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A New Hurdle in State Races

Would-Be Govs. Can’t Use Cash

Complicating the gubernatorial ambitions of at least a handful of Members of Congress, a little-noticed wrinkle in new campaign finance laws forbids federal lawmakers from transferring their cash to a state race.

The new law took effect at the start of the 2004 cycle but its impact will be first felt early next year, as Sens. Charles Schumer (D-N.Y.) and Kay Bailey Hutchison (R-Texas) are faced with decisions about whether to run for governor knowing that their multimillion-dollar federal war chests will be rendered useless.

With several other Members considering or having their names floated for gubernatorial bids, the rule change would at the very least limit the lawmakers from using the leftover federal campaign committee cash as seed money for their state bids.

“They’re going to have to raise it under state law and leave their federal funds for federal races,” said Trevor Potter, an outside adviser to Sen. John McCain (R-Ariz.), one of the principal authors of the new campaign finance laws.

Other campaign lawyers, both Democratic and Republican, agreed that the new law was clear in its restraint against using federal cash for gubernatorial bids, something that had been common in prior campaign cycles and was previously restricted only by individual state’s election laws.

The rules on transferring federal funds to state bids were spelled out in an advisory opinion written by Federal Election Commission Chairman Bradley Smith in March. That opinion also created a further limit on federal cash: Retiring lawmakers can no longer convert campaign war chests into political action committees that give money to candidates in larger amounts than their campaign committees could.

Schumer and Hutchison have not commented extensively about their plans, but behind the scenes their advisers have made clear that a run for governor is very much an option.

In each case, the Senators would be wading into what could be a vicious primary fight.

Schumer, whose re-election this year has been a foregone conclusion since the spring when no major opposition emerged, was sitting on more than $16.8 million as of Sept. 30. That was after giving $1 million to the Democratic Senatorial Campaign Committee and several state party committees, as well as paying for a significant media buy.

Earlier this month, after the latest FEC filing, he gave another $1 million to the DSCC but he is still likely to end the campaign season with well in excess of $10 million. His likely primary opponent, should he run for governor, would be state Attorney General Elliot Spitzer, who, as of June 30, had $5.3 million in his state-based account.

Hutchison, whose third-quarter fundraising numbers were not yet available, ended June with more than $6.8 million on hand. If she jumps into the governor’s race, Hutchison will be going up against the incumbent, Rick Perry (R), who had just more than $5 million in his account mid-year.

Schumer and Hutchison are two of the most prodigious fundraisers in Congress and would, if they entered the gubernatorial primaries, undoubtedly raise large amounts of cash in fairly short order. In Texas there are no limits on what a candidate for governor can raise from individuals, and in New York Schumer can take up to $33,000 from individuals — well in excess of the $2,000 limit they face from individual donors in federal races.

But as they built their bulging campaign war chests over the past several years, the long-standing assumption among their operatives and in their home states was that federal cash would be an intimidating opening ante in a gubernatorial bid.

Sources indicated that not having the federal cash would play no role in Hutchison’s 2006 decision. Schumer’s aides told the New York Post, which reported on the impact of this provision in the Empire State in late September, that they had not looked into the federal or state campaign laws.

Several other lawmakers are eyeing gubernatorial bids in the next cycle. Rep. Jim Nussle (R-Iowa), whose term as House Budget chairman will end in 2006, is openly considering the race to succeed Gov. Tom Vilsack (D), who is not seeking a third term in 2006. Nussle’s House re-election committee had almost $800,000 on Sept. 30.

In Nevada, two GOP Members are viewed as potential governors: Sen. John Ensign, with $485,000 in his federal account, and Rep. Jim Gibbons, who was holding $397,000. In Ohio, where the embattled Gov. Bob Taft (R) is term-limited, some Republicans are pining for Sen. Mike DeWine to return home and run for governor. DeWine had more than $1.8 million in his Senate account as of June 30.

The lawmakers, however, will still likely be able to indirectly boost any gubernatorial ambitions with their federal cash as long as they can navigate the primary and win the nomination. As Smith wrote in his advisory opinion, large transfers to national and state parties would still be legal.

After winning the party’s nomination for governor, a Member of Congress could presumably shift millions of dollars from their federal account to the respective state party committees.

The change in the law came when McCain and other authors of the new campaign laws removed the phrase “any other lawful purpose” from old regulations and set in place very strict limitations on donations to federal campaigns. The money can be spent in a federal race — House, Senate or president — given to charity or given to national and state party campaign committees.

“When people give money for a federal campaign, that’s what it will go toward,” Potter said.

The forbidding of Members from transferring their leftover campaign cash into PACs — which can give $5,000 to House and Senate candidates, as opposed to the $1,000 limit on re-election committees — is another boon to the party campaign committees.

As they headed for retirement from the Senate in 2002, Phil Gramm (R-Texas) and Fred Thompson (R-Tenn.) wrote large, six-figure checks to the National Republican Senatorial Committee and their home state party committees. But, like many other Members before them, each also used hundreds of thousands of dollars in leftover cash to seed a PAC.

Both Gramm, who is now a lobbyist, and Thompson, an actor still active in political circles, are cutting $5,000 checks to candidates this cycle. Now, that would be forbidden and both men would have been more likely to devote the entire chunk of excess cash to their respective party committees.

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