Political Action Committees: Their Evolution, Growth and Implications for the Political System

Congressional research reportApr 30, 1984

Ask Donna

What actually matters in this document.

Text

Report No. 84-78 GOV

POLITICAL ACTION COMMITTEES: THEIR EVOLUTION, GROWTH AND,

IMPLICATIONS FOR THE POLITICAL SYSTEM

Joseph E. Cantor

Analyst in American National Government

Government Division

GENERAL LIBRARIES

DEPOSlTORY

November 6, 1981

Updated April 30, 1984

The Congressional Research Service works exclusively for

the Congress, conducting research, analyzing legislation, and

providing information at the request of committees, Members. and their staffs.

The Service makes such research available, without partisan bias, in many forms including studies, reports, compilations, digests, and background briefings. Upon request, CRS

assists committees in analyzing legislative proposals and

issues, and in assessing the possible effects of these proposals

and their alternatives. The Service's senior specialists and

subject analysts are also available for personal consultations

in their respective fields of expertise.

ABSTRACT

T h i s r e p o r t examines t h e campaign f u n d r a i s i n g v e h i c l e s commonly r e f e r r e d

t o a s p o l i t i c a l a c t i o n committees.

It t r a c e s t h e i r e v o l u t i o n and t h e i r growth,

b o t h i n number and i n l e v e l of f i n a n c i a l a c t i v i t y , and it a n a l y z e s t h e impact

t h e y a r e having on t h e p o l i t i c a l system today.

INTRODUCTION

P o l i t i c a l a c t i o n c o m m i t t e e s (PACs) a r e t h e v e h i c l e s t h r o u g h which i n t e r e s t

g r o u p s r a i s e and c o n t r i b u t e money t o p o l i t i c a l c a n d i d a t e s .

Although o r i g i n a l l y

t h e a l m o s t e x c l u s i v e domain of o r g a n i z e d l a b o r , t h e i r a p p e a l h a s e x t e n d e d s i n c e

t h e e a r l y 1970s t o b u s i n e s s e s , t r a d e a s s o c i a t i o n s , and a wide r a n g e o f o t h e r

i n t e r e s t groups.

T h e i r p r o l i f e r a t i o n i n number and t h e i r growth i n l e v e l o f

f i n a n c i a l a c t i v i t y d u r i n g t h i s period has occurred a t a r a p i d pace.

I n 1982,

t h e 3,371 PACs had r e c e i p t s i n e x c e s s of $199 m i l l i o n and c o n t r i b u t e d more

t h a n $83 m i l l i o n t o c a n d i d a t e s f o r t h e U n i t e d S t a t e s C o n g r e s s .

PACs h a v e t h u s

become a major s o u r c e of campaign f i n a n c i n g i n modern c o n g r e s s i o n a l campaigns.

The amount o f money PACs a r e p r o v i d i n g t o campaigns h a s r a i s e d q u e s t i o n s

a8 t o whether t h e s e contributio_pssssare e n a b l i n x s p e c i a- l - i n t e r e s -t s- t o- - - g- a_i n -

d i s p r o p o r t i o n a t e i n f l u e n c e i n t h e l e g i s l a t -i -v- e p r o c e s s , by

o b l i g a t i o n by t h e r e c i p i e n t s o f t h -e--i r p o l i t i c a l d o n a t i o n s .

----

These c o n c e r n s a r e

c h a l l e n g e d by t h o s e who i n s i s t t h a t PAC money i s g e n e r a l l y g i v e n t o reward p u b l i c

- .-.

- .

o f f i c i a l s who a r e b a s i c a l l y s y m p a t h e t i c w i t h t h e i s s u e g o a l s o f t h e i n t e r e s t

g r o u p , r a t h e r t h a n t o promote s h i f t s i n v o t i n g p a t t e r n s which a r e i n c o n s i s t e n t

with t h e general philosophical o r constituency-based

views of t h e l e g i s l a t o r .

F u r t h e r m o r e , PACs a r e viewed by t h e s e i n d i v i d u a l s a s s i m p l y a n o t h e r m a n i f e s t a t i o n

o f t h e p--l u- r a l i s m r e f l e c t e d i n i n t e r e s t g r o u p a c t i v i t y s i n c e t h e f o u n d i n g o f t h e

Nation.

T h i s d e b a t e r e v e a l s s i g n i f i c a n t d i f f e r e n c e s i n outlook a s t o t h e r o l e of

i n t e r e s t g r o u p s i n p u b l i c p o l i c y - m a k i n g and t h e most d e s i r e d method f o r

t h e f i n a n c i n g o f e l e c t i o n campaigns.

T h i s r e p o r t examines t h e growth o f PACs i n r e c e n t y e a r s and a n a l y z e s

t h e r e a s o n s f o r t h e i n c r e a s e d r e l i a n c e upon them i n c o n g r e s s i o n a l campaigns.

It f o c u s e s on t h e r o l e o f PACs i n campaigns f o r t h e U.S. C o n g r e s s , e s s e n t i a l l y

b e c a u s e i t i s t h e r e t h a t PAC a c t i v i t y h a s been most pronounced.

Only a s m a l l

f r a c t i o n o f PAC c o n t r i b u t i o n s t o F e d e r a l c a n d i d a t e s h a s been g i v e n t o

P r e s i d e n t i a l c a n d i d a t e s ( l a r g e l y b e c a u s e of p u b l i c f u n d i n g of s u c h e l e c t i o n s ) ,

and knowledge o f PAC a c t i v i t y a t t h e S t a t e and l o c a l l e v e l i s q u i t e l i m i t e d .

I n any c a s e , t h e i s s u e s r a i s e d by PAC a c t i v i t y a t t h e c o n g r e s s i o n a l l e v e l

h a v e a pronounced e f f e c t on t h e p o l i t i c a l s y s t e m a s a whole.

This study

d i s c u s s e s t h e r e a s o n s f o r t h e c o n t i n u i n g c o n t r o v e r s y s u r r o u n d i n g PACs and

t h e i r i m p l i c a t i o n s f o r t h e p o l i t i c a l system.

C h a p t e r One d i s c u s s e s what i s meant by t h e term " p o l i t i c a l a c t i o n c o w i t t e e "

and g i v e s a rough i d e a o f how i t f u n c t i o n s .

Chapter Two p l a c e s PACs i n p e r s p e c t i v e

by examining how b u s i n e s s and l a b o r were i n v o l v e d i n campaign f i n a n c i n g b e f o r e

t h e modern PAC e r a and t r a c e s t h e l e g i s l a t i v e , e x e c u t i v e , and j u d i c i a l d e c i s i o n s

which gave impetus t o t h e i r growth and development.

Chapter Three p r e s e n t s t h e

d a t a on t h e i r growth and ~ r o l i f e r a t i o n , i n t e r m s o f b o t h numbers and d o l l a r s ,

and r e v i e w s t h e most w i d e l y h e l d t h e o r i e s e x p l a i n i n g t h e i r growth.

C h a p t e r Four

a n a l y z e s t h e i s s u e s r a i s e d by PACs i n t e r m s of t h e i r impact on t h e p o l i t i c a l

system.

C h a p t e r F i v e r e v i e w s r e c e n t c o n g r e s s i o n a l a t t e m p t s t o c u r t a i l PAC

i n f l u e n c e , a n a l y z e s some of t h e c u r r e n t p r o p o s a l s t o l i m i t them, and d i s c u s s e s

t h e p r o g n o s i s f o r t h e f u t u r e o f PACs i n o u r p o l i t i c a l system.

b i b l i o g r a p h y and a p p e n d i x a r e i n c l u d e d f o r f u r t h e r r e f e r e n c e .

Finally, a

Two e x p l a n a t i o n s r e g a r d i n g terminology used i n t h i s r e p o r t b e a r mentioning.

F i r s t , t h e term " i n t e r e s t group" i s used t o r e f e r t o o r g a n i z a t i o n s which pursue

p a r t i c u l a r p o l i c y g o a l s t h r o u g h t h e p o l i t i c a l a r e n a , and i t encompasses

c o r p o r a t i o n s , l a b o r u n i o n s , and t r a d e a s s o c i a t i o n s , a s w e l l a s t h e v a r i o u s

i d e o l o g i c a l o r i s s u e groups.

Second, because o f t h e a c t i v i t y o f and t h e p u b l i c i n t e r e s t i n t h o s e PACs

which a r e i d e o l o g i c a l l y homogenous i n n a t u r e , t h i s r e p o r t makes r e f e r e n c e t o

" l i b e r a l " and " c o n s e r v a t i v e " PACs.

In v i r t u a l l y a l l instances, these labels

r e f l e c t t h e s e l f - a s c r i p t i o n o f t h e groups themselves; a t t h e v e r y l e a s t , t h e y

r e f l e c t t h e widespread and u n c o n t e s t e d c h a r a c t e r i z a t i o n s a p p e a r i n g i n t h e media

and i n academic w r i t i n g s .

F i n a l l y , s e v e r a l i n d i v i d u a l s deserve a note of thanks f o r t h e i r a s s i s t a n c e

i n the preparation of t h i s report.

I n p a r t i c u l a r , Kent Cooper, Chief o f t h e

F e d e r a l E l e c t i o n Commission's P u b l i c Records D i v i s i o n , provided i n v a l u a b l e and

p a t i e n t h e l p i n t h e c o m p i l a t i o n o f d a t a f o r Chapter Three.

He a l s o reviewed t h a t

c h a p t e r , a s d i d P r o f e s s o r Herbert Alexander o f t h e C i t i z e n s v Research Foundation.

S h e r r y S h a p i r o and Edkth S u t t e r l i n , C o n g r e s s i o n a l Research S e r v i c e b i b l i o g r a p h e r s ,

a s s i s t e d i n t h e p r e p a r a t i o n o f t h e b i b l i o g r a p h y a t t h e end of t h i s r e p o r t .

CONTENTS

............................................................... iii

INTRODUCTION ..............................................................

ABSTRACT

.. 1

............................ 1

............................................... 7

.................................................. 7

........................................... 9

................................. 11

................................... 1 4

............................................ 17

CHAPTER TWO: EVOLUTION OF POLITICAL ACTION COMMITTEES ....................

I . Group Involvement P r i o r t o t h e 1970s .............................

A . Legal R e s t r i c t i o n s ........................................ 1 9

B . How I n t e r e s t Groups Made P o l i t i c a l C o n t r i b u t i o n s ..............

1. Labor ....................................................

2 . Business ................................................... 28

3 . Conclusion .................................................

I1. S t i m u l i t o PAC Growth i n t h e 1970s Provided by L e g i s l a t i v e .

J u d i c i a l . and A d m i n i s t r a t i v e D e c i s i o n s .........................

A . The F e d e r a l E l e c t i o n Campaign Act o f 1971 ..................... 36

B . P i p e f i t t e r s Local 562 v . United S t a t e s ........................

C . The F e d e r a l E l e c t i o n Campatgn Act Amendments o f 1974 ..........

D . The FEC's SUN PAC Advisory Opinion ............................ 43

E . The Supreme C o u r t ' s Buckley v . Valeo D e c i s i o n .................

F . The F e d e r a l E l e c t i o n Campaign Act Amendments o f 1976 .......... 47

G . Conclusion .................................................... 54

WHAT I S A POLITICAL ACTION COMMITTEE AND HOW DOES I T WORK?

CHAPTER ONE:

What i s a P o l i t i c a l Action Committee?

11 How a PAC O p e r a t e s

A Organization

B Records and Reports

C S o l i c i t a t i o n of C o n t r i b u t i o n s

D The Decision-Making P r o c e s s

E R e g u l a t i o n of PACs

CHAPTER THREE: GROWTH OF PACS SINCE 1972: TiIE NUMBERS.

THE DOLLARS. AND THE REASONS

PAC Growth S i n c e 1974

PAC Growth From 1972

1982: t h e D o l l a r s

A PAC Spending Since 1972: t h e Aqgregate Data

1 The Overview from t h e PAC P e r s p e c t i v e

2 The Overview from t h e C a n d i d a t e s ' P e r s p e c t i v e

B PAC Spending S i n c e 1972: Where Has t h e Money Come From?

1 E x p e n d i t u r e s and C o n t r i b u t i o n s by PAC Groupings

S i n c e 1972

2 The L a r g e s t PAC C o n t r i b u t o r s and Spenders

a Top 20 c o n t r i b u t o r s from 1972-1982

b Top 20 PAC s p e n d e r s from 1976-1982

c Comparison o f t h e l a r g e s t s p e n d e r s and c o n t r i b u t o r s

among PACs

C PAC Spending S i n c e 1972: Where t h e Money Has Gone

1 Candidate P r e f e r e n c e s from t h e PAC P e r s p e c t i v e

2 PAC C o n t r i b u t i o n s from t h e C a n d i d a t e s ' P e r s p e c t i v e

D Summary O b s e r v a t i o n s on PAC Growth

I11 Reasons f o r PAC Growth S i n c e t h e 1370s

. .

........................................... 55

........................ 63

.................. 65

..................... 66

............. 73

...... 82

.............................................. 82

................. 90

..................... 91

..................... 102

........................................... 111

............ 118

........ 130

...........................

135

.......................... 139

CHAPTER FOUR: ISSUES SURROUNDING THE PAC ROLE IN THE POLITICAL SYSTEM

The Role of Special Interests

I1 PAC Impact on the Political Parties

I11 The Role of Individuals in the Political Process

Impact of PACs on the Congress

A Paralysis of the Policy-Making Process

B Linkage Between PAC Money and Legislative Votes

C PACs as Protectors of Incumbents

The Business-Labor Balance of Power

PACs and Political Accountability

VII The Level of Money in Politics

..................................

............................

...............

.................................

......................

.............

............................

..............................

.................................

CHAPTER FIVE: CONGRESS' RESPONSE TO PACs AND THE PROGNOSIS FOR THE

FUTURE

Legislation to Limit PACs in the 95th through 97th Congresses

A 95th Congress Legislation

B 96th Congress Legislation

C 97th Congress Legislation

D 98th Congress Legislation

Current Proposals to Limit PAC Influence

A Reduce PAC Contribution Limits

B Reducing Candidate Dependence on PACs

C Enhancing the Role of Other Participants in the

Political Process

D Public Funding of Congressional Elections

I11 Prognosis for the Future of PACs

................................................................

...................................

.......................

..............................

.......................

.........................................

...................

...............................

APPENDIX ................................................................

BIBLIOGRAPHY ............................................................

General ............................................................

Historical Accounts ................................................

Congressional Documents ............................................

1971 Federal Election Campaign Act (FECA) .....................

1974 FECA Amendments ..........................................

1976 FECA Amendments ..........................................

Miscellaneous ................................................

Trends and Statistics on PAC Activity by Election Cycle ............

Pre-1970 .....................................................

1972 ..........................................................

1974 ..........................................................

1976 .......................................................

1978 ..........................................................

1980 ..........................................................

1982 ..........................................................

Profiles on Specific PACs or Groupings of PACs .....................

How PACs Work ......................................................

The Impact of PAC Contributions ....................................

Independent Expenditures ...........................................

149

150

154

158

165

167

170

173

179

183

185

188

194

197

202

206

209

215

220

231

239

245

247

248

249

250

251

253

254

256

258

265

269

273

CHAPTER ONE:

WHAT IS A POLITICAL ACTION COMMITTEE AND HOW DOES IT WORK?

In s e t t i n g t h e s t a g e f o r t h e d i s c u s s i o n t o f o l l o w , t h i s c h a p t e r d e f i n e s

t h e term " p o l i t i c a l a c t i o n committee" and s k e t c h e s t h e e s s e n t i a l o u t l i n e of

how a PAC o p e r a t e s .

T h i s i s not intended t o be an e x p l i c i t , d e t a i l e d g u i d e

t o t h e f o r m a t i o n of a PAC; such g u i d e s do e x i s t and, i n f a c t , provided

c o n s i d e r a b l e a s s i s t a n c e i n t h e p r e p a r a t i o n of t h i s o u t l i n e . 1/

Those

c o n s i d e r i n g s e t t i n g up a PAC would be w e l l a d v i s e d t o o b t a i n c o p i e s of t h e

F e d e r a l E l e c t i o n Campaign Act, T i t l e 11 of t h e Code of F e d e r a l R e g u l a t i o n s

( p e r t a i n i n g t o F e d e r a l ~ l e c t i o n s ) ,and t h e F e d e r a l E l e c t i o n Commission's

Campaign Guide f o r Nonconnected Committees o r Campaign Guide f o r C o r p o r a t i o n s

and Labor O r g a n i z a t i o n s .

T h i s c h a p t e r i s c o n f i n e d t o conveying some i d e a

of what i s involved i n t h e mechanics of s e t t i n g up and o p e r a t i n g a PAC, s o

a s t o a p p r e c i a t e t h e r o l e t h e s e v e h i c l e s p l a y i n American p o l i t i c s and t h e

i s s u e s t h e y r a i s e f o r t h e p o l i t i c a l system.

WHAT I S A POLITICAL ACTION COMMITTEE

The term " p o l i t i c a l a c t i o n committee" i s w i d e l y used t o d e n o t e a l e g a l

e n t i t y which i s e s t a b l i s h e d by an i n t e r e s t group t o r a i s e and spend money

i n an a t t e m p t t o i n f l u e n c e e l e c t i o n s .

In s p i t e of i t s common usage, t h e term

1/ Sudow, William E. O r g a n i z a t i o n and A d m i n i s t r a t i o n : PAC Legal

~ o n s i z e r a t i o n s . I n P o l i t i c a l Action f o r Business: The PAC Handbook.

Washington, F r a s e r A s s o c i a t e s , 1981. p. 192-218.

S p r o u l , C u r t i s C.

C o r p o r a t i o n s and Unions i n F e d e r a l P o l i t i c s : A P r a c t i c a l Approach t o

F e d e r a l E l e c t i o n Law Compliance. In P o l i t i c a l Action Committees and

Campaign Finance: Symposium. Arizona Law Review, v . 2 2 , 1980: 465-518.

i s , i n f a c t , a c o l l o q u i a l e x p r e s s i o n which does not a p p e a r i n F e d e r a l s t a t u t e s .

I n o r d e r t o u n d e r s t a n d t h e l e g a l framework i n which a PAC o p e r a t e s , one must

e x p l o r e t h e d e f i n i t i o n s o f t h r e e r e l a t e d , b u t not e q u i v a l e n t , l e g a l t e r m s :

p o l i t i c a l committee," " s e p a r a t e s e g r e g a t e d fund," and " m u l t i c a n d i d a t e p o l i t i c a l

V i r t u a l l y a l l PACs, a s we w i l l r e f e r t o them t h r o u g h o u t t h i s r e p o r t , a r e

" p o l i t i c a l committees."

Under t h e d e f i n i t i o n i n 2 U.S.C.

431 of t h e F e d e r a l

E l e c t i o n Campaign Act (FECA):

( 4 ) The term " p o l i t i c a l committee" means-(A) any c o m m i t t e e , c l u b , a s s o c i a t i o n , o r o t h e r g r o u p o f

p e r s o n s which r e c e i v e s c o n t r i b u t i o n s a g g r e g a t i n g i n e x c e s s

of $1,000 d u r i n g a c a l e n d a r y e a r o r which makes e x p e n d i t u r e s

a g g r e g a t i n g i n excess of $1,000 d u r i n g a calendar year; o r

(B) any s e p a r a t e s e g r e g a t e d fund e s t a b l i s h e d under t h e

p r o v i s i o n s of s e c t i o n 441b(b) of t h i s t i t l e ; o r

r e c e i v e s c o n t r i b u t i o n s a g g r e g a t i n g in excess of $5,000 d u r i n g a

c a l e n d a r y e a r , o r makes payments exempted from t h e d e f i n i t i o n o f

c o n t r i b u t i o n o r e x p e n d i t u r e a s d e f i n e d i n p a r a g r a p h s ( 8 ) and

( 9 ) o f t h i s s e c t i o n a g g r e g a t i n g i n e x c e s s of $5,000 d u r i n z a

c a l e n d a r y e a r , o r makes c o n t r i b u t i o n s a g g r e g a t i n g i n e x c e s s

of $1,000 d u r i n g a c a l e n d a r y e a r o r makes e x p e n d i t u r e s

aggregating i n excess of $1,000 during a calendar y e a r .

