Supreme Court ruling on campaign finance may have little impact on MI elections

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As the 2010 election season gets underway, Michigan is struggling to define the guidelines under which corporations and labor unions will participate.

A January Supreme Court ruling on campaign finance — Citizens United v. Federal Election Commission — changed the way that corporations and labor unions can fund political campaigns and some worried that this would allow a new flood of corrupting corporate funded campaign ads, but so far in Michigan it seems unlikely to change much about how elections play out.

In Citizens United v. FEC the court considered the constitutionality of laws that limit a corporation’s ability to spend money on political ads. The case involved a corporation, Citizens United, which was blocked by the 2002 McCain-Feingold Campaign Finance Act from distributing an anti-Hillary Clinton documentary via cable pay-per-view during the 2008 presidential primary season.

The Supreme Court ended up deciding this case by overturning a previous decision they’d made in a case about Michigan campaign finance law. In 1990 in Austin v. Michigan Chamber of Commerce, the Supreme Court upheld a lower court ruling that found that Michigan’s law banning independent expenditures by corporation was justified because people believe that corporate contributions can have a corrupting influence on politics.

In Citizens United, the majority of justices looked to the court’s tradition treating corporations as “persons“ with First Amendment rights and ruled that it is unconstitutional to limit the speech of corporate persons by limiting how much money they spend on political communications.

The case was decided by a majority consisting of the court’s five conservative justices. Solicitor General (and current Supreme Court justice nominee) Elena Kagan argued on behalf of the government against removing the restrictions on corporate campaign speech.

The case did not take up the issue of contributions to candidates or their political committees, just how corporations can spend for their own “independent” communications in favor of or against a candidate. The court also affirmed that states can establish rules to require financial disclosure from corporations that make independent expenditures.

The Citizens United ruling was seen as a landmark campaign finance decision with the potential to herald vast new corporate spending on elections. And because corporations tend to have more money than labor unions, the removal of funding restrictions seemed likely to favor GOP candidates.

Within weeks of the January decision, the Michigan Chamber of Commerce — perhaps the state’s most powerful lobbying group — requested a declaratory ruling from the Michigan Secretary of State on what the ruling would mean for the Chamber’s campaign related activities.

The Chamber wanted to know whether it could now form a political action committee for the purpose of making independent expenditures for “express advocacy” ads that directly endorse a candidate, whether it could solicit funds from others to pay for those ads, and whether it would have to disclose which companies or individuals had contributed to the new committee.

In a final ruling on the Chamber’s question issued May 21, Secretary of State Terri Lynn Land said that the Chamber can spend any amount it wishes on independent expenditures for express advocacy, but it cannot collect money from other groups for the purpose of funding these ads.

“A corporation’s political speech,” Land wrote, “must be funded exclusively by that corporation.”

Robert LaBrant, vice president of public affairs and general counsel for the Michigan Chamber of Commerce said that he was surprised by Land’s decision.

Corporations have long been permitted to spend freely on ads relating to ballot proposals and to solicit contributions for this purpose, LaBrant said, and he had expected independent expenditures to be treated similarly.

The limitation on fundraising drastically reduces the likelihood that the Chamber will make much use of its new freedom to buy ads telling people how to vote, he said.

Under Land’s interpretation on the Michigan Campaign Finance Act, corporations are not restricted n how much they may spend on “issue ads” — communications that don’t explicitly say who to vote for or against but are clearly intended to influence that vote. And they are permitted to raise money from others to pay for such ads and need not disclose who contributed to the ad.

Because of the lack of reporting requirements associated for issue ads, corporations of all sorts can provide what LaBrant called “a cloak of anonymity” to the contributors to their ads.

“I don’t think you are going to see much [independent expenditure] activity at all in 2010 because you still have the issue ad alternative,” he said. “And when given the alternative to have anonymity or not, most people are going to chose anonymity. Plus, if you can’t do any fundraising [for express advocacy] you are not going to be able to accumulate money. There has to be some incentive to utilize this mechanism.”

Issue ads have become a staple of Michigan political campaigns.

TV stations are required to make a public record of who pays for political ads but these records don’t show where those corporations got the money for the ad.

According to the Michigan Campaign Finance Network (MCFN) which tracks spending on political ads, in the last decade more than $45 million has been spent on these ads.

In the 2008 Michigan Supreme Court campaign $3.8 was spent on issue ads, more than the total spent by the candidates’ committees and reported independent expenditures.

The issue ads included the most prominent advertisements of the campaign: Out of Touch, sponsored by the Michigan Republican Party; The Sleeping Judge, sponsored by the Michigan Democratic Party; and Dangerous Rulings, sponsored by the Michigan Chamber of Commerce.

Rich Robinson, director of MCFN, says that issue ads sponsored by the Michigan Civic Educational Fund, Eagle Strategies and Americans for Job Security have already aired in this year’s campaign for governor.

Land’s ruling that the Chamber cannot aggregate funds for express advocacy is a “small victory” according to Robinson. But, he said, “The matter of candidate-focused issue ads has not been addressed, and that is an enormous loophole.”

Robinson said that Secretary Land was wrong to address only the very narrow issue of “express advocacy” in her ruling.

“‘Express advocacy’ is neither a language nor concept found in the Michigan Campaign Finance Act, he wrote, “In fact, the impact of the Citizens United v. F.E.C. decision is to allow all corporate expenditures … Citizens United should affect all communications in state campaigns where there is a clear inference of support or opposition to a candidate.”

Michigan legislators could chose to adopt new rules requiring greater disclosure for how corporations spend on political campaigns, and this month the House Ethics and Elections committee held hearings on a package of bills that would amend the way that state campaign finance law deals with independent expenditures.

Both Robinson and LaBrant say these bills are more of a publicity stunt than a serious attempt at legislative reform.

The package does not deal with disclosure of funding for issue ads but it does include language prohibiting direct expenditures by a broad class of corporations, including foreign corporations, subsidiaries of foreign corporations, those who receive funding from a foreign county and even those that have a single shareholder that is not a U.S. citizen.

The bills would also prohibit independent expenditures by corporations that are receiving or have applied for grants, tax incentives or tax credits from the state, or by corporations that received assistance from the federal Troubled Asset Relief Program.

The legislation would also block independent expenditures from insurance companies and electric and natural gas utilities.

“It is a package of bills that is so constitutionally flawed it would never survive a preliminary injunction motion,” LaBrant said, “but at least it allowed an opportunity to discuss some of the public policy issues.”

LaBrant said that he testified before the House committee last week and suggested that lawmakers create a rule that would allow corporations to pool their resources to purchase express advocacy ads. He said that the Chamber would be open to disclosing some information about the contributors to the ad fund.

Robinson, meanwhile, says that such legislative efforts to fix this problem are likely to fail because politicians of both parties benefit from the spending of interest groups and don’t want to disrupt the system as it is.

“This isn’t Republicans against Democrats,” Robinson said, “this is people giving comfort to interest groups against peoples’ rights to know. There are no innocents in this.”

“I can’t emphasize enough what a huge isue this is. Jennifer Granholm benefited from $20 million in these ads. We don’t know where any of that money came from.”