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Congressional 527s Are a Flop

Just six months before the 2004 election, independent groups formed to harvest and spend soft money on House and Senate races have largely failed.

A look at financial reports recently filed with the Internal Revenue Service coupled with interviews of partisans on both sides reveal that these organizations are unlikely to become even a minor factor in the battle for control of Congress.

“All [of these organizations] will die as entities,” predicted one Democratic consultant.

The inability of these groups to raise any significant amount of money stands in stark contrast to the success of the handful of Democratic organizations raising millions of soft dollars to influence the presidential race.

A variety of reasons were offered for the ineffectiveness of the Congressional committees, from a lack of energy in the donor community about anything other than the presidential race to the ongoing legal battle over the applications of the Bipartisan Campaign Reform Act.

“1600 Pennsylvania is a great office,” explained Illinois Rep. Rahm Emanuel (D), referring to the address of the White House.

Clearly these Congressional entities are withering on the vine financially.

On the Democratic side, the New House PAC and the Democratic Senate Majority Fund have ceased fundraising activity.

For Republicans, the Leadership Forum, which was formed to collect soft money for House candidates, brought in just $100,000 in the first three months of 2004; the group raised $225,000 in 2003.

The National Committee for a Responsible Senate never even opened its doors, and GOPers acknowledge no group is likely to emerge to collect soft-money contributions for Senate races this cycle.

By contrast, the Media Fund and America Coming Together, the two largest Democrat-affiliated groups working on the presidential election, raised nearly $20 million from Jan. 1 to March 31 and expect to spend upwards of $100 million.

“These large 527s have sopped up a lot of money that could go to the smaller groups,” said Texas Rep. Martin Frost, who chaired the Democratic Congressional Campaign Committee in the 1996 and 1998 cycles.

Formed in the wake of the passage of the BCRA, these 527 groups — named for the section of the IRS tax code that applies to their activities — sought to serve as a conduit for the $292 million in soft money raised by the four House and Senate party committees during the 2002 election cycle.

Under the new law, the national party committees are banned from raising or spending any soft money.

The groups began to crop up in late 2002 and early 2003 and were staffed by former top campaign operatives.

Former Democratic Congressional Campaign Committee Executive Director Howard Wolfson and DCCC Finance Director Jonathan Mantz created the New House PAC.

Missouri campaign operative Marc Farinella and Monica Dixon, an aide to then-Vice President Al Gore, were the masterminds behind the Democratic Senate Majority Fund.

On the Republican side, Susan Hirschmann, a former chief of staff to House Majority Leader Tom DeLay (Texas), and former New York Rep. Bill Paxon founded the Leadership Forum.

Three attorneys with the Washington, D.C., powerhouse firm of Patton Boggs LLP started the NCRS in late 2002 but the group never became more than simply a name on paper.

The most common justification for the inability of these groups to get off the ground was the narrow focus in the donor community on the presidential race.

“Almost all the attention and interest is focused on the presidential race,” said a Democratic strategist, who spoke on the condition of anonymity.

“The president has soaked up so much money,” agreed Virginia Rep. Tom Davis, the immediate past chairman of the National Republican Congressional Committee.

Sen. John Kerry (D-Mass.), the party’s presumptive presidential nominee, raised nearly $60 million in the first three months of 2003 compared to Bush’s $53 million haul.

Bush had raised $185 million at the end of March compared to $85 million for Kerry.

Democrats also pointed out that for much of 2003 and the early months of this year their donors assumed the presidency was the only race they had a chance to win.

“The big donors were making a rational assessment,” said a well-connected Democratic consultant. “Since they didn’t think we had a shot of regaining control of [the House and Senate] the donors thought the only place we were going to stop all of this stuff is to win the presidency.”

Triggered by Colorado Sen. Ben Nighthorse Campbell’s (R) retirement announcement in March, national Democrats have succeeded in creating the perception that regaining the Senate majority is now within reach.

Privately, even Democrats admit that winning back control of the House is a long-shot proposition.

As important a factor in the groups’ failure was the lingering uncertainty over the outcome of the Supreme Court case aimed at voiding large sections of the campaign finance law.

“At the beginning of all of this there was a fair amount of enthusiasm and we were very optimistic,” said Farinella. “But as we got closer and closer to the time the court was taking it up, potential contributors began to have more concerns about its viability.”

While the court upheld the vast majority of BCRA, Republicans quickly called on the FEC for an advisory opinion on the proper role for the new independent 527 organizations within the campaign finance framework.

In mid-February the commissioners issued a ruling that curtailed the spending of soft money to influence federal elections by groups that have registered with the FEC — meaning they raise both hard and soft money.

That effectively ended the DSMF, said Farinella, because it did not have the ability to raise vast sums of hard money to fund its activities.

It would also have ended the efforts of the New House PAC, which like the DSMF had a hard- and soft-money component, but the group had already been shuttered earlier in 2004.

The Leadership Forum is solely a soft-money entity, and therefore was unaffected by the ruling.

Even so, it has generally disappointed in fundraising.

The group received four $25,000 contributions in the first three months of 2003 from the Association of American Railroads, Guardian Industries, Union Pacific and Pfizer. It spent just over $4,000.

Davis, who headed the NRCC in the 2000 and 2002 cycles, said that these groups have not succeeded because they are seen as a “usurpation of the party leadership.”

“We discourage someone going out and freelancing like the Club for Growth,” Davis added, referring to the free-spending conservative group that is currently spearheading Rep. Pat Toomey’s primary challenge to Pennsylvania Sen. Arlen Specter (R).

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