The Biggest Loser in Last Week’s Elections

The biggest loser in last week’s round of municipal elections is the New Jersey campaign finance law. 

When over $6 Million gets thrown around in an election for Mayor of Newark and the public does not know who contributed the money or even who is responsible for the money, it is time to admit that New Jersey needs new thinking about campaign finance laws.

However high minded (but misguided) the thinking might have been to allow local municipal ordinances to pre-empt state law, the United States Supreme Court would never have allowed local municipal ordinances to pre-empt federal law. 

Two court cases in 2010 changed the campaign spending scheme, resulting in the creation of the Super PAC. The first case was the Supreme Court decision in Citizens United v. Federal Election Commission. The high Court struck down all caps on the amount of money individuals could give to a PAC. The ruling also provided that corporations and unions could make unlimited donations as well.

A few months later in the second case, v. FEC, the U.S. Court of Appeals for the District of Columbia Circuit held that PACs and other groups that made independent expenditures to candidate committees or parties could accept contributions without restriction as to source or size. This ruling led to the creation of Super PACs commonly divided into two categories – federal Super PACs and those created under Internal Revenue Code §501(c)(4).

A federal Super PAC is prohibited from organizing activities with any candidate or campaign, but the distinction between cooperation and independent support often falls within a grey area. In fact, some Super PACS are led by individuals who have formerly been closely involved with the political candidate.

Super PACs are often referred to as “expenditure-only committees,” because they can raise an unlimited amount of money and spend it to openly advocate for or against political candidates. A Super PAC cannot donate money directly to a political candidate. However, similar to a traditional PAC, a Super PAC must report its donors to the Federal Election Commission on a monthly or quarterly basis

In contrast, Super PACs created under section 501(c)(4) are not required to disclose their donors. Thus, those who want to influence an election while remaining anonymous consider this type of PAC to be an attractive option.

A Super PAC created under section 501(c)(4) is a nonprofit organization that is created, at least in theory, to promote social welfare causes. These groups are permitted to participate in politics as long as they spend less than 50 percent of their funds on politics. Many of these organizations have multiple facets, including a nonprofit and a Super PAC. They often seek to influence elections through advertisements.

According to the Center for Responsive Politics, conservative nonprofits spent more than $265 million during the 2012 campaign and their liberal counterparts spent nearly $35 million. Additionally, reports have shown that in 2010 the secretive nonprofit PACs outspent Super PACs by a 3-2 margin. And, when you are talking hundreds of millions of dollars being spent, the impact on political campaigns and the candidates who win is significant.

New Jersey’s ridiculously complex campaign finance laws were doomed from the start and it is time to give them a refresh with more modern and more progressive thinking. 

Donald Scarinci is a managing partner at Lyndhurst, N.J. based law firm Scarinci Hollenbeck.  He is also the editor of the Constitutional Law Reporter and Government and Law blogs

The Biggest Loser in Last Week’s Elections