For p u r p o s e s o f t h i s r e p o r t , t h e t h i r d t y p e of p o l i t i c a l cormnittee--ones

a r e a f f i l i a t e d with a p o l i t i c a l party--will

that

not b e c o n s i d e r e d ; t h e s e a r e n o t

what i s g e n e r a l l y meant a s p o l i t i c a l a c t i o n committees.

Instead, t h i s report

i s c o n c e r n e d w i t h what t h e F e d e r a l E l e c t i o n Commission r e f e r s t o a s "nonparty"

p o l i t i c a l c o m m i t t e e s , which can t a k e t h e form of e i t h e r d e f i n i t i o n (A) o r ( B ) .

The e s s e n t i a l d i s t i n c t i o n between p o l i t i c a l committee ( A ) and p o l i t i c a l

committee (B) i s t h e l a t t e r ' s a f f i l i a t i o n w i t h an e x i s t i n g , s p o n s o r i n g

o r g a n i z a t i o n , i n c o n t r a s t with t h e former's o s t e n s i b l y independent s t a t u s .

It i s p o l i t i c a l committee (B), t h e s e p a r a t e s e g r e g a t e d f u n d , which h a s

c o n s t i t u t e d t h e f o r e r u n n e r a n d , i n a s e n s e , t h e moving f o r c e behind t h e

p r o l i f e r a t i o n o f PACs.

U n t i l r e c e n t l y , t h e t e r m " s e p a r a t e s e g r e g a t e d fund"

was v i r t u a l l y synonymous w i t h t h e t e r m " p o l i t i c a l a c t i o n committee ," a n d , even

t o d a y , w i t h t h e i n c r e a s i n g growth o f and a t t e n t i o n f o c u s e d on t h e u n a f f i l i a t e d ,

i n d e p e n d e n t PACs, s e p a r a t e s e g r e g a t e d f u n d s a c c o u n t f o r n e a r l y 80 p e r c e n t o f

PAC s

A s e p a r a t e s e g r e g a t e d fund i s " l i t t l e more t h a n a bookkeeping c o n c e p t ,"

which i s n o t d e f i n e d i n t h e F e d e r a l e l e c t i o n l a w s . 21

As w i l l b e e x p l o r e d

i n C h a p t e r Two, i t d e v e l o p e d o u t of t h e l e g a l p r o h i b i t i o n s on t h e s p e n d i n g of

g e n e r a l t r e a s u r y f u n d s f o r p o l i t i c a l c o n t r i b u t i o n s by u n i o n s and c o r p o r a t i o n s .

Such p r o h i b i t i o n s l e d l a b o r u n i o n s ( a n d u l t i m a t e l y o t h e r s ) t o e s t a b l i s h and

u n d e r w r i t e t h e o p e r a t i n g e x p e n s e s of d i s t i n c t c o m m i t t e e s ( m a i n t a i n i n g a c c o u n t s

s e p a r a t e from t h e u n i o n s ' ) t o c o l l e c t and d i s t r i b u t e v o l u n t a r y p o l i t i c a l

c o n t r i b u t i o n s from t h e i r members, w i t h o u t i n v o l v i n g d i r e c t union c o n t r i b u t i o n s

t o candidates.

I n such a manner, t h e c o n c e p t of a s e p a r a t e s e g r e g a t e d fund

came i n t o b e i n g .

The law a u t h o r i z e s t h r e e s p e c i f i c p o l i t i c a l a c t i v i t i e s which can b e

c o n d u c t e d w i t h g e n e r a l t r e a s u r y f u n d s of u n i o n s and c o r p o r a t i o n s .

2 U.S.C.

While

441b(a) p r o h i b i t s c o n t r i b u t i o n s t o Federal candidates by n a t i o n a l

b a n k s , c o r p o r a t i o n s , and l a b o r o r g a n i z a t i o n s , S e c t i o n 4 4 1 b ( b ) ( 2 ) s t a t e s t h a t

t h i s p r o h i b i t i o n s h a l l not include-(A) communications by a c o r p o r a t i o n t o i t s s t o c k h o l d e r s

and e x e c u t i v e o r a d m i n i s t r a t i v e p e r s o n n e l and t h e i r f a m i l i e s

o r by a l a b o r o r g a n i z a t i o n t o i t s members and t h e i r f a m i l i e s

on any s u b j e c t ;

(B) n o n p a r t i s a n r e g i s t r a t i o n and g e t - o u t - t h e - v o t e

campaigns

by a c o r p o r a t i o n aimed a t i t s s t o c k h o l d e r s and e x e c u t i v e o r

a d m i n i s t r a t i v e p e r s o n n e l and t h e i r f a m i l i e s , o r by a l a b o r

o r g a n i z a t i o n aimed a t i t s members and t h e i r f a m i l i e s ; and

-21

S p r o u l , C o r p o r a t i o n s and Unions i n F e d e r a l P o l i t i c s , p. 4 9 3 .

( c ) t h e e s t a b l i s h m e n t , a d m i n i s t r a t i o n , and s o l i c i t a t i o n

o f c o n t r i b u t i o n s t o a s e p a r a t e s e g r e g a t e d fund t o be u t i l i z e d

f o r p o l i t i c a l p u r p o s e s by a c o r p o r a t i o n , l a b o r o r g a n i z a t i o n ,

membership o r g a n i z a t i o n , c o o p e r a t i v e , o r c o r p o r a t i o n w i t h o u t

c a p i t a l stock.

P a r t C t h u s s a n c t i o n s t h e e s t a b l i s h m e n t o f s e p a r a t e s e g r e g a t e d f u n d s by

c o r p o r a t i o n s , u n i o n s , membership o r g a n i z a t i o n s , c o o p e r a t i v e s , and c o r p o r a t i o n s

w i t h o u t c a p i t a l s t o c k ; i n a d d i t i o n , t r a d e a s s o c i a t i o n s a r e g r a n t e d t h e same

r i g h t i n 2 U.S.C.

4 4 1 b ( b ) ( 4 ) ( ~ ) . These e n t i t i e s r e p r e s e n t s i x of t h e s e v e n

t y p e s o f PACs r e c o g n i z e d under law, and t h e y w i l l be d i s c u s s e d a t l e n g t h i n

C h a p t e r T h r e e , which p r e s e n t s d a t a on s p e n d i n g by t h e v a r i o u s t y p e s o f PACs.

A key f e a t u r e o f a l l t h r e e s a n c t i o n e d a c t i v i t i e s ( p a r t s A, B, and C o f s e c t i o n

4 4 1 b ( b ) ( 2 ) ) i s t h a t t h e y must b e c o n f i n e d t o t h e a u d i e n c e s s p e c i f i e d i n t h e

law; t h i s h a s an i m p o r t a n t b e a r i n g on t h e o p e r a t i o n s o f PACs and t h e i r

i m p l i c a t i o n s f o r t h e e l e c t o r a l process.

The k i n d s o f e x p e n s e s which may be p a i d o u t o f t h e g e n e r a l t r e a s u r i e s o f

t h e s p o n s o r i n g o r g a n i z a t i o n s a r e e l a b o r a t e d upon i n t h e r e g u l a t i o n s promulgated

by t h e F e d e r a l E l e c t i o n Commmission.

11 C.F.R.

114.l(b) s t a t e s :

" E s t a b l i s h m e n t , a d m i n i s t r a t i o n , and s o l i c i t a t i o n c o s t s ' ' means

t h e c o s t s o f o f f i c e s p a c e , phones, s a l a r i e s , u t i l i t i e s , s u p p l i e s ,

l e g a l and a c c o u n t i n g f e e s , f u n d r a i s i n g and o t h e r e x p e n s e s

i n c u r r e d i n and r u n n i n g a s e p a r a t e s e g r e g a t e d fund

....

These c o s t s need n o t b e r e p o r t e d t o t h e F e d e r a l E l e c t i o n Commmission.

Having d e s c r i b e d t h e p r i n c i p a l c h a r a c t e r i s t i c s o f PACs which a r e s e p a r a t e

s e g r e g a t e d f u n d s , o n e must t a k e n o t e o f o t h e r p o l i t i c a l c o m m i t t e e s which a r e

e s t a b l i s h e d a s i n d e p e n d e n t , p o l i t i c a l f u n d r a i s i n g and s p e n d i n g v e h i c l e s .

These

c o m m i t t e e s must s i m p l y meet t h e c r i t e r i a o f r a i s i n g o r s p e n d i n g o v e r $1,000

i n a c a l e n d a r y e a r and t h e n f i l e t h e a p p r o p r i a t e forms w i t h t h e F e d e r a l

E l e c t i o n Commission.

These u n a f f i l i a t e d PACs a r e not governed by t h e

r e s t r i c t i o n s a p p l i c a b l e t o t h e s e p a r a t e s e g r e g a t e d f u n d s , i n t e r m s o f whom

t h e y may s o l i c i t f o r c o n t r i b u t i o n s , nor a r e t h e y a b l e t o r e l y upon a s p o n s o r i n g

o r g a n i z a t i o n t o b e a r t h e i r a d m i n i s t r a t i v e and f u n d r a i s i n g c o s t s ; such c o s t s

must b e p a i d o u t o f t h e v o l u n t a r y c o n t r i b u t i o n s t h e y r a i s e .

Therein l i e s the

paramount a d v a n t a g e and d i s a d v a n t a g e a c c r u i n g t o what t h e FEC d e s c r i b e s a s t h e

"non-connected"

PACs, t h e s e v e n t h and f i n a l PAC c a t e g o r y .

As w i l l b e d i s c u s s e d

l a t e r i n t h i s r e p o r t , t h e u n a f f i l i a t e d ( o r non-connected) g r o u p i n g i s l a r g e l y

comprised o f i d e o l o g i c a l and i s s u e - o r i e n t e d

i n t e r e s t groups.

One a d d i t i o n a l b i t o f l e g a l t e r m i n o l o g y - - t h e

p o l i t i c a l commit tee1'--needs

term "multicandidate

t o b e e x p l a i n e d i n o r d e r t o round o u t o n e ' s

f u n d a m e n t a l u n d e r s t a n d i n g o f what a PAC i s and why i t i s such a much-discussed

vehicle.

T h i s t e r m a r i s e s from t h e l i m i t a t i o n s p l a c e d on p o l i t i c a l

c o n t r i b u t i o n s by i n d i v i d u a l s and g r o u p s under S e c t i o n 441a of t h e FECA.

S u b s e c t i o n ( a ) ( 1 ) l i m i t s " p e r s o n s " t o c o n t r i b u t i o n s o f $1,000 per e l e c t i o n

t o any F e d e r a l c a n d i d a t e o r h i s a u t h o r i z e d c o m m i t t e e s , $20,000 p e r y e a r t o

n a t i o n a l p o l i t i c a l p a r t y c o m m i t t e e s , and $5,000 a y e a r t o o t h e r p o l i t i c a l

committees.

As d e f i n e d i n 2 U.S.C.

4 3 1 ( 1 1 ) , t h e t e r m "person"

includes:

an i n d i v i d u a l , p a r t n e r s h i p , committee, a s s o c i a t i o n , c o r p o r a t i o n ,

l a b o r o r g a n i z a t i o n , o r any o t h e r o r g a n i z a t i o n o r g r o u p of p e r s o n s ,

b u t s u c h t e r m d o e s n o t i n c l u d e t h e F e d e r a l Government o r any

a u t h o r i t y o f t h e F e d e r a l Government.

Thus, t h e l i m i t s above a p p l y t o a n i n d i v i d u a l c i t i z e n a s w e l l a s t o an

o r g a n i z a t i o n o r group.

The law makes p r o v i s i o n , however, f o r a s p e c i a l t y p e o f p o l i t i c a l

c o m m i t t e e , t o which d i f f e r e n t c o n t r i b u t i o n l i m i t s a p p l y ; t h i s t y p e o f PAC

i s t h e " m u l t i c a n d i d a t e p o l i t i c a l committee," which i s d e f i n e d i n S e c t i o n

441(a)(4) as:

a p o l i t i c a l committee which h a s been r e g i s t e r e d under s e c t i o n 433

o f t h i s t i t l e f o r a p e r i o d o f n o t l e s s t h a n 6 months, which h a s

r e c e i v e d c o n t r i b u t i o n s from more t h a n 50 p e r s o n s , a n d , e x c e p t f o r

any S t a t e p o l i t i c a l p a r t y o r g a n i z a t i o n , h a s made c o n t r i b u t i o n s t o

5 o r more c a n d i d a t e s f o r F e d e r a l o f f i c e .

By meeting these three additional criteria, the multicandidate PAC may, under

2 U.S.C. 441a(2),

contribute $5,000 per election to a Federal candidate,

$15,000 to a national political party cornittee, and $5,000 to any other

political committee.

Whereas the last limitation is the same as for the basic political

committee and the second is actually lower, the $5,000 limit on contributions

to candidates, in contrast with the $1,000 limit applicable to basic political

committees and individuals, provides greater opportunities for influence and,

hence, greater incentive for a political committee to attempt to meet the

three additional criteria for multicandidate status.

With these criteria

being relatively easy to meet, it is hardly surprising that most nonparty

committees today are multicandidate committees.

What this means is that,

for all intents and purposes, most PACs may contribute more money to Federal

candidates than can individual citizens (this difference is accentuated by

the imposition of a $25,000 aggregate limit on political contributions by

individuals, with no such limit on political committees).

This distinction

has had a significant bearing on the growth of PACs, as well as on the debate

surrounding their influence on American politics.

In summary, virtually all PACs are political committees, most, but not

all, are separate segregated funds, and most, but not all, are multicandidate

political committees.

Because of the implications for public policy and in

the interests of greatest consistency with common usage, the term "PAC," for

purposes of this report, will generally refer to nonparty, multicandidate

political committees which may be either separate segregated funds or

unaffiliated entities.

The sections which follow in this chapter will have

particular applicability to separate segregated funds, although they will

be broadly relevant to all types of PACs.

11.

HOW A PAC OPERATES

Organization

A PAC is required to file a statement of organization with the Federal

Election Commission within ten days after its establishment. 3/

For a

separate segregated fund, the regulations suggest several alternative events

which can be considered to constitute "establishment":

a vote by the board of directors or comparable governing body

of an organization to create a separate segregated fund to be

used wholly or in part for federal elections; selection of

initial officers to administer such a fund; or payment of the

initial operating expenses of such a fund. For an unaffiliated PAC, "establishment" is considered to have occurred when

it meets the requirements of a political committee (i.e., when an organization

or group raises or spends more than $1,000 in a year). 51

In order to register with the FEC, the newly-formed PAC must file a

Statement of Organization, FEC Form 1 [a copy is provided in Appendix A ] ,

which contains the following information:

(1) name, address, and type of committee;

(2) name, address, relationship, and type of connected

organization;

(3) name, address, and committee position of custodian

of records (may be the treasurer);

( 4 ) name and address of treasurer;

-3/

-5 /

11 C.F.R. 102.1

11 C.F.R. 102.l(c)

11 C.F.R. 100.5(a);

102.l(d)

( 5 ) listing of depositories used by committee (at least

61;

one must be designated) -

The one officer required by law in a PAC is the treasurer, who plays a pivotal

role in the committee. As stated in 2 U.S.C. 432(a):

Every political committee shall have a treasurer.

No contribution or expenditure shall be accepted or

made by or on behalf of a political committee during

any period in which the office of treasurer is vacant.

In selecting the name, a separate segregated fund must include the name of its

connected organization in its Statement of Organization, on all reports filed,

and in all advertisements and communications. 7/

Beyond the requirements above, there are virtually no other steps required

for the establishment of a PAC.

Those in charge of the PAC may or may not

decide to incorporate. By-laws which set forth the goals, organizational

structure, and guidelines for PAC operations are recommended by many

authorities, but they are not required by law. 81

Regarding the tax status of a PAC, the law states that political

organizations are not entirely exempt from income taxation and are required to

91 However, a PAC qualifies for a limited tax-exempt status

file tax returns. "as long as it is organized and operated primarily for the purpose of receiving

contributions and making expenditures within the meaning of the Act." 101

11 C.F.R.

102.2(a)

-7/ 11 C.F.R. 102.14

-8/ Sudow, Organization and Administration, p. 199-200.

-9/ 26 U.S.C. 6012(a)(6)

lo/ Sudow, Organization and Administration, p. 207. Although money

raiserfrom contributions for political expenditures is tax-exempt, political

organizations must pay taxes on income from investments.

Records and R e p o r t s

Under 2 U.S.C.

432, t h e t r e a s u r e r i s r e q u i r e d t o keep an account

of t h e PAC's f i n a n c i a l t r a n s a c t i o n s and t o s t o r e t h e s e r e c o r d s f o r t h r e e

years a f t e r the relevant reports a r e f i l e d .

I n terms of r e c e i p t s , t h e s e

r e c o r d s must i n c l u d e :

( 1 ) an account of a l l c o n t r i b u t i o n s r e c e i v e d ;

( 2 ) t h e name and a d d r e s s of persons who c o n t r i b u t e more t h a n $50;

( 3 ) employment s t a t u s of persons c o n t r i b u t i n g over $200 i n a y e a r ;

( 4 ) i d e n t i f i c a t i o n of any c o n t r i b u t i o n by a p o l i t i c a l c o r n i t t e e .

For i t e m s 2-4,

well.

t h e d a t e and amount of c o n t r i b u t i o n must be i n c l u d e d , a s

For a l l PAC d i s b u r s e m e n t s , t h e r e c o r d s must provide:

( 1 ) name and a d d r e s s of e v e r y r e c i p i e n t ;

( 2 ) d a t e , amount, and purpose;

( 3 ) name of c a n d i d a t e (and o f f i c e s o u g h t ) on whose b e h a l f

disbursement was made.

A r e c e i p t , i n v o i c e , o r c a n c e l l e d check i s r e q u i r e d t o be kept f o r d i s b u r s e m e n t s

exceeding $200.

S e c t i o n 434 of t h e FECA r e q u i r e s PACs t o r e p o r t i n f o r m a t i o n on t h e i r

f i n a n c i a l a c t i v i t y t o t h e F e d e r a l E l e c t i o n Commission a t r e g u l a r i n t e r v a l s ;

2 U.S.C.

439 a l s o r e q u i r e s r e l e v a n t s e c t i o n s of r e p o r t s t o be f i l e d w i t h t h e

S e c r e t a r y of S t a t e i n t h o s e S t a t e s where c a n d i d a t e s have r e c e i v e d PAC

contributions.

Appendix B)

C u r r e n t r e g u l a t i o n s r e q u i r e them t o use FEC Form 3-X.

(See

These r e p o r t s e l i c i t i n f o r m a t i o n on PAC r e c e i p t s through two methods.

The f i r s t , c a t e g o r i e s of r e c e i p t s , r e q u i r e s t h e r e p o r t i n g of t o t a l amounts

i n c o n t r i b u t i o n s from i n d i v i d u a l s , p a r t y committees, o t h e r p o l i t i c a l committees,

and a l l t h e s e s o u r c e s combined; i n a d d i t i o n , t o t a l amounts o f t r a n s f e r s from

a f f i l i a t e d c o m m i t t e e s , l o a n s , o f f s e t s t o o p e r a t i n g e x p e n s e s , and o t h e r r e c e i p t s

must be r e p o r t e d i n t h e c a t e g o r i e s s e c t i o n .

The second s e c t i o n of t h e r e c e i p t s

r e p o r t p r o v i d e s a n i t e m i z e d a c c o u n t ( w i t h d a t e s and amounts) of c o n t r i b u t i o n s

from i n d i v i d u a l s who c o n t r i b u t e more t h a n $200 i n a y e a r and from a l l c o m m i t t e e s

( p o l i t i c a l and o t h e r w i s e ) ; i n a d d i t i o n , i t e m i z e d a c c o u n t i n g i s r e q u i r e d f o r

t r a n s f e r s from a f f i l i a t e d c o m m i t t e e s , a l l l o a n s t o t h e PAC, a l l r e b a t e s t o

o f f s e t o p e r a t i n g c o s t s i n e x c e s s o f $200, and d i v i d e n d s o r i n t e r e s t i n amounts

o v e r $200. E/

With r e g a r d t o PAC d i s b u r s e m e n t s , t h e same two methods a r e u s e d .

