$774,000 for an incumbent vs. $295,000 for a challenger—a 2.6 to 1 ratio, while the average
Senate incumbent’s $4.3 million exceeded the average challenger’s $2.5 million by 1.8 to 1.)
Incumbents’ generally easier access to money is seen as the real problem, not the aggregate
amounts spent by all candidates.
Those concerned about competitiveness also view the PAC issue through this lens. With
some 75% of PAC funds going to incumbents in 2000, the question of PACs “buying access”
with those most likely to be elected is seen as a more serious problem than the generally high
amounts of aggregate PAC giving. But others dispute that the problem is really an
incumbency one or that electoral competition should be the main goal of reform. After all,
there is a fair degree of turnover in Congress (through defeats, retirements, etc.), and the
system does allow changed financing patterns with sometimes unexpected results, as it did
in 1994. Aggregate incumbent-challenger disparities may be less meaningful, it is noted, than
those on the closer spending levels in hotly contested or open races.
Today’s Paramount Issue: Perceived Loopholes in Current Law
Interest has intensified, especially since 1996, over campaign finance practices that some
see as undermining the law’s contribution and expenditure limits and its disclosure
requirements. Although these practices may be legal, they are seen as “loopholes” through
which electoral influence is sought by spending money in ways that detract from public
confidence in the system and that are beyond the scope intended by Congress. Some of the
prominent practices are bundling, soft money, independent expenditures, and issue advocacy.
Bundling. This involves collecting checks for (and made payable to) a specific
candidate by an intermediate agent. A PAC or party may thus raise money far in excess of
what it can legally contribute and receive recognition for its endeavors by the candidate.
Soft Money. This refers to money that may indirectly influence federal elections but
is raised and spent outside the purview of federal laws and would be illegal if spent directly
on a federal election. The significance of soft money stems from several factors: (1) many
states permit direct union and corporate contributions and individual donations in excess of
$25,000 in state campaigns, all of which are prohibited in federal races; (2) under the 1979
FECA Amendments and FEC rulings, such money may be spent by state and local parties in
large or unlimited amounts on grassroots organizing and voter drives that may benefit all
party candidates; and (3) publicly-funded presidential candidates may not spend privately
raised money in the general election. In recent presidential elections, national parties have
waged extensive efforts to raise money for their state affiliates, partly to boost the national
tickets beyond what could be spent directly. Incomplete 2000 data show that over $487
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million in soft money was raised by the major parties, nearly double the $262 million raised
in 1996.
Independent Expenditures. The 1976 Buckley ruling allowed unlimited spending
by individuals or groups on communications with voters to expressly support or oppose
clearly identified federal candidates, made without coordination or consultation with any
candidate. Independent expenditures totaled $11.1 million in 1992, $22.4 million in 1996, and
$25.6 million in 2000. These expenditures may hinder a candidate’s ability to compete with
both an opponent and outside groups. They may also impair a sense of accountability between
a candidate and voters, and many question whether some form of unprovable coordination
may often occur in such cases.
Issue Advocacy. Although federal law regulates expenditures in connection with
federal elections, it uses a fairly narrow definition for what constitutes such spending, per
several court rulings on First Amendment grounds. The law, as affected by court rulings,
allows regulation only of communications containing express advocacy, i.e., that use explicit
terms urging the election or defeat of clearly identified federal candidates. By avoiding such
terms, groups may promote their views and issue position in reference to particular elected
officials, without triggering the disclosure and source restrictions of the FECA. Such activity,
known as issue advocacy, is often perceived as having the intent of bolstering or detracting
from the public image of officials who are also candidates for office. In 1996, an estimated
$135 million was spent on issue advocacy, rising to between $275 and $340 million in 1998,
and to $509 million in 2000 (although these data do not distinguish between campaign-related
and non-campaign-related communications). Also, groups ranging from labor unions to the
Christian Coalition promote their policy views through voter guides, which present
candidates’ views on issues in a way that some see as helpful to some candidates and harmful
to others, without meeting the standards for FECA coverage.
Policy Options
The policy debate over campaign finance laws proceeds from the philosophical
differences over the underlying issues discussed above, as well as the more practical, logistical
questions over the proposed solutions. Two primary considerations frame this debate. What
changes can be made that will not raise First Amendment objections, given court rulings in
Buckley and other cases? What changes will not result in new, unforeseen, and more
troublesome practices? These considerations are underscored by the experience with prior
amendments to FECA, such as PAC growth after the 1974 limits on contributions.
