Legislature Pulls Surprise

By J. Barlow Herget
Published: Jul. 26, 2004

RALEIGH - Who knew?

The General Assembly quietly ignored the ambitious lobbying reform bills proposed by Sen. Tony Rand, D-Fayetteville, and Rep. Joe Hackney, D-Chapel Hill before it adjourned and left town. That was expected. It left behind some modest proposals for reforming local government elections and for improving the new judicial election laws, too.

But in a welcome surprise, the legislature in the final days, final hours really, of the short session overwhelmingly adopted a campaign finance reform bill affecting corporate contributions. The new law prohibits corporations from dumping money into political non-profit organizations for “issue ads” that are really campaign advertising for and against targeted candidates.

Chris Heagarty, the executive director of the nonpartisan N.C. Center for Voter Education, had been disappointed by the inaction on important campaign reform bills. But he hailed House Bill 737.

“Senator Rand and the legislature really stepped up to the plate and took action to restore people's faith and confidence in the system," he said in reference to the bill's sponsor. "This bill will really help stop electioneering by special interest groups that try to hide their agendas from voters behind misleading names."

This act of legislative common sense did not rise out of a sterile political debate. It was prompted by news reports that large corporate contributions were financing the bitter feud between Republican House Co-Speaker Richard Morgan and his Republican opponents.

Like other powerful politicians, Morgan formed his own political nonprofit committee, what is now called a “527” after the number of the IRS code that regulates such organizations. Morgan named his group “The North Carolina Republican Main Street Committee.” His opponents called their 527 the “North Carolina Legislative Majority Committee.” (Don’t you just love these names? It makes one wonder if there is a “Mom and Apple Pie Committee.”)

Thanks to a free and inquisitive press, the public learned that Morgan’s committee had received more than half of its contributions from a single company, S&M Brands Inc. of Virginia. Its check was for $100,000. S&M, by the way, is a discount cigarette maker that had lobbied -- successfully -- for Morgan to defeat in 2003 a bill supported by large tobacco companies regarding escrow payments into a tobacco settlement fund.

Morgan’s opponents were not outdone. Their Legislative Majority Committee received $200,000 from Variety Stores, a company controlled by former state Rep. Art Pope, a wealthy Republican from Raleigh and no champion of Morgan’s.

In the July 20 Primary Election, Morgan retained his seat by a few hundred votes but a number of his House allies were defeated with the help of hard-hitting, negative issue ads. Pope’s $200,000 spoke louder than S&M’s $100,000.

Legislators, no doubt, looked at the news about the contributions and muttered, “There but for the grace of God and Art Pope, go I.” They know that in North Carolina legislative campaigns today, the candidate who spends the most money wins almost 90 percent of the time.

And more and more money is being spent in contested campaigns, be they state or local.

The new “landmark” legislation sets some reasonable rules for 527 committees. For example, these rules will help citizens discover who it is that is giving money to such groups. The 527 must also disclose the name of all candidates that are mentioned in the advertising and the amount and recipient for each disbursement over $1,000.

North Carolina law already prohibits, wisely, corporations from making contributions directly to candidates. The new law applies the same prohibition to 527s. S&M Brands Inc. and Variety Stores won’t write any more $100,000 checks to political non-profits in North Carolina.

More complicated is the law’s regulation of what it calls “electioneering communications.” That’s legalese for political ads.

Current state law follows the accepted federal strictures on “issue ads” that ban non-profits from telling listeners or viewers basically to vote or defeat named candidates. The new law goes further.

It stops 527s from spending big bucks on political advertising 60 days before a general election and 30 days before a primary election. The law defines such “electioneering communications” as TV and radio ads, mass mailings or large-scale phone banks.

To be regulated, the ads must “(a) name a candidate for statewide or legislative office; (b) cost over $10,000; (c) target a significant part of the candidate’s electorate,” according an analysis by Bob Hall, the research director for the campaign watchdog non-profit, Democracy North Carolina of Carrboro.

That leaves much on the table for 527s to do and given North Carolina’s recent litigious record when it comes to redistricting and other political matters, someone is likely to challenge the new rules in court.

But for now, voters have something to be proud of. This legislation is more than a surprise gift horse. It also is a bridle to stem the galloping influence of money in North Carolina’s elections.