UF Researcher: "Veiled" Organizations Secretly Sway Ballot Measures

April 14, 2004

GAINESVILLE, Fla. — Stealth or disguised political organizations with little public accountability are spending large sums of frequently untraceable money to influence the outcomes of referendum elections in many states, largely due to weak or loophole-ridden disclosure laws.

So argue scholars from the University of Florida and University of Southern California in a paper to be delivered at the Midwest Political Science Association meeting in Chicago on Saturday.

In the paper, UF political science Associate Professor Daniel Smith and USC law Professor Elizabeth Garrett describe how “veiled political actors” ranging from politically oriented nonprofits to little-known advocacy groups use a variety of state and federal regulatory loopholes to sway the outcome of ballot initiatives. States and the federal government should pass stricter laws requiring more disclosure about these organizations, their members and their spending behavior so voters can be as informed as possible when they go to the ballot box, the researchers write.

“It’s impossible to track the activities of these organizations because the reporting is so ambiguous,” Smith said. “Our argument is that the more disclosure you have, the more competent your voters will be.”

Much of the emphasis of recent campaign financing reform legislation has been placed on elections involving political candidates. For example, a campaign finance law sponsored primarily by Sen. John McCain and Russell Feingold that passed in 2002 and recently was upheld by the U.S. Supreme Court, bans unregulated “soft money” donations and limits campaign-season political advertising for traditional elections but says nothing about ballot elections.

Instead, Smith said, such elections tend to be governed by disclosure and spending rules that are much more lax following a 1978 Supreme Court decision asserting that states do not have a compelling interest in regulating candidate and party contributions in ballot initiatives. While individual contributions to federal candidate elections are capped at $2,000, there are no caps for ballot measures, Smith said.

The result has been that veiled organizations have become increasingly involved and successful at swaying state ballot elections, he said. These include nonprofits that ostensibly exist for charitable, environmental health or community reasons, and include organizations set up under varying state statutes for ostensibly nonpolitical purposes that in practice act as political advocates, he said.

The authors cite several examples of individuals in different states contributing large sums to nonprofits, which, under federal rules do not have to reveal donor names. The nonprofits then spent the money on advertising and contributions to ballot campaigns to influence their outcomes. In Colorado, one individual created the Colorado Youth Charity, donated $1 million to it, then removed $170,000 the same day, which he devoted to a personal initiative supporting same-day voter registration.

“There are several cases in which individuals have created nonprofits with the major intent of ‘laundering’ money,” he said. “Both liberals and conservatives are doing this.”

In Florida, Smith and Garrett focused on “committees of continuous existence,” or CCEs, speculating these organizations may have tried to influence at least one of the five ballot initiatives in the state’s 2002 election. CCEs were originally created by the Florida Legislature as a vehicle to provide anonymity for associations wanting to engage in political activities and shelter members’ names. Today, they also include so-called “leadership CCEs,” which exist to funnel money from elected officials’ campaign accounts to those of other officials and political candidates, Smith said.

In an attempt to clarify the activity of CCEs in Florida, Smith and UF graduate student Nicole James downloaded and analyzed data from CCE disclosure reports filed with the Florida Division of Elections. Analyzing the reports of 22 leadership CCEs, the researchers found these organizations had collectively raised more than $3.1 million over the past four years.

More than 41 percent of contributions greater than $1,000 came from anonymous “members” known only to lawmakers, the researchers said. As for how these groups spent their contributions, only 12.8 percent of the CCEs’ expenditures went to the political committees of member legislators, a low figure considering such spending was the leadership CCEs’ original purpose, Smith writes.

Smith and Garrett also looked specifically at CCE financing of a ballot initiative on Florida’s 2002 ballot: Amendment 9, a classroom size-reduction measure opposed by developers and homebuilders. While they were not able to find any direct links between home builders’ CCEs and funding of advertising or other activities opposing Amendment 9, the researchers documented several transactions between the CCEs, other furtive campaign finance organizations such as so-called “527s,” and public relations or advertising firms in the months leading up to the vote.

“The deliberately concealed nature of the numerous transactions involving various Florida CCEs and 527s with ties to Florida home builders, combined with the timing of the expenditures, is suspect” as the expenditures could have been used to oppose the ballot measure or other issues related to candidate races, the authors argue. The amendment passed by a slim margin.

Smith said state legislators in Florida and other states with CCEs or similar organizations should pass better campaign disclosure legislation requiring, among other things, that the organizations reveal the names of their donors or members and explicitly state how their money was spent.

“This research is novel in that it looks at veiled actors in initiative politics,” said Todd Donovan, a professor of political science and expert on ballot initiatives and other forms of direct democracy at Western Washington University in Bellingham, Wash. “The bulk of the research has been looking at these actors in federal candidate races. This work is one of the clearest appeals thus far for introducing narrowly targeted regulations on spending related to initiative campaigns.”