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If McCutcheon vs. FEC overturns contribution caps, will your campaign be ready?

The U.S. Supreme Court, which heard oral argument in McCutcheon vs. FEC this week, may overturn the aggregate contribution caps that have governed federal elections since 1974. If so, candidates should prepare now for the political landscape that will exist come June.

The question presented by Mr. McCutcheon was this: How can it be constitutional, under the guise of preventing corruption, to permit a donor to give max contributions to nine federal candidates but not ten? After all, that is the effect of a $48,600 aggregate limit imposed by federal law. There are similar caps restricting contributions to parties and PACs ($74,600), and an overall limit ($123,600) as well. The law’s defenders counter that wealthy donors should not exert undue influence and that aggregate limits are necessary to prevent circumvention of the base limits.

Based on the oral argument, most observers predict a divided court will strike down one or more aggregate limit. A decision may not come until June, but if candidates wait to adjust, it will likely be too late. Your playbook should be amended now.

The reality is that certain existing laws will become more workable and money will more easily flow through certain channels. Here are two potential examples.

First Super-PACs, Now Super-JFCs.  Joint fundraising committees typically sponsor star-studded events where donors write one big check. In April 2012, for example, a ticket to President Obama’s “Women’s Issues Conference” cost top donors $75,800.  (Romney Victory was no different). That amount represented the max possible contribution under 2012 limits. Without aggregate caps, JFCs could have raised over $500,000 per person.

The advantage for candidates could come in the form of coordinated party expenditures. For example, a donor may contribute $200,000 to a JFC, having four Arizona representatives in mind. Those funds are distributed among various state parties but eventually make their way to a state party here to conduct coordinated expenditures. This is when a party pays for goods/services to benefit a candidate’s general election but without triggering an in-kind contribution.

Thus, while contributions are limited to $5,000, Arizona parties may spend up to $46,600 in coordinated expenditures per House race. This is nothing new.  However, our hypothetical JFC donor — who would normally bump up against aggregate limits — could see that all four candidates receive the full benefit of coordinated expenditures.

The lower court worried that “the candidate who knows the coordinated expenditure funding derives from that single large check . . . will know precisely where to lay the wreath of gratitude.” But the Supreme Court may decide that does not justify restricting donors’ constitutional rights.

Candidates regularly jockey for coordinated money. It is unclear how that process will change, but it will change if the court strikes down the limits. Candidates therefore should have a plan in place to tap any new resources that become available.

Candidate-Specific PACs. Candidates cannot establish multiple committees to receive multiple $2,600 contributions. Nor can donors earmark a PAC contribution for a particular candidate if the donor has already maxed out to that candidate. However, nothing prevents a donor from making $5,000 contributions to various PACs that the donor hopes will contribute to his/her preferred candidates. Regulations merely prevent contributions given “with the knowledge that a substantial portion will be contributed to that candidate.”

With aggregate limits, it does not make much sense to test that boundary or attempt to maximize the multiplication effect of PACs. But without caps, it may be tempting to establish potentially dozens of PACs. Lawyers will then be asked by clients — likely to be donors or past aides of a particular candidate who are suddenly interested in forming an array of innocuous-sounding organizations — how much distance they must maintain from a particular campaign.

These are just two examples of what a post-McCutcheon world might look like. While some may think the sky is falling, take solace – myriad prophylactic measures will survive this ruling. Earmarking prohibitions, enforced by the FEC, will still be in place. Contributions and expenditures will be disclosed. And watchdogs can still be expected to shine a light on suspicious activity.

Whether the sea change brought about by McCutcheon will undermine the campaign finance system is for Congress to decide. In the meantime, however, candidates should begin preparing now or risk being at a competitive disadvantage when the Supreme Court’s decision is rendered next year.

Eric Spencer is an attorney with Snell & Wilmer L.L.P. and practices election law.

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