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Dark Money

Dark MoneySpecter of anonymous campaign spending looms over 2014

Next year’s elections are shaping up like 2012 — organizations with generic names, big checkbooks and secret contributors spending millions to influence Arizona’s elections.

Some lawmakers have expressed interest in passing legislation to require disclosure of so-called “dark money” groups that can raise unlimited sums and spend on independent expenditures campaigns without disclosing the source. Sen. Michele Reagan, who chairs the Senate Elections Committee, said she is evaluating several proposals and plans to run legislation in 2014.

But Reagan said it’s unlikely any laws passed next year will go into effect in time to have much of an impact on the 2014 elections. And many advocates of stricter disclosure are skeptical that the Legislature will pass any new laws at all.

While disclosure advocates say voters should have a right to know who is influencing their elections, critics of such laws say greater disclosure infringes on First Amendment rights.

Rick Hasen, a professor of law and political science at the University of California, Irvine, and a frequent contributor to Election Law Blog, said laws requiring disclosure of anonymous contributions from nonprofit entities and other “dark money” groups are constitutional. But the bigger question is whether lawmakers will impose those requirements, even as anonymous spending has increased in the wake of the U.S. Supreme Court’s landmark ruling in Citizens United.

In Citizens United v. Federal Election Commission, the Supreme Court held that the First Amendment prohibits the government from restricting political independent expenditures by corporations, associations or labor unions.

“Certainly the amount has ramped up,” Hasen said. “The question is whether or not there’s a desire to have more disclosure.”

Anonymous campaign spending has been a hot topic across the country, and in Arizona, several recent incidents have pushed it to the forefront.

In 2012, Americans for Responsible Leadership (ARL), a nonprofit organization founded by businessman Robert Graham and run by former Arizona House Speaker Kirk Adams, spent a little over $1.6 million in a campaign against two ballot measures, one that would have extended a temporary 1-cent sales tax increase permanently and another that would have created a “top-two” primary election system.

ARL contributors were secret, and the spending elicited howls of protest from the campaigns for the ballot measures, both of which lost by two-to-one margins.

More recently, Arizona Public Service, the state’s largest utility, initially denied funding a massive public relations campaign urging regulators to make changes to rules on solar power. The utility later acknowledged to The Arizona Republic that it was funding the campaign, which ultimately cost APS about $3.7 million.

And the Arizona Public Integrity Alliance, a conservative nonprofit group that spent money on several campaigns in 2012, is running ads bashing Attorney General Tom Horne for campaign finance allegations against him. The nonprofit is not required to disclose its contributors, and will not even have to report how much it is spending on the ads because they are deemed issue advocacy, not electioneering.

Shining some sunshine

While ARL garnered the biggest headlines, largely due to the group running afoul of California’s much stricter disclosure laws, numerous other groups in Arizona sought to tip the scales in 2012 with anonymous money. Usually, the organizations are registered as nonprofits or LLCs, which must disclose what they spend on elections, but not who gave them the money.

Reagan, R-Scottsdale, said she’d like to require disclosure of the source of the contributions. She’s still sifting through the details of what her legislation will look like, examining what other states are doing and determining what will pass muster based on past U.S. Supreme Court rulings.

“I just want to see if there’s any way that we can … shine a little sunshine on some of the donations that are being made in Arizona that the public doesn’t have access to,” Reagan said.

She said her push for greater campaign finance disclosure isn’t being driven by the controversies that engulfed the 2012 election. Nor is it inspired, she said, by her own campaign for the Secretary of State’s Office.

“I think it’s really important that we allow our citizens and voters to see (who’s) paying for different campaigns. I have to, as a candidate, disclose who’s contributing to me. It seems like a no-brainer that if a group is spending money that the citizens have a right to be able to see where that money’s coming from,” Reagan said. “This anonymous stuff is not tolerated in other states, and I want to see why it’s tolerated in our state.”

Most states don’t require the level of disclosure that Reagan is talking about. But calls for an end to dark money are growing across the country.

California, which took ARL to court to force it to disclose the source of the $11 million it spent on two ballot measure campaigns there in 2012, requires political groups to disclose the identity of their contributors. Minnesota this year passed stricter disclosure laws.

Peter Quist, research director at the Montana-based National Institute on Money in State Politics, said few states require the disclosure of contributors to “dark money” groups, and efforts to impose to disclosure requirements are a fairly recent phenomenon.

“I think this is really sort of new territory for a lot of states with the Citizens United decision really raising awareness of this kind of spending in elections, and also allowing that spending to increase,” Quist said.

If Reagan can get a bill through the Legislature, Arizona would be one of the first states in the country to have such a law.

Democratic lawmakers such as House Minority Leader Chad Campbell and Sen. Steve Farley introduced legislation in 2013, though neither bill got any traction. Campbell, D-Phoenix, said any proposal will probably have to introduced by a Republican for it to have a chance of passing in the GOP-led Legislature.

