Stateline Story

Governors' Associations' 527 Groups Gain Greenbacks, Influence

The Republican and Democratic governors' associations are little known to the public, but they now rank as the two biggest players in garnering millions of dollars in "soft money" contributions from corporations and labor groups to help sway state elections.

Donations to the governors' groups, which serve as campaign strategy and policy promoters for the nation's 28 Republican and 22 Democratic governors, have grown exponentially since passage of the 2002 McCain-Feingold law, according to the Center for Public Integrity, a nonpartisan organization that monitors campaign finance issues.

The federal law's limits on national parties and federal candidates don't apply to the governors' associations, which operate under section 527 of the U.S. tax code and hence bear the popular moniker, "527 groups." The 527 groups are able to spend "soft money": cash raised and supposedly spent independently of the parties or candidates for "voter education" or "issue advocacy," but often used to bash an opposing candidate.

The center reports that the Democratic Governors Association (DGA), chaired by Iowa Gov. Tom Vilsack, ranks fourth among the more than 300 527 groups in terms of money raised, far eclipsing such headline-grabbers as the Swift Boat Veterans for Truth or MoveOn.org, which are trying to influence the presidential election. The DGA has raised more than $32 million since it was formed in 2000, the center says.

The Republican Governors Association (RGA), led by Ohio Gov. Bob Taft, has raised $30.2 million since it was formed in 2002, making it sixth largest nationally in financial terms.

The DGA and RGA are the largest of more than 50 such groups that contribute to state and local campaigns, and also are able to use their clout to trumpet their party's presidential candidate.

By comparison, the left-leaning MoveOn.org has raised $12 million since it was launched in 2003, while the Swift Boat Veterans group has raised $2 million this year to air its television ads attacking Democratic presidential candidate John Kerry, according to the center's figures.

At the state level, especially, the new campaign clout has brought the governors' associations greater scrutiny.

The Republican association recently was fined $200,000 in North Carolina for a TV ad supporting GOP gubernatorial candidate Patrick Ballantine. The State Board of Elections ruled that the ad violated a state law banning the use of corporate funds to endorse candidates.

In Montana, the RGA stirred controversy by funding a telemarketing campaign to disparage Democratic gubernatorial candidate Brian Schweitzer. The so-called "push poll" asked callers to answer some general questions about the Montana gubernatorial race, then leveled a number of charges about Schweitzer's political and business record.

As of mid-July, the RGA had raised $7.8 million and spent $2.9 million in 2004, and the DGA had raised a little more than $5 million and spent $2.7 million for gubernatorial candidates. Both groups had spent more on fund-raising events and campaign consulting than they had given directly to the 11 gubernatorial races, according to a Stateline.org review of their federal tax filings.

That pattern has shifted since the July reports, and money has begun to flow to the states, according to spokesmen for both organizations. Both groups are required to file updated contribution and spending reports by Oct. 15.

Campaign finance watchdogs are concerned that the governors' groups are circumventing state election laws by raising money from sources and in amounts that would be prohibited by some state laws. In addition, critics say, the groups avoid state lobbying disclosure rules by rewarding donors with exclusive opportunities to meet with governors at posh resorts, receptions and closed-door policy meetings.

"Many states have laws to prevent corporations and interest groups from contributing to candidates," wrote Center for Public Integrity researcher John Sents in a study. "But 527 committees such as the governors' associations are unregulated and can accept unlimited contributions from any source. While governors' associations have limits on their direct contributions to candidates under state laws, they can still raise money from sources that would otherwise be prohibited in certain states."

DGA spokeswoman Nicole Harburger defended her organization's actions, saying, "There is no skirting of the law."

"The contributions that are raised at events are for the DGA, not individual governors," she said. "When the DGA makes a contribution to a state, that contribution is made according to state campaign finance law."

RGA spokesman Harvey Valentine said, "We raise money all over the country and spend money all over the country. We make sure we comply with the campaign finance laws of all 50 states. All of our political activities and contributions are disclosed to the appropriate state and federal agencies."

But researcher Sents cites the example of Mississippi, where corporations are limited to $1,000 campaign contributions. The Nissan Corporation, which opened a Mississippi plant in May 2003, gave $100,000 to each governors' association in advance of last year's gubernatorial race. In turn, the RGA set up a state political action committee, which spent more than $5.6 million to help Haley Barbour win the 2003 Mississippi governor's race, while the DGA spent nearly $2.3 million to support then-Gov. Ronnie Musgrove.

Like Nissan, most of groups that give to the governors' associations have direct interests in state policy. The largest contributor to either group this year is the American Federation of State, County and Municipal Employees, a union representing 1.4 million government employees, which has given $250,000 to the DGA. The RGA's biggest donor this year was the MassMutual Life Insurance Company, which has contributed $130,000.

Scores of contributors have given to both groups, including the Anheuser-Busch Companies, the Service Employees International Union and the National Rifle Association.

In return for their largesse, contributors, who purchase "memberships," can meet with governors behind closed doors at association events in vacation hotspots. For example, memberships for the DGA include the "Chairman's Board" level for contributions of $75,000 and above and the "Governor's Circle" level for contributions between $50,000 and $75,000.

The DGA Spring Policy Conference, in Phoenix, Ariz., included three hours of policy discussions sandwiched between receptions, meals, golf outings and two Major League Baseball games. The Summer Policy Conference in New Mexico had a similar schedule with time for "Golf on Tournament Course" and a Western-themed "Buckaroo Ball," according to its agenda.

Both governors' groups hosted several members-only receptions at the Democratic and Republican national conventions.

The events are a way for donors to avoid states' limits and reporting requirements on buying gifts and meals for lawmakers, said Bob Stern, president of the nonpartisan Center for Governmental Studies.

Ruth Jones, an expert in state-level politics and campaign finance at Arizona State University, said the forums violate the spirit, if not the letter, of the law. A lawsuit has been filed to make all 527 groups subject to the McCain-Feingold contribution limits, which would curtail much of the governors associations' activities, she said.