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Panel Urges Fixing Rules for Convention Funding

With Republicans and Democrats poised to spend in excess of $100 million on their conventions in New York and Boston, an independent task force has called for an overhaul of the way national political conventions are funded.

“The FEC rules have created a $100 million loophole for unlimited soft-money contributions to the political parties,” said Michael Malbin, executive director of the Campaign Finance Institute, a nonpartisan organization affiliated with George Washington University.

In a newly released study on soft money and the party conventions, CFI provided a detailed look at the fundraising mechanisms being employed by Republicans and Democrats and offered a detailed analysis of the activities of fundraisers and donors to both parties’ host committees.

CFI’s Task Force on Presidential Nomination Financing is urging that the national party committees be limited to raising only hard money for conventions — a move that CFI officials predicted would close a loophole that is at odds with the Bipartisan Campaign Reform Act’s ban on national party soft money, as well as reduce the “gaudiness” of the highly orchestrated political extravaganzas.

The task force is also calling on the Internal Revenue Service to reassess its classification of convention host committees as section 501(c)(3) charities, to which all donations are tax-deductible.

“The IRS needs to look much more carefully at this question,” said CFI Associate Director for policy Steve Weissman, who helped author the new study. Weissman noted that the U.S. tax code specifically prohibits charities from engaging in political campaigns, something he believes the host committees are clearly doing.

In addition, the report analyzes changes in Federal Election Commission regulations over the past decade and the impact those changes have had on fundraising for the party’s quadrennial extravaganzas.

In 2003, the Federal Election Commission eliminated a requirement that money raised for convention expenses and promotion of the host city be raised only from local businesses, labor groups and individuals. This opened the door for corporations from around the nation to get into the convention-sponsorship game.

Some experts who did not serve on the CFI panel disagreed with the report’s conclusions.

In an interview, FEC Commissioner Michael Toner, a Republican who worked on President Bush’s 2000 presidential campaign, rejected the notion that anything is amiss with the FEC’s view on convention funding.

“Last year when the [FEC] looked at convention financing, we found that there was no evidence that Congress in any way intended to restrict the way convention host committees operate and raise funds,” Toner said. “We noted that there’s no mention of convention fundraising or host committees in [BCRA and] virtually no floor debate on the subject.

“In our view, Congress just didn’t focus on this area in passing McCain-Feingold,” Toner said. “If Congress had intended to alter the way conventions are financed, there clearly would have been significant floor debate on this topic.”

Toner also defended his agency’s decision to abolish the requirement that donors to conventions be local.

“The locality requirement discriminated against smaller-market cities,” said Toner, who noted that Republicans had a difficult time raising money for their 1996 convention in San Diego because the city is significantly smaller than other recent convention sites, such as Chicago, Los Angeles and New York.

Toner said the change “places all cities in this country on equal footing” and seems to have worked well for the Democrats in Boston.

Former Democratic National Committee Chairman Don Fowler, a member of the CFI panel, offered his own suggestions about how conventions might be altered to save money while also delivering greater punch.

Fowler said a two- or three-day weekend convention would be “more convenient” and “less expensive” to mount, and would allow “different kinds of people and people of modest means to participate” in the convention process.

He estimated that a typical week’s stay at one of the conventions costs somewhere in the neighborhood of $3,500 to $5,000.

“There are a lot of Democrats who can’t afford that,” he said. Winkingly, he added, “There are even some Republicans who can’t afford that.”

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