Avoiding political destruction

Without stricter disclosure laws, 2014 will likely be more of the same, said lobbyist Chris Herstam, a vocal critic of “dark money” in politics. Especially with Arizona’s statewide offices up for grabs, Herstam said he expects millions to be funneled through independent expenditure groups in next year’s election.

“If you’re a candidate that is being attacked by millions of dollars of dark money, your only hope is to expose the contributors of that money and make the Arizona voters aware of the situation,” Herstam said. “As long as the attack money remains dark, candidates … will be politically destroyed.”

Some lawmakers on both sides of the aisle are very open to the idea of requiring more transparency in campaign spending. Though a partisan divide has emerged on the issue of dark money, and Republicans are largely perceived as being the bigger beneficiaries, Democrats have used it to their advantage as well.

Sen. John McComish, R-Phoenix, faced $300,000 worth of opposition from independent expenditures in last year’s general election, with some of the money coming from undisclosed sources. McComish said groups have the right to spend money as they wish, but the public should have a right to know where the money is coming from.

McComish said he believes a disclosure bill can get through the Legislature next year.

“People might not want to be on record as voting against disclosure,” he said.

Campbell said transparency shouldn’t be a partisan issue. Democrats are concerned about anonymous spending from conservatives such as wealthy Koch brothers, he said, while Republicans worry about campaign activity by labor unions.

The House minority leader pointed to APS’ recent public relations campaign over net metering, which dictates how much the company must pay to buy back excess solar power from customers, as an example of why new laws on the subject are needed.

“No matter what we do ultimately, the goal should be transparency,” Campbell said. “We’re not going to be able to limit where money is coming from, most likely … so I think the key is transparency. To me, that shouldn’t be a Democratic or Republican issue.”

However, other lawmakers are skeptical. Rep. J.D. Mesnard, R-Chandler, said disclosure and transparency measures are worth considering. But there are valid reasons for not imposing new laws, he said.

“If you’re talking about organizations who are set up and who are trying to exercise their free speech, at least as the courts have interpreted it, I place a preference on their freedom to do that without fear of retribution than I do the concept that we need to disclose everything under the sun,” Mesnard said.

Fears of retaliation

Advocates of anonymous spending frequently cite the prospect of retaliation and harassment against groups for their campaign activities.

Political consultant Sean Noble, who worked for APS and directed millions to Americans for Responsible Leadership, said America has a proud tradition of anonymous political speech that goes back to the Federalist Papers. Noble, who in the past has had deep ties to the Koch brothers’ political network, said more disclosure would lead to more retaliation, such as the harassment faced by funders of California’s Proposition 8, an anti-gay marriage initiative from 2008.

Noble said it’s not important for voters to know who is funding campaign activity. Disclosure, he said, distracts from the speech itself.

“Who’s speaking is way less important than what is being said. This is a nation of vigorous debate,” Noble said.

Noble accused critics of invoking “dark money” as a diversion and scapegoat for political losses.

“It is a distraction, away from the merits of the debate,” he said.

Adams, the former House Speaker, whose political advocacy group Prosper Inc. has been taking an increasingly large role in Arizona politics, including in the net metering debate, said increasing disclosure requirements may not even be constitutional under the First Amendment. APS’ parent company acknowledged giving money to Prosper, which ran television ads advocating its position on net metering.

Adams noted that a 1958 U.S. Supreme Court ruling barred Alabama from forcing the National Association for the Advancement of Colored People to turn over its membership list out of fear of retribution.

“There are constitutional issues with trying to impose that type of disclosure regime to anonymous outside groups,” he said.

Hasen, the election law expert, said the Supreme Court has recognized that disclosure is unconstitutional if it subjects people to harassment. But the harassment has to be substantial in order to meet that benchmark, he said, and proving that harassment is severe enough to render a disclosure law unconstitutional is difficult.

For example, Hasen said the level of harassment faced by Prop. 8 supporters in California was “relatively small.” Even the Citizens United ruling included a “ringing endorsement” of disclosure laws, Hasen said.

“California’s laws, I believe, are perfectly constitutional. This is the next frontier. The fight before was about limits, and now the fight is to try to have secret money, to try to use the Constitution to shield the identity of large players in elections. And so far the courts have not agreed,” Hasen said.

Noble predicted that the disclosure of anonymous campaign spending will end up before the Supreme Court sometime in the next decade. In the meantime, legislatures will likely continue to debate the issue.

But even if Arizona’s Legislature passes a bill in 2014, it may not go into effect in time to give voters a clear picture of who is spending money to influence next year’s election.

Reagan said she didn’t know if a new law could be implemented in time for the 2014 election.  So far, she hasn’t even decided exactly what the bill will look like, while Campbell said he doubts that new disclosure requirements could be put in place that quickly.

“I’m realistic about it,” he said.

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