Jordan Breslauer
Highland Park High School
Committee: Senate Committee on Ethics
Topic: Pay- To- Play
Delegation: Georgia (Democrat)
Throughout American history, “Pay- to- play” has been an important issue never
dealt with in its entirety. Pay- to- play is the political term that describes “attempts by
municipal bond underwriting businesses to gain influence with political officials who
decide which underwriters are awarded the municipality's business.”1 2More generally,
Pay-to-Play refers to strategies used by individuals or organization (usually in the form of
campaign contributions) to gain inappropriate influence with politicians so that they can
financially benefit from political decisions. Pay- to-play has much to do with the political
corruption that has occurred and continues to occur in American government. Many
American presidents, such as the great General George Washington, wowed important
wealthy voters in order to win the first American Presidential election. Andrew Jackson
placed 40 % of his financial supporters in positions within the federal bureaucracy.
1
In other words, play to play is the process by which government officials give favorable treatment in
government contract auction and other favors to corporations and other interests in return for campaign
contributions (from director’s brief)
2
“Pay to Play Definition.” http://www.advfn.com
Today, because of the growing number of corporations in America that can donate hard3
and soft money4 to political elections and affairs, the issue has become even more
pertinent to the conduct of American government. Contributors who take part in pay- toplay activities inappropriately influence the decisions of many Congressmen and other
politicians.
Although some state and national legislators have created and passed legislation
to prevent excessive pay- to- play activities, little has been done to enforce these
regulations to their full extent. In 1907, Congress passed the Tillman Act, “prohibiting
corporations and national banks from contributing to federal campaigns.”5 The law also
proposed limits on individual contributions. However, money has continued to permeate
into the political process, often unfairly influencing publicly elected decision makers. In
the more modern version of pay to play, the principal source of political money has
shifted form banks to corporations. Starting in the early 1900s, political policy became
greatly influenced by corporations contributing large sums of money. The Tillman Act
continuously was violated by politicians. It wasn’t until the Teapot Dome Scandal
occurred that Congress became convinced that the Tillman Act was not sufficiently
Hard money- “A short-term bridge loan that is used for acquisitions, turnaround situations, foreclosures
and bankruptcies. Interest rates, although somewhat higher than a normal real estate loan, are less costly
than taking on a financial partner or losing the real estate opportunity altogether”
(http://www.papkegroup.com 1). “Hard Money is money or anything of value that a political committee
receives that satisfies federal contribution limits, source restrictions, and disclosure requirements..”
(http://www.campaignfinanceguide.org 1).
3
Soft money- “A money that cannot be depended upon to be available although it may be counted, such as
a money pledged as a contribution or that which was received from a source in the past that is only
assumed to be available again in the future; money provided in exchange for any type of influence”
(http://www.findmehere.com 1). “Soft money is money or anything of value that is given or spent for
federal election purposes outside of federal contribution limits, source restrictions, and disclosure
requirements. (http://www.campaignfinanceguide.org 1).
5
“In Politics, Money Talks--and Keeps Talking, Despite Reforms.”
http://www.campaignfinancesite.org/history/reform3.html
4
effective. They decided more effective legislature was needed to mediate pay to play
activities. The Teapot Dome Scandal in 1920 involved companies bribing the Republican
Party in exchange for oil reserves. The company clearly had gained influenced over the
Republican Party, demonstrating the political corruption that results from pay- to- play
activities. Following this scandal, the Federal Corrupt Practices Act of 1925 was created.
Unfortunately, the law had a plethora of loopholes and therefore was severely criticized
as being ineffective.
The next legislature created to limit pay- to- play activity was the Hatch Act of
19406. This act was created by the Republicans, and like all the proceeding acts and laws
limiting pay- to- play activities, proved to be ineffective. The general problem had
become increasingly evident; congressmen and companies were able to find loopholes in
the laws and exploit them. Political Action Committees (PACs) were created giving
Congressmen and other politicians yet another way to receive contributions legally.
“PACs work by raising money from people employed by a corporation or in a trade
union.” PACs allow for corporations to continue their contributions legally because they
are affiliated with these groups when they lobby. “In a presidential campaign...the
amount a PAC can contribute to a national party is limited to $15,000.... However, PACs
can contribute a lot more to state and local parties. In some states the amount is restricted
but in others it is not.”7 Thus, ten PACs could donate a total of $150,000 dollars to a
presidential campaign, and so on and so forth.8
6
The Hatch Act: Prohibited Federal employees from participating in or contributing to Federal political
campaigns. This legislation grew out of FDR's attempts to professionalize government, and from a
legislative and public perception that major changes were needed to save the economic viability of the
country (http://www.polisci.ccsu.edu 2).
7
“Political Action Committees.” http://www.historylearningsite.co.uk/political_action_committees.htm
8
Equation to formulate the amount of money a presidential campaign can receive from PACs:
Total money= 15,000X----------- X= the number of PACs.