Just as the overriding issues centered until recently around election costs and funding
sources, the most prominent legislation long focused on controlling campaign spending,
usually through voluntary systems of public funding or cost-reduction benefits, and on
altering the relative importance of various funding sources. Some saw both concepts
primarily in the context of promoting electoral competition, to remedy or at least not
exacerbate perceived inequities between incumbents and challengers. Increasingly since the
mid-1980s, and particularly since the 1996 elections, concerns over perceived loopholes that
undermine federal regulation have led to proposals to curb such practices. Conversely, some
proposals have urged less regulation, on the ground that it inherently invites circumvention,
while still other proposals have focused exclusively on improving or expanding disclosure.
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Proposals on Longstanding Issues
Campaign Spending Limits and Government Incentives or Benefits. Until
the late 1990s, the campaign reform debate often focused on the desirability of campaign
spending limits. To a great extent, this debate was linked with public financing of elections.
The coupling of these two controversial issues stemmed from Buckley’s ban on mandatory
spending limits, while allowing voluntary limits, with adherence a prerequisite for subsidies.
Hence the notion arose in the 1970s that spending limits must be tied to public benefits,
absent a constitutional amendment.
Public funding not only might serve as an inducement to voluntary limits, but by limiting
the role of private money, it is billed as the strongest measure toward promoting the integrity
of and confidence in the electoral process. Furthermore, it could promote competition in
districts with strong incumbents or one-party domination. Public financing of congressional
elections has been proposed in nearly every Congress since 1956 and has passed in several
Congresses. The nation has had publicly funded presidential elections since 1976, and tax
incentives for political donations were in place from 1972 to 1986.
Objections to public financing are numerous, many rooted in philosophical opposition
to funding elections with taxpayer money, supporting candidates whose views are antithetical
to those of many taxpayers, and adding another government program in the face of some
cynicism toward government spending. The practical objections are also serious: How can
a system be devised that accounts for different natures of districts and states, with different
styles of campaigning and disparate media costs, and is fair to all candidates—incumbent,
challenger, or open-seat, major or minor party, serious or “longshot?”
A major challenge to spending limit supporters has been how to curb, if not eliminate,
public funding from their proposals. Although spending limits may have wide public support,
most evidence suggests far less support for public financing. In the 105th Congress, the
principal reform bills debated on the floor contained neither campaign spending limits nor
public funding, reflecting not only the overriding concerns over soft money and issue
advocacy but also the changed political climate since the 1970s.
Stemming from the spending limits debate have been proposals to lower campaign costs,
without spending limits. Proposals for free or reduced rate broadcast time and postage have
received some notable bipartisan support. Such ideas seek to reduce campaign costs and the
need for money, without the possibly negative effects of arbitrary limits.
Changing the Balance Among Funding Sources. Until recently, most proposed
bills sought, at least in part, to curb PACs’ perceived influence, either directly, through a ban
or reduced limits, or indirectly, through enhancing the role of individuals and parties. Current
law allows individuals to give $1,000 per candidate, per election, while most PACs (if they
are “multicandidate committees”) may give $5,000 per candidate, increasing their ability to
assist candidates, and without an aggregate limit such as that affecting individuals.
Three chief methods of direct PAC curbs were prominent in proposals advanced through
the mid-1990s: banning PAC money in federal elections; lowering the $5,000 limit; and
limiting candidates’ aggregate PAC receipts. These concepts were included, for example, in
all of the bills that the House and Senate voted on in the 101st-104th Congresses. Although
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support for such proposals was fueled by a desire to reduce the perceived role of interest
groups, each proposal had drawbacks, such as constitutional questions about limiting speech
and association rights and the more practical concern over devaluation of the $5,000 limit
by inflation since it was set in 1974.
Yet another concern raised during that period was the potential encouragement for
interest groups to shift resources to “independent” activities, which are less accountable to
voters and more troublesome for candidates in framing the debate. Furthermore, independent
advertisements were often marked by negativity and invective. If such prospects gave pause
to lawmakers during the 1980s, the surge of financial activity outside the framework of
federal election law since 1996 has largely dampened attempts to further limit PACs. The
major reform bills in the 105th and 106th Congresses contained no further PAC restrictions.
