1

FEDERAL ELECTION COMMISSION

PUBLIC HEARING ON

\(1\) THE DEFINITION OF FEDERAL ELECTION ACTIVITY;

AND

\(2\) STATE, DISTRICT AND LOCAL PARTY COMMITTEE

PAYMENT OF CERTAIN SALARIES AND WAGES

Thursday, August 4, 2005

10:06 a.m.

9th Floor Meeting Room

999 E Street, N.W.

Washington, D.C.

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C O N T E N T S

AGENDA ITEM PAGE

Opening Remarks 3

Panel 1: Federal Election Activity

Larry Noble, The Center for Responsive

Politics 6

Paul S. Ryan, The Campaign Legal Center 9

Brian G. Svoboda, Democratic Legislative

Campaign Committee 15

Questions and Answers 23

Panel II: Federal Election Activity

Mark Brewer, Association of State

Democratic Chairs 90

Joseph E. Sandler, Sandler, Reiff and

Young, P.C. 97

Donald J. Simon, Democracy 21 102

Questions and Answers 108

Panel III: State, District, and Local Party

Committee Payment of Certain Salaries and Wages

Mark Brewer, Association of State

Democratic Chairs 179

Paul S. Ryan, The Campaign Legal Center 184

Joseph E. Sandler, Sandler, Reiff and

Young, P.C. 190

Donald J. Simon, Democracy 21 193

Questions and Answers 198

Adjournment 246

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P R O C E E D I N G S

OPENING REMARKS

CHAIRMAN THOMAS: Good morning, one and

all. Let\'s get underway. The Special Session of

the Federal Election Commission for Thursday,

August 4, 2005, will please come to order.

I would like to welcome everyone to

today\'s Commission hearing. This morning, we will

be discussing the Notice of Proposed Rulemaking on

a definition of Federal election activity, which

was published in the Federal Register on May 4,

2005\. The NPRM explored possible modifications to

the definitions of voter registration activity, get

out the vote activity, and voter identification so

that they would be consistent with the District

court\'s decision in Shays v. FEC.

I would like to thank all of the people

who took the time and effort to comment on the

proposed rules, and in particular those who have

come here today to give us the benefit of their

practical experience and expertise on issues raised

by the proposed rules. I also want to thank our

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staff for working hard to get this hearing ready.

Let me briefly describe the format we will

be following today. This is what we have been

doing a lot recently. We have this morning a total

of six witnesses with regard to this particular

rulemaking. We have divided them among two panels.

Each panel will last for one hour. Each witness

will have five minutes to make an opening

statement. We have a light system at the witness

table to help you keep track of your time. The

green light will start to flash when you have one

minute left. The yellow light will go on when you

have 30 seconds left. And the red light means it

is time to wrap up your remarks.

The balance of time is reserved for

questioning by the Commission. For each panel, we

will have at least one round of questions from

Commissioners, the General Counsel, and our Staff

Director, and then there will be a second round if

time permits.

We will have a short break between the two

panels, and after a lunch break, we will conduct a

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separate hearing on a separate issue. We have a

busy day ahead of us and would appreciate

everyone\'s cooperation in helping us to stay on

schedule.

Let us begin by hearing from any of my

colleagues who might wish to make an opening

statement. Anybody?

\[No response.\]

CHAIRMAN THOMAS: Well, that makes this

easy. We\'re ahead of schedule.

\[Laughter.\]

COMMISSIONER McDONALD: Already a bonus.

PANEL 1: FEDERAL ELECTION ACTIVITY

CHAIRMAN THOMAS: Our first panel consists

of Larry Noble, who is appearing on behalf of the

Center for Responsive Politics; Paul Ryan, who is

appearing on behalf of the Campaign Legal Center;

and Brian Svoboda, who is appearing on behalf of

the Democratic Legislative Campaign Committee.

Please take a seat and proceed when you

are ready. We will go alphabetically, I suppose,

and Mr. Noble would start us off.

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MR. NOBLE: Mr. Chairman, Mr. Vice

Chairman, members of the Commission, Mr. General

Counsel, staff, on behalf of the Center for

Responsive Politics, I want to thank you for the

opportunity to testify before the Federal Election

Commission on Federal election activity. I have

only a few brief comments and then will be glad to

try to answer any questions that you have.

This hearing is part of the continuing

saga of the rulemaking. BCRA represents the most

comprehensive reform legislation in 25 years, and

writing the rules implementing the new law has

been, I think, a long and often contentious

undertaking. We are here today because the U.S.

District Court rejected the FEC\'s attempt to define

several of the component parts of the definition of

Federal election activity. Specifically, we are

dealing with the rules defining voter registration

and get out the vote activity, voter

identification, and the phrase in connection with

an election in which a candidate for Federal office

appears on the ballot.

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In some cases, the court held that the

agencies rules did not comport with the clear

language of the statute, while in others, the court

held that the regulations violated the APA because

of a lack of proper notice. And even in some of

those cases, the court left open the question of

whether the underlying rule was within the agency\'s

discretion.

Regardless of the reason the regulation

was sent back, we urge the Commission to use this

opportunity to adopt regulations that implement the

law in a manner consistent with the Congressional

intent to ban the use of soft money to influence

Federal elections rather than just looking for new

ways to limit the reach and effectiveness of BCRA.

Of course, the Commission must consider

the impact its rules will have on the regulated

community, but the FEC\'s desire to minimize the

burden on the regulated community cannot override

the agency\'s mandate to enforce the law as enacted

by Congress.

Ultimately, whether you think BCRA was

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sound public policy or not, this is a law of limits

and prohibitions which, by its very nature,

restricts how certain campaign activities may be

funded. Trying to move as many of those activities

as possible out of the reach of the law will not

only undermine BCRA, but will undermine the

credibility of the agency. If you believe

provisions of BCRA were a mistake or not working in

the way you intended, you can make that case to

Congress, but BCRA is the law of the land and

should be administered in a way that is consistent

with the purposes and goals and the FEC\'s mandates.

