Jesse Unruh, the late California state treasurer and General Assembly speaker, has been immortalized for his oft-repeated remark: "Money is the mother's milk of politics." As campaign costs skyrocket and allegations of questionable fundraising practices mount, the flood of money into elections has curdled into growing public disaffection with politics and has generated rising demands for change.

Journalistic, public, and scholarly attention typically focuses on presidential and congressional campaigns, largely ignoring state and local races. Anecdotes of alleged excess and record expenditures at the state level, of course, abound. Together, the three candidates for the 1998 Democratic nomination for governor in California spent more than $65 million and flooded the airwaves with nearly nonstop campaign ads. Closer to home, the 1997 Virginia governor's race was the most expensive ever, costing over $18 million. Controversies erupted over contributions to statewide and legislative candidates from national party organizations (such as the Republican National Committee and the Congressional Blue Dog PAC) and visible individuals and interests (like Pat Robertson and trial lawyers).

Considerably less clear and far more contentious, however, are other issues. How much money should be raised and spent in campaigns for state office? From whom should funds come? What, if anything, should be done to change the present system of campaign finance? Even as US Senate hearings on alleged finance abuses in the 1996 presidential campaign continue, the need and prospects for campaign finance reform in Virginia also deserve attention.

At the outset, it is important to distinguish between national and state levels. The Federal Election Campaign Finance Act applies only to candidates for federal office (the presidency and Congress). States have numerous and diverse laws that regulate campaign finance in all sorts of state and local elections. Moreover, the electoral dynamics at the two levels often differ dramatically. Turnout in purely state or local races tends to be lower than in congressional or presidential elections; more frequently, too, state and local contests are less competitive and less visible. The interest groups that contribute to the campaigns also vary; since states regulate numerous industries (such as utilities and insurance) and have the primary responsibility for public education, for instance, candidates for state office usually receive sizeable contributions from groups representing these interests.

A brief examination of both the alleged problems in current state campaign-finance practices and possible "solutions" may help in sorting out the numerous issues involved. Certainly, such exploration will highlight areas of considerable complexity and controversy.

ARE THERE PROBLEMS?

Many observers point to at least three concerns with the way candidates for state office pay for their campaigns: the amount of money that is raised and spent, the sources of those funds, and whether a particular political party or incumbents have an "unfair" advantage in raising money. Underlying these issues is a deeper concern about the effects of campaign money--on who wins and who loses elections and on the policy decisions of elected officials.

Amount of money

A September 1997 Washington Post poll of 808 Virginians found that 83 percent believed that "too much" money was being spent in the fall campaigns. But less obvious is the point at which expenditures become "excessive." The 1997 Virginia governor's race, for example, cost more than $18 million. By comparison, in 1994, the last time 36 other states had gubernatorial elections, the average cost was $11.6 million. In nearby states, costs in Pennsylvania totaled $36.1 million; in Tennessee, $28 million; in Maryland, $13.4 million; in South Carolina, $12.3 million; and in Georgia, $12 million. ¹ Virginia, with its perpetually open governor's seat and increasing party competition, ranks roughly in the middle of its neighbors in the amount of money spent. The comparison changes somewhat when one examines cost per voter to help take into account differences in population size. Then, Tennessee and South Carolina rise to the top of the list, with $18.82 and $13.20 spent per voter, respectively; Georgia (at $7.73) again appears at the bottom, with Maryland ($9.53) and Pennsylvania ($10.06) next. Once more, Virginia ($10.20) falls in the intermediate range. At the same time, the rapid growth in candidate spending disturbs many people. The 1997 Virginia governor's race not only was the most expensive ever, but it contrasted sharply with the $11.97 million spent in 1993 as well as the $12.34 million that flowed in the hotly contested 1989 race between Marshall Coleman and L. Douglas Wilder. Accelerating expenditures also appear when one considers cost per general-election voter in recent gubernatorial contests: $6.91 in 1989, $6.59 in 1993, and $10.20 in 1997. Meanwhile, between 1983 and 1993, campaign expenditures in races for seats in the Virginia House of Delegates in districts with both Democratic and Republican nominees increased 450 percent, reaching more than $6.5 million in 1993. By 1995 candidates spent $21 million running for state house and senate seats, compared to $3.4 million in 1983, another non-gubernatorial election year (when expenditures in state legislative races typically are higher).