Partly because of this problem, both before and after 1996, many have looked to more
indirect ways to curb PACs and interest groups, such as raising limits on individual or party
donations to candidates. These increases have also been proposed on a contingency basis to
offset such other sources as wealthy candidates spending large personal sums on their
campaigns. While higher limits might counterbalance PACs and other groups and offset
effects of inflation, opponents observe that few Americans can afford to give even $1,000,
raising age-old concerns about “fat cat” contributors.
House Republicans have pushed to boost the role of individuals in candidates’ states or
districts, to increase ties between Members and constituents. By requiring a majority of
funds to come from the state or district (or prohibiting out-of-state funds), supporters expect
to indirectly curb PACs, typically perceived as out-of-state, or Washington, influences.
Support also exists for increasing or removing party contribution and coordinated
expenditure limits, based on the notions that the party role can be maximized without leading
to influence peddling and on strengthening party ties to facilitate effective policymaking.
Opponents note that many of the prominent allegations in 1996 involved party-raised funds.
Also, even with some degree of philosophical agreement on increasing the party role, current
political realities present some obstacles, i.e., the difference in the relative resources of the
Republican Party committees, whose federal accounts raised over $447 million in the 2000
election cycle, and the Democratic committees, which raised $270 million.
Promoting Electoral Competition. Proposals to reduce campaign costs without
limits are linked to broader concerns about electoral competition. Political scientists tend to
view spending limits as giving an advantage to incumbents, who begin with high name
recognition and perquisites of office (e.g., staff, newsletters). Challengers often spend money
just to build name recognition. Limits, unless high, may augment an institutional bias against
challengers or unknown candidates. (Conversely, public funding could help challengers to
compete with well-funded incumbents.)
Many of those concerned about electoral competition consequently have opposed
spending limits, although they are philosophically opposed to public funding. These
individuals tend to favor more “benign” forms of regulation, such as allowing higher limits on
party contributions to challengers in early stages, or, generally, allowing greater latitude in
challengers’ ability to raise needed funds. At the very least, these individuals insist that
changes not be made that, in their view, exacerbate perceived problems.
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Proposals to Close Perceived Loopholes in Current Law
Proposals have increasingly addressed perceived loopholes in the FECA, and indeed this
area is now the primary focus of reform efforts. This debate underscores a basic philosophical
difference between those who favor and oppose government regulation of campaign finances.
Opponents say that regulation invites attempts at subterfuge, that interested money will
always find its way into elections, and that the most one can do is see that it is disclosed.
Proponents argue that while it is hard to restrict money, it is a worthwhile goal, hence one
ought to periodically fine-tune the law to correct “unforeseen consequences.” Proposed
“remedies” stem from the latter view, i.e., curtail the practices as they arise.
Bundling. Most proposals in this area, which is seen as less an issue now than in prior
years, would count contributions raised by an intermediary toward both the donor’s and
intermediary’s limit. Hence, an agent who had reached the limit could not raise additional
funds for that candidate. Proposals differ as to specific agents who could continue this
practice (e.g., whether to ban bundling by party committees or by all PACs).
Independent Expenditures. Short of a constitutional amendment to allow
mandatory limits on campaign spending (as the Senate debated in 1988, 1995, 1997, and
2000), most proposals aim to promote accountability. They have sought to prevent indirect
consultation with candidates and to ensure that the public knows these efforts are not
sanctioned by candidates. Many bills have sought to tighten definitions of independent
expenditure and consultation and to require more prominent disclaimers on ads. Many
spending limits/ benefits bills have provided subsidies so those attacked in such ads may
adequately respond.
Soft Money. This practice has provided the greatest opportunity to date for spending
money beyond the extent allowed under federal law. FEC rules that took effect in 1991
require national parties to disclose non-federal accounts and allocate soft versus hard (i.e.,
federally permissible) money. Hence, we are more aware of soft money today and better able,
at least theoretically, to keep it from financing federal races than we were previously.