With these thoughts in mind, we urge the

Commission to do the following. Amend the proposed

rule regarding voter registration to include

efforts to encourage individuals to register to

vote. Amend the proposed rules regarding get out

the vote activity to include efforts to encourage

individuals to vote and eliminate the 72-hour time

period limitation on the definition. Adopt the

proposed rule to eliminate the association

exception for get out the vote activity and voter

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identification. Include voter list acquisition in

the definition of voter identification. And reject

the adoption of any exception to the existing

Federal election time periods for the definition of

a term in connection with a Federal election.

Again, I thank you for this opportunity to

testify and will be glad to answer any questions

that you have.

CHAIRMAN THOMAS: Thank you. We are just

racing ahead of schedule here.

Next, I guess, Mr. Ryan. Good morning.

Welcome.

MR. RYAN: Good morning, Mr. Chairman, Mr.

Vice Chairman, Commissioners, and Commission staff.

It is a pleasure to be here this morning testifying

in this rulemaking.

As Mr. Chairman noted, I am here

testifying on behalf of the Campaign Legal Center,

which I serve as Associate Legal Counsel. The

Campaign Legal Center has submitted detailed

written comments on this rulemaking, together with

Democracy 21 and the Center for Responsive

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Politics. Due to the large number of legal and

policy issues raised by the NPRM for this

rulemaking, I will not repeat all the points made

in my written comments, but instead will address

the issues considered by the Campaign Legal Center

to be most important.

With regard to voter registration

activity, the regulation proposed in this

rulemaking is identical to the existing rule. The

Campaign Legal Center objects to readoption of this

rule on the ground that the rule includes only

individualized efforts to assist voters to

register. We ask that the Commission amend the

rule to include encouraging or urging voters to

register.

In the present NPRM, the Commission noted

its concern that adoption of a definition of voter

registration activity that includes encouraging

people to register to vote, quote, \"could overrun

the administrative and enforcement capacity of the

Commission,\" unquote. This concern seems

unwarranted given the fact that the Commission

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already regulates such activity under Sections

106.7(c)(5) and 100.133 of the Code of Federal

Regulations.

Regulation 106.7(c)(5) requires State

parties to use at least some hard money to pay for

voter drive activities that, quote, \"urge the

general public to register or vote,\" unquote, but

do not qualify as Federal election activity.

Regulation 100.133, which implements an

exemption from the definition of the term

\"expenditure\" describes voter registration and get

out the vote activities as, quote, \"designed to

encourage individuals to register to vote or to

vote,\" unquote.

Just as the implementation of Sections

106.7(c)(5) and 100.133 have not overwhelmed the

administrative and enforcement capacity of the

Commission, nor would adoption in this rulemaking

of a voter registration regulation that includes

activity encouraging or urging voters to register.

With regard to get out the vote activity,

the Campaign Legal Center supports the Commission\'s

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proposal to eliminate the association exception

from the current rule as the only acceptable means

of complying with the District Court decision in

Shays.

For the reasons just stated with regards

to voter registration activity, we further ask that

the Commission amend the proposed get out the vote

rule to include activity encouraging voters to get

out and vote.

We also urge the Commission to eliminate

the 72-hour time period reference from the proposed

get out the vote rule. BCRA covers all get out the

vote activity in connection with a Federal

election. Such activity can and does occur in the

weeks and months prior to an election, particularly

in the 27 States that permit early voting. As

Attorneys Sandler and Reiff noted in their written

comments, the existing regulations\' reference to a

72-hour time period led many committees to

mistakenly believe that any get out the vote

activity outside the 72-hour window did not qualify

under the regulation as get out the vote

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activities. For these reasons, the Commission

should eliminate the 72-hour time period reference.

With regard to voter identification, the

Campaign Legal Center again supports the

Commission\'s proposal to eliminate the association

exception from the current rule as the only

acceptable means of complying with the District

Court decision in Shays.

We likewise support the Commission\'s

proposal to include the acquisition of voter lists

in the definition of voter identification, but

further urge the Commission to include the use of

voter lists in the definition of voter

identification. Under such a regulation, State

party committees would be required to use Federal

funds to pay for any voter list acquired or used

within the time period defining what constitutes

activity in connection with a Federal election.

This regulatory language would prevent a State

party committee from gaming a system by acquiring a

voter list outside of the time period but using a

list within the time period.

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The Commission seeks comment with regard

to voter list acquisition on whether the regulation

should include an exception for the acquisition of

voter lists if the party committee does not

actually use the voter list in connection with any

election where a Federal candidate appears on the

ballot. We oppose the creation of any such

exception because, in the words of the Shays court,

inherent in the acquisition of such a list is the

identification of voters.

Finally, the Commission has taken this

opportunity to propose several amendments to a

regulation not challenged in the Shays litigation,

Section 100.24(a)(1), which defines the phrase in

connection with an election in which a candidate

for Federal office appears on the ballot. The

Campaign Legal Center supports the Commission\'s

proposal to extend the coverage of Section

100.24(a)(1) to even year special elections.

However, we oppose the creation of any

exceptions to the existing Federal Election

Commission time periods established by this

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section. The proposed exception would create large

periods of time in which State and local party

committees would be permitted by the Commission to

freely spend soft money in a manner that undeniably

influences Federal elections and, consequently,

unduly compromises the soft money ban.

Thank you for your attention. I look

forward to answering any questions you might have

to the best of my abilities.

CHAIRMAN THOMAS: Thank you.

Mr. Svoboda, thank you.

