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Campaign finance now in uncharted territory

Now that the U.S. Supreme Court has ruled that corporations and labor unions can spend freely on political campaigns, Arizona has a simple choice – create new regulations to monitor that type of spending, or run the risk of an entire election cycle being dominated by millions of dollars worth of anonymous advertising.

The court’s January ruling in the case Citizens United v. Federal Elections Commission lifted a federal ban on direct campaign spending by corporations and unions. Twenty-three states, including Arizona, had also prohibited such spending, and many are now crafting new laws to regulate it under the assumption that their bans are now unconstitutional.

Arizona is one of the states moving to regulate the new kind spending before corporations and unions begin forming independent expenditure committees to promote their favored candidates and causes. The House Judiciary Committee on Feb. 25 passed H2788, which would require corporations and unions to report such spending.

Secretary of State Ken Bennett, who helped craft the bill, said other regulations might be necessary in the future if problems arise this election cycle. For now, he said, it’s important to require transparency as the state heads into uncharted territory.

“This is the first cycle with this sort of corporate involvement in these elections, so we recognize that there are going to be issues that come up after the cycle,” he said. “We’ll go back and deal with those, but we don’t view this as kind of a placeholder or anything.”

If the bill passes, the law would require corporations and unions to report all independent expenditure advertising, and mandates that the ads must clearly state who paid for them. Instead of the pre-set filing deadlines for other independent expenditures, the new committees will have to report when they spend $5,000 or more on a statewide race or $2,500 on a legislative race. All ads must clearly state who paid for them as well.

H2788 would apply only to state and local races. The federal government continues to govern such spending in congressional, senatorial and presidential campaigns.

Most agree that some type of regulation is needed and that passing the bill would lay a solid foundation. But that bill hasn’t even made it to the House floor yet, and already some critics have suggested changes they’d like to see in the near future.

Diane Brown, director of the Arizona chapter of the Public Interest Research Group, said she expects corporations to make ample use of their newfound rights in 2010. Ensuring transparency is critical, she said.

“Overall, the legislation is a good step toward insuring that the public has information on corporate spending, which we anticipate being huge in this and future elections,” Brown said.

But others aren’t sure corporate and union activity in the election will be as abundant as Brown assumes. For one thing, no one is quite sure how the new campaign activity – and the subsequent regulations – will work.

Jason Bagley, a lobbyist for Intel, said his company likely won’t be “out in front of any campaigning.” Intel is interested in getting more involved in state-level races, he said, but the company hasn’t had enough time to fully study the impact of the Supreme Court’s ruling.

“We do prefer to work closely within the business community, within various associations and other businesses to accomplish our objectives. I don’t think Intel would likely be out in front,” he said. “That’s not to say that we’re not interested.”

Even if corporations and trade unions engage heavily in independent expenditure spending, attorney Lee Miller questions whether anything would change. Those organizations already had the right to donate to political action committees, and regardless of what kind of reporting system is in place, big spenders can still find ways to distance themselves from the money.

“Anybody who’s going to be a big-money player, they’re going to set up a PAC in Alabama and send that money to a corporation in Idaho, which in turn funds a trade association in Arizona,” said Miller, a lobbyist who serves as counsel for the Arizona Republican Party. “Everybody’s expectation is that the mere ability of unions and corporations to spend this money is going to facilitate this sort of gaming of the system. …That goes on now, so what’s the big deal?”

Critics argue that the bill is far too strict because it requires all corporate and union political expenses to be reported the Secretary of State’s Office within 24 hours, and because violators could be charged with a felony and could face a maximum penalty of two years in prison.

Elections attorney Lisa Hauser said that timeframe may not leave expenditure committees with enough time to ensure that their reports are filed correctly. Attribution is required on all ads, she said, so the public will already know who paid for them.

“I’m not entirely certain what benefit is derived from the 24-hour reporting,” Hauser said. “I’m not entirely sure why you would need to have information about those expenditures so quickly.”

Another problem is that the language of the bill and its intent might have become disconnected at the point in which the reporting deadline was outlined.

Bennett said the bill would require expenses to be reported within 24 hours of a communication going public, such as a television commercial airing or campaign literature being sent out through the mail. But the text of the proposed law states that expenditure is considered to have occurred no later than the date on which an advertisement “is submitted to a communications system for broadcast.”

Requiring independent expenditures to report spending on TV and radio ads before they air could be a problem, said attorney Nick Dranias of the Goldwater Institute. Those reports would be immediately available and would expose campaign strategies that many committees guard jealously, he said.

“It is very valuable to a political operative to know, weeks before a TV broadcast has run, that you just put your check down and signed up for a half-hour ad to be running every five days or so on Channel 5,” Dranias said. “That is something that is of immense value to a political consultant. It is of little or no value to the political debate.”

Matt Benson, Bennett’s spokesman, said it won’t make much difference either way because most ads are submitted shortly before they air, and the reports will correlate closely with the air dates.

Others, such as Brown, want stricter requirements, such as significantly lower monetary thresholds for reporting, not the $5,000 and $2,500 limits currently written into H2788.

Brown also advocated for a ban on independent expenditures by foreign corporations and a provision that would require corporations to get approval from their stockholders before spending company money on campaign ads. Both ideas are being debated in Congress, but Brown said PIRG may push the Legislature to adopt those rules next year.

“While most shareholders may invest in a company for financial reasons, they may not agree with that company on political issues,” Brown said. “We’re working on this nationally right now, and we would be very supportive of similar efforts in Arizona.”

Bennett, though, sees problems not with the law being proposed but instead with the ones that are already on the books. Bennett said the reporting requirements he proposes should be applied across the board, possibly requiring all independent expenditure committees to report based on spending thresholds, not preset deadlines for campaign finance reports as they are now.

Hauser said she supports Bennett’s proposal. That system would be generally less burdensome to independent expenditure committees, she said, and would remove an unnecessary double standard.

“(H2788) doesn’t address other political committees. So there’s a little bit of a different treatment of independent expenditures,” she said. “If they’re done by political committees, you and me and 30 of our closest friends get together and create a political committee to conduct an independent expenditure, we are not subject to these rules, as I read it.”

Click here to read sidebar: “States rush to catch up with campaign finance ruling”

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