Campaign finance in the United States is the financing of electoral campaigns at the federal, state, and local levels. At the federal level, campaign finance law is enacted by Congress and enforced by the Federal Election Commission (FEC), an independent federal agency. Although most campaign spending is privately financed, public financing is available for qualifying candidates for President of the United States during both the primaries and the general election. Eligibility requirements must be fulfilled to qualify for a government subsidy, and those that do accept government funding are usually subject to spending limits on money.
Races for non-federal offices are governed by state and local law. Over half the states allow some level of corporate and union contributions. Some states have limits on contributions from individuals that are lower than the national limits, while four states (Missouri, Oregon, Utah and Virginia) have no limits at all.
Campaign Finance Numbers: How are campaigns for federal office financed?
In 2008, candidates for office, political parties, and independent groups spent a total of $5.3 billion on federal elections. The amount spent on the presidential race alone was $2.4 billion,and over $1 billion of that was spent by the campaigns of the two major candidates: Barack Obama spent $730 million in his election campaign, and John McCain spent $333 million. The total amount spent by Obama and McCain was a record at the time.
In the 2010 midterm election cycle, candidates for office, political parties, and independent groups spent a total of $3.6 billion on federal elections. The average winner of a seat in the House of Representatives spent $1.4 million on his or her campaign. The average winner of a Senate seat spent $9.8 million.
The money for campaigns for federal office comes from four broad categories of sources: (1) small individual contributors (individuals who contribute $200 or less), (2) large individual contributors (individuals who contribute more than $200), (3) political action committees, and (4) self-financing (the candidate's own money). In the 2010 Congressional races, the sources of campaign contributions broke down as follows:
Sources of campaign funding How do candidates raise money?
Federal contribution limits
Federal law restricts how much individuals and organizations may contribute to political campaigns, political parties, and other FEC-regulated organizations. Corporations and unions are banned from donating money directly to candidates or national party committees.
One consequence of the limitation upon personal contributions from any one individual is that campaigns seek out "bundlers"—people who can gather contributions from many individuals in an organization or community and present the sum to the campaign. Campaigns often recognize these bundlers with honorary titles and, in some cases, exclusive events featuring the candidate.
Although bundling existed in various forms since the enactment of the FECA, bundling became organized in a more structured way in the 2000s, spearheaded by the "Bush Pioneers" for George W. Bush's 2000 and 2004 presidential campaigns. During the 2008 campaign the six leading primary candidates (three Democratic, three Republican) had listed a total of nearly two thousand bundlers.
Lobbyists often assist congresspersons with campaign finance by arranging fundraisers, assembling PACs, and seeking donations from other clients. Many lobbyists become campaign treasurers and fundraisers for congresspersons.
Spending by Outside Organizations
Organizations other than individual campaigns also contribute to election spending. In addition to donating money to political campaigns (according to the limits described above), these organizations can spend money directly to influence elections.
Political action committees
Federal law allows for multiple types of political action committees (PACs).
Connected PACs: The Bipartisan Campaign Reform Act prohibits corporations and labor unions from making direct contributions or expenditures in connection with federal elections. These organizations may, however, sponsor a "separate segregated fund" (SSF), known as a "connected PAC". These PACs may receive and raise money only from a "restricted class", generally consisting of managers and shareholders in the case of a corporation and members in the case of a union or other interest group. In exchange, the sponsor of the PAC may absorb all the administrative costs of operating the PAC and soliciting contributions. As of January 2009, there were 1,598 registered corporate PACs, 272 related to labor unions and 995 to trade organizations.
Nonconnected PACs: A nonconnected PAC is financially independent, meaning that it must pay for its own administrative expenses using the contributions it raises. Although an organization may financially support a nonconnected PAC, these expenditures are considered contributions to the PAC and are subject to the dollar limits and other requirements of the Act.