The

c a t e g o r i e s o f d i s b u r s e m e n t s p r o v i d e t h e t o t a l amounts s p e n t on o p e r a t i n g

expenses, t r a n s f e r s t o a f f i l i a t e d committees, l o a n repayments, o f f s e t s ,

c o n t r i b u t i o n s t o o t h e r p o l i t i c a l c o m m i t t e e s , l o a n s made by t h e PAC, i n d e p e n d e n t

e x p e n d i t u r e s , and o t h e r e x p e n s e s .

An i t e m i z e d a c c o u n t i n g ( w i t h d a t e s and

amounts) i s r e q u i r e d f o r e a c h d i s b u r s e m e n t of more t h a n $200 i n a y e a r ( s t a t i n g

t h e purpose o f t h e e x p e n d i t u r e ) , e a c h t r a n s f e r t o an a f f i l i a t e d c o m m i t t e e ,

e a c h l o a n repayment, each r e f u n d o r o f f s e t , e a c h c o n t r i b u t i o n t o a p o l i t i c a l

committee ( w i t h name and o f f i c e s o u g h t , i f t o a c a n d i d a t e ' s a u t h o r i z e d

c o m m i t t e e ) , e a c h l o a n , and e a c h i n d e p e n d e n t e x p e n d i t u r e of more t h a n $200. 12/

F i n a l l y , t h e r e p o r t s f i l e d must a l s o d i s c l o s e such i n f o r m a t i o n a s c a s h

on hand, o u t s t a n d i n g d e b t s and o b l i g a t i o n s , and summaries o f c o n t r i b u t i o n s

and o p e r a t i n g e x p e n d i t u r e s . 1 3 1

11/

12/

13/

11 C.F.R.

1 0 4 . 3 ( a ) ( 2 ) and ( 4 )

11 C.F.R.

1 0 4 . 3 ( b ) ( l ) and ( 3 )

11 C.F.R.

104.3(a)(l),

( c ) , and ( d )

PACs may choose one of two s c h e d u l e s f o r f i l i n g t h e i r d i s c l o s u r e r e p o r t s .

The f i r s t o p t i o n r e q u i r e s e l e c t i o n - y e a r r e p o r t s on a q u a r t e r l y b a s i s (due

J a n u a r y 31, A p r i l 15, J u l y 1 5 , and October 1 5 ) , a p r e - e l e c t i o n

r e p o r t (due

12 days b e f o r e a primary o r g e n e r a l e l e c t i o n ) , and a p o s t - e l e c t i o n r e p o r t

(due 30 days a f t e r a g e n e r a l e l e c t i o n ) ; i n n o n - e l e c t i o n y e a r s , two semi-annual

r e p o r t s a r e r e q u i r e d under t h i s system (due J u l y 31 and J a n u a r y 31).

The

second r e p o r t i n g o p t i o n r e q u i r e s monthly r e p o r t s (due by t h e 20th day of t h e

f o l l o w i n g month) i n b o t h e l e c t i o n and n o n - e l e c t i o n y e a r s ; d u r i n g e l e c t i o n

y e a r s , however, pre- and p o s t - e l e c t i o n r e p o r t s and a year-end

r e p o r t (due

J a n u a r y 31) a r e r e q u i r e d i n l i e u of t h e November and December monthly

reports.

141

S o l i c i t a t i o n of Contributions

A t t h e c o r e of a PAC's e x i s t e n c e is i t s a b i l i t y t o r a i s e money.

The FECA

and i t s i n t e r p r e t a t i v e r e g u l a t i o n s o f f e r d e t a i l e d g u i d e l i n e s which must be

followed by t h e v a r i o u s t y p e s of s e p a r a t e s e g r e g a t e d funds i n t h e i r a p p e a l s

for voluntary contributions.

One o v e r r i d i n g r u l e , a t l e a s t w i t h r e s p e c t t o

union o r c o r p o r a t e employers who s o l i c i t t h e i r s u b o r d i n a t e s , i s t h a t a l l

s o l i c i t a t i o n s must inform t h e employee of t h e p o l i t i c a l purposes of t h e PAC

and of h i s r i g h t t o r e f u s e t o c o n t r i b u t e without f e a r of r e p r i s a l . 151

C o r p o r a t i o n s may s o l i c i t c o n t r i b u t i o n s t o t h e i r PACs o n l y from t h e i r

s t o c k h o l d e r s , a d m i n i s t r a t i v e o r e x e c u t i v e p e r s o n n e l , and f a m i l i e s . 161

141 11 C.F.R.

104.5(c)

151 2 U.S.C. 4 4 1 b ( b ) ( 3 ) ( ~ ) and ( c )

161 2 U.S.C. 4 4 1 b ( b ) ( 4 ) ( A ) ( i )

The

law defines "executive or administrative personnel" as:

individuals employed by a corporation who are paid on a

salary, rather than hourly, basis and who have policymaking,

managerial, professional, or supervisory responsibilities. 171

Labor unions may only solicit contributions from their members and their

families. 181 Such solicitations by unions and corporations may be in written

or oral form and may occur at any time, with no 1imitatioh.on the number of

times per year.

In addition to the above guidelines, the law permits corporations and

unions to solicit each other's solicitation pools twice a year.

This type

of solicitation must be in writing and be sent to the residence of the

191 The regulations further require that these written

prospective donor. solicitations inform the reader that a custodial arrangement exists to protect

the anonymity of those who do not contribute, those who make a single

contribution of $50 or less, and those whose aggregate contributions in a year

do not exceed $200; the corporation or union may not be informed of those who

fail to contribute, and those who contribute less than $50 at a time or $200

in the aggregate may send their contributions to the custodian. 201

The law requires that whatever methods a corporation uses in its

fundraising efforts must be made available at cost to a labor union which

represents its employees. 2 1 The regulations suggest that such methods of

171 2 U.S.C. 441b(7)

181 2 U.S.C. 441b(b)(4)(A)(ii)

191 2 U.S.C. 441b(b)(4)(B)

201 11 C.F.R. 114.6(c) and (d)

211 2 U.S.C. 441b(b)(6)

s o l i c i t a t i o n i n c l u d e b u t a r e n o t l i m i t e d t o a p a y r o l l d e d u c t i o n o r check-off

s y s t e m , c o m p u t e r s f o r a d d r e s s i n g e n v e l o p e s f o r home s o l i c i t a t i o n s , and t h e u s e

of c o r p o r a t e f a c i l i t i e s f o r f u n d r a i s i n g e v e n t s . 221

The r u l e s g o v e r n i n g s o l i c i t a t i o n by membership o r g a n i z a t i o n s ( o t h e r t h a n

t r a d e a s s o c i a t i o n s ) , c o o p e r a t i v e s , and c o r p o r a t i o n s w i t h o u t c a p i t a l s t o c k a r e

much s i m p l e r t h a n t h o s e f o r c o r p o r a t i o n s and u n i o n s .

Any o f t h e t h r e e former

t y p e s o f o r g a n i z a t i o n s may s o l i c i t i t s members a t any t i m e and i n any manner,

w i t h o u t any r e s t r i c t i o n on number o f s o l i c i t a t i o n s per y e a r . 231

The g u i d e l i n e s g o v e r n i n g a t r a d e a s s o c i a t i o n p e r m i t i t t o s o l i c i t t h e

s t o c k h o l d e r s and a d m i n i s t r a t i v e o r e x e c u t i v e p e r s o n n e l (and f a m i l i e s ) o f member

c o r p o r a t i o n s , p r o v i d e d t h a t t h e c o r p o r a t i o n g r a n t s s p e c i f i c , p r i o r a p p r o v a l and

t h a t i t n o t p e r m i t such s o l i c i t a t i o n s by any o t h e r a s s o c i a t i o n t h a t y e a r .

The c o r p o r a t i o n i s f r e e t o l i m i t t h e number o f s o l i c i t a t i o n s d u r i n g t h e y e a r

b y t h e a u t h o r i z e d t r a d e a s s o c i a t i o n and t o f u r t h e r r e s t r i c t t h e s o l i c i t a t i o n

p o o l . 241

The law h a s l i t t l e t o s a y r e g a r d i n g s o l i c i t a t i o n s by non-connected

PACs,

e x c e p t t h a t t h e y must i d e n t i f y any communications a s b e i n g p a i d f o r by

them. 2 5 1

Beyond t h a t , a s p r e v i o u s l y s t a t e d , t h e y may s o l i c i t anyone f o r

c o n t r i b u t i o n s , t h r o u g h any v e h i c l e , any number o f t i m e s .

One f i n a l comment r e g a r d i n g PAC s o l i c i t a t i o n of c o n t r i b u t i o n s d e s e r v e s

mention h e r e .

C o n t r i b u t i o n s t o a PAC a r e g e n e r a l l y e l i g i b l e f o r t h e 50 p e r c e n t

221 11 C.F.R. 1 1 4 . 5 ( k )

231 2 U.S.C. 4 4 1 b ( b ) ( 4 ) ( C ) ; 11 C.F.R. 114.7

241 2 U.S.C. 4 4 1 b ( b ) ( 4 ) (Dl; 11 C.F.R. 1 1 4 . 8

251 11 C.F.R. 110.11

t a x c r e d i t a p p l i c a b l e t o a l l p o l i t i c a l c o n t r i b u t i o n s ; a maximum c r e d i t of

$50 may b e t a k e n by a s i n g l e t a x p a y e r and $100 by t h o s e f i l i n g a j o i n t r e t u r n .

T h i s p r o v i s i o n i s commonly mentioned by PACs i n t h e i r f u n d r a i s i n g a p p e a l s .

D . The Decision-Making P r o c e s s

Of a l l t h e a s p e c t s o f p o l i t i c a l a c t i o n c o m m i t t e e s , t h e i r o p e r a t i o n and

t h e i r r o l e i n o u r p o l i t i c a l s y s t e m , t h e one which i s p r o b a b l y t h e l e a s t

u n d e r s t o o d i s t h e PAC decision-making

process.

T h e r e i s a d e a r t h of l i t e r a t u r e

on how PACs a r r i v e a t d e c i s i o n s on which c a n d i d a t e s t o s u p p o r t , and t h e r e i s

no s y s t e m a t i c , comprehensive e x a m i n a t i o n of t h i s q u e s t i o n .

What l i t e r a t u r e

d o e s e x i s t i s l a r g e l y c o n f i n e d t o examples of s e l e c t e d PACs and i s h e a v i l y

anecdotal i n nature.

Furthermore, t h e i n s i g h t s i n t o t h e inner workings of

PACs f o c u s e s p e c i a l l y on c o r p o r a t e PACs.

This i s perhaps a t t r i b u t a b l e t o t h e

e f f o r t s o f c o r p o r a t e spokesmen t o p u b l i c i z e t h e i r o p e r a t i o n s , i n o r d e r t o

h e l p s h a p e a s y m p a t h e t i c p u b l i c p e r c e p t i o n o f them.

Thus, n o t o n l y a r e t h e

e x i s t i n g a c c o u n t s o r i e n t e d t o t h e c o r p o r a t e s e c t o r b u t t h e y may be l a c k i n g

i n objectivity, as well.

Although t h i s s e c t i o n a t t e m p t s t o p r o v i d e some u s e f u l

g e n e r a l i z a t i o n s on t h e PAC d e c i s i o n - m a k i n g p r o c e s s , i t i s n e c e s s a r i l y l i m i t e d

by t h e a f o r e m e n t i o n e d c o n s t r a i n t s .

The fundamental r e a s o n f o r t h e g e n e r a l l y vague p e r c e p t i o n of PAC i n t e r n a l

workings i s t h e a b s e n c e of d e t a i l e d l e g a l g u i d e l i n e s and d i s c l o s u r e r e q u i r e m e n t s ,

s u c h a s t h o s e t h a t a p p l y t o t h e PAC's f i n a n c i a l o p e r a t i o n s .

I n t h e c a s e of

t h e v a s t m a j o r i t y o f PACs which a r e a f f i l i a t e d , i t i s known t h a t t h e l e a d e r s h i p

o f t h e s p o n s o r i n g o r g a n i z a t i o n h a s broad a u t h o r i t y t o c o n t r o l t h e s p e n d i n g

d e c i s i o n s o f t h e i r PACs.

A board o f d i r e c t o r s i s u s u a l l y e s t a b l i s h e d a s t h e

u l t i m a t e d e c i s i o n - m a k i n g body of t h e PAC, and management-level

o f f i c e r s of t h e

company or union typically serve on the PAC board.

The day-to-day operations

of the PAC are generally handled by a designated manager, who may serve only

part-time in that capacity and whose principal occupation might be government

affairs specialist of the connected organization. 261

The PAC board may also

rely on standing comrnittees to assist with such specific tasks as fundraising,

monitoring legislators' votes, or voter education. 271

The number of people actually involved in the decision-making process will

also vary.

It appears that some actively encourage input from the contributors,

which may involve an earmarking system, while others reserve the decisions on

whom to support to the PAC board of directors or a subgroup thereof.

Some may

place particular emphasis on the advice of Washington representatives of the

connected organization; others may solicit input from local affiliates before

making decisions for the national body. 281

Most of the literature stresses the wide number of options open to PAC

decision-makers.

Some of these options are summarized below as a means of

illustrating how varied the operations and foci of PACs are likely to be.

Through these choices, a PAC assumes its own identity:

(1) to limit contributions to local races or to support

candidates across the Nation;

(2) to pursue an incumbent-oriented approach or to take

more risks on challengers;

261 Cohen, Richard E. Congressional Democrats Beware--Here Come the

corpo=te PACs. National Journal, v. 12, August 9, 1980: 1306.

271 Sudow, Organization and Administration, p. 197.

281 Budde, Bernadette. Business Political Action Committees. In

J. Malbin (ed. )

~ichax

Parties, Interest Groups, and Campaign Finance

Laws. Washington, American Enterprise Institute for Public Policy Research,

1980. p. 22-23.

( 3 ) t o c o n c e n t r a t e c o n t r i b u t i o n s on incumbents i n

l e g i s l a t i v e l y s t r a t e g i c p l a c e s , such a s key committee

posit ions;

( 4 ) t o c o n t r i b u t e e a r l y i n t h e e l e c t i o n c y c l e (perhaps

t a k i n g more r i s k s ) o r w a i t u n t i l l a t e r i n t h e campaign

( p e r h a p s t o a s s e s s who i s most l i k e l y t o w i n ) ;

(5) t o c o n t r i b u t e i n primaries o r only i n general e l e c t i o n s ;

( 6 ) t o c o o r d i n a t e g i v i n g w i t h o t h e r PACs o r t o work a l o n e ;

( 7 ) t o g i v e a s m a l l number of l a r g e d o n a t i o n s o r t o g i v e a

l a r g e r number of t o k e n c o n t r i b u t i o n s ;

(8) t o contribute t o Presidential candidates, t o parties, t o

o t h e r PACs, a s w e l l a s t o c o n g r e s s i o n a l c a n d i d a t e s ;

( 9 ) t o g i v e t o S t a t e and l o c a l o r o n l y F e d e r a l c a n d i d a t e s ;

( 1 0 ) t o a l l o w c o n t r i b u t o r s t o earmark c o n t r i b u t i o n s t o

designated candidates;

( 1 1 ) t o make p o s t - e l e c t i o n d o n a t i o n s t o h e l p e a s e a

c a n d i d a t e ' s campaign d e f i c i t ;

( 1 2 ) t o make in-kind d o n a t i o n s t o c a n d i d a t e s ( s u c h a s

p r o v i d i n g goods and s e r v i c e s ) o r o n l y f i n a n c i a l

contributions ;

( 1 3 ) t o make i n d e p e n d e n t e x p e n d i t u r e s o r l i m i t s p e n d i n g t o

d i r e c t c a n d i d a t e c o n t r i b u t i o n s . 291

One f i n a l p o i n t might b e made h e r e r e g a r d i n g PAC d e c i s i o n - m a k i n g .

Often,

i f n o t most of t h e t i m e , t h e i n i t i a l s u g g e s t i o n f o r c o n t r i b u t i n g t o a p a r t i c u l a r

C o r p o r a t e PACs: Step-by-step Formation and

291 K e n d a l l , Don R.

~ r o u b z f r e eO p e r a t i o n . Campaigns and E l e c t i o n s , v . 1, S p r i n g 1980: 18;

Kayden, Xanda. The Impact o f t h e FECA o n t h e Growth and E v o l u t i o n o f

P o l i t i c a l A c t i o n Committees. I n U.S. Congress.

House o f R e p r e s e n t a t i v e s .

Committee on House A d m i n i s t r a t i o n .

An A n a l y s i s of t h e Impact o f t h e F e d e r a l

E l e c t i o n Campaign A c t , 1972-1978.

From t h e I n s t i t u t e of P o l i t i c s .

J o h n F.

Kennedy School of Government. Harvard U n i v e r s i t y .

Committee P r i n t , 9 6 t h Cong.,

1 s t S e s s . Washington, U.S. Govt. P r i n t . O f f . , 1979. p. 101. w ere after c i t e d

a s U.S. Congress. An A n a l y s i s o f t h e Impact of t h e FECA)

c a n d i d a t e e m a n a t e s from t h e c a n d i d a t e h i m s e l f .

301 The p r a c t i c e o f c a n d i d a t e s

- making a p p e a l s f o r PAC money h a s become s o w i d e s p r e a d t h a t a d v i c e on how t o

maximize t h e i r c h a n c e s f o r o b t a i n i n g PAC c o n t r i b u t i o n s a p p e a r s t o have become

a s t a n d a r d p a r t o f t h e t r a i n i n g f o r modern-day c a n d i d a t e s . 31/

R e g u l a t i o n o f PACs

PACS a r e F e d e r a l l y r e g u l a t e d by t h r e e p r i m a r y s o u r c e s .

The f i r s t i s t h e

F e d e r a l E l e c t i o n Campaign Act o f 1971 and i t s 1974, 1976, and 1979 Amendments:

P u b l i c Laws 92-225,

93-443,

c o d i f i e d i n law a s 2 U.S.C.

94-283,

and 96-187,

431 e t s e q .

respectively.

The FECA i s

S e c o n d l y , T i t l e 11 of t h e Code o f

F e d e r a l R e g u l a t i o n s i n c l u d e s r e g u l a t i o n s promulgated by t h e F e d e r a l E l e c t i o n

Commission which a r e b a s e d on t h e s t a t u t e s and which s e r v e a s more d e t a i l e d

g u i d e l i n e s f o r p a r t i c i p a n t s i n t h e campaign f i n a n c e p r o c e s s ; t h e s e a l s o have

t h e advantage of being w r i t t e n with t h e i n t e n t of e a s i e r comprehensibility

than s t a t u t o r y language.

F i n a l l y , t h e FEC i s a u t h o r i z e d under 2 U.S.C.

437f

t o i s s u e a d v i s o r y o p i n i o n s , a t t h e r e q u e s t of i n d i v i d u a l s , c a n d i d a t e s , o r

c o m m i t t e e s , which a r e i n t e n d e d t o c l a r i f y q u e s t i o n s o r p e r c e i v e d a m b i g u i t i e s

a b o u t t h e law.

These a d v i s o r y o p i n i o n s a r e compiled and indexed by t h e FEC;

t h e i n d e x i s updated p e r i o d i c a l l y and i s a v a i l a b l e from t h e Commission.

PACs.

7-9.

3 0 1 Kayden, Xanda.

I n U.S. Congress.

31/

Campaign F i n a n c e : The Impact on P a r t i e s and

An A n a l y s i s of t h e Impact o f t h e FECA, p. 86.

How t o S o l i c i t PACs.

Campaigning R e p o r t s , v . 1, J u l y 26, 1979:

CHAPTER TWO:

EVOLUTION OF POLITICAL ACTION COMMITTEES

Although t h e y have o n l y r e c e n t l y become a major s o u r c e o f campaign f u n d i n g

i n t h e U n i t e d S t a t e s , p o l i t i c a l a c t i o n c o m m i t t e e s a r e not a r e c e n t phenomenon.

F u r t h e r m o r e , i n t e r e s t g r o u p involvement i n t h e e l e c t o r a l p r o c e s s i s n o t a new

development.

Groups have a l w a y s s o u g h t - - l e g a l l y

and i l l e g a l l y , d i r e c t l y and

indirectly--to

maximize t h e i r i n f l u e n c e o v e r t h e s e l e c t i o n o f p u b l i c o f f i c i a l s .