MR. SVOBODA: My name is Brian Svoboda. I

am counsel to the Democratic Legislative Campaign

Committee and I want to thank the Commission for

the opportunity to testify and also thank the

Commission staff for the time and effort they have

put in choosing a convenient date for everybody.

I am here for the particular purpose of

talking about how this rulemaking might affect

organizations like my client and like non-party

legislative caucuses across the country that engage

in the support of State and local candidates and

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some things that the Commission perhaps should

consider both as legal and practical matters in

developing these rules and applying them to these

types of organizations.

There\'s two basic things that the

Commission might want to consider about

organizations like these as they proceed with these

rulemakings or with this rulemaking. The first is

that organizations like the DLCC, organizations

like legislative caucuses at the State level that

are organized outside the party structure, are

fundamentally different from other types of

organizations that are regulated by BCRA, and in

particular, they pose a\--in particular, they

present considerations that make expanded Federal

regulation and the imposition of complex rules

perhaps inadvisable in this context.

So for example, it is well acknowledged

that groups like caucuses and like the DLCC have

had a longstanding and historical interest in

supporting specifically State and local candidates.

In the case of my client, they are monomaniacally

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focused on the election of State legislators, and

this is something that, in fact\--I mean, the

sponsors of BCRA in the most recent 527

legislation, H.R. 513 that was reported out of the

House Administration Committee, acknowledged.

Faced with the task of trying to decide what

universe of 527 organizations ought to face the

requirement to register as a political committee with

the Commission, the sponsors and the House

Administration Committee adopted an exemption that

would apply to organizations like these to the

extent that they do not refer to Federal candidates

in their communications or otherwise manifest signs

of being actively involved on behalf of Federal

candidates or Federal political parties.

So we start from kind of the baseline that

these sorts of organizations present a

fundamentally different sort of case for

regulation, that they are focused on State and

local candidates and some measure of respect should

be afforded to their State and local election

activities.

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The second consideration that

organizations like these face is that they are not,

frankly, historically accustomed to having to

comply with Commission regulations, particularly

regulations as complex as these. Indeed, given

their focus on candidates at the State and local

level and the absence of a focus on Federal

candidates, they have had\--they would have had,

before passage of Shays-Meehan, little reason to

suspect that their activities might be affected by

the operations of this agency or by the regulations

of this agency. And when the Federal election

activity regulations, in fact, were adopted at the

end of 2002, most entities like this complied with

them in a very simple way. They chose not to

conduct Federal election activity.

Their principal concern as an operational

matter was can we urge voters to go out on November

2 and vote for State Senator X? And fortunately,

at that time, there were Commission regulations in

place that essentially allowed them to do that, the

regulation that the Commission is now being called

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upon to revise as a result of the Shays District

Court\'s opinion that created an exemption for State

and local committees that were active solely in

State and local elections.

So the idea that these organizations are

prepared, as a practical matter, or focused, as a

practical matter, on conducting allocation or using

reasonable accounting methods to determine the

sources of funds that they are raising, spending,

and using for their State election activities is an

assumption that warrants some careful review. I

mean, we at the DLCC have taken some effort during

the last cycle to educate caucuses on the

requirements of Federal election activity, we think

with some fruit. But by and large, I think it

needs to be supposed by the Commission that most

people at the State and local level are not aware

of how these rules might affect their activity and

that that problem would be compounded if these

rules become more complex or more onerous.

So where, in our view, does that leave the

Commission at the present moment? You have a

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statute that at its core is ambiguous. I mean, for

example, under the term that would seemingly apply

to my client, the a-

association of State or local officeholders or of

State and local candidates, is undefined by

Congress or in the regulation. We assume it

applies to us and we think that that is the best

assumption, but it\'s not defined, and similarly,

the court in the Shays case said that the basic

elements of Federal election activity were

undefined by Congress, such as get out the vote,

voter registration, and voter identification. That

suggests that the Commission has some room to

interpret these statutes and to apply them in a way

that is consistent with Congress\'s purpose.

What was Congress\'s purpose as it passed

this statute? With respect to organizations like

ours, Congress was almost silent. I found one line

of legislative history on the subject. It\'s in a

section-by-section analysis that Senator Feingold

introduced on the floor saying basically that the

purpose of the restriction was, quote, \"to close

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the State party loophole.\" Their fear, and

frankly, I think, it was the fear that was echoed

by the sponsors in the Shays litigation at the

District Court level, was that organizations like

State caucuses thought to have a relationship with

State parties or with national parties might serve

as a Trojan horse for the conduct of Federal

election activities and, thus, the purpose of

imposing the restrictions on them was to prevent

that sort of circumvention.

Obviously, what the court did in the Shays

case was to reject the notion that the Commission

could take two components of the Federal election

activity definition, the voter identification and

get out the vote provisions, and exempt caucuses

and associations entirely from those restrictions.

So what can the Commission do now? One

possible avenue might be for the Commission to

review the GOTV and voter identification

definitions and come up with exemptions that are

more narrowly tailored toward the purpose of the

statute, and here again, H.R. 513 and the position

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taken by the sponsors of the legislation in the 527

bill might provide some guidance. For example,

they make exemptions for political committee

status for certain types of non-Federal

organizations contingent on a series of

circumstances\--whether they comply with State law,

whether Federal candidates, Federal officeholders,

national parties or their agents participate in the

operations of the organization or raise money for

them, whether they make direct contributions to

Federal candidates.

Perhaps the Commission could adopt an

approach to the GOTV and voter identification

question for organizations like ours that would

allow them to conduct those activities so long as

they met those sorts of conditions. That, to us,

would seem to meet the concerns that the sponsors

had addressed, which was essentially to make sure

that organizations like ours did not function as

Trojan horses for party or candidate activity.