Serious differences exist regarding soft money. Reformers want to curb what they view
as an inherent circumvention of federal limits, while parties want to protect a source of
funding that has bolstered their grassroots efforts. Proposed reforms have included
specifying a “federal election period” in which soft money cannot be spent by state parties;
prohibiting national party committees and federal candidates from raising or distributing soft
money (the first two being prominent features of the recent McCain-Feingold and Shays-
Meehan bills); prohibiting the use of any soft money in mixed (federal-state) activities;
codifying the FEC’s requirements for allocation of soft versus hard money among federal,
state, and local candidates; requiring disclosure of or limitation on spending by tax-exempt
groups; and curbing or requiring disclosure of labor and corporate soft money (including
limits on unions’ political use of worker dues). Beyond legislative solutions have been
proposals for the FEC to restrain soft money through promulgating new regulations. These
differences reflect the lack of consensus on both the nature of and the solutions to the soft
money problem, as well as the respective strategic concerns of the two major parties.
Issue Advocacy. Addressing this practice, a form of soft money, involves broadening
the definition of federal election-related spending. A 1995 FEC regulation offered such a
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definition, using a “reasonable person” standard, but this was struck down by a 1st Circuit
federal court in 1996; this decision was later upheld by an appeals court but is at variance with
an earlier 9th Circuit ruling. The FEC has been reluctant to enforce the regulation pending
further judicial or legislative action. Some bills (such as the Shays-Meehan bill that passed
the 105th and 106th Congresses) have sought to codify a definition of “express advocacy” that
allows a communication to be considered as a whole, in context of such external events as
timing, to determine if it is election-related. The recent McCain-Feingold bills, incorporating
language initially proposed by Senators Snowe and Jeffords, narrowed the scope of the
proposed definition of what would be considered federal election-related and focused
primarily on disclosure on such activity. Finding a definition that can withstand judicial
scrutiny may be the key to bringing some of what is labeled “issue advocacy” under the
FECA’s regulatory framework. This has emerged since 1996 as probably the thorniest aspect
of the campaign finance debate.
Legislative Action in Congress
Congress’ consideration of campaign finance reform has steadily increased since 1986,
when the Senate passed the PAC-limiting Boren-Goldwater Amendment, marking the first
campaign finance vote in either house since 1979 (no vote was taken on the underlying bill).
With Senate control shifting to Democrats in 1986, each of the next four Congresses saw
intensified activity, based on Democratic-leadership bills with voluntary spending limits
combined with inducements to participation, such as public subsidies or cost-reduction
benefits. In the 100th Congress, Senate Democrats were blocked by a Republican filibuster.
In the 101st - 103rd Congresses, the House and Senate each passed comprehensive bills based
on spending limits and public benefits; the bills were not reconciled in the 101st or 103rd,, while
a conference version achieved in the 102nd was vetoed by President Bush.
With Republicans assuming control in the 104th Congress, neither chamber passed a
reform bill. A bipartisan bill based on previous Democratic-leadership bills was blocked by
filibuster in the Senate, while both Republican- and Democratic-leadership bills—with starkly
different approaches—failed to pass in the House. [For further discussion, see CRS Report
98-26, Campaign Finance Reform Activity in the 100th - 104th Congresses.]
In the 105th Congress, reform supporters succeeded in passing the Shays-Meehan bill in
the House (H.R. 2183, as amended). Senate sponsors of its companion McCain-Feingold
measure (S. 25, as revised) failed on three occasions to break a filibuster in opposition,
however, and no vote occurred on the bill. For further discussion of 105th Congress activity,
see Campaign Finance Reform Electronic Briefing Book. 105th Congress–Summary.
[http://www.congress.gov/brbk/html/ebcam4.html].
In the 106th Congress, the House again passed the Shays-Meehan bill (H.R. 417).
Supporters of the companion McCain-Feingold bill initially introduced S. 26, much the same
bill as its final version in the 105th Congress. They later introduced a much narrower version
(S. 1593), focusing largely on party soft money but dropping the issue advocacy and other
provisions. This version was debated in October 1999 but failed to break a filibuster in
opposition. Reform supporters succeeded, however, in enacting legislation to require
disclosure by tax-exempt political organizations under Section 527 of the Internal Revenue
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Code. For further discussion of 106th Congress activity, see Campaign Finance Reform
Electronic Briefing Book. 106th Congress-Summary.
[http://www.congress.gov/brbk/html/ebcam20.html].
107th Congress
As of May 2, 37 campaign reform bills have been introduced in the 107th Congress (26
in the House and 11 in the Senate). Three of these are new versions of 106th Congress bills
and are receiving particular attention: S. 27 (McCain-Feingold bill); H.R. 380 (Shays-
Meehan), the companion to McCain-Feingold); and S. 22 (Hagel-Landrieu).