The f i r s t s e c t i o n o f t h i s c h a p t e r o u t l i n e s t h e laws g o v e r n i n g g r o u p involvement

i n F e d e r a l e l e c t i o n s p r i o r t o t h e F e d e r a l E l e c t i o n Campaign Act of 1971 and

d i s c u s s e s t h e t y p e s of a c t i v i t i e s i n which t h e g r o u p s were engaged.

The second

s e c t i o n t r a c e s t h e key laws and a d m i n i s t r a t i v e and j u d i c i a l r u l i n g s o f t h e 1 9 7 0 ' s

which s e r v e d t o f a c i l i t a t e t h e e s t a b l i s h m e n t o f PACs a s t h a t d e c a d e advanced.

GROUP INVOLVEMENT PRIOR TO THE 1970s

Legal R e s t r i c t i o n s

D i r e c t p a r t i c i p a t i o n i n e l e c t i o n s by c o r p o r a t i o n s and l a b o r u n i o n s , t h e

foremost t y p e s o f i n t e r e s t g r o u p s , h a s been c i r c u m s c r i b e d f o r much of t h i s

century.

The T i l l m a n Act o f 1907 321 p r o h i b i t e d a l l c o r p o r a t i o n s and n a t i o n a l

banks from making "money c o n t r i b u t i o n [ s l " i n c o n n e c t i o n w i t h F e d e r a l e l e c t i o n s .

It was e n a c t e d a t t h e s u g g e s t i o n o f P r e s i d e n t Theodore R o o s e v e l t i n t h e wake

of c h a r g e s d u r i n g h i s 1904 campaign t h a t he had r e c e i v e d l a r g e c o r p o r a t e

321

34 S t a t . 864 ( 1 9 0 7 )

contributions from prospective government contractors and in light of increased

public cynicism over the role of large corporations in the electoral process. 33/

This prohibition was extended by the Corrupt Practices Act of 1925 34/ to all

contributions (not just monetary ones).

That law, however, excluded primary

elections and nominating conventions from its restrictions, in accordance with

the prevailing interpretations of the Supreme Court's decision in Newberry

v. United States. 351

The role of labor unions in election campaigns was not circumscribed until

1943, with the enactment of the War Labor Disputes (or Smith-Connally) Act. 36/

Prior to that, most labor campaign contributions had come from union dues of

members.

What had prompted the move to curtail labor's political giving was

the marked upsurge of such activity in and following the 1936 elections, as

described in the following account:

The 1936 elections saw an eruption of political activity by

organized labor. Reported political expenditures by interstate

labor organizations ran to over $750,000. This exceeded by

eight times the sum raised by the American Federation of Labor

for political purposes during the previous 30 years. Labor dove

into active campaigning and into campaign contributing on behalf

of Democratic candidates. The move provoked a fierce howl that

clearly marked 1936 as a watershed year,in the political

371

alignment of social and economic interests. -

331 Epstein, Edwin M. Corporations, Contributions, and Political

campaZns: Federal Regulation in Perspective. Berkeley, Institute of

Governmental Studies, May 1968. p. 11-12.

341 43 Stat. 1074 (1925)

351 256 U.S. 232 (1921); the Newberry decision was seen as placing

limitson the Federal Government ' s authority to control party primaries

and conventions.

361

57 Stat. 167 (1943)

371 Heard, Alexander. The Costs of Democracy.

university of North Carolina Press, 1960. p. 169.

Chapel Hill, The

In addition to the concern over the growing power of unions among opponents

of labor's political philosophy, there developed a desire to protect the rights

of union members from having their dues monies given to candidates with whom

381

they differed politically. -

Consequently, the 1943 Act prohibited unions

from making contributions in connection with elections for Federal office.

important distinction to note is that although unions were barred from using

their treasuries for campaign contributions, they interpreted the law as not

applying to their separate segregated funds.

The 1943 Act was in effect only until six months after the end of World

War 11, and, in 1947, Congress passed the Labor Management Relations (or TaftHartley) Act which made permanent the restrictions on labor's political

activities. 391 Furthermore, it extended the ban for both corporations and

labor unions to expenditures as well as contributions, in light of efforts by

the CIO's Political Action Committee in 1944 to circumvent the Smith-Connally

prohibition on union contributions. 401 The 1947 Act also extended coverage

(for corporations and unions) to primaries and conventions. This appeared to

41/

be consistent with the Supreme Court's ruling in United States v. Classic, which was interpreted as overruling the Newberry decision by sanctioning Federal

421

regulation of the nominating process. -

381 Ibid., p. 190.

391 61 Stat. 159 (1947)

401 Epstein, Corporations, Contributions, and Political Campaigns,

p. 147

411 313 U.S. 299 (1941)

421 Epstein, Corporations, Contributions, and Political Campaigns,

p. 15r152 [fn. 431

The 1925 C o r r u p t P r a c t i c e s A c t , a s amended by t h e 1947 T a f t - H a r t l e y Act

and c o d i f i e d a t 18 U.S.C.

610, was t h e p r i n c i p a l law g o v e r n i n g t h e p o l i t i c a l

a c t i v i t i e s o f c o r p o r a t i o n s and l a b o r u n i o n s u n t i l t h e F e d e r a l E l e c t i o n Campaign

The 1925 law, however, was w i d e l y c o n s i d e r e d t o b e

Act t o o k e f f e c t i n 1972.

vague, w h i l e t h e j u d i c i a l i n t e r p r e t a t i o n s were s e e n t o b e i n s u f f i c i e n t l y p r e c i s e

t o o f f e r a c l e a r " l i n e o f d e m a r c a t i o n " between p e r m i s s i b l e and i m p e r m i s s i b l e

c o r p o r a t e and l a b o r a c t i v i t i e s . 4 3 1

F u r t h e r m o r e , r u l i n g s by t h e Supreme C o u r t

and lower c o u r t s i n s i x c a s e s d u r i n g t h e 25-year

d o u b t on t h e c o n s t i t u t i o n a l i t y o f 18 U.S.C.

p e r i o d had c a s t s u f f i c i e n t

610 t h a t t h e J u s t i c e Department was

r e l u c t a n t t o p r o s e c u t e presumed o f f e n d e r s o f t h e law. 441

A s d e p i c t e d by o n e

observer :

V i r t u a l l y no c o r p o r a t i o n o r l a b o r union t h a t wished t o d o s o

was d e t e r r e d d e f a c t o from making campaign c o n t r i b u t i o n s and

e x p e n d i t u r e s . 451

How I n t e r e s t Groups Made P o l i t i c a l C o n t r i b u t i o n s

Labor

Labor u n i o n s had been engaged i n p o l i t i c a l a c t i v i t y f o r q u i t e some

t i m e , b u t u n t i l 1936, u n i o n s had c o n t r i b u t e d o n l y s m a l l amounts d i r e c t l y

t o p o l i t i c a l campaigns.

The American F e d e r a t i o n o f Labor (AFL), t h e

major u m b r e l l a l a b o r o r g a n i z a t i o n a t t h a t t i m e , m a i n t a i n e d a p r a c t i c e o f

------431

Ibid.,

p. 56-57.

441 E p s t e i n , Edwin. C o r p o r a t i o n s and Labor Unions i n E l e c t o r a l

~ o l i t z s . I n A l e x a n d e r , H e r b e r t ( e d . ) . P o l i t i c a l F i n a n c e : Refonn and

R e a l i t y . P h i l a d e l p h i a , The Annals of t h e American Academy o f P o l i t i c a l

and S o c i a l S c i e n c e , v . 425, May 1976. p. 37.

451

Ibid.,

p. 39.

not using its general funds for political purposes. 461 The enormous increase

in union contributions in 1936 (noted earlier) emanated almost exclusively

fr&

unions affiliated with the more politically aggressive Committee for

Industrial Organization (CIO), established in 1935. The preponderance of

contributions by the CIO affiliated unions were made from union funds, as

authorized by convention votes. 471

In response to the Smith-Connally Act's prohibition on labor contributions

in 1943, the Congress of Industrial Organization--as the CIO was later called-made the first foray into the field of political action committees, as we now

know them.

Labor unions had operated political committees in the past (most

notably Labor's Non-Partisan League, which began a brief existence in 19361,

but the CIO-PAC, established in July 1943, constituted the earliest effort at

successfully maintaining what is today known in law as a "separate segregated

fundH--a separate account for transfering voluntary contributions from members

to political candidates. In addition to the CIO-PAC, the CIO, under the direction

of Sidney Hillman, established the National Citizen's Political Action Cornittee

(NC-PAC) in 1944, in order to collect political funds from progressive individuals

481

outside of labor's ranks. The CIO-PAC entered the political arena during the election of 1944.

Prior

to the Democratic Convention, it raised $647,903 from the general funds of its

affiliated unions, of which it spent $478,499 on primary campaigns and "political

education" of its members on issues.

Given that the 1943 law did not cover

461 Overacker, Louise. Presidential Campaign Funds.

~ o s t o n ~ n i v e r s iPress,

1946. p. 50.

Ibid., p. 50-51.

481 Ibid., p. 57-58.

Boston,

primary elections, it was an allowable expenditure for CIO-PAC.

But once the

convention was held and the general election campaign was considered to have

begun, the existing PAC funds were frozen.

Thereafter, the CIO-PAC launched

its "A Buck for Roosevelt" drive to collect one dollar in voluntary contributions

from its five million members; half of the money was to be used by the PAC and

the other half was to be channeled to the union's State or local political action

committees.

The PAC raised $470,852 in this manner. 491

It is important to bear in mind that the CIO-PAC's activities were

controversial at the time (indeed the primary contributions led to the tighter

restrictions in the 1947 Act), but they played a major role in establishing

precedents for later--and modern--modes of political activity by labor unions

(and other groups).

As the following passage reveals, the principal focus was,

from the outset, on the maintenance of separate and distinct accounts for

channeling political contributions:

The status of the PAC committees also posed some legal

conundrums. Union officials argued that these were not

"labor organizations" within the meaning of the Smith-Connally

Act as they were separately organized, under different sets of

officers, and maintained independent treasuries. Nevertheless,

the connection between the PAC and the CIO was very close on

every level of organization. Sidney Hillman, President of the

Amalgamated Clothing Workers of America, an important CIO

affiliate, was chairman of both the CIO-PAC and the NC-PAC;

the State political action committees frequently utilized the

existing mechanism of CIO State councils; and local political

action committees were similarly set up as cormnittees of CIO

locals. At the national level, and in most of the States,

financial separation was strictly observed, and at the local

level union personnel assigned to full-time PAC work were

transferred to the PAC payroll. But when CIO personnel were

assigned to the PAC on a part-time basis it was frequently

impossible to distinguish the services which were political

and which should be charged to the PAC. In California the

separation between CIO and CIO-PAC was never very clearly

defined. The State PAC was set up as a subcommittee of the

49/ Ibid., p. 57-59.

CIO, funds were not separate, and no separate records were kept.

After the trade union fund was "frozen," the financial support

of the CIO-PAC came from individual trade union members. CIO

membership lists were, of course, used in soliciting contributions,

and in some instances the "voluntary" character of these gifts

was questioned. However, the modest size of the funds would seem

to indicate that if compulsion was used, it was surprisingly

ineffective. 50/

With the CIO breaking ground in establishing and operating separate political

funds in order to comply with Federal law, other labor unions followed suit.

The AFL, the other major labor organization, set up its Labor's League for

Political Education in 1947. 51/

In 1955, these two umbrella organizations merged

to become the AFL-CIO, and their PACs were united as the Committee on Political

Education (COPE).

COPE quickly established itself as the foremost source of

labor-oriented political giving, although other national unions added considerably

to the overall political war chest of the American labor movement.

In 1956, seventeen national labor political committees made disbursements

of some $2.1 million; in addition, 155 State and local union affiliates had

political committees in operation that year, although much of the local groups'

52/ By 1968, there

funds constituted transfers from the national committees. were 37 national labor political committees making disbursements of $7.1

million. 531

The most visible manifestation of labor's political giving took the form

of "free fundsu--direct contributions to candidates from voluntary donations

501 Ibid., p. 60-61.

511 Heard, The Costs of Democracy, p. 192 (fn).

52/ Ibid., p. 189.

531 Alexander, Herbert.

Financing the 1976 Election.

~ o n ~ r z s i o n aQuarterly

Press, 1979. p. 559.

Washington,

by union members.

C o n t r i b u t i o n s t o c a n d i d a t e s f o r F e d e r a l o f f i c e by i n t e r s t a t e

committees ( l i m i t e d t o amounts o f $5000) were r e q u i r e d t o b e r e p o r t e d under

t h e F e d e r a l C o r r u p t P r a c t i c e s A c t , t h u s making i t p o s s i b l e t o gauge (however

i n e f f e c t i v e l y ) t h e l e v e l of c o n t r i b u t i o n s by such g r o u p s a s l a b o r u n i o n s .

But f r e e f u n d s a l o n e d i d n o t r e f l e c t t h e t r u e l e v e l of l a b o r ' s p o l i t i c a l

g i v i n g , and t h r e e o t h e r major avenues were w i d e l y u s e d - - a l l

of which were funded

from t h e g e n e r a l t r e a s u r i e s of u n i o n s :

( 1 ) C o n t r i b u t i o n s t o c a n d i d a t e s f o r S t a t e and l o c a l o f f i c e s c o u l d be

made from union t r e a s u r i e s i n t h o s e S t a t e s which d i d not p r o h i b i t such p r a c t i c e s

(few d i d ) .

I n some S t a t e s , Democratic c a n d i d a t e s c o u l d e x p e c t t o r e c e i v e 10-20

p e r c e n t of t h e i r campaign f u n d s from u n i o n s .

( 2 ) Union t r e a s u r i e s were used f o r " e d u c a t i o n a l "

technically non-political

e x p e n d i t u r e s , which were

( t h u s not s u b j e c t t o F e d e r a l laws p r o h i b i t i n g union

d u e s money f o r p o l i t i c a l p u r p o s e s ) b u t which t y p i c a l l y i n v o l v e d such a c t i v i t i e s

a s get-out-the-vote

d r i v e s , v o t e r r e g i s t r a t i o n d r i v e s , and d i s t r i b u t i o n of v o t i n g

records of elected o f f i c i a l s .

The f o l l o w i n g p a s s a g e i n d i c a t e s t h e s i g n i f i c a n c e

of t h i s c a t e g o r y of l a b o r a s s i s t a n c e t o c a n d i d a t e s :

O r g a n i z e d l a b o r ' s r e g i s t r a t i o n d r i v e s may be o f more v a l u e t o

t h e Democrats t h a n d i r e c t money c o n t r i b u t i o n s .

I n 1968 COPE

s p e n t more t h a n $1 m i l l i o n on r e g i s t r a t i o n a l o n e , c o n c e n t r a t i n g

on m a r g i n a l C o n g r e s s i o n a l d i s t r i c t s . L o c a l and s t a t e l a b o r

o r g a n i z a t i o n s t r i e d t o match t h i s n a t i o n a l o u t l a y . L a b o r ' s

r e g i s t r a t i o n drives, naturally, are carried out selectively in

541

h e a v i l y Democratic p r e c i n c t s . -

( 3 ) P u b l i c s e r v i c e a c t i v i t i e s , such a s union newspapers and r a d i o

programs, c o u l d be funded from t h e union t r e a s u r i e s , and t h e y were a b l e

541 A l e x a n d e r , H e r b e r t E .

~ f f a i Pz r e s s , 1972. p. 170.

Money i n P o l i t i c s .

Washington, P u b l i c

t o d i s s e m i n a t e i n f o r m a t i o n and views s u p p o r t i v e of t h e i r p o l i t i c a l

philosophy.

551

I n a d d i t i o n t o t h e c h a n n e l s of a c t i v i t y open t o l a b o r unions d i s c u s s e d

above, t h e unions enjoyed wide l a t i t u d e i n p o l i t i c a l a c t i v i t y a s a r e s u l t of

v a r i o u s Supreme Court d e c i s i o n s .

Common p r a c t i c e s i n c l u d e d union employees'

r e c e i v i n g compensation w h i l e p r o v i d i n g s e r v i c e s t o c a n d i d a t e s and a d v o c a t i n g

c a n d i d a t e s ' e l e c t i o n o r d e f e a t i n TV o r r a d i o time paid from union funds. 561

The above d i s c u s s i o n r e v e a l s t h e range of o p t i o n s open t o l a b o r unions

which sought t o i n f l u e n c e t h e p o l i t i c a l p r o c e s s p r i o r t o t h e campaign f i n a n c e

laws e n a c t e d d u r i n g t h e 1970s.

While p i o n e e r i n g i n t h e f i e l d of s e p a r a t e

s e g r e g a t e d funds and p o l i t i c a l a c t i o n committees f o r d i r e c t c a n d i d a t e

c o n t r i b u t i o n s , t h e unions found many o t h e r v a l u a b l e means of making t h e i r

influence f e l t .

A s t h e c o s t s of many of t h e s e a c t i v i t i e s were n o t r e q u i r e d

t o be r e p o r t e d under t h e f i n a n c i a l d i s c l o s u r e laws i n e x i s t e n c e through 1972,

i t was e x c e e d i n g l y d i f f i c u l t t o o b t a i n a c c u r a t e d a t a on t h e d e g r e e of l a b o r

u n i o n s ' f i n a n c i a l a c t i v i t y i n F e d e r a l e l e c t i o n s . T h i s d i f f i c u l t y was compounded

by t h e e a s e with which t h e d i s c l o s u r e laws could be l e g a l l y circumvented,

a s r e f l e c t e d i n t h e p r a c t i c e by n a t i o n a l l a b o r committees of t r a n s f e r r i n g funds

t o S t a t e a f f i l i a t e s , not s u b j e c t t o F e d e r a l r e p o r t i n g r e q u i r e m e n t s . 571

However

u n c e r t a i n one may be a s t o t h e e x t e n t of l a b o r spending i n t h e y e a r s l e a d i n g

up t o t h e FECA o f 1971, one may s a f e l y conclude t h a t t h e unions were p l a y i n g

a v i t a l r o l e i n t h e f i n a n c i n g of e l e c t i o n campaigns.

5 5 1 I b i d . , p. 170-171; and Heard, The C o s t s of Democracy, p. 177-178.

561 Alexander, Money i n P o l i t i c s , p. 171.

5 7 1 I b i d . , p. 172.

Business

The c h a n n e l s f o r p o l i t i c a l a c t i v i t y by t h e b u s i n e s s s e c t o r p r i o r t o t h e

1970s were a l s o w e l l - e s t a b l i s h e d ,

t h e l e v e l of b u s i n e s s - o r i e n t e d

a l t h o u g h i t i s even more d i f f i c u l t t o gauge

a c t i v i t y than it is f o r labor a c t i v i t y .

Corporate

i n t e r e s t s d i d n o t e n t e r t h e p o l i t i c a l a c t i o n committee f i e l d u n t i l t h e 1 9 6 0 s ,

h a v i n g i n s t e a d become accustomed t o d o n a t i n g l a r g e amounts o f money t o campaigns

t h r o u g h c o r p o r a t e e x e c u t i v e s and o t h e r w e a l t h y i n d i v i d u a l s a s s o c i a t e d w i t h

l a r g e c o r p o r a t i o n s . 581

While t h i s was p e r h a p s t h e most v i s i b l e way o f s p e n d i n g

p o l i t i c a l money i n t h e i n t e r e s t s of b u s i n e s s , i t was by no means t h e o n l y way.

C o r p o r a t i o n s t h e m s e l v e s were p r o h i b i t e d from s p e n d i n g t r e a s u r y money

on c o n t r i b u t i o n s t o F e d e r a l c a n d i d a t e s , b u t , a s w i t h l a b o r u n i o n s , t h e r e was

a wide r a n g e of a c t i v i t i e s r e l a t i n g t o t h e p o l i t i c a l p r o c e s s on which g e n e r a l

funds could be s p e n t .

Here a g a i n , t h e l i n e between p a r t i s a n and b i p a r t i s a n ,

p e r m i s s i b l e and i m p e r m i s s i b l e , was o f t e n b l u r r e d enough t o f a c i l i t a t e t h e

u n d e r t a k i n g o f a c t i v i t i e s by a c o r p o r a t i o n which had a d i s t i n c t s l a n t toward

an i n t e n d e d b e n e f i c i a r y o r p o i n t of view.