We respectfully suggest that the facts

from the past election cycle suggest that that has

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not happened, but should the Commission wish to

guarantee that that not happen in a way that is

consistent with the statute, that might be one

possible approach.

And again, I appreciate your forbearance

and the opportunity to testify today and I\'m happy

to answer your questions.

CHAIRMAN THOMAS: Thank you.

QUESTIONS AND ANSWERS

CHAIRMAN THOMAS: I\'ll start off the

questioning. The opposition put forth by Mr. Noble

and Mr. Ryan is that we ought to, at least in some

of our definitions, for example, for GOTV type of

activity, move into including\--encouraging people

to get out the vote, but I think we have to concede

there are some, I guess, complications about what

that would then bring in. I suppose you\'ve

probably seen the comments submitted by Mark Brewer

of Michigan Democratic Party, but if you haven\'t,

on page four, he throws out a few hypotheticals.

He thinks that if we move into this attempt to

cover encouraging voter registration through

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improved responding to a voter calling in\--I\'m

sorry, calling his local party headquarters and

asking where he or she could register, it would

also bring in placing a stack of voter registration

cards at the front desk. It would also pick up

perhaps the cost of a party website where

registration materials are available.

Those are the kinds of hypotheticals that

have been thrown out, and I\'m just curious how you

would react to whether those kinds of activities

should be covered by a modified definition that

would add in encouraging people to get out the

vote.

MR. NOBLE: Obviously, with any of these

rules, you\'re going to have to draw certain lines,

and off the top of my head, I would say that

responding to a voter calling in, if that\'s all it

is, a random call, then, no, that doesn\'t have to

be looked at as an activity that was out there

encouraging voters. However, if you took out an ad

encouraging voters to call in and find out how they

could\--where they can vote or find out why they

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should vote, then yes, that would.

I think you really would encourage\--what

we\'re saying here is, don\'t limit it to actually

physically or in some ways assisting individual

votes. But anything that encourages them that is

meant to get them to get out, to tell them to go out

and vote should be covered. Placing cards on the

front desk, probably not. I\'m not sure just the

act of placing them. But telling people, come in

and we have cards for you to register to vote, yes.

CHAIRMAN THOMAS: Any\--

MR. RYAN: The only thing I would add is

that I would encourage the Commission to rely on

the expertise that has developed in years of

implementing Regulation 106.7(c)(5), which seems,

in my reading of it, to require state parties to

allocate between Federal money and\--hard money and

soft money, any activities that urge voters to

either register or vote. The Commission has

experience implementing this type of regulation.

MR. SVOBODA: Mr. Chairman, if I may, I

might offer one comment on the foregoing, and that

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is there is no doubt that there are some things

that the Commission is going to have to change in

the FEA rules as a result of the Shays opinion. I

mean, that just is what it is.

But from the perspective of clients like

mine and State caucuses, there\--our perspective

would be that the Commission really should put some

thought in making the changes as minimal as

possible, and I\'ll tell you why, which is that, A,

these rules are rules that people at the State and

local level have spent two years trying to become

accustomed to, trying to figure out and trying to

figure out how to comply with, and the second is

that these rules are very complicated. I mean,

they just are.

I mean, the classic case during the last

cycle was the calls we would get from clients

saying, \"I want to send a mailing saying, be sure

to vote for the Democratic candidate on November

2,\" or Candidate X on November 2 as that Federal

election activity, and, well, it is providing the

date of the election, specific information that

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might assist them in voting, and there\'s a risk

it\'s GOTV.

So you already have a level of investment

and complexity in dealing with these rules and one

fear, I think, that the regulated community perhaps

has is that if the rules change again and if the

rules become more complicated again, it may

actually retard the ability to comply effectively

with the rules.

Understandably, I can see the desire to

try to move the ball forward to prevent additional

opportunities for evasion or for circumvention, but

the flip side of that is that if the rules change

so quickly and become so complicated that,

particularly people at the State and local level

don\'t understand them, there\'s a serious question

as to how they will be brought to comply. And

again, that\'s something that organizations like the

DLCC can and have made a difference. We try to

educate our clients as best we can about these

issues.

It\'s, frankly, a subject on which the

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Commission would need to make, I think, some

significant investment, because the way the

situation is right now, without some aggressive

outreach to these organizations, changes in the

rules have the effect of essentially planting land

mines across the country, but somebody trips on it

years from now and blows themselves up without any

idea that they\'re there. So that is the

fundamental issue that we would raise about a lot

of these restrictions and perhaps the direction

that the Commission should take in revisiting

subjects that perhaps the Shays court did not

require them to address.

CHAIRMAN THOMAS: I don\'t have much time

left. I was just going to try to get

clarification. In the comments of the Campaign

Legal Center and the Center for Responsive Politics

and Democracy 21, there seems to be the impression

that if we don\'t bring some of these voter

registration and GOTV activities into the FEA

definition, that somehow that leaves these State

and local parties free to pay for the costs 100

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percent with soft money. I just want to get some

clarification.

MR. NOBLE: I apologize. Actually, I

meant to address that in the opening statement.

That was a mistake on page seven of our comments,

if that\'s what you\'re referring to, the first full

paragraph, where we say contacting and encouraging

voters to register will be exclusively soft money.

That actually was an error. That would be a mix of

hard and soft money.

CHAIRMAN THOMAS: So even if we don\'t\--

MR. NOBLE: Right.

CHAIRMAN THOMAS: \--bring this into the

FEA realm, there would still have to be some

allocation\--

MR. NOBLE: Allocation, yes, sir.

CHAIRMAN THOMAS: Okay, thanks.

Next, we\'re going to go to Vice Chairman

Toner.

VICE CHAIRMAN TONER: Thank you, Mr.