Supporters of McCain-Feingold sought an early debate and vote on the issue, and, on
January 26, reached an agreement with Majority Leader Lott for a two week Senate debate
in mid- or late-March. On February 6, two unanimous consent agreements were approved
by the Senate: the first committed the Senate to begin debating McCain-Feingold on March
19 or 26, with floor amendments allowed; the second agreement committed the Senate to
consider the Hollings-Specter constitutional amendment to allow mandatory campaign
spending limits, immediately following disposition of McCain-Feingold. Senate debate began
March 19, and after a two-week debate, S. 27 was passed by the Senate on April 2 by a vote
of 59-41. As passed, S. 27 included 22 amendments offered on the floor; 16 other
amendments were rejected during the two-week debate. On March 26, the Senate debated
S.J.Res. 4 and defeated it by a 40-56 vote.
The House Administration Committee began a series of hearings on campaign finance
reform on March 17 in Phoenix AZ. On May 1, during the second hearing of the series,
supporters of the McCain-Feingold bill and its House companion, H.R. 380 (Shays-Meehan),
urged the House to pass a bill by Memorial Day. Chairman Ney predicted the Committee
would report a bill to the House by the end of June. Meanwhile, House Majority Leader
Armey has said he expected the House to act on the issue before the August recess.
LEGISLATION
H.R. 380 (Shays-Meehan)
Bipartisan Campaign Finance Reform Act of 2001. Bans soft money raising by national
parties and federal candidates. Curbs state party soft money spending on “federal election
activity.” Defines express advocacy as advocating election or defeat of a candidate by: (1)
using either explicit phrases, or words or slogans that in context can have no other reasonable
meaning than election advocacy; (2) referring to a candidate in a paid radio or TV broadcast
ad that appears in affected state within 60 days of election; or (3) expressing unmistakable,
unambiguous election advocacy, when taken as a whole and with limited reference to external
events. Requires greater notice of non-union members’ rights to rebates of dues payments
used for political purposes. Raises limits on individual contributions to state parties and on
aggregate annual federal contributions. Introduced Jan. 31, 2001; jointly referred to
Committees on House Administration, Education and the Workforce, Government Reform,
Judiciary, Ways and Means, and Rules.
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S. 27 (McCain-Feingold)
Bipartisan Campaign Reform Act of 2001. Bans soft money raising by national parties
and federal candidates. Curbs state party soft money spending on “federal election activity.”
Defines electioneering communication as a broadcast ad referring to a clearly identified
federal candidate within 60 days of a general election or 30 days of a primary, to an audience
that includes voters in that election. Requires disclosure of electioneering communications
above $10,000, with identification of donors of $500 or more. Bans funding of electioneering
messages with union or corporate funds (including by 501(c)(4) groups for targeted
communications). Raises limits on individual contributions to candidates and parties and on
aggregate annual federal contributions. Introduced Jan. 22, 2001; referred to Committee on
Rules and Administration. Discharged from Committee and Senate debate began on March
19, 2001. Passed Senate, as amended, Apr. 2, 2001 (59-41).
Amendments Accepted
! Domenici (S.Amdt. 115) – to raise limits on contributions to Senate
candidate whose opponent exceeds a designated level of personal funding in
his or her campaign. Approved (70-30), March 20.
! Torricelli (S.Amdt. 122) – to make broadcast time purchased at lowest unit
rate non-preemptible and to require such rates to be available to political
parties buying time on behalf of candidates. Approved (70-30), March 21.
! Cochran (S.Amdt. 137), as modified – to: (1) require all reports filed with
FEC to be posted on Internet and available for inspection within 48 hours
(24 if filed electronically); and (2) require FEC to maintain a central web site
of all election-related reports. Approved by voice vote, March 22.
! Wyden-Collins (S.Amdt. 138) – to require candidates to appear personally
in lowest unit rate broadcast ads that refer to opponents. Approved by voice
vote, March 22.
! Nickles-Gregg (S.Amdt. 139) – to strike Beck provision in McCain-Feingold
bill. Approved (99-0), March 22.
! Landrieu (S.Amdt. 124), as modified – to require FEC to develop and
provide standardized software for filing reports electronically. Approved by
voice vote, March 22.