Such e l e c t i o n - r e l a t e d a c t i v i t i e s

a s v o t e r r e g i s t r a t i o n and g e t - o u t - t h e - v o t e

d r i v e s among employees, p r o v i s i o n

o f employee and s t o c k h o l d e r l i s t s t o p o l i t i c a l p a r t i e s , p a y r o l l d e d u c t i o n

systems f o r p o l i t i c a l c o n t r i b u t i o n s , and campaign f u n d - r a i s i n g d r i v e s among

employees were conducted by v a r i o u s c o r p o r a t i o n s , a p p a r e n t l y n o t i n v i o l a t i o n

of 18 U.S.C.

610. 591

A s i d e from t h e above-mentioned

"educational" a c t i v i t i e s , corporations

had some leeway i n e n g a g i n g i n more p a r t i s a n e n d e a v o r s , such a s t o :

581 E p s t e i n , Edwin M.

~ a ~ / ~ 1979.

= e

p. 35.

An I r o n y of E l e c t o r a l Reform.

Regulation, v. 3 ,

591 E p s t e i n , C o r p o r a t i o n s , C o n t r i b u t i o n s , and P o l i t i c a l Campaigns, p. 45.

( 1 ) s u p p o r t o r oppose c a n d i d a t e s , p a r t i e s and i s s u e s i n t h e i r r e g u

p u b l i c a t i o n s , c i r c u l a t e d t o t h e i r employees, s t o c k h o l d e r s , s u p p l i e r s and

customers;

( 2 ) d i s t r i b u t e i n f o r m a t i o n a l l i t e r a t u r e t o t h e g e n e r a l p u b l i c which

s t a t e d t h e i s s u e s and c a n d i d a t e s ' r e c o r d s , b u t which d i d n o t a d v o c a t e t h e

e l e c t i o n o r d e f e a t of c a n d i d a t e s ;

( 3 ) engage i n p u b l i c s e r v i c e a d v e r t i s i n g on p u b l i c i s s u e s ;

( 4 ) wage a d v e r t i s i n g campaigns w i t h r e g a r d t o p u b l i c p o l i c y i s s u e s n o t

on t h e b a l l o t a s r e f e r e n d a o r i n i t i a t i v e s ;

( 5 ) a d v e r t i s e i n program books of n a t i o n a l p a r t y c o n v e n t i o n s - - a

popular

p r a c t i c e f o r which c o r p o r a t i o n s c o u l d r e c e i v e a t a x d e d u c t i o n ; and

( 6 ) u s e c o r p o r a t e f a c i l i t i e s and p e r s o n n e l t o s e e k v o l u n t a r y c o n t r i b u t i o n s

t o an a f f i l i a t e d p o l i t i c a l a c t i o n committee ( d i s c u s s e d f u r t h e r b e l o w ) . 601

The d i s c u s s i o n u n t i l t h i s p o i n t h a s been c o n f i n e d t o c o r p o r a t e p o l i t i c a l

a c t i v i t i e s a p a r t from d i r e c t c o n t r i b u t i o n s t o c a n d i d a t e s .

But t h i s a s p e c t was

n o t n e g l e c t e d by t h o s e s e e k i n g t o i n j e c t b u s i n e s s ' p o i n t o f view i n t o t h e

p o l i t i c a l process.

T h e r e were b o t h d i r e c t (and l e g a l ) and i n d i r e c t ( a n d e x t r a -

l e g a l ) methods f o r c o n t r i b u t i n g t o c a n d i d a t e s .

A s u r v e y o f t h e N a t i o n ' s businessmen i n 1959 found t h a t h a l f o f t h o s e

i n t e r v i e w e d c l a i m e d t o have c o n t r i b u t e d t o e l e c t i o n campaigns i n 1958--a

high

f i g u r e f o r a n o n - P r e s i d e n t i a l y e a r and markedly h i g h e r t h a n t h a t of t h e o v e r a l l

p o p u l a t i o n i n any y e a r . 6 1 1

C o r p o r a t e o f f i c i a l s gave c o n s i d e r a b l y t o e l e c t i o n

campaigns, w i t h t h e u n d e r s t a n d i n g t h a t t h e c o r p o r a t i o n would r e c e i v e t h e c r e d i t

i n t h e e y e s o f t h e campaign o f f i c i a l s .

practice:

--6 0 1 I b i d . , pp. 46-55.

6 1 1 I b i d . , p. 6 9 .

The f o l l o w i n g p a s s a g e d i s c u s s e s t h i s

S i n c e , o b v i o u s l y , t h e r e i s no o f f i c i a l r e c o r d of " c o r p o r a t e

g i v i n g , " an i n d e x OF company c o n t r i b u t i o n s i s u s u a l l y compiled

by a g g r e g a t i n g t h e " i n d i v i d u a l " d o n a t i o n s o f c o r p o r a t e o f f i c e r s

and d i r e c t o r s . The u n d e r l y i n g a s s u m p t i o n o f such c o m p i l a t i o n s

i s t h a t c o r p o r a t e o f f i c i a l s a c t a s c o n d u i t s f o r company

c o n t r i b u t i o n s t o p a r t i e s o r c a n d i d a t e s . 621

I n 1956, f o r example, 199 o f f i c i a l s of some o f t h e 225 l a r g e s t c o r p o r a t i o n s

c o n t r i b u t e d $1.9 m i l l i o n i n amounts o f $500 o r more t o i n t e r s t a t e c o m m i t t e e s . 6 3 1

Both p o l i t i c a l p a r t i e s made an e f f o r t t o a t t r a c t w e a l t h y ( o f t e n c o r p o r a t e a f f i l i a t e d ) d o n o r s , by c r e a t i n g such p r e s t i g i o u s c o n d u i t s a s t h e Democrats'

P r e s i d e n t ' s Club--which

r a i s e d around $3.8 m i l l i o n i n 1964--and

t h e Republican

C o n g r e s s i o n a l B o o s t e r s Club. 641

A s i m p r e s s i v e a s t h e s e and o t h e r d a t a may b e , t h e y r e f l e c t o n l y a s h a r e

o f t h e c o n t r i b u t i o n s from c o r p o r a t i o n - a s s o c i a t e d

individuals.

By g i v i n g c a s h

c o n t r i b u t i o n s o r g i v i n g t o i n t r a s t a t e c o m m i t t e e s , d o n o r s c o u l d and d i d a v o i d

Federal r e p o r t i n g requirements.

By g i v i n g t o i n t r a s t a t e c o m m i t t e e s , w e a l t h y

d o n o r s c o u l d a l s o c i r c u m v e n t t h e F e d e r a l c o n t r i b u t i o n l i m i t of $5000.

This

l i m i t was a l s o c i r c u m v e n t e d t h r o u g h t h e p r a c t i c e of g i v i n g c o n t r i b u t i o n s

t h r o u g h members o f o n e ' s own f a m i l y .

An example o f t h i s p r a c t i c e can be found

i n 1956, when 12 f a m i l i e s commonly a s s o c i a t e d w i t h p a r t i c u l a r c o r p o r a t i o n s

gave o v e r $ 1 . 1 m i l l i o n t o i n t e r s t a t e p o l i t i c a l c o m m i t t e e s .

(The f a m i l i e s were

DuPont, F i e l d , F o r d , Harriman, Lehman, M e l l o n , O l i n , Pew, Reynolds, R o c k e f e l l e r ,

V a n d e r b i l t , and Whitney.) 651

Hence, l a r g e amounts of money c o u l d be g i v e n

l e g a l l y , d e s p i t e t h e l i m i t s , and l a r g e amounts c o u l d go u n r e p o r t e d l e g a l l y ,

d e s p i t e the disclosure requirements.

621

Ibid.,

p. 61.

631

Ibid.,

p. 64.

641

I b i d . , p. 67.

651

Ibid.,

p. 68.

The i n d i r e c t c o r p o r a t e c o n t r i b u t i o n s , t h o s e made i l l e g a l l y with c o r p o r a t e

t r e a s u r y f u n d s , a r e , not s u r p r i s i n g l y , more d i f f i c u l t t o gauge.

Such d o n a t i o n s d i d n o t appear on any l i s t s f i l e d w i t h governmental

a g e n c i e s , nor were t h e y mentioned i n annual r e p o r t s t o s t o c k h o l d e r s .

Most businessmen were u n d e r s t a n d a b l y d i s i n c l i n e d t o d i s c u s s t h e i r

campaign a c t i v i t i e s . 661

I n 1960, Alexander Heard wrote:

It i s n o t unusual f o r c o r p o r a t e funds t o make up 10 p e r c e n t of t h e

campaign fund of a c a n d i d a t e f o r s t a t e o r l o c a l o f f i c e , and t h e

p e r c e n t a g e has gone h i g h e r . In a l l , i n a p r e s i d e n t i a l e l e c t i o n

y e a r , s e v e r a l m i l l i o n d o l l a r s of c o r p o r a t e money f i n d s i t s way by

one p r o c e s s o r a n o t h e r i n t o p o l i t i c a l campaigning. 671

When read i n t h e wake of t h e e x p e r i e n c e s of t h e 1972 Nixon r e - e l e c t i o n

campaign,

t h i s passage u n d e r s t a t e s t h e p o t e n t i a l f o r c h a n n e l l i n g c o r p o r a t e money i n t o

p o l i t i c a l campaigns.

According t o Edwin E p s t e i n , an e s t i m a t e d $30 m i l l i o n was

c o n t r i b u t e d t o t h a t campaign from t h e b u s i n e s s sector--through

i l l e g a l channels.

both l e g a l and

There were widespread a l l e g a t i o n s of s t r o n g p r e s s u r e t a c t i c s

a p p l i e d t o c o r p o r a t e o f f i c i a l s , and some 20 c o r p o r a t i o n s and o f f i c i a l s were

i n d i c t e d ( w i t h most p l e a d i n g g u i l t y o r nolo c o n t e n d e r e ) on c h a r g e s o f making

i l l e g a l corporate p o l i t i c a l contributions.

Thus, t h e 1972 campaign i l l u s t r a t e d

t h a t t h e c o r p o r a t e s e c t o r c o u l d b e a l u c r a t i v e s o u r c e of campaign funds g i v e n

a s y s t e m a t i c s o l i c i t a t i o n e f f o r t by a campaign. 681

S i g n i f i c a n t l y , t h e 1972

e x p e r i e n c e s were a major impetus i n t h e amending of t h e campaign f i n a n c e law

661 I b i d . , p. 69.

671 Heard, The C o s t s of Democracy, p. 130.

6 8 / E p s t e i n , Edwin M.

Labor and F e d e r a l E l e c t i o n s : The New Legal

~ r a m e K r k . I n d u s t r i a l R e l a t i o n s , v . 15, October 1976. p. 262.

According t o Heard, t h e v a r i o u s , commonly-used methods o f i n d i r e c t

c o r p o r a t e c o n t r i b u t i o n s s t r e s s e d concealment o f c o r p o r a t e f u n d s :

( 1 ) e x p e n s e a c c o u n t s were used t o r e i m b u r s e c o r p o r a t e o f f i c i a l s f o r

campaign-related

e n t e r t a i n i n g and t r a v e l i n g ;

(2) c o n t r i b u t i o n s "in-kind,"

whereby goods and s e r v i c e s were l o a n e d

o r d o n a t e d by a b u s i n e s s t o a campaign ( e . g . ,

o f f i c e equipment, company

airplanes, etc. );

( 3 ) a d v e r t i s e m e n t s i n p o l i t i c a l j o u r n a l s , p a i d f o r from c o r p o r a t e

funds but with t h e source concealed;

( 4 ) c o r p o r a t e money " l a u n d e r e d " t h r o u g h p u b l i c r e l a t i o n s f i r m on

r e t a i n e r , w i t h money t h e n f u n n e l e d i n t o campaigns;

( 5 ) f e e s t o lawyers re-routed

t o campaigns;

( 6 ) s a l a r i e s and bonuses t o employees, g i v e n w i t h t h e e x p e c t a t i o n

t h a t t h e y , i n t u r n , w i l l make p o l i t i c a l d o n a t i o n s ( s a i d t o be a p a r t i c u l a r l y

notorious practice);

( 7 ) c o n t r i b u t i o n s c h a n n e l e d t h r o u g h o t h e r o r g a n i z a t i o n s , such a s

t r a d e a s s o c i a t i o n s ; and

(8) d i r e c t c o r p o r a t e payments, e . g . ,

from p e t t y c a s h . 691

One p r a c t i c e o m i t t e d i n H e a r d ' s l i s t was t h a t o f c o r p o r a t e o f f i c i a l s ' r e c e i v i n g

r e m u n e r a t i o n w h i l e d o i n g campaign work, a widespread o c c u r r e n c e a c c o r d i n g t o

most a c c o u n t s . The p i c t u r e t h a t emerges i s of c o r p o r a t e a c t i v i t i e s r e s e m b l i n g

t h o s e o f l a b o r u n i o n s i n e x p l o r i n g avenues f o r p o l i t i c a l i n v o l v e m e n t .

The f i n a l avenue o f b u s i n e s s a c t i v i t y d u r i n g t h e pre-1970's

p o l i t i c a l a c t i o n committee.

e r a was t h e

The f i r s t major PAC i n t h e b u s i n e s s (and

p r o f e s s i o n a l ) s e c t o r was t h e American Medical P o l i t c a l A c t i o n Committee (AMPAC),

6 9 1 Heard, The C o s t s o f Democracy, p. 133-134

founded in 1961 by the American Medical Association to further the goal of

"minimizing government control over the medical profession." 701

It was

followed in August 1963, by the Business-Industry Political Action Comnittce

(BIPAC), which was established by the National Association of Manufacturers

"to provide financial support to Congressional candidates who support the

principles of constitutional government." 711

Both of these PACs followed the lead of COPE and created two separate

accounts--one for administrative costs for which corporate funds could be used

and the other for the contributions themselves for which only voluntary funds

could be sought. The system was described by the then-President of BIPAC,

Robert Humphrey, before House hearings in the 89th Congress:

[ ~ l ehave two distinct funds. We have two distinct divisions

of operation. One is political education, and the other is

political action. We maintain separate bank accounts. The

political education funds are used for our administrative

overhead. We do not intermingle the funds. We have a small

political education budget and the money in our education account

comes from corporate contributions and from subscriptions to our

publication. 72/

During the 1964 elections, BIPAC spent $203,283 and AMPAC spent $402,052 (compared

with the $988,810 spent that year by COPE). 731 In 1968, B1PAC's spending jumped

to $519,700 and AMPAC1s to $682,000 (COPE spent $1,207,000 that year). 74/ BIPAC

701 Alexander, Herbert E.

Financing the 1968 Election.

~ e a t h y n dCompany, 1971. p. 202.

Lexington, D.C.

711 Ibid., p. 201.

721 U .S. Congress. House. Committee on House Administration.

~ubcoGitteeon Elections. Election Reform Act of 1966. Hearings, 89th Cong.,

2nd Sess., July 21, Aug. 17, 22, and 25, 1966. Washington, U.S. Govt. Print.

Off., 1966. p. 120.

731 Alexander, Herbert E.

Financing the 1964 Election. Princeton,

citiz=s1 Research Foundation, 1966 [study number 91. p. 64-65.

741 Alexander, Financing the 1968 ~lection,p. 195, 201-202.

and AMPAC together accounted for 61 percent of total expenditures by the 33

national business and professional committees then in existence. 751

Those 33 represented a three-fold increase in the number of business and

761 and by 1972, there were some

professional committees registered in 1964, 771 Furthermore, as more business-oriented groups were

200 such committees. formed, the enormous gap between reported business and labor spending (nationally)

was narrowed significantly. Gross disbursements by the 37 national-level labor

committees totaled $7.1 million in 1968; a little over $2 million was spent by

the 33 business and professional committees that year--a gap of around three

and one-half in labor's favor. 781 By 1972, the national labor committees spent

$8.5 million, while the business/professiona1 committees spent $6.8 million--an

791 Of course, the labor totals do

advantage by labor of around 33 percent. not reflect the substantial value in additional services which unions have

traditionally provided, as indicated in this 1972 account:

. . . it would be difficult to exaggerate the political value of

labor's enormous manpower pool, particularly for voter registration

and get-out-the-vote activities on election day. The AFL-CIO

Industrial Union Department and affiliates may put as much as $4

to $5 million into citizenship activities, including registration

drives. 801

By the same token, the spending data do not reflect the additional resources

of the business sector which was channeled into political campaigns through

751 Ibid., p. 200-201.

761 Ibid., p. 200.

771 Alexander, Herbert E.

Financing the 1972 Election.

D.C. Heath and Company, 1976. p. 461.

781 Alexander, Financing the 1968 Election, p. 194, 201.

791 Alexander, Financing the 1972 Election, p. 504, 461.

801 Ibid., p. 506.

Lexington,

t h e many avenues d e s c r i b e d above.

The d a t a i s i n d i c a t i v e , however, of t h e

growing, open r o l e of c o r p o r a t i o n s i n t h e p o l i t i c a l p r o c e s s d u r i n g t h e decade

preceding t h e F e d e r a l E l e c t i o n Campaign Act.

3 . Conclusion

B u s i n e s s and l a b o r h a v e , a s n o t e d , long sought t o i n f l u e n c e t h e e l e c t o r a l

process.

I n examining t h e p r o l i f e r a t i o n of PACs i n t h e 1970s and beyond, i t

i s important t o b e a r i n mind t h a t t h e i r u n d e r l y i n g r a i s o n d ' e t r e - - t h e

furthering

of t h e g r o u p ' s p o l i c y g o a l s and t h e maximizing of i t s i n f l u e n c e through t h e

e l e c t i o n of s y m p a t h e t i c p u b l i c o f f i c i a l s - - h a s

b e f o r e t h e modern-day e r a of PACs.

been a g u i d i n g p r i n c i p l e long

Groups sought i n f l u e n c e and s p e n t money i n

l a r g e q u a n t i t i e s , through l e g a l and e x t r a - l e g a l

channels.

The PAC evolved a s

a means of l e g a l l y circumventing t h e p r o h i b i t i o n on c o r p o r a t e and, l a t e r , union

contributions t o candidates.

Once l a b o r unions were f o r c e d t o t u r n t o t h i s

method, t h e y q u i c k l y developed a p a t t e r n of e f f e c t i v e o p e r a t i o n s through t h e

use of s e p a r a t e s e g r e g a t e d funds.

It was o n l y a m a t t e r of time b e f o r e t h e

b u s i n e s s c o r n u n i t y began t o emulate l a b o r ' s s u c c e s s e s .

The fundamental p o i n t

i s t h a t i n t e r e s t group involvement g e n e r a l l y and p o l i t i c a l a c t i o n committee

a c t i v i t y s p e c i f i c a l l y pre-dated

t h e campaign f i n a n c e reforms of t h e 1 9 7 0 ' s .

Indeed, t h e y s e t t h e p r e c e d e n t s f o r t o d a y ' s PACs.

11.

STIMULI TO PAC GROWTH I N THE 1970s PROVIDED BY LEGISLATIVE, JUDICIAL,

AND ADMINISTRATIVE DECISIONS

A number of a c t i o n s by t h e t h r e e b r a n c h e s of t h e F e d e r a l Government s e t

t h e s t a g e f o r t h e p r o l i f e r a t i o n of p o l i t i c a l a c t i o n committees d u r i n g t h e 1970's.

E s s e n t i a l l y , t h i s s e c t i o n p r o v i d e s a l e g i s l a t i v e h i s t o r y o f t h e i m p o r t a n t PAC

p r o v i s i o n s , s p e c i f i c a l l y f o c u s i n g on t h e F e d e r a l E l e c t i o n Campaign Act of 1971

and i t s 1974 and 1976 Amendments.

I n a d d i t i o n , t h e Supreme C o u r t ' s 1971 d e c i s i o n

i n P i p e f i t t e r s L o c a l 562 v. U n i t e d S t a t e s , i t s 1976 d e c i s i o n i n Buckley v . V a l e o ,

and t h e F e d e r a l E l e c t i o n Commission's 1975 a d v i s o r y o p i n i o n i n t h e Sun O i l Company

c a s e w i l l be examined, f o r t h e i r r e l e v a n c e t o t h e l e g i s l a t i v e h i s t o r y and t h e i r

r o l e i n PAC growth o f t h e 1970s.

These a c t i o n s o c c u r r e d a g a i n s t a b a c k d r o p i n which PACs had e x i s t e d and

were growing i n number b u t i n which u n c e r t a i n t y e x i s t e d o v e r what t y p e s o f

p o l i t i c a l a c t i v i t y were p e r m i s s i b l e .