Chairman. I want to thank the witnesses for being

here today helping us. It used to be that August

30

was kind of a quiet time in Washington. I miss

those days, but thank you for being here.

I want to follow up with another

hypothetical. The Chairman mentioned a

hypothetical that Mr. Brewer offered, and Mr.

Noble, I\'ll begin with you. Three months before

next year\'s mid-term elections, let\'s say the Ohio

Democratic Party invites Reverend Jesse Jackson to

travel to Columbus, Ohio, to be the keynote speaker

of a large voter registration rally the party is

sponsoring there. Hundreds of thousands of people

attend the rally in Columbus and Reverend Jackson

makes the following comments. Quote, \"It is

critical that all of you here today register to

vote. Remember Florida in 2000? Remember Ohio in

2004? If everyone here registers to vote, we will

not be denied again. The Democratic Party is on

the brink of taking back control of Congress. With

your help, we will be successful in November.\"

And my question is, in your view, are

Reverend Jackson\'s remarks voter registration

activity under BCRA? Would they meet the

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\"encouraging individuals to register to vote\"

standard that you\'re proposing?

MR. NOBLE: Yes.

VICE CHAIRMAN TONER: And so, therefore,

in your view, would that means that all the event

costs for this event would have to be paid for with

federally permissible or Levin funds?

MR. NOBLE: Yes.

VICE CHAIRMAN TONER: No soft money

whatsoever for any of these\--

MR. NOBLE: If that is the event, yes.

VICE CHAIRMAN TONER: Mr. Ryan, do you

concur?

MR. RYAN: Yes.

VICE CHAIRMAN TONER: Okay. Mr. Svoboda,

what are your thoughts on that?

MR. SVOBODA: Well, Commissioner, I\'m not

sure that I agree with the foregoing analysis. I

mean, for one thing, as a practical matter, I mean,

that sort of activity, absent more detail from your

question, would make the line item of any party

committee or party organization\'s voter

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registration budget. I mean, they have an

intuitive sense of what voter registration is and

the mechanics in terms of how it\'s conducted. It

involves reaching out to people, providing them

with voter registration materials and, to the

extent permitted by State law, collecting the

registration materials, bringing them back to the

registrar and making sure that they get on the

rolls. It\'s a much more focused activity than that

and I\'m not sure that a party organization would

view it as necessarily a wise investment in voter

registration simply to have people come to a rally,

be told they ought to register, and then go home

whether they register or not.

So absent those additional facts, I mean,

anecdotally, I don\'t think it\'s something that a

political organization would regard as voter

registration activity. Whether it qualifies as

such on the rules, under the current rules, I think

clearly it does not. I mean, there has to be some

sort of action taken to assist the voter in the act

of voting\--

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VICE CHAIRMAN TONER: Under the proposed

rules of encouraging people to vote, register to

vote\--

MR. SVOBODA: I think it very well could.

VICE CHAIRMAN TONER: Mr. Noble?

MR. NOBLE: I wanted to add one thing, and

I think Brian raises a good point. In practical

terms, I\'m not sure you\'re going to see many of

those where there aren\'t actually then attempts

made to register the voter.

VICE CHAIRMAN TONER: You certainly won\'t

if your proposed regulation is adopted.

MR. NOBLE: I\'m not sure you see them

right now.

VICE CHAIRMAN TONER: That is my point. I

am just saying the mere exhortation to register to

vote, in your view, ought to be Federal election

activity.

MR. NOBLE: Right.

VICE CHAIRMAN TONER: Without anything

more.

MR. NOBLE: Right.

34

VICE CHAIRMAN TONER: Yes, Mr. Svoboda?

MR. SVOBODA: I apologize for

interrupting. My follow-up was going to be that

follow-up activity, that going and visiting the

people who attended the event, encouraging them to

vote, that might very well be classified as voter

registration under the current rules and those

costs captured.

VICE CHAIRMAN TONER: And Mr. Ryan, if as

a result of\--if we were to adopt that kind of

position and voter registration rates fell off,

would that be just sort of an unfortunate byproduct

of the law? We really don\'t have any discretion in

the area, and that\'s just something we\'d have to

live with?

MR. RYAN: I wouldn\'t expect voter

registration rates to fall off\--

VICE CHAIRMAN TONER: If hard dollars had

to be used for mere exhortations to register to

vote?

MR. RYAN: Correct. I think that the last

election cycle showed, at least with respect to the

35

national parties, that the ability to raise hard

dollars has in no way been impeded by the

implementation of BCRA, that parties are raising

more money than ever under the BCRA limits, under

the hard money limits, and I think they would

continue to engage in the activity.

I think the fundamental question here is

not whether or not this Commission is going to

regulate the activity you have described, because

it seems to fall within the current regulations

requiring allocation between hard and soft money.

What will change is instead of using some soft

money, the Commission will now have to use either

Levin funds or all hard money as part of that

allocation, depending on the nature of the

communication.

VICE CHAIRMAN TONER: So the position is

that State parties will be able to have enough hard

money to cover this activity, and if they don\'t,

well, that\'s just\--we really have no discretion to

deal with that.

MR. RYAN: Yes.

36

VICE CHAIRMAN TONER: Congress has spoken,

even though they didn\'t have a regulatory standard.

MR. RYAN: In enacting BCRA, Congress

changed the presumption that State party activities

may not influence Federal elections to a

presumption which all State party activities do\--are

presumed to influence Federal elections.

Congress was pretty clear in doing so, I believe,

and I think this Commission has the responsibility

to implement that purpose and intent of BCRA.

VICE CHAIRMAN TONER: So any State party

event at which a speaker merely urges someone to

register to vote would be Federal election activity

when done in the last 120 days before an election

with no exceptions.

MR. RYAN: Within\--yes, within the

specified time periods.