! Wellstone (S.Amdt. 145) – to remove exemption for 501c(4) or 527 groups’
“targeted communications” (i.e., electioneering communications broadcast
by TV, radio, cable, or satellite, primarily to voters of state of election).
Approved (51-46), March 26.
! Hagel (S.Amdt. 146 – Division 2: Subtitle B–Increased Disclosure) – to
codify FEC regulations requiring national party soft money disclosure; to
require candidates to file monthly reports in election years and quarterly
reports in non-election years, and require national party committees to file
monthly reports in all years; to require broadcasters to maintain and make
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available for public inspection, records of broadcast time requests by
candidates or other entities whose message relates to political matters of
national importance, including about a legally qualified candidate, a federal
election, or a legislative issue of public importance. Motion to table
defeated (100-0), March 27. Approved by voice vote, March 27.
! Thompson, as modified (S.Amdt. 149) – to raise limit on individual
contributions to $2,000 per candidate, per election, and to national party
committees to $25,000 per year; to raise aggregate limit on individual
contributions to $37,500 per year, to raise special limit on combined
contributions to Senate candidates by national/senatorial party committees
to $35,000 in year of election; all indexed. Approved (84-16), March 28.
! Schumer (S.Amdt. 153) – to require national parties to comply, voluntarily,
with coordinated expenditure limits in the event Supreme Court finds them
unconstitutional, to be eligible for lowest unit broadcast rate; to allow
broadcasters to not offer lowest unit rate to parties for independent
expenditures. Approved (52-48), March 28.
! Bingaman (S.Amdt. 157) – to require FEC disclosure of donations to
presidential inaugural committees and to prohibit such donations from
foreign nationals. Offered and Approved by voice vote, March 29.
! Specter (S.Amdt. 140, as modified) – to provide alternative to definition of
electioneering communication, if Snowe/Jeffords provision is ruled
unconstitutional, based on Furgatch case (i.e., suggestive of no plausible
meaning other than an exhortation to vote for or against a candidate,
regardless of whether it constitutes express advocacy); to provide that
nothing in the provision alters the FEC regulation, 11 CFR 100.22(b),
defining express advocacy. Approved (82-17), March 29.
! Nelson (S.Amdt. 159) – to ban fraudulent misrepresentation in the solicitation
of campaign funds. Approved by voice vote, March 29.
! Kerry (S.Amdt. 160) – to direct GAO to study statistics for and the effect of
public funding systems in Arizona and Maine and report to Congress within
a year of enactment. Approved by voice vote, March 29.
! Levin (S.Amdt 161) – to allow state/local parties to use funds raised under
state law for allocable share of voter registration drives in the last 120 days
of a federal election, voter identification efforts, get-out-the-vote drives, and
generic activities, provided that they do not refer to a federal candidate and
that no person donates more than $10,000 a year to a state or local party for
such activities. Approved by voice vote, March 29.
! Durbin (S.Amdt. 162) – to require sponsorship identification on all election-
related advertising, and to enhance the visibility of such identification in the
communication. Approved by voice vote, March 29.
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! Thompson (S.Amdt 163) – to increase penalties for knowing and willful
violations; to change statute of limitations for election law violations from
three to five years; to direct U.S. Sentencing Commission to promulgate
guidelines and make recommendations regarding penalties for election law
violations. Approved by voice vote, March 29.
! Bond (S.Amdt. 166) – to increase civil and criminal penalties for knowing
and willful violations of ban on contributions made in the name of another.
Approved by voice vote, March 30.
! Hatch (S.Amdt. 167) – to provide expedited review to the U.S. District
Court for D.C. for declaratory judgment and injunctive relief; to provide
direct appeal to the U.S. Supreme Court; and to provide expedited
consideration by both courts. Approved by voice vote, March 30.
! McCain (S.Amdt. 165) – to replace section on coordinated activities; to
define “coordinated expenditure or other disbursement” as a payment made
in concert or cooperation with, or at request or suggestion of, or pursuant
to any particular or general understanding with a candidate or party; to
include in the definition of “contribution,” “any coordinated expenditures or
other disbursements” (including non-express advocacy); to direct FEC to
promulgate new regulations on this subject. Approved (57-34), March 30.
! Durbin (S.Amdt 169, as modified) – to take into account gross receipts of
a candidate (as of June 30 and Dec. 30 of year before election) whose
opponent exceeds recommended amount of personal fund spending on his or
her campaign, before contribution limit increases are triggered. Approved by
voice vote, March 30.
