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Money is the mother’s milk of politics

By Dallas Woodhouse and Bryce Fiedler

When it comes to campaign donations, government ethics and pay-to-play politics, South Carolina has a shockingly corrupt and unaccountable system. Citizens can’t find out who is giving political money and why. Donations of all kinds are secret. Campaign finance regulations are laughably weak, unenforceable or simply nonexistent. When politicians do break the rules, rarely are there meaningful consequences. It is the perfect recipe for corruption.

While the South Carolina Policy Council (SCPC) supports the freedom for people to engage in political speech as they see fit, we also believe maximum disclosure is critical for accountability and transparency, and that consistent and meaningful enforcement is necessary to maintain the public's trust. Rules should be clear, concise and unambiguous.

Small updates will not be enough to resolve this issue. South Carolina has not significantly overhauled its campaign finance system in more than three decades, and major change is required.

The Policy Council recommends:

  • Adopting clear definitions of “political committee (s)” that draw clear distinctions between political parties, political action committees, issue advocacy and independent expenditures.

  • Requiring additional disclosure requirements for contributions and expenditures, while avoiding overregulation that would stifle grassroots political activity.

  • Removing or significantly increasing individual and political party contribution limits to

  • Requiring all candidates, political parties and organizations engaged primarily in express advocacy to fully report donations and expenses.

  • Requiring expenditure reporting for organizations involved in candidate-specific communications immediately preceding elections.

  • Repealing special rules for special legislative committees.

  • Banning all direct corporate contributions to candidates and political parties.

  • Empowering the S.C. State Ethics Commission with real enforcement authority.

  • Ending legislative self-policing on campaign finance.

  • Repealing grossly unconstitutional statutes that criminalize the political speech of certain state lawmakers.

  • Expanding state ethics laws to cover local lobbying.

Historical background

The First Amendment guarantees every American freedom of speech. That freedom includes the right to spend money on speech – otherwise, our message wouldn’t travel beyond the sound of our voice. The U.S. Supreme Court has long prohibited the government from limiting how much individuals can spend on political speech.

In the first modern campaign-finance case, Buckley v. Valeo (1976), the Supreme Court responded to the post-Watergate reform known as the Federal Election Campaign Act. The court applied the First Amendment’s free-speech protections to expenditures, though not to contributions. The court held that contribution limits are constitutional given the government’s interest in preventing quid-pro-quo corruption, or the appearance of corruption, but that limits on expenditures are not constitutional.

However, as noted by The Institute for Free Speech:

“The right to support candidates or causes that you believe in is a core First Amendment right. Limits on one’s political donations infringe on that right. While the Supreme Court has generally accepted contribution limits, that doesn’t mean such limits are good policy. Evidence from the past 40 years of contribution limits, provides little evidence that such restrictions have reduced corruption, as the Court anticipated, or achieved their proponents’ stated goal of promoting a healthy democracy.”

In Citizens United v. Federal Election Commission (2010), the court stated that political speech is “indispensable to decision-making in a democracy,” and struck down contribution limits for corporations, unions and political action committees that make political expenditures independent from candidates. The court was clear that government “may regulate corporate political speech through disclaimer and disclosure requirements, but may not suppress speech altogether.”

While Citizens United did not address direct campaign contribution limits, the decision rendered most state campaign contribution limits obsolete and counterproductive.

The fact is that after Citizens United, there is no practical or legal way to prevent any person, company or union from influencing our elections as much as they are able and doing it anonymously. And there is no law South Carolina can adopt to prevent unlimited and anonymous “dark money” from influencing our elections.

States that choose to limit contributions can today run afoul of the U.S. Supreme Court if campaign donation limits are set so low that, in effect, they “prevent candidates from amassing the resources necessary for effective campaign advocacy.” (Randall v. Sorrell, 2006).

Legal limbo

In separate rulings in 2010 and 2012, federal judges ruled that South Carolina’s definition of a political committee was unconstitutional because it was “overbroad”. The state has yet to adopt a new definition after more than a decade, causing a serious lack of transparency, disclosure, and enforcement when it comes to campaign finance activity.

