Millionaires on Notice

Ill. Candidate Triggers Law With Spending

Posted January 31, 2003 at 6:41pm

Less than three months after a sweeping new campaign finance law took effect, the complicated guidelines governing self-financed candidates and their opponents are already coming into play in a hotly contested Illinois Senate primary.

The constitutionality of the Bipartisan Campaign Reform Act signed into law last year remains to be decided, and observers believe an initial ruling from a panel of three federal judges could come as early as this week. But the so-called millionaires’ amendment — a controversial provision designed to level the playing field for candidates facing wealthy opponents — has been triggered for the first time by Democrat Blair Hull, who according to his campaign has already dumped $1.3 million in personal funds into his effort.

Hull, who has said he intends to spend up to $40 million of his own money to win the seat, is one of at least five candidates expected to compete in a Democratic primary for the right to face Sen. Peter Fitzgerald (R-Ill.), considered one of the chamber’s most vulnerable incumbents up for re-election next year.

Hull sent notice to the Federal Election Commission and his two announced Democratic opponents — former Chicago school board president Gery Chico and state Sen. Barack Obama — on Jan. 21 that he had contributed more than double a calculated trigger threshold of $524,000 in personal spending.

The threshold which activates the provisions designed to protect Senate candidates from free-spending opponents is calculated using an equation that takes into account the voting-age population for each state. Under the new law, when a candidate’s personal contributions reach double the threshold it allows the limit on individual contribution for his or her opponents to triple.

“At this point Blair has donated enough of his own personal money to the campaign … to trigger that first threshold and that allows each of his announced opponents at this point … to raise up to $6,000 per individual as opposed to the previous [$2,000],” explained Hull campaign spokesman Jim O’Connor.

Confusion and controversy have surrounded the provision since it was added to campaign finance reform legislation as it ground toward passage in March 2002.

The FEC issued a 142-page “interim” final rule in late December to implement the millionaires’ provision, along with a 35-page document attempting to explain what they’d done.

So far, neither of Hull’s opponents has actually taken advantage of the increased contribution limits, as they attempt to decipher how the new law will impact them.

Michael Goldman, Chico’s campaign manager, said the campaign had not received the notice from Hull but had been alerted to the situation through other sources.

“We’ll be following up with our counsel to see how this changes our fundraising operation,” he said.

“Our attorneys are still reviewing it,” said Obama campaign finance director Claire Serdiuk, adding that they are “in contact with the FEC now.”

The increased limits will also be available to other Democratic candidates expected to join the race, such as state Comptroller Dan Hynes, who is likely to announce his candidacy later this month. It does not, at this point, apply to Republicans running.

Meeting the requirements of the new law presents challenges for Hull as well, although his campaign’s comprehension of what is required by the new regulations has not appeared to be lacking to this point. When Hull filed a statement of candidacy with the FEC he alerted the campaign watchdog agency that he intends to primarily self-finance his campaign.

“There’s sufficient ambiguities on our end because the impetus is on the wealthy candidate to file it at a certain point, even though those points aren’t clearly identified yet,” O’Connor said.

The campaign was, however, ahead of the curve when it came to filing notice of reaching the threshold with the FEC. The commission only last week approved the official form for self-funding candidates to use when reporting that they have reached or exceeded the threshold.

By law, Hull is now required to report to the FEC and his opponents each time he contributes more than $10,000 to his campaign. The individual contribution limits for his opponents are recalculated based on how much of his own money Hull donates to the race.

Hull made his fortune as founder, chairman and CEO of The Hull Group Inc., a Chicago-based securities brokerage firm. He sold the firm to Goldman, Sachs and Co. for $531 million in 1999.

If Hull contributes four times the $524,000 threshold (roughly $2 million in personal funds), his opponents will be eligible to receive six times the $2,000 individual contribution limit, or up to $12,000 from an individual.

However, if the limits are increased to those levels, they are only likely to stand until midsummer, when the candidates’ second-quarter fundraising reports are filed with the FEC and new formulas come into play.

At that point other factors, such as how much each candidate has raised (excluding personal funds), are used to calculate a wealthy candidate’s opponents’ contribution limits. That part of the new provision is meant to avoid giving increased contribution limits to candidates whose campaigns have a significant fundraising advantage over their opponents.

“You don’t necessarily reward someone who has huge balances in their campaign accounts when their opponent is spending personal funds,” explained FEC spokesman Bob Biersack.

Hull’s fundraising from other sources will likely be minimal, as he has pledged not to accept individual contributions over $100, nor will he take political action committee funds. Chico, on the other hand, has raised $1 million for the race so far and has not loaned any personal funds to his coffers. Obama has raised more than $300,000 for the campaign, including a personal loan of $10,500.

The increased limits only apply to primary campaign donors at this point. Each candidate is still limited to accepting the maximum $2,000 contribution for the general election.

In a general election, the same spending triggers apply. Also, if a candidate contributes 10 times the threshold to their campaign, the contribution limits for his or her opponent are raised six-fold and the national and state party committees can make unlimited coordinated expenditures on the candidate’s behalf.

The new regulations, assuming they are upheld in federal court, will likely be used in the general election in Illinois regardless of whether Hull wins the primary.

Fitzgerald, heir to a banking fortune, defeated an incumbent in 1998 after spending almost $18 million — including $14 million of his own money. He has not yet indicated whether he will again spend personal resources this time around, but many believe it is a foregone conclusion.

By that token, it may not be purely by accident that Illinois is the first state where candidates are making use of the measure. One of the chief sponsors of the millionaires’ provision was Fitzgerald’s home-state colleague, Sen. Dick Durbin (D-Ill.).

A spokeswoman for Durbin said the amendment was not crafted specifically for this race, but with the state candidates’ past spending habits in mind.

“Durbin thought of this amendment before he even knew who Blair Hull was,” said Stacey Zolt. “While this will have a direct effect on the 2004 Senate race in Illinois, it is a great reflection of the history of campaign spending in Illinois Senate races since 1992.”

That year, Al Hofeld spent $3 million in a Democratic primary, enabling then-Cook County Recorder of Deeds Carol Moseley-Braun to win the three-way race. In 1996, Durbin faced wealthy Republican trial lawyer Al Salvi.

In recent years, wealthy candidates in other states have made those totals appear miniscule. Among them is National Democratic Senatorial Committee Chairman Jon Corzine (N.J.), who spent a record $60 million to win his seat in 2000. Corzine voted in favor of the millionaires’ amendment last year.