Beginning in the 1940s, controlling the media became extremely important for
winning elections. Campaigns needed more money, so more pay- to- play activity and
contributions occurred. In 1971, Congress attempted to regulate campaign finance for the
first time in forty six years. They created a new act called the Federal Election Campaign
Act (FECA). FECA initially had a large impact because it, “Changed campaign finance
regulations in two major ways. First, in an effort to address rising campaign costs, it
limited the amount of money a candidate could give to his or her own campaign and
placed limits on the amount a candidate could spend on television advertising. Second, it
revised the regulations for disclosing contributions and expenditures by requiring
candidates, PACs, and all party committees active in federal elections to file reports on a
quarterly basis.”9 Despite these new regulations, spending went from 8 million in 1968
under old legislation to 88 million in 1972 under FECA. In 1974, Congress created the
Federal Election Commission (FEC). The FEC had the responsibility of, “administering
and enforcing federal campaign finance laws.”10 Amendments were and still are being
created by Congress and the Federal Election Commission on FECA. Notably, in 1979,
Congress created legislature that, “allowed political parties to spend without limit on getout-the-vote and voter registration activities conducted primarily for a presidential
candidate, so long as the funds used to pay for these activities came from monies raised
under FECA contribution limits (so-called hard money).”11 FECA restrictions were
constantly undermined by political parties who needed money for campaigns. FECA and
“A Brief History of Money and Politics.” http://www.campaignfinanceguide.org/guide-34.html
Ibid
11
Ibid
9
10
subsequently the FEC took a large hit in effectiveness when they allowed soft money12
contributions to be received by political parties both in states and in national elections.13
The FECA had been infiltrated when the FEC allowed soft money contributions.
Congress’ next step towards regulating campaign finance happened in 2002 when it
created the Bipartisan Campaign Reform Act. This Act mainly was a reinforced version
of FECA with the exception of some new regulations on some forms of soft money.
“First, it reinstituted limits on the sources and size of political party contributions; and
second, it regulated how corporate and labor treasury funds could be used in federal
elections.”14 In dealing with the issue of soft money, the BCRA resolved the problem by
“prohibiting national party committees from raising or spending soft money.”15 Under the
new legislation, national party committees only could use hard money raised in
accordance with federal contribution limits to pay for their political activities.
Although the Federal Government has taken action and has attempted to enforce
this legislature to its fullest extent, pay to play activities have risen over the years, and
contributions have sky rocketed at an even faster pace. A few states have made efforts to
rule out pay to play activities in their states. New Jersey has made great strides in
attempts to rid corruption from state government by passing a bill that limits pay to play
activity. CMD media explains that the purpose of this bill is to make sure that New Jersey
citizens have a, “clean, efficient government at all levels. This measure ensures that local
governments have the power to tighten restrictions on public contracts to the level they
believe is most appropriate. In other words, this legislation ensures that the towns and
12
Reference to footnote #3
Appendix A: Chart of soft money fundraising 1992-2002
14
Ibid
15
Ibid
13
municipalities have the right to enact their own, more stringent 'pay-to-play' reforms that
are stronger than existing state law.”16 The bill is going through some minor amendments
but has shown some definite impact throughout the state. New Jersey has shown that it is
possible to enforce pay to play legislation by heavily fining corporations that secretly and
illegally donate to campaigns.
Other states have not made significant strides in rooting out pay to play activity.
In fact, “the business of offering short-term, high interest loans – or payday loans” is
“legal in 37 states.”17 In 2004, Georgia “shut down the payday loan industry.” However,
“a bill was introduced in February returning “payday loans back to the state.” The reason
why most states don’t ban pay to play activity is because of the “greedy financial services
industry – which includes payday advance lenders, title loan companies, check cashing
companies, and pawn shops.”18 Some states want to keep reform and regulation to a
minimum because “regulation and reform can effectively wipe out a business in a state,
sending its customers across state lines to receive financial services.”1920 While
acknowledging this reasoning, the question still remains whether the economy of the
states and the federal government is more important than preventing the corruption that
results from pay to play activity.
Since 2000, money contributed by corporations to campaign funds increasingly
has shown its impact on the election process. Since 2000, the “financial services industry
has contributed $7.36 million to state-level candidates and party committees in 42 states
“Banning New Jersey's 'Pay To Play' History.”
http://www.new-jersey.ws/modules.php?name=News&file=article&sid=4254
17
“Political Payday.” www.followthemoney.org
18
Ibid
19
In other words, reform may be detrimental to economic structure of states and the federal government.