Such c o n c e r n s were h e i g h t e n e d by i n c o n c l u s i v e

j u d i c i a l r u l i n g s and i n t e r p r e t a t i o n s of t h e law ( 1 8 U.S.C.

6 1 0 ) , and t h e y s e r v e d

t o hamper i n t e r e s t g r o u p s i n e x p l o r i n g t h e f u l l p o t e n t i a l o f t h e PAC v e h i c l e .

By c l a r i f y i n g t h e a m b i g u i t i e s i n t h e law and by i n s t i t u t i o n a l i z i n g t h e PAC a s

a r e c o g n i z e d v e h i c l e under t h e law, t h e s e l e g i s l a t i v e and o t h e r a c t i o n s c r e a t e d

t h e c l i m a t e i n which p o l i t i c a l a c t i o n conunittees c o u l d f l o u r i s h .

The F e d e r a l E l e c t i o n Campaign Act o f 1971

The F e d e r a l E l e c t i o n Campaign Act of 1971 ( P u b l i c Law 92-225) 811 marked

t h e f i r s t t i m e t h e c o n c e p t o f t h e p o l i t i c a l a c t i o n committee was c o d i f i e d i n t o

F e d e r a l law.

S e c t i o n 205 of t h a t Act amended 18 U.S.C.

610 t o e x c l u d e t h r e e

s p e c i f i c a c t i v i t i e s from t h e l e g a l r e s t r a i n t s on c o r p o r a t e and union p o l i t i c a l

expenditures.

A s s t a t e d i n t h e amended v e r s i o n o f S e c t i o n 610, t h e f o l l o w i n g

a c t i v i t i e s c o u l d b e funded from c o r p o r a t e o r union g e n e r a l t r e a s u r i e s :

811

86 S t a t . 3 .

communications by a corporation to its stockholders and

their families or by a labor organization to its members and

their families on any subject;

nonpartisan registration and get-out-the-vote campaigns

by a corporation aimed at its stockholders and their families,

or by a labor organization aimed at its members and their

families; [and]

the establishment, administration, and solicitation of

contributions to a separate segregated fund to be utilized for

political purposes by a corporation or labor organization

....

While thus opening the door for the political action committee, the amended

section added the following language to ensure that only truly voluntary

contributions be made to the PAC:

....

Provided, that it shall be unlawful for such a fund

to make a contribution or expenditure by utilizing money or

anything of value secured by physical force, job discrimination,

or financial reprisal; or by dues, fees, or other monies required

as a condition of membership in a labor organization or as a

condition of employment, or by monies obtained in any commercial

transaction.

The above amendments to 18 U.S.C. 610 were initially offered as an

amendment to H.R. 11060 (the House version of the FECA) by Representative

Orval Hansen.

The Hansen amendment passed the House by a 233-147 vote, 821

replacing a section of the House Administration Committee's bill which also

sanctioned the separate segregated fund but which was seen as prohibiting the

use of union (and corporate) funds in registration and get-out-the-vote drives.

Supporters of the Hansen amendment argued that its intended effect was

to codify in law what 18 U.S.C. 610 had been interpreted to mean. 831 Describing

his amendment as consistent with the then-existing statute, Hansen stated:

For the underlying theory of section 610 is that substantial

general purpose treasuries should not be diverted to political

821 Federal Election Reform. [Vote in the House]

~ e c o r Kv. 117, November 30, 1971. p. 43391.

~ouse:

Congressional

831 Steiger, William.

Federal Election Reform. Remarks in the

Congressional Record, v. 117, November 30, 1971. p. 43388.

p u r p o s e s , b o t h because of t h e e f f e c t on t h e p o l i t i c a l p r o c e s s

o f such aggregated w e a l t h and o u t of concern f o r t h e d i s s e n t i n g

member o r s t o c k h o l d e r . Obviously, n e i t h e r of t h e s e c o n s i d e r a t i o n s c u t s a g a i n s t a l l o w i n g v o l u n t a r y p o l i t i c a l funds. For no

one who o b j e c t s t o t h e o r g a n i z a t i o n ' s p o l i t i c s has t o lend h i s

s u p p o r t , and t h e money c o l l e c t e d i s t h a t i n t e n d e d by t h o s e who

c o n t r i b u t e t o be used f o r p o l i t i c a l purposes and not money

d i v e r t e d from a n o t h e r s o u r c e . 841

The S e n a t e ' s v e r s i o n of t h e FECA--S.

382--had

c o n t a i n e d no p r o v i s i o n

comparable t o t h e Hansen amendment, and t h e c o n f e r e e s on t h e l e g i s l a t i o n

accepted t h e House-passed

language. 851

Thus t h e Hansen amendment became law.

S e c t i o n 206 of t h e FECA amended 18 U.S.C.

611, which p r o h i b i t e d p o l i t i c a l

c o n t r i b u t i o n s by Government c o n t r a c t o r s , t o extend t h e ban t o i n d i r e c t , a s w e l l

a s d i r e c t , c o n t r i b u t i o n s . 861

Because PAC c o n t r i b u t i o n s could be viewed a s

i n d i r e c t l y emanating from t h e o r g a n i z a t i o n ' s t r e a s u r y f u n d s , t h i s s e c t i o n

a p p a r e n t l y had a c h i l l i n g e f f e c t on Government c o n t r a c t o r s i n t e r e s t e d i n

e s t a b l i s h i n g PACs.

Furthermore, t h e f a c t t h a t many of t h e most i m p o r t a n t

c o r p o r a t i o n s and unions were engaged i n some form of Government c o n t r a c t i n g

meant t h a t t h e new p r o v i s i o n s of 18 U.S.C.

wide range of i n t e r e s t groups. 871

611 would c o n c e i v a b l y a f f e c t a

It was i r o n i c t h a t , w h i l e one s e c t i o n

of t h e new campaign f i n a n c e law provided t h e l e g a l f o u n d a t i o n f o r p o l i t i c a l

a c t i o n committees, t h e n e x t s e c t i o n may have caused s u f f i c i e n t c o n f u s i o n s o

a s t o i n h i b i t many p o t e n t i a l s p o n s o r s of PACs from e s t a b l i s h i n g them.

841 Hansen, O r v a l .

F e d e r a l E l e c t i o n Reform. Remarks i n t h e House.

~ o n ~ r z s i o n Record,

v . 117, November 30, 1971. p. 43381.

851 U.S. Congress. House. Conference Committee.

Federal Election

c a m p a Z n Act of 1971. Conference Report t o accompany S. 382. House Report

No. 92-752, 92nd Cong., 1st S e s s . Washington, U.S. Govt. P r i n t . O f f . , 1971.

p. 30-31.

861 E p s t e i n , C o r p o r a t i o n s and Labor Unions, p. 40-41.

871 Alexander, F i n a n c i n g t h e 1976 E l e c t i o n , p. 560.

P i p e f i t t e r s L o c a l 562 v . U n i t e d S t a t e s

The Supreme C o u r t ' s J u n e 1972 r u l i n g i n t h e c a s e o f

v. United S t a t e s

18 U.S.C.

8 8 1 p r o v i d e d t h e f i r s t l e g a l i n t e r p r e t a t i o n of t h e r e v i s e d

6 1 0 , and i t v a l i d a t e d t h e c o n c e p t of u n i o n s ' and c o r p o r a t i o n s '

maintaining s e p a r a t e voluntary funds f o r p o l i t i c a l c o n t r i b u t i o n s .

The c a s e

i n v o l v e d t h e c o n v i c t i o n o f t h e union and t h r e e o f f i c e r s f o r t h e i r m a i n t a i n i n g

c o n t r o l o v e r a s e p a r a t e s e g r e g a t e d fund f o r which s o l i c i t a t i o n s were

s y s t e m a t i c a l l y made a t job s i t e s .

The C o u r t of A p p e a l s had upheld t h e i r

c o n v i c t i o n 891 on t h e grounds t h a t t h e fund was compulsory and u n i o n - f i n a n c e d

r a t h e r t h a n v o l u n t a r y and member-financed.

901

The Supreme C o u r t ' s 6-2 r e v e r s a l of t h e Court of Appeals r u l i n g c o i n c i d e d

w i t h t h e a s p i r a t i o n s of o r g a n i z e d l a b o r , which had played a key r o l e i n t h e

p a s s a g e of t h e Hansen amendment, a p p a r e n t l y w i t h t h e pending Supreme Court

r u l i n g i n mind.

According t o one a c c o u n t :

U n c e r t a i n a s t o what d i r e c t i o n t h e Supreme C o u r t would t a k e , t h e

AFL-CIO s o u g h t l e g i s l a t i v e l e g i t i m i z a t i o n of t h e key a s p e c t s o f

i t s e l e c t o r a l r o l e s i n c e t h e 1940s: u t i l i z a t i o n of t h e p o l i t i c a l

a c t i o n committee d e v i c e t o r a i s e and d i s t r i b u t e p o l i t i c a l monies;

communicating p o l i t i c a l l y w i t h i t s members; and, f i n a l l y , membero r i e n t e d r e g i s t r a t i o n and g e t - o u t - t h e - v o t e

a c t i v i t i e s . 911

Thus, t h e P i p e f i t t e r s c a s e s e r v e d , w h i l e i t was s t i l l p e n d i n g , a s t h e c a t a l y s t

f o r t h e p a s s a g e o f t h e Hansen amendment a n d , l a t e r , a s t h e f i r s t j u d i c i a l

d e c i s i o n t h a t o b s e r v e r s saw a s l e g i t i m i z i n g t h e t h r u s t o f t h e Hansen amendment.

881 407 U.S. 385 ( 1 9 7 2 ) .

891 434 F. 2d 1127 (CCA 8 t h , 1 9 7 0 ) .

901 E p s t e i n , Labor and F e d e r a l E l e c t i o n s , p. 261.

9 1 1 E p s t e i n , Edwin M.

The Emergence o f P o l i t i c a l A c t i o n Committees. I n

P o l i t i c a l F i n a n c e . B e v e r l y H i l l s , Sage P u b l i c a t i o n s ,

~ l e x a z e ,r H e r b e r t ( e d . )

1979. p. 265.

The Supreme Court h e l d t h a t no v i o l a t i o n of t h e (amended) law had o c c u r r e d ,

i n view o f t h e f a c t t h a t c o n t r i b u t i o n s were s o u g h t f o r t h e PAC on a v o l u n t a r y

b a s i s ( w i t h no r e p r i s a l s t h r e a t e n e d 1, t h a t t h e i n t e n d e d p o l i t i c a l purpose

o f t h e d o n a t i o n s was c l e a r l y i n d i c a t e d , and t h a t t h e money was k e p t s e g r e g a t e d

from t h e union t r e a s u r y ( d u e s money).

That t h e union o f f i c i a l s were i n v o l v e d

i n c o l l e c t i n g t h e f u n d s and r e t a i n e d c o n t r o l o v e r t h e i r d i s p o s i t i o n was not

viewed by t h e C o u r t a s a v i o l a t i o n of t h e law.

Nowhere, however, h a s Congress r e q u i r e d t h a t t h e p o l i t i c a l

o r g a n i z a t i o n s be f o r m a l l y o r f u n c t i o n a l l y i n d e p e n d e n t of

union c o n t r o l o r t h a t union o f f i c i a l s b e b a r r e d from

s o l i c i t i n g c o n t r i b u t i o n s o r even p r e c l u d e d from d e t e r m i n i n g

how t h e monies r a i s e d w i l l be s p e n t

921

....

By g i v i n g i t s s a n c t i o n t o t h e v o l u n t a r y , s e p a r a t e s e g r e g a t e d f u n d , t h e C o u r t

a c c o r d e d primacy t o t h e p r o t e c t i o n o f t h e i n d i v i d u a l s t o c k h o l d e r o r union

member from h a v i n g t o c o n t r i b u t e t o c a n d i d a t e s opposed t o t h e i r p e r s o n a l

p h i l o s o p h i e s o v e r t h e sometimes c o n f l i c t i n g g o a l of l i m i t i n g t h e i n f l u e n c e o f

u n i o n s and c o r p o r a t i o n s i n e l e c t i o n s t h r o u g h t h e i r a g g r e g a t e d w e a l t h . 931

Court s t a t e d :

When Congress p r o h i b i t e d l a b o r o r g a n i z a t i o n s from making

c o n t r i b u t i o n s o r expenditures i n connection with f e d e r a l

e l e c t i o n s , i t was, of c o u r s e , concerned n o t o n l y t o

p r o t e c t m i n o r i t y i n t e r e s t s w i t h i n t h e union b u t t o e l i m i n a t e

t h e e f f e c t of a g g r e g a t e d w e a l t h on e l e c t i o n s . But t h e

a g g r e g a t e d w e a l t h i t p l a i n l y had i n mind was t h e g e n e r a l

u n i o n t r e a s u r y - - n o t t h e f u n d s d o n a t e d by union members of

t h e i r own f r e e and knowing c h o i c e . 941

Although i t r e f u s e d t o d e a l w i t h c o n s t i t u t i o n a l i s s u e s , 951 t h e C o u r t ' s

921 407 U.S., a t 415.

931 E p s t e i n , C o r p o r a t i o n s and Labor Unions, p. 4 2 .

941 407 U.S., a t 415-416.

9 5 1 407 U.S., a t 407.

The

ruling in the Pipefitters case nonetheless offered a sense of legitimacy to

the operation and concept of the separate segregated fund--the essence of

the PAC--and particularly to the practice of union (or corporate) control

over the disposition of the funds. Without the right to involve themselves

in this aspect of the process, the political influence of business and labor

would be sharply curtailed.

The Federal Election Campaign Act Amendments of 1974

96/

The Federal Election Campaign Act Amendments of 1974 (public Law 93-443) -

constituted a response of Congress to the Watergate scandal and is principally

remembered for its imposition of limitations on campaign contributions and

expenditures, and the establishment of the Federal Election Commission.

With

regard to PACs, the FECA Amendments of 1974 made three changes, relating to

penalties, contribution limits, and Government contractors; the basic intent

of 18 U.S.C. 610, as amended by the 1971 Act, was not affected by the 1974

legislation.

Section 101(a) of Public Law 93-443 amended 18 U.S.C. 608 to impose a

limitation of $5000 on the amount a "political committee" (other than a

candidate's principal campaign committee) could donate per election to a

candidate for Federal office, while any other "person" was limited to giving

$1000. As defined in the amended section (b)(2),

a "political committee" met

the criteria of what the 1976 Amendments later defined as a "multicandidate

committee"--one that is registered for at least six months with the FEC,

receives contributions from more than 50 persons, and makes contributions to

96/ 88 Stat. 1263 (1974).

five or more Federal candidates. Hence, the term "political committee" under the

1974 Amendments can be read as "multicandidate committee" or "political action

committee ," the terms used today; the term "person" under the 1974 Amendments

would today refer to both an "individual" or a (non-multicandidate) "political

committee."

Thus, the 1974 Amendments made the critical distinction for

purposes of the contribution limit between the political action committee and

the individual. The opportunity for greater leverage accorded the PAC has had

a definite impact on the financing of congressional elections, as will be

discussed later.

The second PAC-related provision in the 1974 Amendments was in Section 101(e)

which amended 18 U.S.C. 610 to impose higher penalties for violations of the ban

on corporate and union contributions. The penalty for organizations convicted

of violating the ban was raised from $5000 to $25,000 and from $10,000 to $50,000

for officers of those organizations who were found guilty of such violations.

The third provision, and the one which may well have had the biggest impact

on PAC development in the 1970s, was the authorization for Government contractors

to set up PACs.

The confusion over this question steming from the 1971 Act was

exacerbated by a 1972 law suit by Common Cause against TRW, Inc., which alleged

that the company, a major Government contractor, violated the law by setting

up a PAC. 971 Both the House Administration Committee, in its report on H.R.

16090, 981 and the Senate Rules and Administration Committee, in its report on

------971

Epstein, Corporations and Labor Unions, p. 49.

981 U.S. Congress. House. Committee on House Administration.

~ e d e r xElection Campaign Act Amendments of 1974. Report to accompany

H.R. 16090. House Report no. 93-1239, 93rd Cong., 2nd Sess. Washington,

U.S. Govt. Print. Off., 1974. p. 20-21.

S. 3044, 991 recommended amending 18 U.S.C. 611 to allow Government contractors

to establish separate segregated funds.

These provisions were passed by the

respective chambers, and the following language was reported by the conference

committee 1001 and was written into Public Law 93-443 as Section 103, amending

18 U.S.C. 611 to read:

This section does not prohibit or make unlawful the

establishment or administration of, or the solicitation of

contributions to, any separate segregated fund by any corporation

or labor organization for the purpose of influencing the

nomination for election, or election, of any person to Federal

office, unless the provisions of section 610 of this title

or make unlawful the establishment or administration

of, or the solicitation of contributions to, such fund.

This provision removed a major stumbling block to the establishment of PACs

by those companies and unions doing business with the Federal Government.

The FEC's SUN PAC Advisory Opinion

On November 18, 1975, the newly-created Federal Election Commission issued

an advisory opinion in response to a request from the Sun Oil Company which

had a dramatic effect on the rise of the corporate political action committee.

Sun Oil had requested permission from the FEC to expend corporate funds in seeking

employee and stockholder contributions to two separate political programs:

trustee payroll deduction plan (SUN EPA), which would act as a conduit for

political contributions to candidates designated by the donor, and a political

991 U.S. Congress. Senate. Committee on Rules and Administration.

~ e d e r a r ~ l e ion

c t Campaign Act Amendments of 1974. Report to accompany S

3044. Senate Report no. 93-689, 93rd Cong., 2nd Sess. Washington, U.S. Govt.

Print. Off., 1974. p. 17.

1001 U.S. Congress. House. Conference Committee.

Federal Election

Campaign Act Amendments of 1974. Conference Report to accompany S. 3044.

House Report no. 93-1438, 93rd Cong., 2nd Sess. Washington, U.S. Govt. Print.

Off., 1974. p. 67-69.

a c t i o n committee (SUN PAC), t h r o u g h which c o n t r i b u t i o n s would be g i v e n t o

c a n d i d a t e s a t t h e d i s c r e t i o n of company o f f i c i a l s .

I n A d v i s o r y O p i n i o n 1975-23,

t h e FEC approved t h e proposed Sun O i l Company

programs a n d , i n s o d o i n g , e s t a b l i s h e d s e v e r a l i m p o r t a n t p r e c e d e n t s :

( 1 ) t h a t g e n e r a l t r e a s u r y f u n d s c o u l d b e used t o e s t a b l i s h , a d m i n i s t e r ,

and s o l i c i t c o n t r i b u t i o n s t o b o t h SUN PAC and SUN EPA;

( 2 ) t h a t Sun c o u l d s o l i c i t c o n t r i b u t i o n s t o SUN PAC from employees, a s

well a s stockholders;

( 3 ) t h a t Sun c o u l d e s t a b l i s h m u l t i p l e PACs w i t h s e p a r a t e c o n t r i b u t i o n

and e x p e n d i t u r e l i m i t s ( a s long a s t h e f u n d s came s o l e l y from v o l u n t a r y

c o n t r i b u t i o n s ) ; 1011 and

( 4 ) t h a t t h e p a y r o l l deduction (automatic check-off)

p l a n was a

l e g i t i m a t e v e h i c l e w i t h which t h e company c o u l d s e e k c o n t r i b u t i o n s , i n c o n t r a s t

w i t h t h e p r o h i b i t i o n on such a p l a n f o r l a b o r u n i o n s engendered i n t h e 1947

T a f t - H a r t l e y A c t . 1021

C l e a r l y , t h e major ground broken by' t h e SUN PAC r u l i n g was t h e p e r m i s s i o n

g r a n t e d f o r c o r p o r a t i o n s t o s o l i c i t employees, i n a d d i t i o n t o s t o c k h o l d e r s ( a s

s p e c i f i c a l l y p e r m i t t e d i n 1 8 U.S.C.

610).

T h i s was s e e n by l a b o r u n i o n s and

t h e two d i s s e n t i n g FEC Commissioners a s u p s e t t i n g t h e p o l i t i c a l b a l a n c e Congress

had sought t o e s t a b l i s h between c o r p o r a t i o n s and u n i o n s .

