Political Donations: Can States Legislate?

Political donations in the United States are governed by laws at the federal, state, and local levels, with the Federal Election Commission (FEC) enforcing the Federal Election Campaign Act of 1971 (FECA). The FECA limits the amount of money individuals and organizations can donate to federal candidates and prohibits contributions from certain entities, such as foreign nationals and federal government contractors. State laws also play a role, especially in state-level campaigns, where factors like district size and shifting boundaries can influence the reliance on out-of-state donations. Public concern over the influence of large donors has led to proposals for reform, including small donor public financing and full disclosure of all political spending.

Foreign donations to US political candidates

Federal law prohibits foreign nationals from directly or indirectly contributing to any federal, state, or local elections in the United States. This includes any contributions, donations, expenditures, independent expenditures, or disbursements for electioneering communications. These laws are designed to prevent foreign influence in US elections.

Despite these laws, there have been instances of foreign money influencing US elections. For example, during the 2016 election, there was significant interference from Russia, which prompted formal inquiries and hearings by Congress and criminal prosecutions by the Department of Justice. Additionally, the FEC has been criticized for its failure to enforce the laws banning foreign money in elections. In one instance, the FEC closed a matter involving a US company, American Ethane Co., which used funds from Russian oligarchs to support federal candidates and PACs during the 2018 election cycle.

The FEC's handling of this situation has raised concerns about its commitment to protecting US elections from foreign interference. Some argue that foreign money can be spent on elections if it is first "invested" in a US business, creating a legal loophole that increases the risk of foreign influence.

It is important to note that individuals can donate to politicians and political campaigns across the country, regardless of their state of residence. This is separate from foreign donations, which refer specifically to contributions from individuals or entities not based in the United States.

While states have some level of sovereignty, US federal law dictates foreign donations, and any state laws would need to align with federal regulations in this regard.

Limits on campaign contributions

The Federal Election Commission (FEC) in the United States of America imposes limits on campaign contributions. These limits apply to all types of contributions, except those made from a candidate's personal funds. A campaign is prohibited from retaining contributions that exceed the limits, and in the event that a campaign receives excessive contributions, it must follow special procedures for handling such funds.

The FEC specifies that individuals may make contributions to candidates and their authorized committees, subject to limitations. State PACs, unregistered local party organizations, and nonfederal campaign committees may, under certain circumstances, contribute to federal candidates. However, the funds must come from permissible sources, and the contribution may require the nonfederal committee to register with the FEC as a federal political committee.

The Bipartisan Campaign Reform Act (BCRA) increased the contribution limits for individuals giving to federal candidates and political parties. Every two years, the FEC updates certain contribution limits, such as the amount individuals may give to candidates and party committees, which are indexed to inflation. There is no longer an aggregate limit on how much an individual can give in total to all candidates, PACs, and party committees combined.

Independent-expenditure-only political committees, often referred to as "Super PACs," may accept unlimited contributions, including from corporations and labor organizations. However, federal law prohibits contributions, donations, expenditures, and disbursements solicited, directed, received, or made by or from foreign nationals in connection with any federal, state, or local election. Additionally, incorporated charitable organizations are prohibited from making contributions in connection with federal elections, and campaigns may not accept or solicit contributions from federal government contractors.

State laws on political donations

In some states, there are specific provisions for certain types of organizations or individuals. For instance, state Political Action Committees (PACs) and nonfederal campaign committees may contribute to federal candidates under certain circumstances, but they must comply with specific requirements. Unauthorized committees sponsored by an officeholder ("leadership PAC") are not considered affiliated with any authorized committees of the same individual.

Additionally, some states have implemented innovative approaches to diversify the donor pool and increase political engagement. For example, Seattle's Democracy Voucher Program provides city residents with vouchers to donate to participating candidates, and Massachusetts has had a hybrid public funding system for statewide offices since 1978, where taxpayers can contribute $1 to the statewide election fund through their income taxes.

While there are laws and regulations in place, there is still public concern and ongoing efforts to "fix" the influence of large donors in political campaigns.

Influence of large donors

The influence of large donors on politics has been a significant issue in the United States, with a handful of wealthy donors dominating electoral giving and spending. This has led to concerns about the disproportionate influence of the super-wealthy and the impact of "dark money" on political campaigns.

The 2010 Supreme Court decision in Citizens United v. FEC further exacerbated the problem by allowing unlimited independent spending by groups and individuals, including Super PACs backed by billionaires. This has resulted in a flood of money into political campaigns, drowning out the voices of ordinary Americans. The lack of transparency associated with dark money, where the identities of donors are masked, further complicates the issue, making it difficult for voters to know who is trying to influence them.

Wealthy donors have been accused of holding sway over politicians and influencing their decisions, leading to concerns about corruption and the motivation of elected officials. This has resulted in a widespread belief that there is too much money in politics and that major donors, lobbyists, and special interests have an excessive influence on policy-making.

To address these concerns, there have been calls for campaign finance reform, including limits on campaign contributions, increased transparency, and stricter enforcement of existing rules. The DISCLOSE Act, for example, aims to require all groups engaged in political spending to disclose their donors, curbing the influence of dark money. Additionally, proposals such as small donor matching programs aim to amplify the voices of smaller donors and reduce the dependence on large contributions.

While small donor giving has increased in recent years, it has not kept pace with the rapid growth of big-money spending. This disparity underscores the ongoing challenge of reducing the influence of large donors and creating a more equitable and representative political system.

Public funding for campaigns

Public funding for political campaigns is a way to provide financial support for candidates running for office, typically through government funds or taxpayer dollars. In the United States, the Federal Election Commission (FEC) plays a crucial role in regulating and administering public funding for federal elections. The Presidential Election Campaign Fund, for example, is a source of public funding for eligible presidential candidates, who must demonstrate broad-based public support and adhere to spending limits.

The FEC's public funding program for presidential elections aims to match the first $250 of individual contributions received by eligible candidates during the primary campaign. Additionally, it provides funding for major party nominees' general election campaigns and offers assistance to eligible minor party nominees. To establish eligibility for primary matching funds, candidates must raise over $5,000 in matchable contributions from individuals, with a maximum of $250 per contributor, across at least 20 states. This ensures that candidates have a diverse base of support.

State laws also play a role in public funding for campaigns, with varying limits and regulations across different states. For instance, in 2024, state limits range from $1,236,000 in Wyoming to $30,176,500 in California. Candidates may be allowed to spend a limited amount of their personal funds, and certain expenses, such as fundraising and compliance-related costs, may be exempt from spending limits. It's important to note that public funding programs for campaigns are designed to promote fairness and reduce the influence of private interests in politics.

While the focus here is on public funding for campaigns, it's worth mentioning that there are also regulations in place regarding who can and cannot contribute to federal candidates. For example, federal law prohibits contributions from foreign nationals and federal government contractors. Additionally, charitable organizations and corporations are prohibited from making contributions in connection with federal elections, although state PACs and nonfederal campaign committees may contribute to federal candidates under certain conditions.

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