DATE: December 5, 2000
TO: Rich Eggleston, Wisconsin Alliance of Cities
FROM: Jay Heck, Executive Director of Common Cause In Wisconsin (CC/WI)
SUBJECT: State Campaign Finance Reform in 2001-2002: The First Big Step

Candidate spending and independent expenditures—which are disclosed and regulated---broke all-time records in 2000, but it was the increase in the undisclosed, unregulated "phony issue advertisements" that should give Wisconsin citizens the most cause for concern. Untold hundreds of thousands of dollars were spent on these stealth campaign communications, paid for with funds from sources we will never know, in key State Senate and Assembly races during the Fall campaign. Sham issue advocacy has emerged as the single largest loophole in Wisconsin’s once effective campaign finance law and it threatens to undermine any law, present or future, unless it is closed.

Ironically, this distressing phenomenon has created the dynamic for achieving early enactment of meaningful campaign finance reform in the upcoming 2001-2002 legislative session—the first such reform in almost a quarter of a century. Phony issue ads have been the main staple of Wisconsin Manufacturers & Commerce (WMC), the state’s largest business group since 1996, primarily to benefit Republican candidates but this year new groups with names like Americans for Job Security (in support of Republicans) and People for Wisconsin’s Future (favoring Democrats) joined in the phony issuead free-for-all to give this matter a truly bipartisan bent. As a consequence, there is now a growing bipartisan consensus in favor of curbingthis abuse.

Campaign ads masquerading as issue advocacy first gained notoriety in 1996 when WMC reportedly spent more than $400,000 (although we don’t know for sure because it was not disclosed) in behalf of Republican legislative candidates, primarily to attack Democratic incumbents. WMC exploited a gaping loophole in Wisconsin’s campaign finance law permitted them to run campaign ads that, because they carefully avoided the use of certain so-called "magic" words (spelled out in the famous and much misinterpreted footnote number 52 of the 1976 Buckley v. Valeo Supreme Court decision), WMC claimed were not subject to the disclosure and restriction laws that govern candidate campaign ads and campaign ads run by "outside" organizations which are called independent expenditures.

In other words, WMC could run thinly veiled campaign attack ads, paid for by unlimited funds from corporations or wealthy individuals (candidate ads and independent expenditures have limits on the size of contributions that may be used to pay for them), and those sources of funding would not have to be disclosed (any contribution of $20 or more to a candidate or independent expenditure group must be disclosed). This was a deliberate end-run sweep around Wisconsin’s nearly century old prohibition on corporate treasury money from being used to influence the outcome of state elections.

The State Elections Board enjoined WMC’s ads right before the 1996 election for this very reason and the case wound its way through the courts until finally, in July of 1999, the Wisconsin Supreme Court ruled that state election law did not clearly spell out what differentiates express advocacy—or campaign-oriented speech, from issue advocacy—the discussion by individuals or groups about issues. Therefore, the Court said, WMC was not in violation of state election law in 1996. But the Court also ruled that the state had the right—and indeed the duty—to clearly define express advocacy so that there would be no ambiguity about this matter in the future. The Court challenged the State Elections Board or the Legislature to close this huge, gaping loophole in Wisconsin’s campaign finance law and restore a measure of integrity to our system.

On September 29, 1999 the hopelessly dead-locked State Elections Board "punted" on the issue. For two years the Board had split 4 to 4 on whether or not to treat phony issue ads as campaign speech and after the Supreme Court’s ruling they essentially left the decision to the Legislature. The Board issued a definition of express advocacy which was nothing more than a restatement of the infamous foot note number 52 of the 23-year old Buckley decision which meant that they would continue to split 4 to 4 on the matter of whether or not the WMC-type phony issue ads ought to be treated as campaign ads. The impotent rule then went to the Legislature’s standing committees to consider. In February, the Republican-controlled Assembly Committee on Campaigns and Elections—at the strong urging of Common Cause In Wisconsin (CC/WI)--voted unanimously to reject the Elections Board’s "do nothing" rule. The State Senate Committee on Government Operations, controlled by the Democrats, likewise voted without dissent to reject the rule. In both cases, a majority of legislators on each committee expressed the need to adopt a stronger measure to close the phony issue ad loophole.

On April 12th, the rule was considered by the Legislature’s Joint Committee for Review of Administrative Rules (JCRAR), which is evenly split with five Republicans and Democrats each. The Committee, acting on the recommendations of the two legislative standing committees, voted to reject the ineffective rule unanimously. JCRAR then had thirty days to devise a new rule.

