Show Me the Money: How Campaigns Are Funded

Ever wonder how all those political ads and mailers get paid for? Explore the complex world of campaign finance with nonprofit leader John Tynan. Learn the difference between PACs, super PACs, 501(c)(4)s, and more - and how to follow the money trail as an informed voter.

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Connect with John Tynan

South Carolina State Ethics Commission

Conservation Voters of South Carolina

Transcript

Sponsor:

This episode is sponsored by Palmetto Project. Forty years ago, South Carolina leaders championed the idea that every social and economic challenge in our state could be solved through innovation. They believed in the power of new ideas to fulfill the promise of our home. Since 1984, the Palmetto Project has listened to and partnered with community leaders and members to transform our state through 330 public-private partnerships. Today, our programs address early literacy for more than 23,000 children through Dolly Parton's Imagination Library, civic engagement, and equitable access to health care through the only statewide nonprofit health insurance agency in the country, and more. Learn more at palmettoproject.org or at our Facebook and Instagram accounts.

Katy Smith:

During elections, you see information on candidates that come through signs, billboards, postcards in your mailbox, banner ads on the internet, and so much more. How is it all paid for? And what tools for campaign funding are available to groups that are interested in the election of candidates who have policy interests that align with theirs? I'm Katy Smith with Greater Good Greenville, and on this episode of Simple Civics Greenville County, we'll talk about it. I'm pleased to be joined by John Tynan, President of Conservation Voters of South Carolina. CVSC works on the intersection of politics and environmental policy. John has been at CVSC for nine years, but his entire career has been in environmental advocacy and politics in one form or another. He also ran for and was elected to local office on the Greenville Water Commission in 2009. John's going to share lots of examples from the CVSC perspective, but know that what he discusses is true for entities across the political spectrum, such as Planned Parenthood, the NRA, the U.S. Chamber of Commerce, the American Heart Association, or the Heritage Foundation. Take a listen and learn how your dollars could be put to work to help elect candidates that you support.

Katy Smith:

John, thank you so much for joining me and to help all of us better understand money that goes into campaigns. I think this is really on folks' minds because we just got through a super contentious election, both at the presidential, state, and local levels, and people's mailboxes were flooded with cards of all different kinds that had different paid-for bys at the bottom of the card. So can you just kind of give us an overview about how do monies come in to help fund campaigns and candidates?

John Tynan:

Thanks for having me, Katy. It's great to see you again. Great to talk about this. And I'll give a quick background about who I am and CVSC so that folks can kind of understand where I'm coming from. I should say before I go into all this, I'm not an attorney. So please, if you're listening to this, don't take any of what I'm saying as legal advice. If you're going to set up a PAC, set up a 501c4, invest in elections, if you're going to do anything other than just write a check to a candidate, you should probably ask an attorney how to do that and stay on the right side of ethics. 

I am president of Conservation Voters of South Carolina. We are a 501c4 nonprofit organization. We also have a political action committee. For those nerdy people out there, that is a Section 527 organization. This idea, this structure of having a 501c3, a 501c4, and a PAC, it's actually fairly common across both the issues and political spectrum, both at a state and a federal level, these are fairly common structures that we see out there with groups active on issues in the advocacy and in the political space. I know there's a lot of folks out there that are listening that are familiar with other kinds of non-profits, the most common is a 501c3.

Everything we're talking about today in money and politics, that's not 501c3.

501c3s are prohibited from doing any sort of political activities, supporting candidates for office. So we're not talking about that. We're talking about 501c4s, we're talking about PACs, and we're talking about individual contributions to campaigns and these things called independent expenditures. Conservation Voters of South Carolina, we're an environmental organization. We work statewide. We fight to protect the air, land, and water that we love in this state through bipartisan and pragmatic political action. And I say all that to say we're a 23-year-old organization. So we've been doing this work a long time. We've learned a lot. We've evolved a lot. We've added new tactics. We're utilizing all the tools in the toolbox to both advance environmental policy, but to invest in politics as a way to do that. Because as we hear every election cycle, elections have consequences. And so from an environmental perspective, we are the political arm of the environmental community. We invest in elections and then we work with the folks that we help win to pass environmental policies and push for bolder and more forward-thinking environmental change. So back to your first question or to your question about money and politics.

