Everything to Know About Money in U.S. Political Campaigns

Running a campaign is like starting a small business, and that means you need a lot of money.

Everything You Need to Know About Money in US Political Campaigns

It’s true that money buys influence. Just look at politics.

People who donate to political campaigns are a miniscule demographic of the U.S. population. In the 2018 election cycle, for instance, 0.48 percent of Americans donated $200 or more. It gets even more exclusive for those who hit the maximum threshold of $2,700 per candidate for federal office: 0.07 percent.

Still, the money adds up — way up. Besides self-funding, donations are the only way a political campaign, be it a candidate or ballot measure, can amass the resources necessary to succeed. And the amount of money it takes to win rises each election season. Take 2018’s congressional races, which in total spent $5.7 billion. That was considerably higher than just two years prior when candidates blew through $4.1 billion.

And while donations fund the many small businesses that are political campaigns, there are a variety of ways in which that money is collected and tons of laws governing how it’s collected, who can donate it, and how much can be given and for what purpose. Let’s take a closer look at this process.

First, a Look at Who Can’t Contribute

There are so many ways campaigns can receive funding that it’s worth looking at ways they cannot fill their coffers. The Federal Election Commission acts as watchdog over all campaigns — national, state and local. This explainer highlights who or what is allowed and not allowed to donate. Prohibited sources are: Corporations, including nonprofits, and labor unions (however, contributions are acceptable from a separate corporate or labor segregated fund); federal government contractors (to avoid undue influence); foreign nationals; and contributions in the name of another.

Corporations and labor unions are allowed to make independent expenditures on behalf of candidates or ballot measures thanks to a recent U.S. Supreme Court ruling, and we’ll get into that later.

With so few prohibited sources, there are numerous ways to build a campaign war chest.

Max-Out Donors

Donation limits vary widely depending on the type of election, and the FEC has a guide to these limitations for federal and state campaigns. Plenty of heavy hitters spread their wealth around and hit the maximum level for multiple candidates or causes. In brief, limitations are as follows: $2,700 per election per federal candidate or the candidate's campaign committee; $5,000 per year to a political action committee that supports federal candidates; $10,000 per year to a state or local party committee; and $33,900 per year to a national party committee.

In order to keep campaigns honest, large donations in actual cash are illegal. Regardless of the source, the limit on cash donations is $100. Having contributions come through check, money order or online helps watchdogs keep track of the money while preventing accounting manipulation by campaigns and undue influence from donors with large cash reserves.

Limits for local elections are decided by municipalities individually but tend to be much lower than federal and state figures.

Regular Joes

For the 2016 election season, Democratic presidential candidate Bernie Sanders — and to an extent Barack Obama in 2008 — proved that a candidate doesn’t need well-healed donors to amass a significant war chest. Beto O’Rourke, running to represent Texas in the U.S. Senate in 2018, also found gold in smaller donations.

But what Sanders did differently than everyone else is he based his campaign messaging around the low-dollar amount he was taking in on average — even if he fudged the numbers a bit — and that is a stark contrast to candidates who will take money from anyone.

To be clear, any citizen or permanent resident, even those under the voting age of 18, can donate to campaigns. However, no one is allowed to accept money from someone for the sole purpose of making a political donation. And although a permanent resident cannot vote, they can still influence an election outcome with a contribution.

Self-Funding Candidates

Plenty of rich people are in politics, and plenty of rich people have tried to get into politics by largely funding their own ambitions but failing. One of the most spectacular examples of this was the 2010 California gubernatorial run of tech executive Meg Whitman, a Republican. She spent $178.5 million, including a staggering $144 million of her own money, in a losing effort against Jerry Brown, whose campaign tallied a mere $36.7 million that came almost entirely from donations.

Candidates who do this will tell you their spending proves how dedicated to the position they will be, but that is certainly a favorable conclusion not shared by everyone. Regardless, what are the rules around self-funding?

There aren’t really any rules — candidates are free to spend as much of their own money on themselves as they’d like, and that goes for any type of election. Further, if the candidate wins, they can raise funds post-election to pay themselves back.

All in the Family

Family members are governed by the same rules as individual donors when it comes to political contributions. That means your wife, mother, children, siblings, parents, cousines, et al. are free to give you their money as long as they don’t exceed the limits.

Spouses are also allowed to send checks for up to double the contribution limit, which affects each person individually, even if only one person earns money. This is why on campaign finance reports you will sometimes see a bundled donation from a family of four, with each member contributing the maximum.

Political Action Committees

Political Action Committees, commonly called PACs, are formed for the purpose of electing candidates or passing ballot measures, or to defeat candidates or measures. As previously stated, a PAC can only accept $5,000 per year from any non-foreign individual. It’s also limited to contributing $5,000 per election to a candidate and $15,000 to a party committee.

The first PAC was formed in 1944 in support of President Franklin D. Roosevelt’s re-election.

Super PACs

Remember the Supreme Court case we mentioned earlier? It was called Citizens United vs. Federal Election Commission and is often referred to simply as Citizens United. It paved the way for Super PACs, which are similar to PACs but with some major differences that often result in them being labeled as “dark money.”

The main differences are that Super PACs cannot donate directly to a candidate and they can accept unlimited donation amounts from non-foreign sources, most notably unions and corporate entities. Super PACs can also spend unlimited amounts of money to influence elections through what’s called independent expenditures in which a candidate or ballot measure is forbidden by law to coordinate with the organization.