At the same time, it is important to consider why some state-level races cost more than others, as well as why expenditures are rising. Looking across the 50 states, expenditures on governors' races recently have leveled off. If one focuses on the 36 states that elect governors in off-presidential years, one sees inflation-adjusted increases of less than 10 percent between 1986 and 1990 and between 1990 and 1994; nationally, the big increase in recent years came between 1982 and 1986, when spending increased by more than one-third. Even here, almost a quarter of the total expenditures in these 36 states between 1982 and 1994 was spent in Texas and California.

Although the pattern of increases in Virginia is somewhat different, it largely reflects dynamics common to most other states. Inflation is only a relatively small part of the story. More money is spent on campaigns when the seat being contested is open; that is, when there is no incumbent. Alone among the states, the Virginia governor's seat becomes vacant every four years. Campaign expenditures on races for lieutenant governor and attorney general similarly mount when incumbents decide not to seek reelection, as happened in 1997. Campaigns also grow more expensive as individual races become more competitive and when there is a strong chance that party control of the governorship or one of the state legislative chambers might change. It is scarcely surprising, then, that more money has been spent on campaigns in the commonwealth over the past several years, as the Republican party has grown more competitive and both houses of the legislature edged toward equal partisan division of seats. That Virginia and New Jersey are the only states with gubernatorial elections in "off-off years" like 1993 and 1997 also has ensured their becoming virtual magnets for out-of-state and national party money.

Sources of money

Indeed, some critics object not to the amount of money spent on campaigns (which, after all, is less per voter in most elections than many of us pay for cable television every month) but rather to the sources of those funds. Much of the current debate over the fundraising practices of the 1996 Clinton-Gore campaign, for example, focuses on alleged contributions from non-U.S. citizens and from foreign governments, which not only are illegal but also raise national security concerns. At the state level, worry about money donated by corporations and labor unions has led some states to follow the federal lead and to outlaw such contributions; by 1996, 21 states prohibited corporate contributions, while 26 forbade union donations. Others have expressed concern about funds flowing from wealthy individual donors, political action committees (PACs), and national party organizations. As a result, more than two-thirds of the states limit individual contributions, 34 have ceilings on PAC donations, and 19 limit national party contributions.

Virginia is one of only five states with no limits on the sources or the amounts of campaign contributions. Still, as in most states, the major sources of campaign funds typically are, in ranked order, individuals, nonparty PACs, and the political parties. In Virginia in 1997, for instance, much public attention focused on the contributions of evangelist Pat Robertson ² and on donations from the National Rifle Association, tobacco interests, and developers. Considerably less visible were contributions from numerous other wealthy individuals and from banks, health-care providers, utilities, realtors, and other state-regulated interests, including more than 130 distinct PACs.

Finally, local, state, and national party organizations also donated funds. Of particular importance were flows of "soft money" from national party committees, as well as money from the state party organizations and the Republican and Democratic legislative campaign committees. Despite its growing notoriety at the national level, soft money simply refers to funds raised and spent by the national parties for use in state and local "party-building activities." In 1997 Republican candidates in Virginia, in particular, benefited from the national GOP funds: only two states had statewide elections, and New Jersey law limits the amount of money spent by national party groups (on, for example, "issue advocacy" ads). National Republican organizations like the Republican National Committee (RNC) gave more than two million dollars to the Gilmore gubernatorial campaign, $75,000 to lieutenant governor candidate Hager, and $25,000 to attorney general nominee Earley; the state Republican Party received an additional $389,350 from the RNC. Meanwhile, the Democratic National Committee (DNC) struggled with a $15 million debt for legal expenses from the 1996 presidential campaign; contributions from national Democratic groups, including the DNC, to state Democratic candidates and the Virginia Democratic Party totaled only $430,000. Still, overall expenditures by the state party organizations served to partially close the soft money gap. The Democratic Party of Virginia spent close to $2.8 million in 1997, while its Republican counterpart spent just around $1.7 million.

