Stateline Story

Colorado is hot spot for politicking by 527s

In 2004, the Swift Boat Veterans for Truth threw a monkey wrench into Democratic Sen. John Kerry's quest for the White House with ads questioning his military record, while Moveon.org mounted a massive voter turnout program to try to defeat President Bush.
 
Both are examples of the new breed of nonprofit political groups that skirt campaign contribution limits and that now are gearing up in states for the 2006 election.
 
More than 300 of the so-called 527 groups, named for the section of the U.S. tax code that sanctions them, are based in at least 45 states — compared to just 82 such groups four years and 215 in 2004. Allowed to rake in unlimited contributions, they sometimes are wresting control of the political landscape even from the parties and candidates they indirectly seek to promote.
 
One hot spot for 527s is Colorado, where more than a dozen groups are waging a high-priced battle for control of the state Legislature and an open gubernatorial seat.
 
Such 527 groups came to the fore after a 2002 federal campaign reform law prohibited political parties and political action committees from accepting "soft money" — unlimited cash raised and supposedly spent independently for "voter education" or "issue advocacy."
 
But Democrats and Republicans soon got around the soft-money ban. The new entities called 527s were created and still were able to avoid the federal election contribution caps — as long as they didn't directly advocate the election or defeat of a specific candidate.

In the 2004 election, 527s nationally raised approximately $535 million, compared to $268 million in 2002, according to the nonpartisan Center for Public Integrity (CPI), which tracks campaign finance dollars. Two of the largest 527s are the Republican and Democratic governors associations, which are raising tens of millions of dollars to influence some of this year's 36 gubernatorial races.
 
Virginia, one of 13 states with no limits on campaign contributions, is home to the largest number of 527s with 51, followed by California with 47 and Florida with 31, according to CPI data.
 
"I think this is a trend we've started to see, which is only set to grow," said Daniel Lathrop, a CPI researcher. (CPI receives some funding from The Pew Charitable Trusts, which also funds Stateline.org.)
 
At least 15 of the 527s have Colorado addresses, including the Trailhead Group, which was formed last year and raised $291,000 with the help of Gov. Bill Owens (R) . Trailhead's top contribution of $100,000 came from Colorado beer magnate Pete Coors, a Republican who lost the 2004 U.S. Senate race. Four other individuals gave $50,000 each, according to data from the Internal Revenue Service .

Those amounts are well in excess of the $500 maximum individual contribution allowed to political action committees under a constitutional amendment approved by Colorado voters in 2002. Political action committees may accept limited contributions to expressly advocate for the election or defeat of a candidate.
 
Four other contributions to Trailhead came from corporations, a source of campaign cash that the amendment banned for political action committees but not 527s.
 
Trailhead has stirred the most controversy this year with automated phone calls to constituents of 10 Democratic state legislators. Democrats have charged that the calls are slanderous, but Colorado Attorney General John Suthers denied a request to investigate the Trailhead Group.
 
Alan Philp, Trailhead's director and the former director of the Colorado Republican Party , said the group is a direct response to Democratic-oriented 527s that formed for the 2004 election. "I wish we didn't have to do this, but the Democrats forced us into this. It's a matter of survival for Republicans," he said.
 
Two years ago, the Coalition for a Better Colorado, a left-leaning 527 with ties to organized labor, spent $574,368 as Democrats won back a U.S. Senate seat and took control of both chambers of the state Legislature for the first time in 40 years.
 
The top donors to the Coalition for a Better Colorado were Rutt and Barbara Bridges, a couple who has given more than $313,000 to the organization since it was founded in 2004. Rutt Bridges is chief executive officer of the Bighorn Center for Public Policy , a private, nonprofit foundation created in 1999 to "advocate public policies to improve Coloradans' quality of life through effective and efficient state and local government." He declined to comment for this story.

Campaign finance watchdogs in the state have raised questions about both the Trailhead Group and the Coalition for a Better Colorado and the amounts of money they have raised. "I think it's the case that some of these groups are doing things that should pull them into the world of state campaign finance law," said Pete Maysmith, director of Colorado Common Cause
 
John Zakhem, a Denver lawyer representing the Trailhead Group, said the organization is not violating the state's laws by accepting larger donations because it is not giving directly to candidates right now. Trailhead's phone calls against Democratic state legislators do not fall under the state's regulations until 30 days before Colorado's Aug. 8 primary and 60 days before the November general election, he said.
 
A bigger problem is that 527s, which are prohibited from coordinating their campaign efforts with parties and politicians, may frustrate the candidates they are trying to help, Zakhem said. "Candidates absolutely feel they have lost control of campaigns," he said.
 
Colorado State Treasurer Mark Hillman , a Republican, has protested a Trailhead radio advertisement that supports his role in reforming the state's pension plan. "In no way did I authorize or approve these commercials nor do I find their partisan tone to be helpful or productive," Hillman was quoted in The Denver Post .
 
State parties, already feeling pinched by the soft-money prohibition, also may be losing relevance in a political world dominated by nonprofits who can collect unlimited donations. While donations to 527s nearly doubled between 2002 and 2004, state parties saw their war chests cut in half, according to a report from the Institute on Money in State Politics .
 
Pat Waak, chairwoman of the Colorado Democratic Party , said that the 527s have forced her state party to rethink its role, but that her colleagues in other states feel that they have lost control of some aspects of campaigns. "In the end, we would all love to be in total control of the money that is being spent on candidates," she said.
 
Regulators and lawmakers in several states and at the federal level are showing an increased interest in cracking down on 527 activity. Last year, Minnesota regulators levied a record $400,000 penalty against a Democratic political organization that failed to file proper state disclosure forms. And an Arizona nonprofit disbanded in 2005 after a nearly year-long battle with state campaign finance officials who fined the group $5,000, according to CPI.
 
Colorado officials did fine a group $36,000 last year for accepting contributions above the $500 limit.
 
Florida lawmakers are considering a bill to force 527s to report more information about their contributions and spending.
 
Congress, however, soon could close the 527 loophole and shut off soft money: Both the U.S. House and Senate are considering legislation to limit 527 contributions.