VICE CHAIRMAN TONER: Any State party

event whatsoever where anyone said, \"Hey, it\'s

important that you register to vote, do your civic

duty\"\--

MR. RYAN: You know, I think you need to

37

look at the nature of the event. You\'ve described\--your

hypothetical event is a voter drive type of

event.

VICE CHAIRMAN TONER: Voter registration

drop-by.

MR. RYAN: If that\'s the nature of the

event, then yes.

MR. SVOBODA: Commissioner Toner, may I

make some more comment on your question? If we

accept the premise that we teased out here, which

is that these costs could be captured as voter

registration under the rules, then the same logic

will apply to local organizations and not simply to

State party committees. So, for example, if I am

the slate of city council candidates in San

Francisco County and I bring Reverend Jackson to

give that exact same speech, then at a minimum, I

am going to have to look at my bank account and see

if I have sufficient federally-eligible funds on

hand through a reasonable accounting method to

determine whether I have the funds to pay for that

event, and that for local candidates and local

38

organizations could be a significant burden.

VICE CHAIRMAN TONER: Do you think that a

local organization is likely to sponsor such an

event if that were the standard?

MR. SVOBODA: Depending on the

circumstances\--if that were the standard? To the

extent they were aware of it, I think they would be

scared to do it.

VICE CHAIRMAN TONER: Thank you. Thank

you, Mr. Chairman.

CHAIRMAN THOMAS: Thank you.

Next, we move to Commissioner Weintraub.

COMMISSIONER WEINTRAUB: Thank you, Mr.

Chairman.

Mr. Svoboda\--

MR. SVOBODA: Yes, ma\'am.

COMMISSIONER WEINTRAUB: You were never so

polite to me when we worked together.

MR. SVOBODA: Not true.

\[Laughter.\]

COMMISSIONER WEINTRAUB: I just want to

prove that I know how to pronounce your name.

39

CHAIRMAN THOMAS: Now, now, don\'t be mean.

\[Laughter.\]

MR. SVOBODA: I should note that the

chairman came closer than 99 percent of the people

who call my house.

\[Laughter.\]

COMMISSIONER WEINTRAUB: All right. I\'m

wasting my time here. I hear what you\'re saying

about the investment that people have in the

current rules because they\'ve finally figured them

out and you finally convince them that they need to

abide by them and what they mean. The problem is,

the rule was struck down and struck down in not

very complimentary terms. We have gone through at

least one level of appeal and we didn\'t get a

terrific result at that level, either.

I don\'t think we have much of a choice

here. The District Court said Congress has spoken

directly on this question and the Commission\'s

exemption for associations or similar groups of

candidates for State or local office or of

individuals holding State or local office runs

40

contrary to Congress\'s clearly expressed intent and

cannot stand. The sponsors who\--you know, you say

they\'ve introduced other legislation that seems to

be more accommodating to organizations like yours,

submitted comments to us on this rulemaking in

which they said, we agree with the proposed rule

that the statute requires associations of State and

local candidates to use hard money for all of their

GOTV activities when a Federal candidate is on the

ballot.

My concern as a Commissioner, you know, is

an institutional one. I agree that we could do

what you suggest and try a minimalist approach and

try and tweak the rules a little bit, but I suspect

if we did, we\'d end up back in court again and then

we might end up having to rewrite the rules again

and then you might have to re-teach them again to

your clients, which goes against the interest that

you said you were concerned about. From the

institution\'s perspective, I don\'t want this

institution to spend the next ten years rewriting

the same regulations over and over again, going

41

back into court, trying to defend them, then coming

back and writing them\--I just\--I\'m hoping this is

the last time we\'re going to have to do this.

COMMISSIONER McDONALD: Now, now.

COMMISSIONER WEINTRAUB: No, I\'ve only got

another couple of years here, so I\--but I\'d like to

think that by the time I leave, maybe when

Commissioner Noble is here, that he won\'t have to

be still rewriting the same regulation.

COMMISSIONER McDONALD: You beat me to it.

COMMISSIONER WEINTRAUB: So, you know,

I\'ll give you an opportunity\--it\'s not really a

question, but I\'ll give you an opportunity to

comment on that.

MR. SVOBODA: A few comments. I mean, the

first is I assume from your question you were

talking particularly about the exemptions for GOTV

and voter ID that apply to associations of State

officeholders and State candidates, and I think

it\'s important to be precise about what Congress\'s

purpose was in enacting that restriction from what

we know, from what little we know, and what the

42

court\'s reasoning was in invalidating the rules in

place.

Congress\'s purpose, as we talked about

earlier, was basically to prevent these

organizations from serving as Trojan horses for

State parties, for national parties, and for

Federal candidates, to prevent them from being the

new vehicle by which a Senate candidate\'s GOTV

program is going to be run. That\'s the best

inference that we can draw from the legislative

history.

Now, the court\'s problem in Shays, the

District Court\'s problem in Shays, as I read Shays,

was not simply that the Commission chose to provide

some measure of relief for purely non-Federal

activities from these definitions. It is that the

Commission chose to offer blanket exemptions from

these definitions of GOTV and voter identification

based on the class of the organization when the

statute expressly applied the restrictions to that

same class of organization. That was the Shays

court step one problem, that Congress, on the one

43

hand, couldn\'t regulate the voter ID and GOTV

activities of associations, and have the Commission

then say, well, we\'re not going to regulate the

voter ID and GOTV programs of the committees.

Plus, the Explanation and Justification for these

rules initially didn\'t really provide reasoning for

the exemptions other than the Commission\'s

nervousness about going where Congress had signaled

it had intended to go.

So the question that that raises is, does

that permit the Commission to go and try to review

the application of these rules to associations,

which the Commission has some discretion to do, in

a way that\'s actually consistent with the

Congressional design and informed by the

Congressional design.

