Stateline Story

Politicking 527s Target States, Not Congress

Tax-exempt political advocacy groups, known as 527s, are investing growing amounts of money on state-level races and issues this election year in a shift away from topics affecting all 50 states, the latest financial figures show.

A report from the Center for Responsive Politics, a nonpartisan campaign watchdog, details a national trend - occurring in 21 states - of increased activity by 527s towards state-focused endeavors. The report shows that more state-focused 527s are popping up and that they are spending more money in 2006 than in 2004, when groups such as Swift Boat Vets and MoveOn.org made headlines with attempts to sway the presidential race.

But there is no presidential race this year, and 527s are sprouting up in states such as Colorado, where 14 new groups have formed since the 2004 election to weigh in on a competitive governor's race, a fight for political control of the state Legislature, and 14 ballot initiatives that will be decided in November. In addition to the Rocky Mountain State, pending by 527s has increased by the greatest percentage in Alabama, New Jersey, North Carolina, and Virginia, according to the Center's report. Fund raising by 527s increased by the greatest percentage in Colorado, New Jersey, North Carolina, Oklahoma, and New York.

The 527 groups burgeoned after a 2002 federal campaign finance law banned "soft money," unlimited cash contributions that political parties had been able to spend to influence elections through "voter education" or "issue advocacy" but not directly on candidates. To get around the ban, contributors found a new legal outlet in 527 groups, which can use unlimited contributions for issue advertising or get-out-the-vote efforts but also are prohibited from directly advocating for the election or defeat of a specific federal candidate.

The report found the largest state-based 527 is the Protect our Homes Coalition, which has spent more than $2.3 million to support a ballot measure limiting the government's use of eminent domain powers to seize private property in California.

Based on figures for the first 18 months of the 2006 election cycle, 527s focused on state races have raised $105 million — 41 percent more than in the same period for the 2004 election, according to the Center's report. Spending by state-level 527s also increased 36 percent over the same period two years ago, to $85 million, the Center reported.

So far, the nation's top two 527s in the 2006 election cycle are the Republican and Democratic governors associations, which work to elect their party's gubernatorial candidates. From January 2005 through June 2006, the Republican Governors Association has raised $26 million to support many of this year's 36 gubernatorial races, while the Democratic Governors Association has collected $18 million. Both groups were in the top 10 of all 527s in the 2004 elections.

In the same time frame, 527s supporting federal campaigns, such as congressional races, have raised 55 percent less this year — $96 million compared to $211 million at the same point in the 2004 elections — and spent 40 percent less, despite an election season when control of Congress is at stake, the Center reported. The report found the fastest-growing segment of 527s involves groups based in and focused on individual states, such as in Colorado, where 527s can have an enormous impact. For example, in 2004, a group called Coalition for A Better Colorado spent $574,368 and is credited with helping the Democrats gain control of the state Legislature for the first time in 44 years.

Thomas Rogers, a Denver-based attorney specializing in elections, said his state's tight campaign finance restrictions were one of the biggest reasons that 14 new 527s had formed. By giving money to 527s, wealthy individuals and corporations avoid Colorado's strict contribution limits. The 527s provide a financial vehicle that enables these donors to have a much larger impact on elections than even the candidate's committees, he said.

Colorado's Trailhead Group, the second-wealthiest state-based 527, has spent more than $1.5 million to support Republican state legislative candidates and the GOP gubernatorial contender, U.S. Rep. Bob Beauprez.

Trailhead is part of a growing list of groups financed by a small number of wealthy individuals or corporations. It was launched in 2005, with $291,000 given by brewing magnate Pete Coors and four other individuals. In its latest report to the Internal Revenue Service , Trailhead reported just eight contributors who gave a total of $757,000 for the second quarter of the calendar year.

Including Trailhead, at least three of the top-20 state-focused 527s were funded by individuals. North Carolina Conservatives United has received all but $208 of its more than $1 million in contributions from attorney William Graham of Salisbury, N.C. Graham is considered a possible GOP gubernatorial candidate in 2008.

Conservation Strategies, based in Seattle, has received all of its 2006 election-cycle contributions of $825,000 from Paul Brainerd, the founder of the software company, Aldus, which developed the publishing program PageMaker, and the head of The Brainerd Foundation. The group's political goal is to provide " on-going support for pro-conservation candidates and incumbents, including specialized assistance in campaign technology, state-specific information, expertise in a variety of aspects of campaign operation [and] question and answer forums."

The Center's numbers, gleaned from IRS records, do not include fund-raising or expense reports filed by paper as opposed to electronic filings, or amounts for state-focused 527s that choose instead to file in their states. The Center receives a portion of its funding from The Pew Charitable Trusts, which also funds Stateline.org.