Also increasingly important in Virginia--and in other states--are legislative campaign committees. Subdivisions of each party's legislative caucuses, these committees raise money and provide services for party candidates running for state legislative seats. In 1997 the Joint Republican Caucus raised and spent over one million dollars, while the two Democratic legislative committees (the Commonwealth Victory Fund and the Virginia Senate Democratic Caucus) raised almost $2.6 million and spent nearly all of it.

Distribution of money

For still others, a major criticism of current campaign finance systems is the distribution of money among those running for office. Clearly, there are patterns as to how campaign funds do (or do not) flow into candidates' coffers.

In general, PACs contribute mainly to incumbents who hold safe seats. Most PACs represent some sort of economic or professional interest. More than almost anything else, these interests seek predictability from state government--for instance, continued funding, stable regulation, unchanging tax rules. Contribution to a safe incumbent may foster continued support for a PAC's agenda, or at the very least not make an enemy out of a powerful legislator. As a result, most incumbent state legislators receive between one-third and one-half of their campaign funds from PACs, and those proportions generally seem to be rising. In contrast, less than 20 percent of challengers' money comes from PACs.

By comparison, national and state party organizations and legislative campaign committees (as well as "ideological" PACs like the Family Research Council's Campaign for Working Families and the Virginia NOW PAC) are far more likely to focus on open seats and on close races involving incumbents. Such an emphasis not only allows these groups to target funds where they are likely to have the highest return, but also to redistribute campaign money and services away from safe incumbents. In addition, funds from party organizations and legislative committees may help buffer candidates and officeholders from direct interest groups or PAC influence.

Effects of money

Underlying the debate that swirls around campaign finance is a critical question: does campaign spending make any notable difference? Although many Americans evidently believe otherwise, the answers are not always clear-cut.

On the opening day of campaign finance hearings before the Senate Governmental Affairs Committee in 1997, U.S. Senator Max Cleland (D-Ga.) asserted: "Our democracy has become an auction, not an election." Yet spending's impact need not always be bad. In most states most of the time, more expensive campaigns generate higher voter turnout. Nor does spending more than an opponent guarantee success. In Texas in 1994, for example, incumbent Governor Ann Richards spent $14.5 million to George W. Bush's $11.9 million but still lost handily. Despite spending less than either of his two primary opponents, Democrat Gray Davis emerged the victor in June's California gubernatorial primary. Nonetheless, considerable evidence does suggest that the more a challenger spends, the better she or he will do against the rival incumbent. Past some threshold level of expenditure, however, diminishing returns set in; after a certain point, the effect of spending tails off. Even so, it clearly is important for a challenger to amass sufficient funds to run a credible campaign--among the reasons why some states have moved to public financing of state elections. How much money is "sufficient," of course, varies over time and place. And, with few exceptions, states with public financing have not made enough funds available to provide any meaningful tests.

If money usually cannot buy elections, others worry that it may at least serve as a down payment on future policy decisions. There is scant evidence, however, that state legislators vote, or governors act, according to the demands of top contributors. Still, most experts agree that campaign contributions, especially to state legislators, guarantee access and, on occasion, may ensure how a legislator spends his or her time, perhaps the scarcest resource of all. Moreover, some legislators may see PAC giving as a search for "table stakes," aimed at including interest group members in particular policy discussions. As a result, critics charge, narrower economic interests have disproportionate influence on state legislative agendas and on ultimate policy decisions.

Longtime state legislative observer Alan Rosenthal, however, contends: "Money follows votes rather than votes following money."³ That is, interest groups typically donate money to incumbents who agree with the groups on issues. Meanwhile, the influence of any one group on a policy decision typically wanes as the decision becomes more publicly visible and involves issues that are important to more than a single interest. As groups overall come to represent a wider range of interests, it grows less likely that any one group will dominate. At the same time, only rarely do legislators act against their own values or the demands of citizens in their districts. Statewide elected officials typically are exposed to a broader range of oft-competing interests, making it even less likely that they will respond to the demands of any particular donor.