Sun O i l , f o r example,

had 126,555 s t o c k h o l d e r s and 27,707 employees, few of whom were u n i o n i z e d ; t h u s ,

w h i l e t h e company c o u l d s o l i c i t o v e r 150,000 p e r s o n s , t h e union c o u l d s o l i c i t

j u s t a s m a l l f r a c t i o n o f t h a t . 1031

The FEC d i d s e e k t o a l l e v i a t e some o f t h e

1011 E p s t e i n , The Emergence of P o l i t i c a l A c t i o n Committees, p. 167.

1021 E p s t e i n , Labor and F e d e r a l E l e c t i o n s , p. 268.

L03/ E p s t e i n , The Emergence of P o l i t i c a l A c t i o n Committees, p. 168.

CRS -4 5

p o t e n t i a l problems c a u s e d by a l l o w i n g employees t o be s o l i c i t e d by t h e

c o r p o r a t i o n , and i t recommended t h e f o l l o w i n g g u i d e l i n e s i n i t s o p i n i n r l :

F i r s t , no s u p e r i o r s h o u l d s o l i c i t a s u b o r d i n a t e . Second, t h e

s o l i c i t o r s h o u l d i n f o r m t h e s o l i c i t e d employee of t h e p o l i t i c a l .

p u r p o s e of t h e fund f o r which t h e c o n t r i b u t i o n i s s o l i c i t e d .

T h i r d , t h e s o l i c i t o r s h o u l d i n f o r m t h e employee of t h e employee '

r i g h t t o r e f u s e t o c o n t r i b u t e w i t h o u t r e p r i s a l of any k i n d . -104/

--- ~ .

The g u i d e l i n e s a p p a r e n t l y d i d l i t t l e t o a s s u a g e t h e c o n c e r n s of organized l n b n r

t h a t employees would b e p r e s s u r e d , however s u b t l y by t h e i r e m p l o y e r s ,

111

g ~ r l sc L~,

u n i o n s were d i s t r e s s e d by t h e SUN PAC (and SUN EPA) r u l i n g , w h i l e t h e b L ~ s i ~ l c ~ c s

sector hailed it.

I n i t s d e t a i l e d p r e s c r i p t i o n s f o r t h e e s t a b l i s h m e n t and o p e r a t i o n o f

c o r p o r a t e PACs, t h e FEC h e l p e d c r e a t e a c l i m a t e more c o n d u c i v e t o t h e i r

establishment.

As one a c c o u n t s t a t e d :

While i t was t h e 1971 and 1974 amendments t h a t provided t h e leg?.l

a u t h o r i t y f o r b u s i n e s s PACs, i t was SUN PAC t h a t provided t h e

imprimatur f o r t h e e x p l o s i o n i n t h e i r s i z e and numbers. 105/

E. The Supreme C o u r t ' s Buckley v . V a l e o D e c i s i o n

On J a n u a r y 3 0 , 1976, t h e Supreme C o u r t i s s u e d i t s d e c i s i o n i n t h e c a s e

of Buckley v . V a l e o , 106/ i n which t h e c o n s t i t u t i o n a l i t y of many cE t h e c ~ ~ r r ~ p a i g n

f i n a n c e r e f o r m s of 1974 were a t i s s u e .

Most n o t a b l y , t h e C o u r t upheld t h e 1;mlr.s

on c o n t r i b u t i o n s , while n u l l i f y i n g t h e expenditure l i m i t s .

Although 18 IT.!;

I:,

610 and 6 1 1 were n o t d i r e c t l y a t i s s u e , t h e Buckley d e c i s i o n d i d h a v e a b e n t i v g

on p o l i t i c a l a c t i o n c o m m i t t e e s i n t h r e e a r e a s .

1041 F e d e r a l E l e c t i o n Commission. A d v i s o r y O p i n i o n 1.975-23.

R e g i s t e r , v . 4 0 , no. 233, Dec. 3 , 1975. p. 56584-56588.

1051 E p s t e i n , An I r o n y o f E l e c t o r a l Reform, p. 36.

106/

424 U. S. 1 (1976)

F'ede~a~

I n two i n s t a n c e s , t h e C o u r t r e l i e d upon, and i t s d e c i s i o n c o i n c i d e d w i t h ,

t h e FEC's r u l i n g i n t h e SUN PAC c a s e .

I n i t s d e f e n s e o f t h e l i m i t a t i o n on

c o n t r i b u t i o n s , t h e Court argued t h a t ample o p p o r t u n i t i e s remained f o r i n d i v i d u a l s

and g r o u p s t o h a v e an impact on t h e e l e c t o r a l p r o c e s s .

The PAC was h e l d up

a s an example i n t h e f o l l o w i n g f o o t n o t e , i n which t h e Court made r e f e r e n c e t o

t h e a b i l i t y o f c o r p o r a t i o n s t o s o l i c i t employees ( t h e prime c o n t r i b u t i o n o f

t h e SUN PAC d e c i s i o n i n t h e view of many c o m m e n t a t o r s ) :

While p r o v i d i n g s i g n i f i c a n t l i m i t a t i o n s on t h e a b i l i t y of

a l l i n d i v i d u a l s and g r o u p s t o c o n t r i b u t e l a r g e amounts o f money

t o c a n d i d a t e s , t h e A c t ' s c o n t r i b u t i o n c e i l i n g s do not f o r e c l o s e

t h e making of s u b s t a n t i a l c o n t r i b u t i o n s t o c a n d i d a t e s by some

major s p e c i a l i n t e r e s t g r o u p s t h r o u g h t h e combined e f f e c t o f

i n d i v i d u a l c o n t r i b u t i o n s from a d h e r e n t s o r t h e p r o l i f e r a t i o n

of p o l i t i c a l f u n d s e a c h a u t h o r i z e d under t h e Act t o c o n t r i b u t e

t o c a n d i d a t e s . As a prime example, 5610 p e r m i t s c o r p o r a t i o n s

and l a b o r u n i o n s t o e s t a b l i s h s e g r e g a t e d f u n d s t o s o l i c i t

v o l u n t a r y c o n t r i b u t i o n s t o be u t i l i z e d f o r p o l i t i c a l p u r p o s e s .

C o r p o r a t e and union r e s o u r c e s w i t h o u t l i m i t a t i o n may b e employed

t o a d m i n i s t e r t h e s e f u n d s and t o s o l i c i t c o n t r i b u t i o n s from

employees, s t o c k h o l d e r s , and union members. Each s e p a r a t e fund

may c o n t r i b u t e up t o $5,000 per c a n d i d a t e per e l e c t i o n s o l o n g

a s t h e fund q u a l i f i e s a s a p o l i t i c a l committee under 5 6 0 8 ( b ) ( 2 )

1071

...

A s t h e f o o t n o t e c o n t i n u e d , t h e C o u r t a p p e a r e d t o adopt a n o t h e r a s p e c t of t h e

SUN PAC r u l i n g - - c o n c e r n i n g

t h e q u e s t i o n of p r o l i f e r a t i o n , t h e e s t a b l i s h m e n t of

m u l t i p l e PACs w i t h i n an o r g a n i z a t i o n :

The Act p l a c e s no l i m i t on t h e number of f u n d s t h a t may

be formed t h r o u g h t h e u s e of s u b s i d i a r i e s o r d i v i s i o n s of

c o r p o r a t i o n s , o r o f l o c a l and r e g i o n a l u n i t s of a n a t i o n a l l a b o r

union. The p o t e n t i a l f o r p r o l i f e r a t i o n of t h e s e s o u r c e s of

I n 1972, a p p r o x i m a t e l y

c o n t r i b u t i o n s i s not i n s i g n i f i c a n t .

1 , 8 2 4 , 0 0 0 a c t i v e c o r p o r a t i o n s f i l e d f e d e r a l income t a x

I n t h e same y e a r , 71,409 l o c a l u n i o n s were

returns

c h a r t e r e d by n a t i o n a l u n i o n s

The Act a l l o w s t h e maximum c o n t r i b u t i o n t o be made by e a c h

u n i t ' s fund provided t h e d e c i s i o n o r judgment t o c o n t r i b u t e t o

p a r t i c u l a r c a n d i d a t e s i s made by t h e fund i n d e p e n d e n t l y of c o n t r o l

....

1071

424 U.S.,

a t 28 [ f n . 311.

....

o r d i r e c t i o n by t h e p a r e n t c o r p o r a t i o n o r t h e n a t i o n a l o r r e g i o n a l

u n i o n . 1081

The t h i r d r e s p e c t i n which t h e Buckley d e c i s i o n had an impact on PACs

concerned t h e i s s u e of independent expenditures.

The Court d e c l a r e d

u n c o n s t i t u t i o n a l t h e FECA's l i m i t a t i o n s on i n d e p e n d e n t e x p e n d i t u r e s , t h o s e

made i n s u p p o r t o f o r o p p o s i t i o n t o c a n d i d a t e s w i t h o u t p r i o r a p p r o v a l o f o r

c o o r d i n a t i o n w i t h a c a n d i d a t e ' s own campaign.

1091 By l i f t i n g t h e l i m i t s on

s u c h e x p e n d i t u r e s , w h i l e l e a v i n g i n t a c t t h o s e on d i r e c t c o n t r i b u t i o n s t o

c a n d i d a t e s , t h e C o u r t ' s r u l i n g c r e a t e d a major avenue f o r i n d i v i d u a l s and

g r o u p s s e e k i n g t o i n f l u e n c e e l e c t i o n s beyond t h e l e v e l p e r m i t t e d under t h e

FECA.

I n t h e y e a r s s i n c e 1976, p a r t i c u l a r l y i n 1980 and 1982, t h e i n d e p e n d e n t

e x p e n d i t u r e r o u t e h a s become i n c r e a s i n g l y p o p u l a r , w i t h t h e l e a d e r s i n t h e

f i e l d being t h e p o l i t i c a l a c t i o n committees.

t h e independent expenditure--are

f i n a n c e d i n t h e 1980s.

These two v e h i c l e s - - t h e

PAC and

c h a n g i n g t h e way i n which o u r p o l i t i c s a r e

And t h e i n c r e a s i n g c o n v e r g e n c e o f t h e two methods h a v e

compounded t h e i r impact on t h e system.

F. The F e d e r a l E l e c t i o n Campaign Act Amendments o f 1976

On May 11, 1976, t h e F e d e r a l E l e c t i o n Campaign Act Amendments o f 1976

( p u b l i c Law 94-283)

1101 were s i g n e d i n t o law.

Although t h e new amendments were

n e c e s s i t a t e d by t h e Supreme C o u r t ' s r u l i n g i n t h e B u c k l e y v . Valeo c a s e , which

d i d n o t d e a l d i r e c t l y w i t h PACs, t h e 1976 law c o n t a i n e d numerous and i m p o r t a n t

p r o v i s i o n s which had a d i r e c t b e a r i n g on PACs and t h e i r e v o l u t i o n .

1081 I b i d .

109/ I b i d . , a t 47-48.

1101

90 S t a t . 475 ( 1 9 7 6 ) .

These p r o v i s i o n s

d i t t m p t L O c l a r i f y t h e laws r e l a t i n g t o PACs t h r o u g h g r e a t e r

. , s 5 r ~ ~ e dli

t ~

,. i I

1 [

il:: L W

: 1

who c o u l d e s t a b l i s h s e p a r a t e s e g r e g a t e d f u n d s and how t h e y

P ~ i ~ - L h e ~ - m o tr he ,e PAC p r o v i s i o n s c o n s t i t u t e d a compromise

. i w ~ : ~ he

: ~ ~I ~ t k er2sLs

o f b u s i n e s s and l a b o r , i n v i e w of c h a r g e s by l a b o r t h a t

{I,

L J ~ ~ I I L C power between t h e s e c t o r s had been t i l t e d toward b u s i n e s s by

tic

51l~;iPA(

.,. .

e.iat'

I 11

L ~jar

kTIII

,31 ,jtl!,.,

" I J ~1

L l i d ~ l g ~ise b u l t ing

f to

from t h e 1976 Amendments i n c l u d e d : t h e e x p l i c i t

t r a d e a s s o c i a t i o n s , membership o r g a n i z a t i o n s , and o t h e r

,, ~ b d tl ) i~s h s e p a r a t e s e g r e g a t e d funds ; t h e r e s t r i c t i o n on t y p e s o f

, t # r pot a t i o n s c o u l d s o l i c i t ; g u i d e l i n e s f o r s o l i c i t i n g c o n t r i b u t i o n s

lt:es

t ~

cgoi 1 e s

of s e g r e g a t e d f u n d s ; a l i m i t on t h e p r o l i f e r a t i o n o f PACs

i o n ; p e r m i s s i o n f o r u n i o n s t o make u s e of p a y r o l l d e d u c t i o n

~ 1 1 , o rg . c l t l i ~ d t

I [ lt r i,

,,ialtt,

s u c h c o n c e r n s by l a b o r had been h e i g h t e n e d by t h e s i g n i f i c a n t

p t ~ di ~ t PACS

f o l l o w i n g t h a t a d v i s o r y o p i n i o n . 111/

L~~

gdiilte,:

I :

I.,),

L t ~ ll~ i ;

a i ~ l i ~~ ~~ ~

t n t r i b u t i ot o

n si t s

t o

i t J L I ;Lint

(

ommi t t e e " ;

PACs; t h e i n t r o d u c t i o n of t h e t e r m

and, new l i m i t s a f f e c t i n g c o n t r i b u t i o n s by b o t h a

p o l i t l ~ d lc o u m r i [ . t e e and a m u l t i c a n d i d a t e committee.

k I L Y I , t.hta

s from T i t l e 18 of t h e U.S.

c l C ~ l a l i t scc t i

be,.^ i o n

1'1 1

I,. L

iISt

i , l l r d l liriltlcb

tit/

L,,,.!~',

m t ~ 1 1 t L

Irndei

ampaign f i n a n c e laws were r e c o d i f i e d w i t h t h e removal o f a l l

Code and t h e i r r e a s s i g n m e n t t o

6 1 0 , d e a l i n g w i t h c o n t r i b u t i o n s by u n i o n s , c o r p o r a t i o n s , and

became 2 U.S . C .

441b; S e c t i o n 6 1 1 , d e a l i n g w i t h c o n t r i b u t i o n s

o n t r a c t o r s , became 2 U .S.C.

441~.

s e c t on 441b, t h e p r o h i b i t i o n on p o l i t i c a l c o n t r i b u t i o n s and

t?,peLlciit u i e s b y unions and c o r p o r a t i o n s was r e c o d i f i e d a s s u b s e c t i o n ( a ) .

i'titz d L t l r l l I icjrl o f " c o n t r i b u t i o n o r e x p e n d i t u r e v t and t h e e x c l u s i o n s became

.1!

- 1/

k p s t e i r ~ , The Emergence of P o l i t i c a l A c t i o n Committees,

p. 169-170.

subsection (b)(2),

with alterations made in the wording of each of the three

excluded activities--those that could be conducted with the organization's

general treasury.

The permission for internal communications [(b)(2)(A)]

nonpartisan registration and get-out-the-vote drives [(b)(2)(B)]

and

were amended

to allow corporations to direct such activities at executive or administrative

personnel (and their families), in addition to stockholders (and their families);

no change was made affecting the eligible pool for unions (members and their

families)

. The third exclusion--separate segregated funds--was amended to give

specific authority for such funds to organizations other than unions and

corporations; section 441b (b)(2)(C)

excluded from the term "contribution or

expenditure":

...

the establishment, administration, and solicitation of

contributions to a separate segregated fund to be utilized for

political purposes by a corporation, labor organization, membership

organization, cooperative, or corporation without capital stock.

The original FECA prohibition against coercion in the solicitation of

contributions to PACs was transferred intact to subsection (b)(3)(A).

Furthermore, two prohibitions, based on the FEC's guidelines for solicitation

in the SUN-PAC ruling, were added.

Subsection (b)(3)(~)

required employees to

be informed of the political purposes of the fund when solicited, while

subsection (b)(3)(~)

required that the solicited party be informed of his right

to refuse to contribute, without reprisal.

(The FEC suggestion that supervisors

not solicit their subordinates was not incorporated into the 1976 Amendments.)

Subsection (b)(4)(A)

made it unlawful, unless specifically permitted, for

corporations to solicit anyone other than stockholders and executive or

administrative personnel and their families [ (b)(4)(A)(i)]

and for unions

to solicit anyone other than union members and their families [(b)(4)(A)(ii)].

This provision was generally seen as a defeat for the business sector by

curtailing the blanket permission to solicit all employees in a corporation.

Subsection (b) (4)(B) granted permission for unions and corporations to make two

written solicitations per year of each other's pool of potential contributors,

the solicitations to be conducted by a third party to protect the confidentiality

of membership lists.

The guidelines for groups other than unions and corporations were outlined

in subsection (b)(4)(C)

and (D).

In the former, membership organizations,

cooperatives, and corporations without capital stock were authorized to solicit

their members for contributions to a separate segregated fund.

In the latter

subsection, trade associations were granted permission to solicit the executive

or administrative personnel and stockholders (and families) of member

corporations, provided that the corporations gave prior approval and permitted

no more than one affiliated trade association to make such solicitations a year.

Organized labor received a substantial boost from subsections (b)(5)

and

( 6 ) , which gave them permission to solicit contributions in the same manner

that corporations did and required corporations to make available such systems

to unions at cost.

This meant that the payroll deduction plan approved for

corporations by the SUN PAC Opinion but denied to labor unions by the Taft-Hartley

Act was now available to labor, as well.

Thus, a fundraising system which greatly

facilitated the collection of donations would be available to unions, with the

corporations required to assist in the mechanics of the operation.

The final subsection of the new 2 U.S.C. 441b defined what was meant by

the terms "executive or administrative personnel."

Subsection (b)(7)

defined

them as :

individuals employed by a corporation who are paid on a salary,

rather than hourly, basis and who have policymaking, managerial,

professional, or supervisory responsibilities.

Overall, Section 441b underscores one of the basic issues in the discussion

of PACs--who can be solicited for contributions.

Although PACs may accept

contributions from any source generally permitted to contribute to American

elections, they are strictly limited as to whom they may solicit to contribute.

For example, organized labor has argued that the definition of "executive or

administrative personnel" is so broad that the vast majority of corporate

employees can be considered eligible to receive company solicitations. At issue

is the potential for influence; the greater the audience to whom one can direct

one's appeals and communications, the greater the potential harvest of funds

and, in turn, political clout.

The provisions relating to Government contractors were recodified as

2 U.S.C.

441c.

The prohibitions on political contributions and expenditures

by contractors were moved to subsection (a), and the explicit authority for

Government contractors to maintain separate segregated funds was placed in

subsection (b).

PACs set up by contractors would be treated as they would by

any other organization and would abide by the same principles as elaborated in

section 441b.

The framework in which PACs were to operate following the 1976 Amendments

was completed by that section of the new law which established the limitations

on contributions and expenditures.

Section 441a added new limits on contributions

and expenditures, introduced the term "multicand\idate committee," and imposed

anti-proliferation rules on PACs established withiq a single organization.

Whereas the 1974 Amendments had already establis'hed three criteria which

a political committee had to meet in order to qualify for the $5000 limit on

contributions, the 1976 Amendments simply gave this preferentially-treated

political committee a new name.

section 441a(a)(4)

For purposes of the contribution limitations,

defined the term "multicandidate political committee" as:

a political committee which has been registered under section

433 of this title for a period of not less than 6 months, which

has received contributions from more than 50 persons, and, except

for any State political party organization, has made contributions

to 5 or more candidates for Federal office.

The distinctions between the multicandidate political committee and the

political committee lies principally in the different contribution limits

imposed on each.

Section 441a(a)(2)

imposed the following limits on

multicandidate committees:

(A) $5,000 to any candidate or his authorized political committee;

(B) $15,000 to national political party committees; and

The $5,000 limit on candidate contributions was unchanged from the 1974

Amendments, whereas the limits on national party committees and on other

political committees were imposed for the first time in 1976.

In contrast with the multicandidate committee, the limits on the ordinary

political committee were, in all but one respect, the same as those imposed on

the individual. Section 441a(a)(l)

imposed the following limits on contributions

by persons (including both an individual and a political committee):

(A) $1,000 to any candidate or his authorized political committee;

(B) $20,000 to national political party committees; and

The $1,000 limit remained unchanged from 1974, but the limits affecting national

party committees and other committees were innovations of the 1976 legislation.