20
“Political Payday.” www.followthemoney.org
16
to date. Winning candidates received more than $4.2 million in contributions while losing
candidates received slightly more than $800,000.”21 The message that these data send is
the following: the more pay- to- play activity a candidate does, the more likely they are to
be victorious in an election. The corporations are now gradually playing larger and larger
roles in the election and decision processes of candidates.
Currently, “the top 15 contributors combined to give $5.2 million since 1999,
accounting for 71 percent of contributions by the industry” to political parties.22These
companies usually favor a certain political party. As a result, corruption continues, as
both political parties attempt to convince these corporations and contributors to give
money to them for their causes. In fact, in January of 2004, the Republican Party held a
golf convention in Phoenix for industry executives. The Cox News service reported that,
“For around $4,000, industry executives can play golf and have dinner with key
congressional Republicans at a Phoenix resort today, then ‘help Congress write its to-do
list’ on air pollution and energy policy during the next three days.”23 The article goes on
to explain that “money raised by the.... tournament and dinner will be distributed by the
Western GOP Majority Committee to Republican campaign organizations according to
the invitation.”24
The major corporations that make contributions, or the “big five contributors,” as
they are called are25; Advance America26, Cash America International27, Consumer
21
Ibid
Ibid
23
“Excess Pay to Play with GOP” http://www.commondreams.org/headlines04/0107-01.htm
24
Ibid
25
The big five are listed in order of largest contributor to smallest (1-5).
26
From “Political Pay Day,” by Scott Jordan, written March 9 th, 2007: “Advance America- Payday lender
Advance America donated slightly less than $1 million in 28 states. Hardly partisan, the company gave to
both sides of the aisle, slightly favoring Republican candidates and committees with $520,584, while giving
Democratic candidates and committees $431,312” (Jordan 2).
22
Lending Alliance28, Illinois Community Currency Exchange Association29, and Check
Into Cash30. 31 The top ten recipient states of industry contributions received “threequarters of the $7.36 million doled out by the industry.”32 The top ten recipient states are
the following33: Illinois, Florida, California, Georgia, New York, Texas, Virginia, South
Carolina, Missouri, and Nevada.34
We, from the state Georgia, have been heavily involved with pay to play activity
and in the design of legislation for banning such activities. Our industries and
corporations gave a total of $519,173 to political activity. We currently are revisiting a
ban on “predatory lending.” In Georgia, “Republican candidates received $246,132 while
Democratic candidates received $195,225. Republican state committees received $56,066
while Democratic committees received $19,250. Half of the industry contributions, or
From “Political Pay Day,” by Scott Jordan, written March 9 th, 2007: “Cash America International –
Payday lender Cash America International doled out a total of $757,418. Democratic candidates and
committees received $345,955; Republican candidates and committees received $411,463. The company
contributed heavily in five states, giving $212,138 in Texas, $118,450 in Florida, $50,750 in Georgia, and
$50,255 in Illinois” (Jordan 2).
27
From “Political Pay Day,” by Scott Jordan, written March 9 th, 2007: “The Consumer Lending Alliance –
The Consumer Lending Alliance, an industry trade group, 5 gave more than $600,000 in 15 states. Illinois
candidates and committees received more than one-third of that money” (Jordan 3).
28
From “Political Pay Day,” by Scott Jordan, written March 9 th, 2007: “Illinois Community Currency
Exchange Association – The Illinois Community Currency Exchange Association, a business that
primarily deals with check cashing, gave more than $400,000, contributing $254,100 to Democrats and
$149,750 to Republicans” (Jordan 3).
29
From “Political Pay Day,” by Scott Jordan, written March 9 th, 2007: “Check Into Cash – Check Into
Cash has been a big player in state campaigns in two states. Candidates and committees in California and
Illinois received $95,850 and $101,450, respectively” (Jordan 3).
30
31
Appendix B- Chart of TOP PREDATORY FINANCIAL INDUSTRY CONTRIBUTORS, 1999–
2006
“Political Payday.” www.followthemoney.org
The top ten recipient states are listed in order from greatest to least: (1-10).
34
Appendix C: Chart- PREDADORY FINANCIAL SERVICES INDUSTRY CONTRIBUTIONS BY
STATE, 1999-2006
32
33
$262,363, came in the 2006 election.”35 We have made attempts at banning pay to play
actions, but have not yet carried out these plans to the fullest. We feel that the legislation
we have attempted to create is full of loop holes. We also have worried how such
legislation might negatively impact local businesses in the state. Still, we feel that certain
bans on pay to play actions must occur. We support the Bipartisan Campaign Reform Act
(BCRA), but feel that parts of it now must be strengthened, since pay to play activity still
occurs. We also feel that Congress should consider taking clauses of the New Jersey plan
and make them into national legislation. We feel that if Congress is able to fix federal pay
to play activity, state-based pay to play activity will fix itself in response to
Congressional actions. The federal government must lead by example so that the States
can do the same, thereby removing corruption and inappropriate corporate influence on
the political process. Finally, we from Georgia feel that Congress finally should fix the
problems left by FECA. Congress must put an end to soft money contributions and
campaign contributions must be limited. Corporations and unions should be banned from
contributions. However, PACs should still be allowed to contribute to campaigns.