The federal courts found that the state Ethics Act placed significant burdens on groups qualifying as committees without giving meaningful consideration of a group’s major purpose, threatening to chill their First Amendment rights. Specifically, the definition of committee under state law could encompass any group, without reference to the entity’s major purpose. Under the 2010 federal ruling known as South Carolina Citizens for Life. Inc. v. Krawcheck, the definition of “committee” was declared unconstitutionally overbroad due to its impact on groups engaged primarily in issue advocacy. Citing a 2008 federal ruling in North Carolina Right to Life. Inc. v. Leake, the South Carolina federal judge held that the state’s filing and reporting requirements would only be permissible when applied to organizations whose major purpose is the election or opposition of a candidate for elective office.

In 2019, an advisory opinion from the South Carolina Attorney General’s Office advised the State Ethics Commission that the 2010 ruling could also apply to traditional political parties.

In 2014, The Nerve – the investigative news arm of the South Carolina Policy Council – reported how one prominent PAC with ties to a former lawmaker stopped disclosing its contributions and expenditures to the State Ethics Commission, and that the agency took no action in response, citing the two federal court cases.

First and foremost, South Carolina should adopt the following clear and narrow definitions to facilitate a full-scale ethics and campaign-finance reform effort:

Candidate Campaign Committee: Any political committee organized by or under the direction of a candidate, including if the sole person involved in the campaign is the candidate.

Candidate-Specific Communication: Any broadcast, cable, satellite or digital communication, or any mass mailing or phone bank communication that meets the following criteria:

  • Refers to a clearly identified candidate for elected office and does not expressly advocate for the election or defeat of the candidate.

  • The communication is aired or transmitted within 30 days of a primary election and within 60 days of a general election for that office.

  • May be received by up to 50,000 or more individuals in the state in an election for statewide office, or 5,000 or more individuals in any other election.

Corporation: Any corporation doing business under either domestic or foreign charter. This includes any corporate subsidiary; or and any business entity in which a corporation participates or is a stockholder, partner or a member of a joint venture.

Express Advocacy: Language that directly supports or opposes a clearly identified candidate, such as “vote for,” “elect,” “support,” “cast your ballot for,” “Smith for Congress,” “vote against,” “defeat,” or “reject.”

Independent Expenditure: An expenditure that is made to support or oppose a clearly identified candidate without consultation or coordination with any candidate or agent of any candidate.

Independent Expenditure Political Action Committee: An independent expenditure political action committee (I.E. PAC) is a political committee that does not make contributions, directly or indirectly, to a candidate, political party or political committee that donates to candidates. These groups have a “primary purpose” of engaging in “express advocacy” and sometimes are referred to as “Super PACs.”

Issue Advocacy: A paid communication with the sole purpose of providing education on issues and does not support or oppose clearly identified candidates. Issue advocacy is not subject to disclosure requirements or regulations unless it meets the definition of candidate-specific communication.

Political Action Committee: A political action committee (PAC) pools campaign contributions from members and donates those funds to campaigns for or against candidates. Because PACs donate directly to candidates, they must disclose members who donate to the PAC as well as who and how much the PAC donates to specific candidates. Members who donate to PACs must be individuals, not corporations.

Political Party: Any political party organized and operating in this state, regardless of whether the party is recognized for representation on a ballot.

Party Political Caucuses: A body specifically organized under a state political party and may raise funds and segregate them for the primary purpose of electing or defeating political candidates who are members or potential members of said caucuses. As an appendage of a state political party, these caucuses may raise unlimited funds subject to the same reporting and disclosure requirements of the traditional political parties as updated.

Special Legislative Caucuses: This category should be repealed, and the regulations governing it should be struck.


Remove individual contribution limits

In South Carolina, contributions generally are limited to $3,500 for statewide candidates and $1,000 for local candidates. Contribution limits apply to each primary, general, and runoff election in an election cycle. However, a single contribution limit (either $3,500 or $1,000) is applied to the entire election cycle if a candidate is unopposed.

These limits were adopted years before Citizens United significantly altered the political funding landscape. Unlike many other states, South Carolina has not indexed its limits for inflation, which forces candidates to spend more time raising money for diminishing returns and less time meeting voters.

According to the National Conference of State Legislatures, 11 states have no contribution limits in any state campaigns.

