Blog — Campaign Finance Reform

April 04, 2016

Arizona Steps Into the Dark

By Katherine Duncan

Arizona should take heed: beware the ides of March. The same day ethics complaints were filed against four members of the Arizona House—March 15, known as the Ides of March for the first full moon of a new year and the famous line in Shakespeare’s Julius Caesar—a House panel passed a bill that would open the floodgates for secret money in the state’s elections. After passing several different House panels, the bill passed the full House this past Monday. With a potential ethics investigation looming for state representatives—including the House Speaker—Arizona should be moving toward more transparency, not becoming “ground zero in [the] fight over secret political spending.”

Having passed the Senate on a party line vote 18-10  the week before it passed the House, Senate Bill 1516 was touted as a way to simplify Arizona’s election regulations. Some of the provisions in the bill would seem to do just that, but the bill would also do something that could have a much more sweeping impact: ceding the power to enforce Arizona’s laws on dark money groups to the federal government.  As passed by the Senate, the bill would prohibit Arizona’s Secretary of State from requiring dark money groups to disclose their donors unless the Internal Revenue Service had already acted to revoke the group’s nonprofit status. Under the new rule, if the IRS has not acted by the time the group spends money to influence Arizona elections, there is no basis for even considering whether the group qualifies as a political committee under Arizona law. According to a local news story, “foes say [it] will enhance the flow of ‘dark money’ and make it harder for voters to know who is trying to affect the outcome of elections.”

The bill has other provisions that are also troubling. Under current Arizona law, candidates’ committees may not give money to other candidates’ committees; under the bill as passed out of the Senate, candidate committees may give the maximum amount to a candidate for any other office. According to Democratic Rep. Ken Clark, this part of the bill “allows politicians to buy votes from colleagues using campaign contributions.” In addition, Senate Bill 1516 reduces penalties for those who overspend, removes state election officials’ authority to subpoena candidates’ records and eases disclosure requirements for campaign advertising. Also troubling is the complete eradication of limits on dark money groups’ spending limits on ballot measures.

In one of the stranger arguments for keeping political donors’ identities secret, Eric Spencer, the state’s elections director, touted the bill’s dark money provisions as integral to democracy, asserting that “[p]olitical participation is depressed through disclosure.” Operating in the shadows, especially when large sums of money are involved, actually contradicts democracy’s tenets: this bill skews power away from the voters and toward the select few with enough money and prowess to tip things in their favor—all while remaining anonymous. A democracy is supposed to be a system of government by and for the people, but if voters are left unaware of who or what is trying to influence them, then that system can’t function properly. Democratic Arizona Senator Steve Farley supported this notion when he said that the dark money provision “will further depress voter turnout because it’s the huge wave of anonymous money that is making people feel like their vote doesn’t matter.”

The very same Tuesday the Arizona legislature took a giant step away from transparency by passing the bill that “quietly loosens dark money rules,” Democratic legislators in the state filed an ethics complaint against House Speaker David Gowan and three other Republicans for violating state travel policy and against Rep. Gowan specifically for allegedly using his state staff to help in his run for Congress. Claiming “inadvertent oversights in his expense reports,” Speaker Gowan has already repaid $12,000 to the state, calling the discrepancy “errors [that] were errors and nothing more” in a letter to the Arizona Attorney General. The complaint is being reviewed to decide whether to convene the Ethics Committee. In the letter asking for an ethics investigation, Democratic Minority Leader Eric Meyer and Rep. Rebecca Rios wrote, “[t]hese recent events appear to be part of a pattern of inappropriate conduct that has caused the public to lose confidence and trust in the Arizona House of Representatives.”

If ethics and transparency are already an issue in Arizona politics, as these recent complaints suggest, SB 1516 will only compound the problem. It’s notable that Secretary of State Michelle Reagan denounced dark money groups during her 2014 campaign but since getting elected has changed her tune, supporting and championing the recent bill that allows these groups to proliferate. It’s also notable that the Arizona chapter of Americans for Prosperity, a wing of the Koch brothers’ conservative political network and also a leader in dark money political spending, backed the bill.

Opponents of the bill criticize the many ways in which it favors those with well-steeped political and financial connections, further tipping the scales toward the politically established with donors who prefer to stay hidden. “Like water flows downward, the money will flow to those entities that take advantage of the new framework or loophole,” said executive director of Arizona’s Citizens Clean Elections Commission Tom Collins. Those in favor of the bill “dismiss[] the notion that the legislation expands dark money because [they] disagree with the definition of what constitutes dark money…. [claiming that] dark money only involves completely anonymous speech.” This means that as long as a group identifies itself in a political ad (e.g., “ad paid for by XYZ”), regardless of whether or not the group discloses its donors, then it is not “dark money.” This reasoning runs completely counter to the widely agreed upon definition of the term, which is used as a catchall for “social welfare” nonprofits that fall under the 501(c)(4) section of IRS code and are not compelled to disclose their donors—so long as they spend no more than 49% of their resources on political activity, under the IRS’s overly permissive interpretation of the law.

The concurrence of both these recent events in Arizona government is strange timing—or perhaps merely yet another sign of the state’s move in the wrong direction. Loosening campaign finance regulations only encourages more secrecy, cementing a system in which lawmakers are more accountable to deep-pocketed, secret special interests than to actual voters. Chief among the evidence of this is Arizona’s Secretary of State Reagan, who in 2013 as a state legislator “crafted legislation that would have required 501(c)(4) ‘social welfare’ groups to disclose their donors” and campaigned for secretary of state on promises of shining a light on dark money, all of which she abandoned once in office. Reagan herself benefited from dark money during her bid for secretary of state, notably a $300,000 attack-ad push against her Democratic opponent paid for by the conservative tax-exempt group 60 Plus Association. Reagan promoted SB 1516 under the auspices of simplifying Arizona’s campaign finance laws, but the bill goes much further than that, opening the door to more dark money in the state’s elections. Unfortunately, Arizona Governor Doug Ducey signed SB 1516 into law on Thursday, March 31.

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