I wish it was the case that money didn't matter at all in politics, but the reality is that it does. If someone is going to run for office, they have to figure out how to communicate with anywhere from hundreds to hundreds of thousands of voters. And if it's at a statewide level or a federal level, you're talking about millions. And gone are the days when you can just walk around and shake all the hands, kiss all the babies, show up at all the community events, and reach a critical mass of people. Gone are the days when three television stations reach 75 to 80% of Americans. So you have to figure out where do people consume their news? Where do people get their information? Their mailbox is one. Social media is a big one. The internet's another one. Some is on cable, some's on television, some's on streaming devices. So we have to, as we're looking at how candidates get their messages out to individuals, it costs money to be in every single one of those mediums.

So money does matter. A lot of times when I'm talking to candidates, the first thing I ask them is, hey, how much can you raise from yourself, your friends, your family? And so as we're talking about where money comes from in politics, that's really the first place. Any candidate that's going to run for office is going to ask, you know, if they have a partner or spouse, hey, how much can we of our own money put into this? So sometimes people can self-fund if they're wealthy, they can just self-fund their own campaigns. But a lot of times they will go out and they will ask their friends, they will ask their family, they'll ask their business colleagues, to contribute to their campaigns. So individual contributions to a candidate's campaign are how the candidates raise the money that they need. In South Carolina, for local office and state legislative offices, an individual is limited to a $1,000 contribution per election.

And to nerd out a little bit, an individual is, you know, I'm an individual, my wife's an individual. Any of my kids who are 18 years old are individuals, right? Businesses are also individuals. So if I have my own LLC and my wife has a separate LLC, and for some reason my 18-year-old son has an LLC, by the way, my son's not 18, but if he did have an LLC, each of those are also considered individuals because of a lot of federal, state laws, businesses and corporations are people. So... We're not going to debate that today.

Katy Smith:

That is settled.

John Tynan:

It is settled for now, right? And so you're limited to $1,000 per election. To get, again, a little bit nerdy, when you think about what is an election, a primary is an election, a runoff is an election, and a general election is an election. So if there's a candidate who has a primary, a runoff, and a general election in a given cycle, one person can give that candidate $3,000.

If they only have a primary and a general, one person can give that candidate $2,000. If they only have a general, you can only give that candidate $1,000. So the easiest thing to think of, it's $1,000 in election per person. It's worth noting that that money can add up pretty quickly. I mean, we see candidates for even city offices raising hundreds of thousands of dollars through individuals and businesses giving direct to their campaign. So that's one way that money gets in politics. And it's important too, because when you listen to coverage about the strength of political campaigns, the amount of money that people raise is often cited, but also the number of contributions. If you raise a hundred thousand dollars but you only do that from 50 people, that is one indication of support. You get a lot of people maxing out multiple ways. If you raise a hundred thousand dollars but you do it from a hundred thousand people, you have a hundred thousand people giving you a dollar. And so there's also this balance between quantity of people versus size of checks. So that's something to keep in mind when people are evaluating kind of strength of campaign and where campaign money is coming from, that sort of stuff. So candidates often raise money from friends and family, business colleagues first.

If it's a partisan election, oftentimes they're just diehard partisan individuals that you can call up and say, you know, so-and-so always gives to a Democratic candidate, you know, call them. You know, so-and-so always gives to Republican candidates in this area, call them. You know, that's a different conversation as a candidate. You're introducing yourself. You're saying what you're about. And then you're basically making a pitch saying, this is why you need to support me. This is why you need to give me money. You can still raise individual contributions that way.

John Tynan:

So once we leave that space, like at some point, the candidates are going to start to plateau in terms of how much they can raise, how big their networks are, how many friends and families, how big the political party apparatus is that can get the money. So the other ways that money gets into politics is really through what's called independent expenditures. Such an organization like CVSC or 501(c)(4) or CVSC PAC, we are limited to give $1,000 to a candidate.

