Arizona Republic: Legal Battle Looms Over Proposed Arizona Dark-Money Rules

Legal battle looms over proposed Arizona dark-money rules

By Mary Jo Pitzl, The Arizona Republic

The Arizona Secretary of State's Office all but declared war Thursday on a state agency that is attempting to shine a light on "dark money" contributions. And it's willing to sue the Citizens Clean Elections Commission to stop the effort.

Unless the agency backs down on a proposed rule that would require some campaign committees to reveal their donors, a lawsuit is "inevitable," state Elections Director Eric Spencer told the five commissioners.

Spencer argued that the commission doesn't have the authority to regulate independent-expenditure committees, which have proliferated since the U.S. Supreme Court's 2010 ruling in the Citizens United case.

Spencer's boss, Secretary of State Michele Reagan, campaigned for office last year in part on a pledge to bring to light the source of money fueling independent-expenditure committees. But she has since changed her view, saying it's impossible to require disclosures of dark money because federal law doesn't require committees to name their individual contributors.

There was little indication the voter-approved commission will retreat.

The commission unanimously agreed to publish proposed guidelines for regulating independent-expenditure committees whose "primary purpose" is to influence elections. They opened the issue up for another four weeks of public comment.

But sticking to that course, Spencer said, would mean the commission "just bought (itself) a lawsuit."

"A democracy cannot function when it is in a polygamous relationship," Spencer said. The commission is creating a two-track system for regulating campaign finance that will limit free speech, confuse committees and burden businesses, he said.

"Someone has to blink here," he said, adding it won't be the office he represents.

Louis Hoffman, a former commissioner and an author of the Clean Elections Act, said there are rules already in place to ensure the commission and the secretary of state don't have regulatory conflicts. Relations between the two offices, he suggested, have soured since Reagan, who hired Spencer, took office this year.

Arizona voters approved the Citizens Clean Elections Commission in 1998, giving it oversight of a public campaign-finance system and assigning it a role in regulating political campaigns. It is nonpartisan.

The Secretary of State's Office is the official repository of campaign and committee reports. It can refer problems with filings to the Attorney General's Office for prosecution, but it does not have enforcement power itself. The secretary is elected by the voters and runs on a partisan ticket.

Reagan was targeted by dark-money groups when she was a candidate in the GOP primary election last year. But she benefited in the general election when another dark-money group spent money to defeat her Democratic opponent.

Non-profit corporations don't have to disclose their donors, leading to the label "dark money." But the Supreme Court ruling that gave those corporations the same free-speech rights as individuals expected some level of transparency. States have been struggling with how to do that ever since the ruling.

Spencer and the commissioners said they were hopeful there could be compromise.

But in comments after the meeting, Spencer indicated there was little wiggle room, if any.

"We believe litigation, in whatever form it takes, is inevitable," he said. "I don't think the parties will agree."

Previous commissions avoided being "overly provocative," but the current commission is asserting itself in areas it never dealt with before, he continued.

"The aggressiveness by which it is pursuing its regulatory agenda is bringing up buried scars," he told reporters after the meeting.

The Legislature this year passed a bill that says a committee is subject to campaign-finance regulation if its "primary purpose" is to influence an election. But it did not define that purpose, and the commission is attempting to define it with its proposed rule.

The rule proposes that any group formed within six months of the start of an election cycle that spends more than $500 on a race is considered a political committee and is subject to filing campaign reports.

The commission is taking comments on the proposal and will consider whether to adopt it at its Aug. 27 meeting.