Super PACs are swimming in cash due to these rules, and they have the Citizens United ruling to thank. In that case, the high court restored free speech rights of unions and corporations by effectively saying unions, corporations and associations could not be barred from making independent expenditures for candidates and causes they support.

The ruling was immediately put to the test in SpeechNOW.org v. Federal Election Commission and a federal court ruled in favor of SpeechNOW in its pursuit to amass individual contributions in order to make independent campaign expenditures.

Presidential Election Campaign Fund

One way candidates for president can receive money is through this fund. Most of us are familiar with it because we see the $3 donation on IRS forms when filing our taxes every year. However, it’s unlikely most of us have ever ticked the box.

The contribution debuted in 1976, when 27.5 percent of taxpayers made the donation. That number sank precipitously and bottomed out at 4 percent in 2018. Major party candidates rarely accept funds from these coffers since they are raising massive amounts of money on their own and the cash dispersed through it comes with restrictions, such as not being able to accept private contributions and limiting total spending to the amount received.

That’s why in 2016 only two candidates took these funds: Democrat Martin O’Malley accepted about $1.08 million and Jill Stein of the Green Party took a little over $456,000.

The Republican and Democratic National Committees used to get the leftover funds every year, but in 2014 Congress decided the money should go to pediatric cancer research instead.

Public Financing

Public financing might be rare in presidential elections, but it’s widely accepted in state and municipal elections as a means to root out corruption and heavy spending by monied candidates.

Arizona, California, Connecticut, Florida, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, North Carolina, Rhode Island, Vermont and West Virginia allow public financing. In 2011, Wisconsin’s Republican legislature and governor ended the state’s program. California overturned its ban in 2016, but San Francisco and Los Angeles had been providing funding to candidates because they were exempt from the ban as charter cities.

In San Francisco, for instance, candidates are allowed to spend public dollars freely but must meet a minimum level of their own funding based on the top fundraising candidate in their respective races.

In-Kind Contributions

Unlike a regular monetary donation that goes to pay for goods and services for a campaign, an in-kind donation is when the actual goods and services are donated. This makes it pretty impossible to, say, donate a free commercial to a campaign because the cost of a film production will no doubt way exceed donation limits.

What’s more common with in-kind donations is catering for a campaign party, office supplies or hosting a fundraising party for a candidate. These kinds of contributions are subject to the same reporting requirements and can land a campaign in hot water if not properly tallied.

Where Does the Money Go?

Often when the public hears about campaign financing we only hear about the totals raised and spent, but rarely do we learn how the money is spent. This information is readily available, even online nowadays, but few people care to dig below the surface.

Starting a campaign is much the same as starting a business, which means there are myriad expenses to cover. Campaigns need office space, sometimes more than one location. They need lots of staff, from well-paid advisor roles and different types of managers to low-paid canvassers or signature gatherers. They need consultants and lawyers. They need to advertise, and not just on television and radio and social media, but in newspapers and on billboards; digital advertising can be incredibly expensive if the campaign wants to reach a lot of people.

Polling is always done by specialized firms, and they are far from affordable. Shirts and sweatshirts are more costly than you might expect. Then there are fliers, posters, mailers and other items collectively called campaign literature. When you send out 20,000 letters at a time, printing costs and stamps add up.

How about office supplies, utility costs, internet fees and, if it’s a good campaign, things for staff like meals and healthcare? It all adds up to huge amounts of money.

Leftover Donations

Sometimes a campaign doesn’t spend all of the money it took in, and there are several things that can happen in this instance. One is that the leftovers can be returned to donors. The more common path is to roll over the remaining funds into the next election cycle, if the candidate is indeed running again or eligible to do so.

What if the candidate you donated to didn’t make it past the primary but raised funds for the general election effort? The FEC requires those extra funds to be returned to donors immediately.

The crucial rule here is that the money cannot be spent on the candidate or their family in any way. It can be donated to charities or gifted to staffers, but can never go directly to the candidates themselves.

Retiring lawmakers used to be able to keep extra campaign funds, but the 1989 Ethics Reform Act quashed that perk.

Volunteers, the Backbone of Any Campaign

No political campaign can be won without the help of volunteers. In fact, when someone gives their time and heart and soul to a candidate or cause it’s much more valuable than a check, no matter the amount of the check.

Someone volunteering for a campaign is talking to their friends and family about the candidate or cause, relaying valuable information that affects people in a much more genuine way than simply reading a campaign mailer or listening to a candidate be interviewed. It’s like telling people, “Hey, I vouch for this person. They are legit and you should be into them as well.”

What Happens to Violators?

Campaign finance violations are indeed crimes and can be prosecuted as felonies. However, it’s difficult to prove that someone who exceeded donation limits, even if by thousands of dollars, did so with criminal intent. And it’s hard to say the same thing about a campaign that might have taken too much money from one donor. Most of the time the money is returned and sometimes fines are levied.

Often these violations, on a municipal level, end up with a city or county’s ethics office and amount to little more than embarrassment and fines. On rare occasions someone might end up in jail for a serious violation, such as someone who bundles donations for a candidate so they can exceed contribution limits. Again, however, it’s difficult to prove coordination with a campaign and usually candidates do not face severe penalties.