Tuesday, June 28, 2016

North Carolina Campaign Finance Made (Relatively) Easy

The time it takes to make a campaign transparent interferes with the time it takes to actually run the campaign -- things like filling out disclosure and reporting forms to the Board of Elections, for example, which is what caused such a long delay in getting this post up! I thank everyone for being patient.

Here is the long-awaited overview of how North Carolina Campaign Finance works. All citations come from the most recent (2015) North Carolina Board of Elections Candidate Campaign Finance Manual unless otherwise noted or linked.

For ease of reading, I have selected a traditional question & answer format. The first section explains the candidate perspective of campaign finance, while the second section examines donors and donations.

I want to run for office. What do I need to do, and when do I need to do it?

So, you want to run for office. That’s good! Giving back to your local community is laudable, and the process is fairly straightforward… as long as you haven’t actually done anything about it, yet.

Did you just say “Getting involved in the race is easy as long as I haven’t gotten involved in the race?”

Yes, that’s a bit ridiculous, isn’t it? But it’s true – All candidates for office are required to have an election committee (even if the only committee member is the candidate him/herself), and the Board of Elections requires a candidate to file Statement of Organization paperwork within ten days of taking an official “First Activity” of the campaign (pp. 25-27). Once you attempt to get involved in the race, you’re on the clock.

Paperwork sounds dull, and “First Activity” is in quotes. I though you said this would be straightforward…?

The quotes come straight from the Campaign Finance Guide, but the process isn’t too complex (although it can be a bit dull). Let’s start with what a “First Activity” is.

The Campaign Finance Guide defines a “First Activity” (p.25) as one of three things:
- “Receiving money or anything of value for the campaign”
- “Spending money in support of the campaign”
- “Making a public announcement of a definite intent to run for public office in a particular election (Filing a Notice of Candidacy or Statement of Organization would count as a public announcement)”

How does the “First Activity” relate to the Statement of Organization paperwork?

Once you do one of the three “First Actions”, you have 10 days to file a Statement of Organization with the appropriate Board of Elections. The Statement of Organization is made up of between 3 and 5 forms (pp. 27-31).

Mandatory Forms
CRO-2100A Statement of Organization – Candidate Committees
CRO-3100    Certification of Treasurer
CRO-3500    Certification of Financial Account Information

Optional Forms
CRO-3600 Certification of Threshold
CRO-3900 Candidate Designation of Committee Funds

What information do all these forms ask for?

CRO-2100A is the record of: (1) the committee – contact information and Date or Organization [the “First Activity”], (2) the candidate – contact information, party affiliation if any, and office sought, (3) any committee officers – contact information only, and (4) committee banking information – financial institution, purpose, and account type.

CRO-3100 is the record which formally appoints a Committee Treasurer. As you might guess, this form requires the name of the candidate, and the name and contact information of the treasurer. A candidate may serve as their own treasurer, or may appoint any resident of North Carolina who is not their spouse, not a registered political lobbyist or precinct official, and not a member of the Board of Elections or the Parole Commission. (p.22)

CRO-3500 is one of the few forms not released to the public. Candidates must create a special campaign bank account, and provide the Board of Election with their bank account information and a code/designation for that account – while that sounds suspicious, it allows the Board of Elections to publically disclose campaign finance paperwork without publishing the account number of the committee bank account.

CRO-3600 allows a candidate to avoid a substantial amount of financial reporting, as long as they “neither receive nor spend more than $1,000 during the current election cycle […]”

CRO-3900 is the form which deals with the disposition of campaign funds if the candidate dies.

I’m sold on running for office. I am willing to do all my own dull paperwork, and my “First Action” was filing my Declaration of Candidacy. I haven’t raised a dime… I’m golden, right?

Sort of. You’ll be filing a CRO-1000 (Disclosure Report Cover) and a CRO-1100 (Detailed Summary). But if your Declaration of Candidacy required a registration fee, you’ll need to account for where that money came from, via a CRO-1205 or -1210 (depending on whether the amount contributed by paying the fee exceeds $50). If you paid it yourself, because the funds didn’t come out of a campaign bank account, then you’ll also have to file a CRO-1510 on yourself, as you are considered to have made an In-Kind donation to your own campaign. (pp. 26-27) 

What was all that?

“All that” was an Organizational Report (p. 31-33), which is the Dull Paperwork portion of this exercise. The Organizational Report is a detailed list of the Candidate Committee’s finances, made up of a minimum of 2 forms.

Mandatory Forms
CRO-1000 Disclosure Report Cover
CRO-1100 Detailed Summary

Two forms? How bad could that be?

You’d be surprised. These forms aren’t just for candidates – they’re also for Political Action Committees (PACs) and Independent Expenditure Committees (Super PACs).

CRO-1000 is the Disclosure Report Cover. It asks for the committee contact information, a few dates, the type of work the committee is doing, what sort of report is being disclosed, and some bank information.

CRO-1100 is the Detailed Summary. It's reminiscent of a bank statement, or (for those of us old enough to remember) balancing a checkbook.

That doesn’t sound too bad.