While a multicandidate committee may give less than an individual or an ordinary

political committee to national party committees, this feature imposed little

hardship on the multicandidate committees which have strongly preferred

contributing directly to candidates.

The one distinction in limits which has

had a g r e a t impact on t h e e l e c t o r a l p r o c e s s i s t h a t a f f e c t i n g c o n t r i b u t i o n s

t o F e d e r a l c a n d i d a t e s , t h e $5,000 v e r s u s t h e $1,000 l i m i t .

As mentioned above, o n l y i n one r e s p e c t a r e i n d i v i d u a l s and p o l i t i c a l

c o m m i t t e e s t r e a t e d d i f f e r e n t l y under t h e l a w f o r p u r p o s e s o f c o n t r i b u t i o n s .

Under S e c t i o n 4 4 1 a ( a ) ( 3 ) , t h e i n d i v i d u a l i s l i m i t e d t o an a g g r e g a t e o f $25,000

f o r a l l c o n t r i b u t i o n s i n a c a l e n d a r y e a r ( t o c a n d i d a t e s , p a r t i e s , PACs, e t c . ) .

T h e r e i s no a g g r e g a t e l i m i t on p o l i t i c a l c o m m i t t e e s ; nor i s t h e r e f o r

m u l t i c a n d i d a t e committees.

Thus, i n t h i s c r u c i a l r e s p e c t , any p o l i t i c a l

committee, whether o r n o t i t q u a l i f i e s a s a m u l t i c a n d i d a t e c o m m i t t e e , i s g i v e n

a g r e a t e r o p p o r t u n i t y t o a f f e c t t h e outcome o f e l e c t i o n s t h a n i s any i n d i v i d u a l

( a t l e a s t through t h e d i r e c t candidate c o n t r i b u t i o n r o u t e ) .

S e c t i o n 4 4 1 a ( a ) ( 5 ) e s t a b l i s h e d t h e a n t i - p r o l i f e r a t i o n r u l e s , which

declared that:

I n any c a s e i n which a c o r p o r a t i o n o r any of i t s s u b s i d i a r i e s ,

branches, divisions, departments, o r local u n i t s , or a labor

o r g a n i z a t i o n and any of i t s s u b s i d i a r i e s , b r a n c h e s , d i v i s i o n s ,

departments, o r local u n i t s e s t a b l i s h o r finance or maintain o r

c o n t r o l more t h a n one s e p a r a t e s e g r e g a t e d f u n d , a l l such s e p a r a t e

segregated funds s h a l l be t r e a t e d a s a s i n g l e s e p a r a t e segregated

fund f o r p u r p o s e s o f t h e l i m i t a t i o n s p r o v i d e d by p a r a g r a p h ( 1 )

and p a r a g r a p h ( 2 ) .

T h i s p r o v i s i o n o v e r r u l e d t h e SUN PAC O p i n i o n which a l l o w e d s e p a r a t e c o n t r i b u t i o n

l i m i t s f o r e a c h PAC e s t a b l i s h e d w i t h i n a s i n g l e o r g a n i z a t i o n .

t o r e s t r i c t t h e a c t i v i t i e s of b o t h l a b o r and b u s i n e s s .

It was i n t e n d e d

As d e s c r i b e d i n t h e

c o n f e r e n c e r e p o r t on t h e 1976 Amendments:

The a n t i - p r o l i f e r a t i o n r u l e s e s t a b l i s h e d by t h e c o n f e r e n c e

s u b s t i t u t e a r e intended t o prevent c o r p o r a t i o n s , labor

o r g a n i z a t i o n s , o r o t h e r p e r s o n s o r g r o u p s o f p e r s o n s from

e v a d i n g t h e c o n t r i b u t i o n l i m i t s of t h e c o n f e r e n c e s u b s t i t u t e .

Such r u l e s a r e d e s c r i b e d a s f o l l o w s :

1. A l l o f t h e p o l i t i c a l c o m m i t t e e s s e t up by a s i n g l e

c o r p o r a t i o n and i t s s u b s i d i a r i e s a r e t r e a t e d a s a s i n g l e

p o l i t i c a l committee.

2. All of the political committees set up by a single

international union and its local unions are treated as a

single political committee.

3. All of the political committees set up by the AFL-CIO

and all its State and local central bodies are treated as a

single political committee.

4. All the political committees established by the Chamber

of Commerce and its State and local Chambers are treated as a

single political committee.

5. The anti-proliferation rules stated also apply in the case

of multiple committees established by a group of persons. 1121

The 1976 Amendments were considered at the time a victory for labor,

whereas business groups expressed concern over their impact. 1131 In fact,

they gave the business community far greater running room in the electoral

process than theretofore.'' 1141 Furthermore, the explicit authority given

to trade associations, membership organizations and others to establish PACs

adds to the overall impression that all types of PACs benefitted from the

1976 Amendments.

Conclusion

Each law and judicial and administrative ruling discussed above added new

and more detailed guidelines for the establishment and operation of PACs.

Each one served to reduce barriers to their existence, thus individually and

cumulatively contributing to their proliferation.

1121 U.S. Congress. House. Conference Committee.

Federal Election

Campaign Act Amendments of 1976. Report to accompany S. 3065. 94th Cong.,

2nd Sess., House Report no. 94-1057. Washington, U.S. Govt. Print. Off.,

1976. p. 58.

1131

Epstein, Labor and Federal Elections, p. 268.

1141 Epstein, An Irony of Electoral Reform, p. 37.

CHAPTER THREE: GROWTH OF PACs SINCE 1972:

THE NUMBERS, THE DOLLARS, AND THE REASONS

The p r e v i o u s c h a p t e r t r a c e d t h e p o l i t i c a l a c t i o n committee a s i t e v o l v e d

i n F e d e r a l law d u r i n g t h e 1970s.

T h i s c h a p t e r w i l l p r e s e n t and a n a l y z e t h e

d a t a which document t h e PAC growth f a c i l i t a t e d by t h e changes i n t h e law.

In f a c t , i t must b e remembered i n r e v i e w i n g t h e s e d a t a t h a t not o n l y was PAC

growth made p o s s i b l e by t h e laws b u t t h a t t h e laws were n e c e s s i t a t e d by t h e

growth i n PACs; t h e p r o c e s s of amending t h e FECA was c o u p l e d w i t h t h e

p r o l i f e r a t i o n o f PACs which t h e s e s t a t i s t i c s r e v e a l .

S e c t i o n I p r e s e n t s t h e growth o f PACs s i n c e 1974 i n terms o f t h e numbers.

S e c t i o n I1 o f f e r s e v i d e n c e o f PAC growth i n terms of f i n a n c i a l a c t i v i t y .

examines t h e l e v e l s o f PAC s p e n d i n g i n e v e r y e l e c t i o n from 1972 t o 1982, p l a c i n g

t h e f i g u r e s i n t h e c o n t e x t of o v e r a l l campaign s p e n d i n g a c t i v i t y .

In addition,

i t p r o v i d e s such i n f o r m a t i o n a s which t y p e s of PACs h a v e grown t h e most r a p i d l y ,

who h a s b e n e f i t t e d from t h e i r g r o w t h , and which PACs have s p e n t t h e most money

i n each e l e c t i o n y e a r .

F i n a l l y , S e c t i o n 111 o f f e r s a d i s c u s s i o n o f t h e r e a s o n s

f o r PAC growth i n t h e p a s t d e c a d e , i n l i g h t o f t h e f o r e g o i n g d o c u m e n t a t i o n o f

t h e l e g a l and s t a t i s t i c a l b a s e s f o r i t .

PAC GROWTH SINCE 1974

On A p r i l 6 , 1972, t h e d a y t h e FECA o f 1971 t o o k e f f e c t , t h e r e were 113

PAC9 i n e x i s t e n c e ( a c c o r d i n g t o u n p u b l i s h e d FEC d a t a ) .

By J a n u a r y 1, 1975,

when t h e F e d e r a l E l e c t i o n Commission was e s t a b l i s h e d and began s y s t e m a t i c a l l y

k e e p i n g t a b s on PACs, t h e number s t o o d a t 608.

In the nine years since then,

the number of nonparty committees (PACs) registered with the FEC has nearly

sextupled, increasing to 3,525 by the end of 1983.

The following table

presents the numbers of nonparty committees registered with the FEC from 1974

through 1983.

The data is broken down by type of PAC, using the categories

the Commission devised in 1977:

corporate, labor, trade/membership/ health,

non-connected, cooperative, and corporation without stock.

Prior to the

year-end figures for 1977, all PACs other than corporate and labor were

included in the trade/membership/health grouping (thus explaining the drop

in that category from December 31, 1976, to December 31, 1977).

TABLE 1.

Corp.

Labor

201

Number of Registered PACs:

1974-1983 1/

Trade/

Memb.1

318

Health 2/

NonConn

Coop.

Corp.

w/o stock

-- Total

608

Data as of December 31 for every year except 1975 (November 24).

Includes all non-corporate and non-labor PACs through 12/31/76.

Source: U.S. Federal ~lectionCommission. FEC Releases New PAC Figures

(~ressrelease): Jan. 20, 1984.

Although t h e numbers r e l a t i n g t h e n e t growth i n PACs shown i n Table 1 a r e

largely self-explanatory,

some o b s e r v a t i o n s may be a p p r o p r i a t e .

The s h a r p e s t

p e r c e n t a g e i n c r e a s e o c c u r r e d between November 24, 1975, and December 31, 1976.

The e a r l i e r d a t e i s s i g n i f i c a n t because i t marked t h e i s s u a n c e o f Advisory

Opinion 1975-23--the

SUN PAC r u l i n g .

I n t h e f o l l o w i n g 1 3 months, PACs

e x p e r i e n c e d a n e t i n c r e a s e of 59 p e r c e n t , from 722 t o 1,146.

T h e r e a f t e r , PACs

grew i n e v e r - i n c r e a s i n g increments: 214 i n 1977, 293 i n 1978, 347 i n 1979, and

551 i n 1980.

The n e t growth i n 1980, t h e l a r g e s t n u m e r i c a l i n c r e a s e d u r i n g

t h e six-year

p e r i o d , i s a t t r i b u t a b l e i n l a r g e measure t o t h e enormous amount

o f p u b l i c i t y accorded PACs i n t h e media s i n c e t h e 1978 e l e c t i o n s .

S i n c e 1980, t h e r a t e of PAC p r o l i f e r a t i o n h a s slowed n o t a b l y .

From a n

a v e r a g e a n n u a l i n c r e a s e of 21 p e r c e n t between 1974 and 1980, t h e r a t e f e l l t o

1 4 p e r c e n t i n 1981 ( a n i n c r e a s e o f 352 PACs) and r o s e s l i g h t l y i n 1982 t o 16

p e r c e n t ( a n i n c r e a s e of 470 PACs).

PACs had r e g i s t e r e d - - a n

A t t h e end o f 1983, o n l y 154 a d d i t i o n a l

i n c r e a s e o f less t h a n 5 p e r c e n t f o r t h e y e a r .

a p p e a r s t h a t t h e p r o l i f e r a t i o n of PACs h a s t a p e r e d o f f from t h e r a p i d growth

i n t h e l a t e 1 9 7 0 s , a l t h o u g h one can h a r d l y i n t e r p r e t t h i s a s a n i n d i c a t i o n

o f a d e c r e a s e i n importance of o r i n t e r e s t i n PACs.

Beyond t h e o v e r a l l growth i n PACs, Table 1 r e p o r t s t h e r e l a t i v e growth

of t h e v a r i o u s c a t e g o r i e s of PACs.

C l e a r l y , t h e c o r p o r a t e committees have

demonstrated t h e most enormous growth i n t h e i r ranks--with

a n i n c r e a s e of

more t h a n 1600 p e r c e n t i n n i n e y e a r s , from 89 i n 1974 t o 1,536 i n 1983.

Here, t h e SUN PAC r u l i n g can be s e e n a s having had a p a r t i c u l a r l y s a l i e n t

e f f e c t on t h e w i l l i n g n e s s o f c o r p o r a t i o n s t o e s t a b l i s h s e p a r a t e s e g r e g a t e d

f u n d s ; c o r p o r a t e PACs more t h a n t r i p l e d i n number i n t h e 1 3 months f o l l o w i n g

t h a t a d v i s o r y o p i n i o n . A s o f 1983, 4 4 p e r c e n t of a l l PACs were grouped i n

t h e "corporate" category.

As n o t a b l e a s t h e d r a m a t i c i n c r e a s e i n c o r p o r a t e PACs, t h e r e h a s been

r e l a t i v e s t a b i l i t y i n t h e a r e a of l a b o r PACs.

Having i n c r e a s e d j u s t

88 p e r c e n t i n n i n e y e a r s , l a b o r PACs a c t u a l l y e x p e r i e n c e d a n e t d e c l i n e i n

s e v e r a l of t h o s e y e a r s .

Unlike i n t h e c o r p o r a t e s e c t o r , t h e p o t e n t i a l f o r

i n c r e a s e i n l a b o r PACs i s d i s t i n c t l y l i m i t e d .

Most of t h e l a r g e , p o l i t i c a l l y

a c t i v e u n i o n s have o p e r a t e d PACs f o r many y e a r s .

I n c o n t r a s t , most o f t h e

r e m a i n i n g u n i o n s a r e e i t h e r t o o s m a l l o r not s u f f i c i e n t l y p o l i t i c a l o r , as

a f f i l i a t e s o f n a t i o n a l and i n t e r n a t i o n a l u n i o n s , a r e s u b j e c t t o t h e same

s i n g l e c o n t r i b u t i o n l i m i t a s t h e i r parent bodies, thus reducing the i n c e n t i v e s

t o e s t a b l i s h PACs. 1151

Thus, t h e d a t a r e v e a l t h a t w h i l e l a b o r u n i o n s p i o n e e r e d

t h e f i e l d of p o l i t i c a l a c t i o n c o m m i t t e e s , e s t a b l i s h i n g p r e c e d e n t s f o r o t h e r s

t o i m i t a t e , t h e y have been i n c r e a s i n g l y dwarfed by t h e PAC growth i n o t h e r

sectors.

I n 1974, l a b o r PACs c o n s t i t u t e d o n e - t h i r d of a l l PACs; a t t h e end

o f 1983, t h e y c o n s t i t u t e d o n l y o n e - n i n t h .

I n 1974, t h e r e were o v e r t w i c e a s

many l a b o r PACs a s t h e r e were c o r p o r a t e PACs; by 1983, c o r p o r a t e PACs exceeded

t h o s e of l a b o r u n i o n s by a 4 t o 1 r a t i o .

The growth of t h e t r a d e / m e m b e r s h i p / h e a l t h c a t e g o r y i s more d i f f i c u l t t o

document, i n v i e w of t h e i n c l u s i o n between 1974 and 1977 of PACs which were

ultimately assigned separate categories.

t h e growth h e r e h a s been s i g n i f i c a n t .

Nonetheless, it i s f a i r t o say t h a t

I f a l l 318 PACs i n t h e t r a d e / m e m b e r s h i p /

h e a l t h c a t e g o r y i n 1974 were a p p r o p r i a t e l y l i s t e d t h e r e under t h e s t a n d a r d s

i n t r o d u c e d i n 1977, one can s a y t h a t t h e y i n c r e a s e d by 94 p e r c e n t a s of 1983.

I f , on t h e o t h e r hand, t h e 138 PACs s e p a r a t e d i n t o new c a t e g o r i e s i n 1977 were

115/ E p s t e i n , Edwin M.

B u s i n e s s and Labor Under t h e F e d e r a l E l e c t i o n

Campaign Act o f 1971. I n M a l b i n , P a r t i e s , I n t e r e s t Groups, and Campaign

F i n a n c e Laws, p. 143.

i n e x i s t e n c e i n 1974, t h e a c c u r a t e 1974 c o u n t of t r a d e / m e m b e r s h i p / h e a l t h PACs

would b e 180, t h u s i n d i c a t i n g an i n c r e a s e o f 243 p e r c e n t t h r o u g h 1983.

In f a c t ,

t h e c o r r e c t e s t i m a t e o f growth i n t h i s c a t e g o r y l i k e l y f a l l s somewhere between

t h e 94 p e r c e n t and t h e 243 p e r c e n t f i g u r e s - - n o t

a s h i g h a s t h e 480 p e r c e n t

i n c r e a s e i n PACs o v e r a l l , b u t h i g h enough t o add m e a s u r a b l y t o t h e i n c r e a s i n g

b u s i n e s s o r i e n t a t i o n o f PACs t o d a y .

(See f u r t h e r d i s c u s s i o n of t h i s a s p e c t

below. )

The "non-connected"

c a t e g o r y ( t h o s e PACs n o t a f f i l i a t e d w i t h an e x i s t i n g

o r g a n i z a t i o n ) h a s e x p e r i e n c e d e x t r e m e l y r a p i d growth i n t h e s e v e n y e a r s i t h a s

been used by t h e FEC.

As a r e f l e c t i o n o f t h e p o l i t i c a l c l i m a t e i n which PACs

o p e r a t e t o d a y , t h e s h a r p i n c r e a s e of non-connected PACs i s h a r d l y s u r p r i s i n g ,

comprised, a s they a r e , l a r g e l y of i d e o l o g i c a l i n t e r e s t groups.

y e a r s , PACs i n t h i s g r o u p i n g have more t h a n septupled--from

In j u s t s i x

110 i n 1977 t o 821

i n 1983, d u r i n g which t i m e t h e o v e r a l l number of PACs i n c r e a s e d by two-andone-half-fold.

The d a t a p r e s e n t e d and d i s c u s s e d above o f f e r s p a r t i a l e v i d e n c e o f t h e

growth of p o l i t i c a l a c t i o n committees i n g e n e r a l and t h e growth of c o r p o r a t e ,

non-connected,

and t r a d e / m e m b e r s h i p / h e a l t h PACs i n p a r t i c u l a r .

It a l s o o f f e r s

p a r t i a l e v i d e n c e of t h e overshadowing of l a b o r PACs by o t h e r i n t e r e s t g r o u p s .

A l l o f t h e s e phenomena w i l l b e f u r t h e r d e v e l o p e d a s t h e f i n a n c i a l a c t i v i t y

d a t a is presented l a t e r i n t h i s chapter.

The r e l a t i v e power o f l a b o r and b u s i n e s s t o i n f l u e n c e o u r p o l i t i c a l p r o c e s s

i s an age-old

struggle.

Thus, a c l o s e r l o o k a t r e l e v a n t s t a t i s t i c s which may

shed l i g h t on t h i s s t r u g g l e i s w a r r a n t e d .

As b l e a k a p i c t u r e a s t h e d a t a d e p i c t

f o r o r g a n i z e d l a b o r , t h e y , i n f a c t , do not a d e q u a t e l y r e p r e s e n t t h e m a g n i t u d e

o f t h e i n c r e a s i n g g a p between l a b o r PACs and t h o s e a s s o c i a t e d w i t h t h e b u s i n e s s

sector.

A comparison o f t h e numbers f o r c o r p o r a t e v s . l a b o r PACs d o e s not t e l l

the whole story.

There is a strong business orientation in the trade/membership/

health category, as represented by such powerful trade groups as the National

Association of Realtors and such important health groups (largely professional

associations) as the American Medical Association.

Among non-connected PACs,

is the Business-Industry Political Action Committee (BIPAC), the first major

business PAC.

Inc. (AMPI),

Among cooperatives are the PACs of the Associated Milk Producers,

and the Mid-America Dairymen, Inc.

The corporations without stock

are, by definition, business-oriented, as exemplified by the California Almond

1161 Thus, many business-oriented PACs are classified in

Growers Exchange. categories other than the "corporate" one.

In an attempt to construct a system which more accurately reflects the

number of PACs which promote a basically pro-business philosophy, political

scientist Edwin Epstein has estimated that one-half of all non-labor and

non-corporate PACs under the FEC scheme can be classified as business-related,

along with all of the "corporate" PACs. 1171 Based on this system and using

the data in Table 1, one can construct the following chart of labor and

business-related PACs.

116/ Ibid., p. 118.

117/ Ibid., p. 116.

TABLE 2.

Numbers o f Labor and B u s i n e s s - R e l a t e d

PACs: 1974-1982

1974

1976

1978

1980

1982

20 1

224

21 7

297

3 80

248

6 78

1100

1729

2229