And that includes both cash contributions, but also in-kind services. 

Katy Smith:

So really just you can write a check, or it can do something that the campaign needs as long as the value of that, doing something for them is under $1,000, a party, a poll, sending out your own postcard on their behalf.

John Tynan:

Correct. So individuals and organizations are all kind of bound by this. Anything under $1,000 is allowable to the candidate in coordination with the candidate. Anything over $1,000 has to be independent. And when I say independent, what that means is you can't coordinate with the candidate. You can't strategize with the candidate. The candidate can't ask for it. It has to be something that is done separate from and independent of the candidate's campaign. And so as we start talking about money in politics, it's those independent expenditures that people are starting to see more and more of.

In this last election cycle, CVSC, I think we endorsed in 60 different races across the state, and we ran fairly robust independent expenditures in probably about 50 of those races. So we were spending over $1,000 doing mail, doing digital, doing radio ads, doing text messages, etc. And we're able to do that as long as we don't coordinate with a candidate's campaign. We're essentially setting up our own political apparatus and pulling our own list, creating our own content, doing our own polling, and running those efforts without the campaign knowing that they're happening. 

How that happens and how those independent expenditures occur, there's a lot of different ways. The most common are PACs, political action committees, and CVSC has a political action committee. It's a 527.

That is a fairly common way to do it. A hundred percent of the PACs expenditures can and should be focused on political activity. So all of our independent work comes out of our PAC.

There are 501(c)(4)s that exist that are able to do some political activity. Now, the difference is with a 501(c)(4), you have to spend a limited amount of money on political activities. So this is kind of what certain nonprofits can and can't do. So 501(c)(4)s, they can do unlimited amounts of lobbying, but they can only do a small amount of political activities. Depending on the attorney you talk to, some say it's 49% or less of your funds can be political. Some say 45%. Some people say less than 40%. The IRS has never really been very clear on where that actual demarcation is. 

The difference between 501(c)(4) political action and PAC political action: They can all do the same things. It's a difference of how much of their budgets they spend. But the other difference is with all PACs, generally there is some sort of reporting requirement. You either have to report to the Federal Election Commission, or you have to report to a state ethics commission.

501(c)(4)s, on the other hand, don't have to disclose anything. So because it's less than a majority of their activities, there is no reporting requirement. And that's where this term dark money comes in. People are saying, who is this organization and who's supporting them? Well, in a PAC, it's not really dark money because you can go to the ethics website, you can go to the FEC, you can actually figure out who's kind of behind the curtain, behind the name. With a 501(c)(4), you can't. You can pull up their 990, that doesn't show. You can pull up, they don't have to report to ethics, they don't have to report to FEC. So 501(c)(4) is really where that kind of quote-unquote dark money label comes from. Not because it's unethical, it's because you don't know what's behind the curtain. You don't know who the donors are.

Katy Smith:

Interesting. All right. I've seen a diagram that's kind of like a funnel where you've got your 501(c)(3) public charity, which is what most listeners are familiar with. They're most of the nonprofits that you love that are solving community problems that you might donate to. They are allowed to do all kinds of advocacy where they speak on behalf of an issue. They're allowed to do zero candidate support.

John Tynan:

We all know and love 501(c)(3) organizations. 501(c)(3) organizations, they can raise a lot of money. It's a tax-deductible contribution to that organization. They can spend unlimited amounts of money on education. They can spend unlimited amounts of money on advocacy, but they generally can spend about 20% of their annual expenditures on lobbying activities. They can spend zero on political activities. And it's important to denote between lobbying and political. Lobbying in this context is passing a piece of legislation or an ordinance, basically saying, will you vote yes or no on this issue? Political is supporting a candidate for elected office. So 501(c)(3)s, 20% on passing legislation, 0% on electing people to office.