Neighboring North Carolina allows individual contributions up to $5,600 for all candidates, with limits indexed for inflation. Virginia has no individual campaign contribution limits, while Georgia allows individual contributions of up to $7,600 for statewide candidates in the general election and $3,000 for legislative candidates.

Removing or lifting contribution limits can increase competition in political races. A 2020 report by University of Missouri political scientists, titled, “Do Campaign Finance Reforms Insulate Incumbents from Competition? New Evidence from State Legislative Elections,” indicates that campaign contribution limits have “little impact on incumbent reelection prospects.” The report posits that limits on political spending sometimes have the unintended effect of making races less competitive.

Critics of money in politics contend that raising contribution limits will further “unleash big money” in South Carolina political campaigns. This is a farce. Big money is already in our elections, and it is here to stay.

The goal should be to maximize transparency, not to limit speech. Lifting or removing campaign donation limits for individual citizens can help do that. It is easier for voters to hold political candidates directly responsible for the political messages they authorize and appear in, as opposed to the highly negative independent-expenditure ads, produced by nameless, faceless, out-of-state political consultants and fueled by secret money.

Recommendation: South Carolina should consider removing all individual contribution limits to campaigns. This will encourage more political donations from transparent sources that are fully disclosed to the public.

Absent that, South Carolina should raise the personal contribution limits significantly. For now, we recommend $12,000 for statewide campaigns and $6,000 for all legislative and local races, with enhanced disclosure, compliance and enforcement as explained below. For inflationary purposes, contribution limits should be indexed to the Consumer Price Index and adjusted every two years at the beginning of each election cycle.

Abolish special legislative caucuses

South Carolina must repeal all recognition of special legislative caucuses. The law governing these groups is grossly unconstitutional under the First Amendment of the U.S. Constitution as it relates to campaign finance and political speech.

Legislative caucuses are groups of legislators formed around common goals or interests. Under South Carolina law, however, only three types of legislative caucuses are officially recognized: those based on political party, race or gender. Each has special fundraising rules that do not apply to other legislative sub-groups such as the newly formed S.C. Freedom Caucus, or any hypothetical caucus that could be formed.

For example, while the legally recognized Women’s Caucus can raise $3,500 per individual, the Freedom Caucus is virtually unable to raise any money. And while the Women’s Caucus can donate $3,500 to a candidate, the Freedom Caucus cannot do the same.

Recommendation: End all recognition of legislative caucuses and the special rules that apply to them. By eliminating the individual giving limits, groups of legislators are free to raise money and pool them with like-minded legislators as they see fit.

Repeal unconstitutional restrictions on political speech

South Carolina law bans legislative caucuses formed by certain groups of lawmakers from engaging in “core political speech,” even as it permits favored caucuses – those formed around party, race or gender – to engage in that speech. That is a violation of the First Amendment.

Practically, this means caucuses that are not legally recognized cannot raise money except for narrow purposes, such as mailing expenses and certain conferences. If those groups publicly support or oppose legislative candidates, they are subject to criminal penalties.

As warned by the House and Senate ethics committees in advisory opinions, “[t]hese statutes specifically and expressly limit the activities of a legislative special interest caucus and its members.” (Senate Ethics Advisory Opinion 2016-1, p. 2; House Ethics Advisory Opinion 2017- 13, p. 3.) Favored caucuses, meanwhile, remain free to speak and engage in the political process.

Another unconstitutional provision requires groups that produce legislative scorecards or vote-tracking information to file government reports.

SECTION 2-17-45. “An entity which ranks or rates the actions, vote, or failure to act or vote of the Governor, the Lieutenant Governor, or a member or committee of the General Assembly as to any action, vote, or failure to act or vote by these public officials and which disseminates its rankings or ratings to the general public must no later than April first of each year file a report with the State Ethics Commission. The provisions of this section do not apply to an entity whose primary business is the publication of a newspaper or other periodical or the production of electronic media programming or to a private membership organization that disseminates its rankings or ratings only to its own membership …”

People and groups engaged in constitutionally protected political speech do not have to register with the government. This law clearly violates the First Amendment.

Recommendation: South Carolina must repeal the unconstitutional statutes Section 2-17-10(21) & Section 2-17-45. Unconstitutional limitations on political speech have a chilling effect, and an urgent repeal of these laws is necessary.