Leadership PACs: Elected officials and political parties cannot give more than the federal limit directly to candidates. However, they can set up a leadership PAC that makes independent expenditures. Provided the expenditure is not coordinated with the other candidate, this type of spending is not limited. Under the FEC rules, leadership PACs are non-connected PACs, and can accept donations from individuals and other PACs. Since current officeholders have an easier time attracting contributions, leadership PACs are a way dominant parties can capture seats from other parties. A leadership PAC sponsored by an elected official cannot use funds to support that official's own campaign. However, it may fund travel, administrative expenses, consultants, polling, and other non-campaign expenses. Between 2008 and 2009, leadership PACs raised and spent more than $47 million.
"Super PACs": The 2010 election marked the rise of a new political committee, dubbed the "super PAC". They are officially known as "independent-expenditure only committees", because they may not make contributions to candidate campaigns or parties, but rather must do any political spending independently of the campaigns. Unlike other PACs, there is no legal limit to the funds they can raise from individuals, corporations, unions and other groups, provided they are operated correctly. As of August 23, 2012, 797 super PACS had raised upwards of $349 million, with 60% of that money coming from just 100 donors, according to the Center for Responsive Politics. Super PACs were made possible by two judicial decisions. First, in January 2010 the U.S. Supreme Court held in Citizens United v. Federal Election Commission that government may not prohibit unions and corporations from making independent expenditure for political purposes. Two months later, in Speechnow.org v. FEC, the Federal Court of Appeals for the D.C. Circuit held that contributions to groups that only make independent expenditures could not be limited in the size and source of contributions to the group. Independent expenditures continue to grow with $17 million spent in 2002 on congressional elections, $52 million in 2006, and $290 million in 2010. In 10 states independent spending amounted to 19% of the total amount of money contributed to candidates between 2005 and 2010. In three of those states independent spending was greater than 25% of the contributions given to candidates.
501(c)(4) organizations are defined by the IRS as "social welfare" organizations. Unlike 501(c)(3) charitable organizations, they may also participate in political campaigns and elections, as long as the organization's "primary purpose" is the promotion of social welfare and not political advocacy. 501(c)(4) organizations are not required to disclose their donors publicly. This aspect of the law has led to extensive use of 501(c)(4) organizations in raising and donating money for political activity. The NAACP, Planned Parenthood, Sierra Club, and National Rifle Association are well known examples of organizations that operate 501(c)(4) social welfare organizations that engage in political advocacy.
PACs and Super PACs are required by law to disclose all of their donors of over $200. However, 501(c)(4) organizations are only required to disclose their spending on political activity, and not information on their donors unless those donors give for the express purpose of political advocacy. The use of 501(c)(4) organizations for political advocacy has contributed to the sharp rise in outside spending that occurs without disclosure of donors. In 2006 just a bit more than 1% of political spending other than that done by political parties and campaign committees did not disclose donors, but by 2010 it had risen to 44%. And as of August 2012, two of the biggest 501(c)(4) groups (Crossroads GPS and Americans for Prosperity) had put more money into the presidential campaign than all the super PACs combined, according to ProPublica.
Traditionally 501(c)(4) organizations have been civic leagues and other corporations operated exclusively for the promotion of social welfare, or local associations of employees with membership limited to a designated company or people in a particular municipality or neighborhood, and with net earnings devoted exclusively to charitable, educational, or recreational purposes.
A 527 organization or 527 group is a type of American tax-exempt organization named after "Section 527" of the U.S. Internal Revenue Code. Technically, almost all political committees, including state, local, and federal candidate committees, traditional political action committees, "Super PACs", and political parties are "527s." However, in common practice the term is usually applied only to such organizations that are not regulated under state or federal campaign finance laws because they do not "expressly advocate" for the election or defeat of a candidate or party. When operated within the law, there are no upper limits on contributions to 527s and no restrictions on who may contribute. There are no spending limits imposed on these organizations. However, they must register with the IRS, publicly disclose their donors and file periodic reports of contributions and expenditures.
Political party committees may contribute funds directly to candidates, subject to the contribution limits listed above. National and state party committees may make additional "coordinated expenditures," subject to limits, to help their nominees in general elections. National party committees may also make unlimited "independent expenditures" to support or oppose federal candidates. However, since 2002, national parties have been prohibited from accepting any funds outside the limits established for elections in the FECA.