501(c)(4)s, on the other hand, they can do education, they can do advocacy, they can spend an unlimited amount of money on lobbying, and they can spend generally somewhere less than 40% to 45% on political activities. So if you think about tools in the toolbox in this context, if you're doing advocacy, a 501(c)(3) is a great tool. If you're doing lobbying, a 501(c)(3) is a tool, but it has limits. A 501(c)(4) is a great tool for lobbying, passing policy and legislation. Move over to a political action committee, a PAC. That can spend 100% of its money on political activities, electing people to office. So again, if you're thinking about what is the best tool for political activities, you reach into that toolbox. It's better to pull out a PAC than to pull out a 501(c)(4) because a 501(c)(4) has limits, a PAC does not.

And so that's where you got to look at what those limits are and what it allows you to do in terms of the nonprofit space. And that's why there's a lot of orgs like CVSC. We have a 501(c)(4), we have a political action committee. There's also a CVSC education fund, which is a 501(c)(3). It's a separate board of directors. It's a separate bylaw, separate EIN. It's a separate organization. But it does allow us to do some education work that is separate and apart from our lobbying and our political activity.

Katy Smith:

Okay, this is such a helpful overview of the structures that are available and how they work. So now that you know a little bit more, if you're a voter and this is showing up on your TV screen, in your mailbox, on your laptop, how do you suss it all out and think about it?

John Tynan:

Katy, I think you're right. I mean, I think for people that are consuming information, there's so much out there and they don't know, is this a trustworthy source or not? CVSC, we're a 23-year-old organization. We have a website. You can see who our staff is. You can see who our board is. You can go on to the State Ethics Commission and look up who our donors to our PACs are. We're fairly unique in that context. But I do think for voters that are asking that question, who is this group? What do they care about? How are they making these decisions?

Those are the questions voters should be asking. And I think part of why I'm glad we're having this conversation today is just to put that information, that access in the hands of people. So if you get a postcard, if you see a digital ad, if somebody knocks on your door and says, hey, I'm with so-and-so, you should ask questions about, well, what is that group? How long has it been around? Does it exist just for this election cycle? What are the issues that it is working, that that group is working to advance? What is the process that that group went through to select the candidates that it's backing? And you may find that it's one person that just doesn't like the opposition, you may find that it's basically a kind of political smokescreen. It's a very partisan set of decisions. Or you may find that it's an organization like CVSC that's been around for 20 plus years that has a fairly rigorous evaluation process that has a robust board and staff that represents...

Racial, gender, political, economic diversity throughout the state, and is just trying to advance its own issues. So I think asking those questions really helps, can help people dig into what is behind this money in politics. If you're a little bit more interested, you should go onto the state ethics website and it's ethics.sc.gov. And you could start searching for who's giving to candidates. You can start searching for, hey, all these non-candidate committees, these PACs, that's what they're called on the state ethics website is non-candidate committees. Who's giving them money? Where are they spending their money? And you can start to dig into that a little bit more and understand where it comes from. That's where we get into dark money. Like, so some groups go through great lengths to disguise who's funding them, what they're about, who they are. I mean, and it's those sorts of groups that voters should really ask, do I know these folks? Do I know what they're about? Do I know what they stand for? Should I trust this information? If you get a mailer that you can't figure out who's behind it, you can't figure out anything about the organization, it has all these outlandish claims without citations and without information, is that a credible source? In school, they would be told probably not.

So and that's part of what we're getting into in the political spaces. We need voters to start thinking about, is this a source or an organization I'm going to trust? What do I know about them? Are their information well documented or is it not?

Katy Smith:

Makes sense. Makes total sense. Well, John, thank you so much for your deep experience and the information that you shared today. This really helped clear up a lot of campaign finance topics for me and helped me think about how to act as a donor and a voter. And I'm sure it did for everyone else. So thanks so much for all you do for the state and for all you did today to help get us more informed about campaign funding.

John Tynan:

Absolutely. Thanks so much, Katy, for having me. Thanks for doing this podcast and thanks for helping educate voters and candidates and public servants and others about these issues. It's something that we really need more of in today's political environment.

Catherine Puckett: Simple Civics: Greenville County is a project of Greater Good Greenville. Greater Good Greenville was catalyzed by the merger of the Nonprofit Alliance and the Greenville Partnership for Philanthropy. You can learn more on our website at greatergoodgreenville.org.