CAMPAIGN FINANCE "REFORM"

Each of these concerns about campaign finance--the amount of money spent, the sources of funds, the distribution of campaign monies, and the possible effects of contributions on elections outcomes and government decisions--has led states to experiment with diverse "reform" strategies. Most common are the requirements in all 50 states that candidates and PACs disclose the sources of their campaign contributions (usually those over $100) and how those funds are spent; 48 states also require state parties to report their campaign receipts and expenditures, and a majority impose similar mandates on unions and corporations. The goal behind such financial disclosure rules is to permit voters to see any possible conflicts of interest between a candidate's funding sources and his or her responsibilities once elected to public office. A second reform strategy seeks to reduce the influence of wealthy contributors, focusing on the amount or sources of campaign donations. Thus, as we have seen, many states place ceilings on what individuals and PACs may contribute, while others prohibit corporations and unions from donating money. Third, in an effort to level the campaign-funding playing field, 20 states provide some form of public financing (typically funded by state income tax check-offs), although only five make public money available for state legislative races. These races limit the size of campaign contributions, and nine states cap campaign expenditures in return for candidate access to public financing.

Despite such efforts at reining in campaign funding, most observers agree that they have achieved rather little. In part, this reflects the extraordinary difficulty of out-maneuvering determined and ingenious contributors and fundraisers. Limiting the amount that groups or individuals can donate, for example, has channeled money to the national parties' soft money accounts and then back to the targeted state and has catalyzed additional "independent" spending on behalf of or in opposition to particular candidates. Meanwhile, state agencies charged with monitoring compliance to campaign finance laws are notoriously understaffed and underfunded.

Even more important, perhaps, are the inevitable dilemmas posed by campaign- finance reform. For instance, not limiting campaign expenditures may favor Republicans, who tend to have distinct financial advantages. Yet capping expenditures both poses constitutional problems (the U.S. Supreme Court has viewed doing so as infringing on free speech) and may well hurt challengers, whose chances of defeating incumbents are improved by reaching some expenditure floor, not by laboring under a spending ceiling. More generally, in a democracy like the U.S., a conflict arises between making the opportunity to run for office as widely available as possible and permitting challengers to spend whatever they want to try to win elective office. Similarly, the desire to limit the influence of wealthy "special interests" competes with the belief that citizens ought to be able to give money (as well as time, energy, and votes) to any candidate or cause they choose.

Such dilemmas have led some to suggest that perhaps the best "reform" is complete disclosure of the sources and amounts of campaign contributions and expenditures.

In Dirty Little Secrets, for example, political analyst Larry Sabato and journalist Glenn Simpson propose a "free market for campaign finance." Under their strategy, dubbed Deregulation Plus, "disclosure laws would be broadened and strengthened, and penalties for failing to disclose would be ratcheted up, while rules in other aspects--such as sources of funds and sizes of contributions--could be greatly loosened or even abandoned."⁴ Providing citizens ready access to financial information itself may prove quite valuable since such "sunlight" may be, as former U.S. Supreme Court Justice Louis Brandeis once observed, "the best of disinfectants."

Although all states currently have disclosure requirements, fewer than half mandate the listing of donors' occupations and principal employment. Even those states with such requirements permit vague reporting; Virginia, for instance, allows candidates to list donors as "retired," "homemaker," "self-employed," or "unspecified." Only California requires random checks of disclosure reports.