As the senate committee on ethics, we must rid corruption from our capital city as
well as from our states. When our founding fathers created the Constitution and fought
the Revolutionary War, they wanted to establish a country free of corruption. If pay to
play activity continues, the country will not meet the expectations we have set forth for it.
35
“Political Payday.” www.followthemoney.org
Appendix A: Bar Graph of Soft Money Fundraising (1992-2002)
Appendix B: TOP PREDATORY FINANCIAL INDUSTRY CONTRIBUTORS,
1999–2006
COMPANY
Advance America
Cash America International
Consumer Lending Alliance
Illinois Community Currency Exchange
Association
Check Into Cash
Amscot Corporation
Check Cashers Association of New
York/Check PAC
Select Management Resources
Check ‘n Go
QC Financial Services
Moneytree
409 Group
Anderson Financial Services/LoanMax
Dollar Financial Group
California Financial Service Providers
TOTAL
$955,896
$757,418
$604,592
$403,850
$361,000
$359,900
$282,124
$230,104
$211,650
$202,600
$194,079
$183,700
$164,571
$160,200
$152,600
FINAL TOTAL----- $5,224,284
Appendix C: PREDADORY FINANCIAL SERVICES INDUSTRY
CONTRIBUTIONS BY STATE, 1999-2006
STATE
Illinois
Florida
California
Georgia
New York
Texas
Virginia
South Carolina
Missouri
Nevada
Oregon
Tennessee
Louisiana
Indiana
New Jersey
Arkansas
New Mexico
Kansas
Washington
Alabama
Mississippi
Idaho
Utah
North Carolina
Ohio
Oklahoma
Michigan
Maryland
Colorado
Pennsylvania
New Hampshire
Arizona
Maine
Kentucky
Nebraska
Delaware
South Dakota
West Virginia
TOTAL
$1,130,385
$994,125
$837,673
$519,173
$469,895
$394,248
$304,685
$293,225
$260,333
$207,450
$206,329
$191,079
$170,286
$168,495
$148,350
$134,150
$130,200
$121,925
$120,725
$105,345
$76,125
$73,500
$72,400
$43,800
$34,650
$32,300
$29,600
$29,013
$19,215
$11,656
$10,450
$10,000
$9,100
$6,600
$6,220
$3,650
$1,500
$1,250
Wisconsin
Hawaii
Connecticut
Iowa
$1,000
$650
$500
$250
FINAL TOTAL: $7,364,905
Bibliography
Padilla, Steve “In Politics, Money Talks--and Keeps Talking, Despite Reforms,”
http://www.campaignfinancesite.org/, Hoover Institution: Public Policy Inquiry
Campaign Finance History Los Angeles Times, 2001,
<http://www.campaignfinancesite.org/history/reform3.html>
Drew, James and Wilkinson, Mike “Pay-to-play law never enforced, critics say
Loopholes let donors avoid serious scrutiny,” http://www.toledoblade.com/, Coingate,
Toleoblade.com News, 2007,
<http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20050925/SRRARECOINS/30
9250003>
“Teapot Dome Scandal,” http://www.spartacus.schoolnet.co.uk/, 2004,
<http://www.spartacus.schoolnet.co.uk/USAteapot.htm>
“Early Twentieth Century Timeline,” http://www.polisci.ccsu.edu/, 2002,
<http://www.polisci.ccsu.edu/trieb/early.HTM>
Harrington, Shannon D.; Riley, Clint; and Pillets, Jeff; “Calls to reform 'pay to play' go
unheeded,” http://www.northjersey.com/, North Jersey Media Group, 2003,
<http://www.northjersey.com/page.php?qstr=eXJpcnk3ZjcxN2Y3dnFlZUVFeXkyJmZn
YmVsN2Y3dnFlZUVFeXk2NDY4ODgw>
“Political Action Committees,” http://www.historylearningsite.co.uk/, 2000-2007,
<http://www.historylearningsite.co.uk/political_action_committees.htm>
Senator Vitale, Joseph “Banning New Jersey's 'Pay To Play' History,” http://www.newjersey.ws/, CMD Media and Atom Tabloid, 2004, <http://www.newjersey.ws/modules.php?name=News&file=article&sid=4254>
“A Brief History of Money and Politics,” http://www.campaignfinanceguide.org/,
Campaign Finance Guide: Federal Campaign Finance Laws, 2007,
<http://www.campaignfinanceguide.org/guide-34.html>
Jordan, Scott “Political Payday,” National Institute on Money in State Politics, 03 March
07, <www.followthemoney.org>