The 527 factor: It's big in state races, too

Sixty outside groups - and counting - make their dollars felt in campaigns.

While groups such as, and Swift Boat Veterans for Truth have grabbed national attention with their growing advertising clout in presidential politics, other so-called 527 committees are making their dollars felt in state races across the US.

• In Washington State, a last-minute onslaught of 527-fueled ads appeared to tilt the outcome of one race in the Sept. 14 primary when controversy emerged over ads against one Democratic candidate for attorney general. The committee buying the ads was secretly backed by the US Chamber of Commerce.

• In North Carolina, dueling Republican 527s battled over the state legislature during the primary while the Democratic-backed State Capitol Media Project spent an estimated $600,000 against Republican gubernatorial candidate Patrick Ballantine.

• In Colorado, Americans for Job Security, a Virginia-based Republican 527, hammered Democratic US Senate candidate Ken Salazar's environmental record while, during the primary, Pete Coors was challenged by a committee supporting a rival Republican.

Such groups aren't new, but their importance - and influence - escalated when campaign finance limits were imposed by passage of the McCain- Feingold act. Clamping down on spending and fundraising by candidates and political committees sent the money oozing in other directions.

Named for the section of the tax code that gives them tax-exempt status, 527s have no contribution or spending limits. More important, 527 contributions do not count against an individual's limit per campaign cycle. Thus, a contributor who is allowed to give only $95,000 to candidates and political committees during the biennial election cycle can donate millions to 527s à la George Soros.

A recent federal court ruling, however, has added uncertainty to the labyrinth of campaign finance law. Earlier this week, US District Judge Colleen Kollar-Kotelly rejected 15 Federal Election Commission rules, including one governing the direction and solicitation of 527 funds, that had been used to resolve questions arising from McCain-Feingold. The FEC can appeal the ruling. For now, though, it's business as usual.

More than 60 of the 300-plus committees registered with the IRS as 527s describe their mission as state activity, according to Derek Willis of the Center for Public Integrity in Washington. They raised $56 million through June 30, the end of the last filing cycle.

Moreover, the number of committees is growing weekly. The amount they've raised and spent is expected to be much larger when they next file on Oct. 15.

"Here's the whole irony of McCain-Feingold," says Stephen Moore, co-founder of the Club for Growth, a Washington group dedicated to electing Reaganite Republicans. "They didn't even understand their own law made 527s more powerful, not less powerful."

The Club for Growth's 527 will spend at least $5 million on campaigns at the state level between now and Nov. 2, focusing on Senate races in Oklahoma and South Carolina, House races in Texas, and other spots where Mr. Moore sees a chance to make an impact.

That's not to say it is easy. Federal campaign laws apply on the presidential and congressional levels - for instance, corporate and labor-union contributions can't be used for ads that mention a candidate 60 days before the election. Each state, however, has its own regulations.

And some state regulations have had the same effect as McCain-Feingold. When Mississippi curtailed corporate contributions, corporations sent their money to the Republican Governors Association for use in the 2003 governor's race, according to Mr. Willis. The RGA, which split off from the Republican National Committee after McCain- Feingold to gain independent status, funneled over $5.5 million into the Mississippi Republican Party and Haley Barbour's successful campaign for governor.

"This law hasn't changed anything," says Edwin Bender of the Institute on Money in State Politics in Helena, Mont. "It's forced them to look at different avenues and different mediums. They've used every medium effectively in the past, and they will use any that come up."

It's also introduced an element of chaos via the requirement that groups that want to spend freely must remain independent from the campaigns they support. One effect of the separation: Candidates have deniability when negative ads crop up.

Says Moore, "It's best for these outside groups to do the attacking so the collateral damage is not done to the candidate you're trying to help."

But it also prevents candidates from controlling the way 527s and others behave. The groups "can do damage or have little effect," explains Gail Stoltz, executive director of the State Capitol Media Project in Washington, started by four former Democratic governors. "A whole bunch of people are playing in the arena that may help them or hurt them."

The latter proved to be the case in Washington when the Voters Education Committee began a last-minute $1.4 million television campaign aimed at Deborah Senn, a candidate in the Democratic primary for attorney general. The committee filed with the state but provided little information aside from the name of treasurer Bruce Boram, who also is the executive director of the state's leading business lobby, United for Washington.

Pressed by the state's Public Disclosure Commission about the origin of the funds, the committee said the ad should be considered issue advocacy, not express advocacy. (Express advocacy requires more disclosure in Washington.) But the commission relied on a state Supreme Court ruling to sue the committee for full disclosure.

"This was unique," says PDC spokesman Doug Ellis. "This was something we had not experienced before - this kind of money coming this close to an election and being not reported. So the commission thought swift action was required.... Part of it was to send a message as well. A lot of times political committees believe they can do something and say, 'OK, we'll pay for it later on.' "

The committee admitted its backer was the US Chamber of Commerce. The backlash over the ad and the disclosure issue backfired for the Chamber, disrupting the momentum of Ms. Senn's major opponent in the last few days of the primary race. Senn won.

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