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Committee Red Ink Is Flowing

Soft-Money Ban Affects Approach to Debt Retirement

Even as the four campaign committees sort through the intricacies of the Bipartisan Campaign Reform Act, they are also being forced to weigh the impact last cycle’s debts will have on their plans for 2004.

Although debt is a regular fixture at each committee at the end of every cycle following extensive borrowing designed to put a handful of races over the top in the election’s final days, strategists — especially on the Democratic side — believe paying off back bills in an all-hard-money world will limit the committees’ ability to engage in other crucial early activities.

“It is absolutely a problem,” said a Democratic fundraiser, who spoke on the condition of anonymity. “It is much more complicated now because 100 percent of [committee] expenses have to be paid out of hard money.”

The campaign finance reform legislation passed in the 107th Congress outlaws the raising and spending of soft money by the committees, forcing them to rely solely on hard, federal dollars.

Democrats, far more than Republicans, have relied on soft money to bolster their campaign coffers in the past — meaning Democrats will start this cycle at a distinct financial disadvantage.

“There are things they won’t be doing as early in the cycle because of the debt,” said a Democratic fundraiser. “They won’t staff up and won’t do some early national polling in key states.” Already Democratic Congressional Campaign Committee Chairman Robert Matsui (Calif.) has said the 2004 DCCC staff will be roughly half of the 2002 committee.

Another Washington Democrat said the debt “isn’t a killer factor but more of a realization that Democrats have to be smarter about how they spend their money.”

Jim Bonham, executive director of the DCCC, said the debt “is not a big concern for us.”

“It has always been a hard-dollar loan, and we have always been able to pay,” he said. “This is nothing different than we have faced in previous cycles.”

At the start of the 2002 cycle, the DCCC was more than $5 million in the hole.

Brad Woodhouse, a spokesman for the Democratic Senatorial Campaign Committee, said that in spite of its $6 million debt, the organization “has moved forward with significant hirings and we have moved into new offices.” The DSCC is now based at 120 Maryland Ave. NE.

Of the four groups, the National Republican Congressional Committee owes the most, with more than $7 million in arrears. Its Senate counterpart — the National Republican Senatorial Committee — carries a much more manageable $608,000 debt.

Given the magnitude of funds owed by three of the four committees, the interest payments are also significant. That added cost provides the committees an incentive to quickly pay down their debts, said a knowledgeable Democratic source.

The NRCC debt is primarily composed of three bank loans — totaling $6 million — from the First Union National Bank in McLean, Va.

The remaining $1 million is owed to a variety of vendors, including direct-mail and media consultants as well as pollsters.

Steve Schmidt, communications director for the House Republican committee, called paying down the debt a “priority,” but expressed confidence that it would be retired in short order.

“The fact remains that in the 2002 cycle the NRCC raised [$110] million in hard money,” Schmidt said. “We will pay off the debt and we will be in a position to impact a lot of the races around the country.”

Matt Keelen, a leading GOP fundraiser, added: “I am willing to bet we pay ours off before [Democrats] pay theirs off.”

Schmidt added that the NRCC’s debt retirement plan “is not a race” with the DCCC. “The goal here is to be able to have an impact on elections that are still nearly two years away,” he said.

He quickly pivoted to question the DCCC’s ability to remain a major player in House races given its financial situation.

In the 2002 cycle Democrats raised $41 million in hard dollars.

“The DCCC is an entity that occupies real estate and has letterhead,” Schmidt said. “Whether they will be able to raise enough money to impact House races is an open question.”

One Democratic fundraiser suggested that a competitive special election in 2003 could make things difficult for the DCCC.

“That would really kick their butts,” said the source.

At press time, the only special election scheduled was in the strongly Republican 19th district of Texas this May, where Democrats are not expected to make a major effort.

In June 2001, Rep. Randy Forbes (R-Va.) won a hotly contested special election in which the parties spent $5 million combined.

The early fundraising returns in 2003 favored the NRCC. The Republicans raised $6.9 million last month compared to $1.7 million for the DCCC, although they did spend almost $4.5 million more than the House Democrats did in January.

Bonham noted, however, that the committee’s take was one of the highest in DCCC history and far eclipsed the $340,000 the committee raised in both hard and soft money in January 2001.

He credited the strong showing to the financial draw of House Minority Leader Nancy Pelosi (D-Calif.), who has been featured in at least two direct-mail pieces from the committee since December.

“If you have to head into a new cycle with debt it’s nice to have a direct-mail signer that can generate some new [names],” noted a prominent Democratic fundraiser.

Another source familiar with the DCCC’s inner workings said that former Chairwoman Nita Lowey (N.Y.) deserved kudos for the recent fundraising success, because she invested heavily in direct-mail and e-mail acquisition during the 2002 cycle.

Both House committees agreed that the new campaign finance reforms will result in a significant shrinking of their operations in order to deliver maximum impact on House races in 2004.

“The committee is a smaller operation,” acknowledged Schmidt.

Bonham said the committee is “definitely going to be scaling back our operations because we have to become very efficient and very lean.”

Matsui told Roll Call on Tuesday that the maximum number of staffers under his employ will be 45, compared to the 92 people on staff in November 2002.

On the Senate side, the DSCC owes $5,940,000 on a line of credit taken out Oct. 17, 2002.

“This debt is something we want to take care of very, very soon,” said Woodhouse, the DSCC press secretary. “We don’t have a lot of anxiety about it.”

“We’re not going to let it inhibit us to the extent that we can,” he added.

The NRSC is the only one of the four not to have a large outstanding bank loan.

“We are doing what we do after every cycle,” said NRSC Communications Director Dan Allen. “We clear out some debt from vendors we used in the past cycle.”

In a veiled shot at his Democratic rivals, Allen added: “We are very happy that we don’t have a bank loan that would anchor us down.”

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