Now, I understand the Commission\'s concern

about the prospect of additional litigation. It

should be noted that, I mean, that, frankly, was a

prospect that runs in both directions. I say that

not on behalf of my client or anyone my client

knows, but on behalf of many other State and local

44

organizations who five years from now may find

themselves a respondent, you know, being presented

with a conservation agreement that they don\'t sign

and they\'ll say to the Commission, come serve us in

Federal Court, and the first affirmative defense is

that the regulation is unconstitutional under the

First Amendment of the United States Constitution,

and we all know that this particular actual

situation here is not one that was reviewed in

detail by the Supreme Court in McConnell and it was

not reviewed in detail by the District Court in

McConnell.

So, I mean, there\'s room for that sort of

constitutional argument, and to get to Commissioner

Toner\'s hypothetical again, if the slate of city

council candidates in Alameda County has Jesse

Jackson come to a rally urging people to register

to vote and they\'re sued in Federal District Court

by the Commission for having paid for it with

corporate funds under California State law, it\'s

entirely possible that they may have a challenge to

the Commission\'s regulations and that the

45

Commission may be forced to rewrite those

regulations as a result.

So all of that\'s a way of saying that the

risks here run both ways. Just as you have a risk

of being insufficiently faithful to the statute,

you have a risk of infringing the legitimate rights

of other organizations, and just as litigation may

result from your inability to remain faithful to

the statute, litigation may result from being too

aggressive in its enforcement. And so this

difficult job, I don\'t envy you.

\[Laughter.\]

COMMISSIONER WEINTRAUB: Well, at least

nobody\'s circulating your name for Commissioner, so

you won\'t have to be faced with that. I was hoping

to ask a question of the other side, but I guess

maybe I\'ll have a chance later.

CHAIRMAN THOMAS: We go now to

Commissioner Mason.

COMMISSIONER MASON: Thank you, Mr.

Chairman.

I\'ll try not to spend too much time on it,

46

but Mr. Noble, I\'m familiar with your resume and I

don\'t think you ever worked for a State or a local

party or a State or a local campaign.

MR. NOBLE: Actually, when I was\--

COMMISSIONER MASON: A long time ago\--

MR. NOBLE: \--19 years old, I worked for a

mayor for New York.

COMMISSIONER SMITH: Not to date you, but

would that be pre-faker or post-faker?

\[Laughter.\]

COMMISSIONER MASON: Mr. Ryan, do you have

any experience working on\--for State or local

campaigns or political parties?

MR. RYAN: I have limited experience

working for State and local candidate campaigns. I

have never worked on behalf of a party.

COMMISSIONER MASON: Because I just wanted

to, I guess, quarrel with the premise that Mr.

Noble stated in response to Commissioner Toner\'s

questions regarding whether this activity about

encouraging people to vote goes on, because I was a

candidate for State office myself. I have been

47

involved in local political committees and State

committees for a long time and I have a hard time

recalling a campaign event at which someone didn\'t

encourage people to vote, not necessarily to

register, but\--and so one of the concerns that we

had in crafting the regulation is that

encouragement to vote and then sometimes

specifically to register, or to register and to

vote, in fact, is virtually a throw-away line just

incorporated in the normal exhortations at every

party event.

MR. NOBLE: I didn\'t say it doesn\'t go on.

I said what I thought, at most party events aimed

at solely having somebody speak to register to

vote, I said I thought there would probably be some

effort there to also have registration material.

COMMISSIONER MASON: I understand. Well,

yes, and that presents a relative easier case. But

I just want to say that\'s my concern, that if we

throw this net too broadly, in essence, this sort

of, again, routine electioneering of any sort is

going to be constrained to be wholly Federal simply

48

because it\'s just in the nature of political

appeals to encourage your supporters to vote. It

happens all the time, every day in campaigns, and

so that\--

Let me ask a little more specifically, two

things. One is, I think Mr. Ryan said something

about the acquisition versus the use of voter lists

and this was a concern to us and one of the reasons

for some of the complications in the proposals

before you. Exactly what did you mean by that, and

more specifically, assuming there are windows of

FEA and non-FEA for, for instance, voter list

acquisition, what are you proposing if, for

instance, we use an even number/odd number year

approach and leave aside any special elections for

the moment, that a political party acquires a voter

list in an odd-numbered year and then uses it in

some fashion in the even-number year, what are you

suggesting would be the result in terms of how they

have to pay for the cost of the acquisition of the

voter list?

MR. RYAN: I think the result would be

49

that they would need to pay with hard money, with

Federal funds, and the comment\--that point in our

written comments was made specifically in response

to the Commission\'s concern that limiting the

regulation only to acquisition may open the door

for State party committees to, we might call it

game the system by saying, okay, we want to use it

in the Federal election time period but we don\'t

want to pay for it with entirely hard dollars, so

we\'re going to buy it a month before the time

period kicks in and then we\'re going to use it in

the period and we\'ll say, hey, we didn\'t acquire it

during the Federal election time period. It\'s not

FEA.

COMMISSIONER MASON: And so you\'re saying

any use whatsoever would then result in a reach-back and

make it 100 percent Federal?

MR. RYAN: I think that would be a bright-line

rule that would certainly be within the

Commission\'s discretion to adopt.

COMMISSIONER MASON: So, effectively,

there would be no window where they could apply. I

50

mean, I just can\'t quite imagine the situation\--I

mean, I suppose in a very constricted circumstance

where they had an off-year election, they could buy

it and use it and dispose of it. But that\'s not

the way committees normally use it. So Mr. Noble

is nodding affirmatively that\--

MR. NOBLE: Yes, I agree, and I think it

fits into the purposes of the Act, which is that

since that voter list is going to be used for

Federal elections ultimately, because the

hypothetical that you\'re using, it has to be paid

for by hard money. I think that\'s the goal of the

Act and that\'s what they did.