Ban direct corporate contributions

While the federal government has banned corporate contributions to federal candidates in one form or another since 1907, the states are still remarkably split on permitting corporate contributions to state and local candidates.

Currently, 22 states completely prohibit them. Eighteen states, including South Carolina, have the same contribution limits for corporate contributions as they do for individual donations. Four states have other limits, while Washington places individual limits on in-state corporations and prohibits outside corporate contributions.

Recommendation: As corporations are now free to spend unlimited amounts of money to influence elections through uncoordinated independent expenditures – an avenue not fully allowed at the time in which current state campaign-finance laws were adopted – South Carolina should join Ohio, North Carolina, Kentucky and roughly half of American states that prohibit corporate donations made directly to candidates. South Carolina should also ban direct corporate donations to political parties, except for clearly identified non-political and campaign purposes, such as “brick and mortar” building expenses, rent, utilities and landscaping.

Individuals associated with corporations, unions and other entities are free to pool their own individual resources and engage in hard dollar donations to candidates and political parties through Political Action Committees. These funds must come from individuals, not corporate treasuries.

State political parties

As noted by the Institute for Free Speech:

“Political parties have been an important actor in American politics since this country’s founding. Parties have been a boon to First Amendment freedoms of political speech and association. They’ve allowed individuals to join together and speak with one voice about the issues of the day. They’ve allowed candidates to associate with a brand and more easily convey their message to voters. And the parties themselves perform many vital small-r republican and small-d democratic activities that no one candidate is capable of doing on their own. Parties build coalitions among voters, inform voters about their candidate’s policy positions, and pool resources to best promote the party’s platform. Despite political parties’ importance to our democracy, many speech regulations are chipping away at their role. Less heavily regulated groups like super PACs, can spend unlimited sums on political speech, while political parties are hamstrung by laws that make it more difficult to speak during campaigns. Laws should be reformed to ensure that political parties are treated on par with other political groups.”

South Carolina needlessly and illogically limits the amount of money political parties can donate to candidates in a general election. Statewide candidates are limited to receiving $50,000 and other candidates, a mere $5,000. There is no clear reason for this limitation as long as donations to political parties and expenses by are fully and transparently disclosed.

North Carolina, Kentucky, Virginia, Alabama, Louisiana, Texas, Iowa, North and South Dakota, Nebraska, Utah, Wyoming, Pennsylvania, Wisconsin, New Jersey, Vermont and other states have no limits on contributions from state political parties.

In South Carolina, state parties can and do operate independent expenditure committees to support their candidates without limits. Regulating contributions to candidates by state political parties accomplishes nothing but raising the cost of compliance and weakening the “buying power” of each dollar donated. Independent expenditure campaigns are charged significantly higher fees for broadcast television advertising. In South Carolina, forcing people to donate to independent expenditure efforts by limiting their ability to donate directly to candidates inflicts a hidden tax on political speech.

Worse, in South Carolina, county political parties are treated as the same entity as state political parties, restricted to the same single overall spending limit. This unfairly restricts the free association and speech rights of every county party in the state.

Recommendations: South Carolina state political party donation and expenditure limits should be entirely repealed. County political party donations should likewise not be restricted. However, all donations and expenses to and from political parties should be properly disclosed. The Legislature must make this clear a requirement in any reform effort it pursues. As noted above, political parties should not be allowed to accept corporate contributions except for building expenses.

Enhanced reporting requirements

Candidates for public office in South Carolina and state political parties should be required to fully report donations and expenses on a regular schedule.

Specifically:

Political Action Committees that pool campaign contributions from individual members and donate those funds to campaigns for or against candidates must fully disclose members who donate to the PAC, as well as the donations to candidates.

Independent Expenditure Political Action Committees with a “primary purpose of engaging in express advocacy” must fully report all donations and expenditures.

Issue advocacy generally is not subject to disclosure requirements or regulations. However, when an issue advocacy organization engages in candidate-specific communications, expenditures directly related to those communications must be fully reported.

48-hour rule needed

Currently, in South Carolina, a pre-election report must be filed by all candidates no later than 15 days prior to each election and no earlier than 20 days before the election. However, this window does not capture last-minute donations and expenditures which are made leading up to election day.