It’s not, per se. The catch is: The CRO-1100 has approximately 30 lines of financial information to be entered across two columns. Whenever you have financial data to be entered on a line, you also have to attach the proper supplemental report – and giving or receiving any money, goods, services, donations, or items of value generates financial data.

So, if you have financial data on every line, there are 30 supplemental reports??!

No, the maximum number of supplemental reports is 22, although those can be multi-page. The problem, however, isn’t with the actual forms, it’s in keeping the information together to fill the forms out.

What are these supplemental forms?

A non-exhaustive list of six examples:

CRO-1205 Aggregated Contributions from Individuals
CRO-1210 Contributions from Individuals
CRO-1230 Contributions from Other Political Committees
CRO-1310 Disbursements
CRO-1315 Aggregated Non-media Expenses
CRO-1510 In-kind Contributions

As you can see, the Organizational Report is an accounting report given to the Board of Elections by the committee -- albeit a very *detailed* accounting report.

What does a campaign have to account for in this report?

The short answer to this is: Everything.

The longer answer is: (1) Contributions, defined as “Any advance, conveyance, deposit, distribution, transfer of funds, loan, payment, or subscription of money or anything of value whatsoever to a candidate [or] political committee. . . Contributions may be monetary or non-monetary.” (p. 42), and (2) Expenditures, which is all of the above “to support or oppose a candidate. . .” (p.14).

Accounting for a contribution, however, also means keeping track of the contributor.

Why keep track of contributors?

Two reasons: (1) Anonymous contributions are prohibited (p. 46), and (2) “No matter how small the amount, the name of the contributor, amount, date, and form of payment must always be obtained.” (pp.47-48)

If an individual hasn’t contributed more than $50 this election cycle, their contribution can be reported on a CRO-1205… at least until their cumulative contribution exceeds $50, whereupon they must be accounted for on a CRO-1210 (p. 48), which requires the campaign to report the name and address of the donor, their job title/profession, their employer’s name or professional field, and the donor’s contributions-to-date.

I don’t know if I want to share all (or any) of my personal information. Can I get my company to donate?

No. Corporations, business entities, labor unions, professional associations, and insurance companies are prohibited from contributing (p.46). The owners of such companies, however, are not prohibited from contributing.

So, Ed’s Widget Company can’t contribute money or services in a corporate capacity, but Ed (the owner of Ed’s Widget Company) can do so in an individual capacity?

That’s right, and as long as the committee submits the appropriate paperwork, it’s perfectly legal.

Hmm… sounds like a great way to buy elections. There have to be restrictions in place to prevent that, right?

There certainly are restrictions in place to prevent that! For example:

-Cash contributions are limited to $50 per person per day (p. 49)
-Joint contributions are prohibited (p. 49)
-Donations in the name of another are prohibited (p. 47)
-Contributions are limited to $5,100 per individual per election cycle (p. 43)

Those all seem like reasonable restrictions. What’s the catch?

The catch is the exceptions to those rules. For example:

Executive Political Party Committees: One of the disadvantages of first-past-the-post electoral politics (as opposed to proportional representation) is that it encourages factionalism in the form of political parties. This situation is exacerbated when party loyalty and party funding correlate. Simply put, a political party can fund its candidate of choice without restriction – which places unaffiliated candidates in a position where they have no obligation to party politics, but are desperately outmatched from a financial perspective. (pp. 44, 47)

Independent Expenditure Committees: Known more colloquially as the Super-PAC. These committees can’t contribute to or coordinate with a candidate’s campaign. On the other hand, these committees can raise and spend money without restriction on contributors (p. 77) or funds (p.4, and see also N.C. Campaign Finance Training, which is totally worth signing up for!).

Candidates & Spouses: Candidates and their spouses may donate to the campaign with restriction (p.44). You don’t have to be rich to get into politics… but it helps!

So, getting political funding is a piece of cake for party loyalists, the incredibly well connected, and/or candidates who are personally wealthy?

That’s right.

Moreover, committees can obtain loans from individuals, including from the candidate him/herself and their spouse (and remember, candidates and spouses are exempt from contribution limits). A candidate could theoretically advance a loan of personal funds to the committee and receive reimbursement later. In theory, they could even charge the campaign interest, thus turning the usually service-oriented pursuit of office into a profit-making pursuit – although that could conceivably produce some negative optics.

What about candidates who are politically unaffiliated, not well-connected, and/or not personally wealthy…?

Those candidates get to raise money the old fashioned way – which is to say, since I’m in that position myself, I don’t have a clue!

Fundraisers are an option – raffles are popular, but make sure to account for: all tickets sold including purchaser information needed for compliance with CRO-1210, all profits, the origin and value of the prizes, how the venue was paid for, etc.

Really, though… it’s a person to person pursuit. A candidate who is not part of the system will find it hard to become part of the system. Even with the both the financial support and the voting support of other citizens, electoral politics doesn’t favor those who aren’t already ‘part of the club.’

Is there any way to change that?

Only one: Be active in your state elections.

Campaign finance is regulated by North Carolina General Statutes – if you want change, vote for legislators who will make the changes you wish to see.

I want to thank everyone for reading this. I hope I’ve answered some of your questions, and I look forward to your feedback.

-J. McL.

No comments:

Post a Comment