JCRAR Co-Chair, Senator Judy Robson (D - Beloit), was at first inclined to push for the adoption of a measure that would require disclosure only of any widely disseminated communication made thirty days prior to the general election which named or depicted a candidate. This approach had been suggested as a compromise by the three-year-old Governor’s Blue Ribbon Commission on Campaign Finance Reform (Kettl Commission) Report that had virtually no support in the Legislature or among reform organizations including CC/WI, because it did so little to address Wisconsin’s campaign finance problems. But CC/WI sprang into action to press for JCRAR to adopt a stronger, more effective measure to deal with the phony issue advocacy problem. CC/WI convinced Senator Robson to adopt a sixty day measure (rather than a thirty day) requiring not only disclosure but restriction as well on the funds that could be used to pay for such campaign communications. In other words, groups like WMC would no longer be able to solicit $50,000 or $100,000 or even larger contributions from corporate treasury funds or from wealthy individuals to pay for phony issue ads. They would have to abide by contribution limits that would be disclosed—just as groups running independent expenditures and candidates running their own ads are forced to do. CC/WI enlisted the support of Republican reform leaders Representative Stephen Freese of Dodgeville and Senator Mike Ellis of Neenah to help gain Republican support for its stronger JCRAR measure and secured the support of all five committee Democrats. The result, on May 10, 2000 was a stunning, overwhelming and strongly bipartisan 8 to 2 vote in favor of the sixty day rule requiring restriction and disclosure of the funding for phony issue ads. Three JCRAR Republicans (Senator Dale Schultz of Richland Center and Representatives Lorraine Seratti of Florence and Scott Gunderson of Union Grove) joined all five committee Democrats (Senators Robson, Richard Grobschmidt of South Milwaukee, Kevin Shibilski of Stevens Point and Representatives Spencer Black of Madison and James Kreuser of Kenosha) in endorsing the strong and effective measure. At a Capitol press conference on October 19th, Senator Robson, Rep. Freese, Republican Dan Finley, the Waukesha County Executive, joined CC/WI in reiterating strong, bipartisan support for the JCRAR phony issue ad measure and for its immediate consideration and enactment into law in early 2001.

Under Wisconsin Statutes section 227.19(6)(b), JCRAR must introduce the phony issue ad measure in January as part of the regular session of the Legislature where it is immediately referred to each house’s standing committee that considers that subject area. Each standing committee has 30 days to review the measure and within 40 days of referral to the standing committees, the measure must be placed on the calendar of both the Assembly and State Senate for consideration. This means that campaign finance reform–usually delayed and considered at the end of each biennium session, if at all—must be one of the first orders of business of the new 2001-2002 Wisconsin Legislature.

Further bolstering the chances for enactment of the phony issue ad measure is the fact that an overwhelming nearly 90 percent of Wisconsin’s voters, residing in 59 of Wisconsin’s 72 counties with nearly 90 percent of the state’s population, voted a resounding "YES" on the advisory referendum question on campaign finance reform which asked if Wisconsinites favored, among other things, full and prompt disclosure of election related activities. This ought to provide some much needed backbone to legislators who otherwise would fear the wrath of special interest groups opposing disclosure of their campaign ads masquerading as issue advocacy.

Perhaps most significantly, Governor Tommy G. Thompson said shortly after November 7th he would love to face in the courts those outside groups in who misleadingly claim that phony issue advocacy is a First Amendment right protected by the Constitution. He has also said he will sign any campaign finance reform measure that reaches his desk. Senate Majority Chuck Chvala (D-Madison) has announced that the JCRAR phony issue ad measure will be the first, top reform priority in that chamber where there is bipartisan support for it. Republican Assembly Speaker Scott Jensen of Waukesha did not foreclose the idea of acting on the measure, acknowledging the strong statement made by Wisconsin’s voters in the advisory referendum vote.

Enactment into law early in the upcoming legislative session of the JCRAR measure would provide momentum for further, comprehensive campaign finance reform legislation earlier rather than later in the session. It would also close the single largest loophole in Wisconsin’s campaign finance law. Opponents of reform would almost certainly take the measure to the courts in an attempt to have it struck down as unconstitutional. But a similar phony issue ad measure enacted into law in 1999 in Connecticut that stipulated that communications depicting a candidate’s name or likeness 90 days prior to the general election are considered to be campaign speech subject to disclosure and restriction, was in place and functional during the entire 2000 election cycle, despite attempts by reform opponents to have it struck down.

Enactment of this measure would be the most significant campaign finance reform in Wisconsin since 1977. Failure to pass it could lead to the usual stalemate, partisan wrangling and ultimately, failure to achieve any reform Wisconsin’s campaign finance laws. It is an opportunity that must not and cannot be wasted. But state legislators must know that the public is watching to see what they do on this first, all-important test on reform in Wisconsin.

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Thank you.