Many states have adopted what is known as a “48-hour” rule, which requires the disclosure of donations greater than $1,000 that are received in the last 15 days of the election. Such donations must be reported within 48 hours.

Recommendation: South Carolina should improve reporting requirements for specific organizations and require 48-hour reporting for candidates.

Strengthen enforcement of ethics laws

For over a decade, The Nerve has documented in detail the problems with ethics enforcement in South Carolina. It has routinely found examples of lawmakers failing to pay thousands (sometimes tens of thousands) of dollars in fines due to late or unfiled campaign-related paperwork.

Unlike other public officials who answer to the State Ethics Commission for ethics violations, state legislators report to their own legislative ethics committees. The South Carolina Policy Council has long criticized this double standard in our ethics system and called it for what it is: ineffective self-policing. As a rule, there will always be less interest in enforcing the rules against your own colleagues.

The committee model also suffers from a serious lack of transparency. The Senate Ethics Committee, for example, has not updated its public list of lawmaker fines since June 2018, as revealed by The Nerve. Additionally, important meeting decisions are often reached during executive session, which is off limits to the public.

None of this is to suggest that the State Ethics Commission is perfect. In fact, the agency suffers from its own enforcement issues. A 2021 Post and Courier investigation found that nearly $2.9 million in fines had been racked up by “370 politicians, local officials and other deadbeats who refused to pay up” to the commission.

Recommendation: A top priority must be to get the House and Senate out of the business of policing their own members’ ethics violations. We recommend that lawmakers be subject to the State Ethics Commission regarding campaign and ethics issues, just like other public officials. Any criminal complaints should be forwarded to the S.C. Attorney General’s Office for further investigation.

The State Ethics Commission must be adequately funded in the state budget each year so it can perform its duties. The commission is currently funded in large part by fines, which is problematic for several reasons. Public officials who refuse to pay required fines can effectively “starve the agency”. Also, an agency that relies so heavily on fines to operate might be encouraged to pursue more heavy-handed enforcement. The top goal of the commission should be to encourage and facilitate disclosure, accountability and compliance.

After some reasonable amount of time, and after a proper appeals process, the ethics commission should be able to suspend campaigns from raising funds and other operations for significant noncompliance and willful avoidance of the law. As a last resort, elected officials can and should be suspended from their duties for refusing to comply with campaign finance laws.

As an additional transparency measure, we would suggest requiring all elected officials who file annual income-disclosure statements to report if they received income as subcontractors on government-funded projects.

Expand lobbyist reforms

For more than three decades, South Carolina has had some of the most robust rules in the nation limiting improper influence from lobbyists and lobbying firms, after a significant federal sting operation exposed massive corruption.

Anyone who gets paid to influence the Legislature must register as a lobbyist and file annual reports with the state. Lobbyists are banned from spending any money on legislators or other state officials, and they can’t donate to political campaigns.

Gov. Henry McMaster and other reformers have proposed expanding current ethics laws to require anyone who lobbies city or county councils or school boards to register as a lobbyist and abide by the same restrictions as Statehouse lobbyists.

Recommendation: We support the governor’s proposal to extend lobbyist registration rules to the local level, so long as all forms of non-paid citizen activism are protected.

Conclusion

Jesse Unruh, speaker of the California Assembly from 1961 to 1968, is credited with coining the phrase, “money is the mother’s milk of politics.” He noted money is seen as the life force and energy behind politics and elections. This is, and always will be, true. However, South Carolina can and should take steps to significantly increase transparency in government, political campaigns and lobbying activity by enacting comprehensive ethics and campaign reforms.

Disclaimer: The South Carolina Policy Council has found no evidence, nor has any reason to believe, that these reforms would help or hurt any particular candidate, group of candidates, or political party over the other. However, as noted above, there is considerable evidence that shows heavily limiting campaign contributions makes it more difficult for those challenging incumbents to mount competitive campaigns. Incumbents have built-in advantages of name identification and voter awareness that challengers do not possess, and limiting the ability to raise money often has a disparate impact on challengers. It is also worth noting that there is considerable case law indicating that courts believe it is improper to enact campaign finance laws for the sole purpose on “equalizing” political speech (Arizona Free Enterprise Club's Freedom Club PAC v. Bennett, 2011).

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