Virginia comes close to following a Deregulation Plus strategy. It places no restrictions on the sources or amounts of campaign contributions and has no spending limits. The commonwealth does require annual "Statements of Economic Interest" from, among others, all elected state officials and candidates for state elective office. The Campaign Finance Disclosure Act mandates frequent candidate and party reports on campaign contributions and expenditures; these reports are required daily as campaigns move into the final days. In 1998 the General Assembly amended the act to expand the reporting requirements to all elections and to require candidates for statewide office (and to permit legislative candidates) to file this information electronically beginning January 1, 1999; it also instructed the State Board of Elections to post all campaign finance data on the Internet by 2001. Indeed, the Virginia Public Access Project already has collected information on campaign finance going back to 1990 from the Board of Elections and made it available on the Internet (see note 2).

Although most Virginians, like the majority of Americans, favor limits on campaign contributions, the prospects for significant campaign finance reform in the state currently appear quite limited. Bills to introduce public financing and to encourage voluntary acceptance of expenditure limits by state legislative candidates died in the 1998 General Assembly session. Short of serious finance-related scandal (itself nearly unprecedented in the commonwealth), few major changes in campaign finance law seem likely--or clearly warranted.

In the abstract, perhaps the surest way to address concerns about the role of money in campaign politics would be to provide public financing for all statewide and legislative candidates at high enough levels both to give challengers meaningful opportunities to beat incumbents and to ensure that virtually all candidates would accept the public money--and the limits on fundraising, expenditures, and advertising that likely would accompany its acceptance. Yet, like virtually all of the other efforts by states to gain control over campaign finance, this one provides few guarantees. Moreover, public financing would be costly and would require continual monitoring and adaptation to keep up with the ever-changing strategies of resourceful and dogged competitors. Meanwhile, in the real world of Virginia politics, it is difficult to imagine the adoption of public financing by self-interested and risk-averse elected officials competing for partisan advantage in a state known for its fiscal conservatism and distrust of intrusive government.

Far more promising in my view are efforts to improve existing financial disclosure requirements. All candidates for elective office in Virginia as well as parties and PACs should continue to be required to report regularly the sources and amounts of campaign contributions and expenditures. Those reports should be made more easily accessible in understandable form to voters and the media before elections. In addition, the vague reporting categories for donors' occupations should be sharpened, disclosure reports randomly audited, and significant fines levied for late or inaccurate reports.

Even these incremental changes, of course, would demand more not only of candidates, but also of citizens. Citizens arguably need to do more than complain about corrupt or unresponsive government or seek quick fixes in often unworkable, inequitable restrictions on contributions or expenditures. Full financial disclosure, coupled with careful attention to campaign promises and performance in elective office, might well give voters additional leverage when judging the actions of those who seek to govern. For the ultimate responsibility remains with Virginia voters: to communicate knowledgeably, clearly, and persistently what we expect from state government and from campaigns for elective office.

NOTES

1 Figures for states other than Virginia are taken from Thad L. Beyle, "The Cost of Winning," State Government News, April 1996, pp. 10-14. Virginia data are from the State Board of Elections and various issues of the Almanac of Virginia Politics.

2 Robertson donated $50,000 to the James Gilmore campaign for governor, $35,000 to attorney general nominee Mark Earley, and $25,000 to lieutenant governor candidate John Hager. He also made contributions to the Republican Party of Virginia and the Joint Republican Caucus. See the Virginia Public Access Project

3 Alan Rosenthal, The Decline of Representative Democracy: Process, Participation, and Power in State Legislatures (Washington, D.C.: Congressional Quarterly Press, 1998), p.222.

4 Larry J. Sabato and Glenn R. Simpson, Dirty Little Secrets: The Persistence of Corruption in American Politics (New York: Times Books, 1996), p. 330. For a somewhat different view, see, for example, Michael J. Malbin and Thomas L. Gais, The Day after Reform: Sobering Campaign Finance Lessons from the American States (Albany, N.Y.: Rockefeller Institute Press, 1998).

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Karen Marie Hult is a professor in the Department of Political Science and in the Center for Public Administration and Policy at Virginia Tech and has directed the Program in Public Policy Analysis at Pomona College. She co-authored the books Governing the White House: From Hoover through LBJ and Governing Public Organizations: Politics, Structures, and Institutional Design. She has also written numerous articles, book chapters, and book reviews on politics.