! McCain (S.Amdt. 171) – to make minor, technical, and conforming changes
to bill, as passed. Offered and Approved by voice vote, Apr. 2, 2001.
S.J.Res. 4 (Hollings-Specter)
Proposed constitutional amendment to allow Congress and states to set reasonable limits
on contributions and expenditures in support of or opposition to candidates for nomination
and election to federal and state, or local office. Introduced Feb. 7, 2001; referred to
Committee on the Judiciary. Debated by Senate and defeated, March 26, 2001 (40-56).
FOR ADDITIONAL READING
CRS Issue Briefs
CRS Issue Brief IB98025. Campaign Finance: Constitutional and Legal Issues of Soft
Money, by L. Paige Whitaker.
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CRS Reports
CRS Report 97-973. Business and Labor Spending in U.S. Elections, by Joseph E. Cantor.
CRS Report RS20813. Campaign Finance Bills in the 107th Congress: Comparison of S.
22 (Hagel-Landrieu) with S. 27 (McCain-Feingold), by Joseph E. Cantor.
CRS Report RS20820. Campaign Finance Bills in the 107th Congress: Comparison of H.R.
380 (Shays-Meehan) with S. 27 (McCain-Feingold), by Joseph E. Cantor.
CRS Report RL30939. Campaign Finance Bills in the 107th Congress: House, by Joseph
E. Cantor.
CRS Report RS20346. Campaign Finance Bills in the 106th Congress: Comparison of
Shays-Meehan, as passed, with McCain-Feingold, as revised, by Joseph E. Cantor.
CRS Report RL30162. Campaign Finance Bills in the 106th Congress: House, by Joseph
E. Cantor.
CRS Report RL30166. Campaign Finance Bills in the 106th Congress: Senate, by Joseph
E. Cantor.
CRS Report RS20073. Campaign Finance Bills, 106th Congress: Comparison of Shays-
Meehan & McCain-Feingold Proposals, by Joseph E. Cantor.
CRS Report RL30937. Campaign Finance Legislation in the 107th Congress: Comparison
of S. 27 (McCain-Feingold) as Passed by Senate, with Current Law, by Joseph E.
Cantor and L. Paige Whitaker.
CRS Report 98-282. Campaign Finance Reform: A Legal Analysis of Issue and Express
Advocacy, by L. Paige Whitaker.
CRS Report RS20854. Campaign Finance Reform and Incentives to Voluntarily Limit
Candidate Spending from Personal Funds: Constitutional Issues Raised by Public
Subsidies and Variable Contribution Limits, by L. Paige Whitaker.
CRS Report RS20849. Campaign Finance Reform: Constitutional Issues Raised by
Disclosure Requirements, by L. Paige Whitaker.
CRS Report RL30669. Campaign Finance Regulation Under the First Amendment: Buckley
v. Valeo and its Supreme Court Progeny, by L. Paige Whitaker and Christopher A.
Jennings.
CRS Report 97-1040. Campaign Financing: Highlights and Chronology of Current Federal
Law, by Joseph E. Cantor.
CRS Report RL30884. Campaign Financing in the 2000 Federal Elections: Overview and
Estimates of the Flow of Money, by Joseph E. Cantor.
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CRS Report RL30877. Characteristics of and Reporting Requirements For Selected
Tax-Exempt Organizations, by Marie B. Morris.
CRS Report RL30582. 527 Organizations: How the Differences in Tax and Election Laws
Permit Certain Organizations to Engage in Issue Advocacy without Public Disclosure
and Proposals for Change, by Marie B. Morris.
CRS Report 97-680. Free and Reduced-Rate Television Time for Political Candidates, by
Joseph E. Cantor, Denis Steven Rutkus, and Kevin B. Greely.
CRS Report 97-91. Soft and Hard Money in Contemporary Elections: What Federal Law
Does and Does Not Regulate, by Joseph E. Cantor.
CRS Report RS20133. The Presidential Election Campaign Fund and Tax Checkoff:
Background and Current Issues, by Joseph E. Cantor.
CRS Report 97-618. The Use of Labor Union Dues for Political Purposes: A Legal
Analysis, by L. Paige Whitaker.
CRS Report 97-555. The Use of Union Dues for Political Purposes: A Discussion of Agency
Fee Objectors and Public Policy, by Gail McCallion.
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