And we do know from history that whether

you want to call it gaming the system or just

exercising your rights as far as you think you can

push them, that we\'ve seen a lot of instances

where, when there are these types of lines, that

the party committees and others will try to get

outside the line by doing part of the activity in

such a way, whether it be using volunteers or

having the passing of the hands by the volunteers

51

or buying something for a time period, they\'ll do

that to try to maximize the use of soft money. I

think BCRA was aimed at getting at that, and so I

think that is a result.

COMMISSIONER MASON: I wanted to ask a

little more about State and local candidate

associations. I should say, in Virginia, where I

came up in politics, municipal elections are held

in the spring of even-numbered years and this

introduces a number of problems. Sometimes in May,

they\'ll have municipal elections at which there are

no Federal candidates on the ballot, followed in

June by a primary in which there are Federal

candidates on the ballot.

In a number of municipalities in Virginia,

there\'s a tradition of nonpartisan local elections

and there are associations in Richmond\--one of them

is called the Team for Progress and they run a

slate for city council. I guess one of my general

concerns is that an organization of that sort might

be somehow caught up in this FEA definition because

they\'re doing GOTV for their candidates in May,

52

within the window before the June primary.

I don\'t know if any of you have any

specific comments on that hypothetical, but I just

wanted to drive home that there are some real-life

examples out there of organizations which I think

are genuinely nonpartisan, aren\'t intending to help

one party or the other, in fact, it\'s integral to

their mission and their way of operation that

they\'re reaching out across normal party lines and

I don\'t know if you have any thoughts on how we

would craft exemptions that would continue to allow

that activity not to be federalized.

MR. NOBLE: I think that\'s a very

difficult\--as we pointed out in our comments, it\'s

a very difficult issue. In a sense, those type of

elections may take place during a Federal election

period and I looked at it as almost like a cloak of

invisibility over the activity that goes on there

and I\'m not sure you can do that. We understand

that in certain instances, this is going\--

COMMISSIONER MASON: Why would that

activity be in connection with an election at which

53

a Federal candidate is on the ballot?

MR. NOBLE: Well, if it\'s taking place\--if

the municipal election is taking place in the

middle of, let\'s say, a primary campaign for a

Federal office, then the get out the vote activity,

that type of activity is going to have an impact on

the Federal election. And the danger there is, and

I know we keep talking about the worst case

scenarios and the danger, the danger there is that

that then becomes an avenue for people to funnel

money in to increase the get out the vote activity\--

COMMISSIONER MASON: And how does

encouraging people to vote in May affect the

election in June?

MR. NOBLE: Well, it may very well. I

mean, you can have activity in May that is

encouraging people to get out and vote. In certain

districts, it could be encouraging people to

register, depending on how late the registration

is, and that may very well affect the election in

June.

I think the view the Commission had that

54

any type of efforts that aren\'t right up to the

election day, I think was much too narrow of a rule

because, in fact, we do see elections going on, or

get out the vote activity going on earlier, and

some States have elections open for a month. They

have long time periods for elections. So you can\'t

just say anymore it\'s on one day that you\'re

talking about.

Again, I recognize that there are some

applications of this that may seem overbroad in

certain respects, but ultimately, I think the rule

serves a purpose of stopping the flow of soft money

in a way that will influence Federal elections.

MR. SVOBODA: Excuse me, Commissioner, if

I might make one observation on that, I think it\'s

important to note that that same issue can be

raised not simply in the context of your

hypothetical May election, but in myriad ways, as

well. I mean, for example, we just talked about

the acquisition of voter lists. If that same

organization acquired a voter list and that voter

55

list was used later in the organization\'s

activities, they\'d be subject to the same

restrictions. So it\'s a question not simply of

trying to figure out how to protect the May 5

activities, so to speak, but also to realize that

there may be things that they\'re doing for those

same non-Federal candidates even in connection with

an election on the first Tuesday after the first

Monday in November that nonetheless is entirely

non-Federal in its focus and intent.

I heard the concerns about the others on

the panel about the efforts to game the system and

I\'m reminded a bit about the story of the little

girl who sees W.C. Fields on the train reading the

Bible and asks him what he\'s doing and he says,

\"I\'m looking for loopholes.\" I mean, the flip side

of gaming the system is complying with the law, and

the question is, what conduct is going to be

prohibited and what is not?

I think it\'s also worth noting that there

are other restrictions in the Commission rules that

prevent\--that weigh against the same sort of

56

circumvention. For example, your association

hypothetically, or my client would be unable to

coordinate public communications that referred to

the Democratic Party with the Democratic Party

Committee. They would be unable to coordinate

communications that referred to a Federal candidate

with the Federal candidate. They would be

curtailed in their ability to have a Federal

candidate raise money for them. They would be

absolutely barred from having a national political

party committee raise funds for them. So there are

other safeguards in the system that weigh further

toward preventing the avenues for circumvention,

the gaming of the system, that others might fear.

CHAIRMAN THOMAS: Thank you.

We move to Commissioner McDonald.

COMMISSIONER McDONALD: Mr. Chairman,

thank you. Larry, Paul, and Brian, many thanks for

being here this morning.

I\'m a little bit like my good friend,

Commissioner Mason, and I had some very early

experience and actually quite a bit of experience

57

with State and local candidates. One that was

dearest to me was my own candidacy, which I lost

and I\'m still mad about, I might point out.

\[Laughter.\]

COMMISSIONER McDONALD: I am worried. I

take, and I say this very seriously, I take both

sides\' presentation, as all my colleagues do,

seriously, and it is tough. I don\'t think it\'s

unfair to say that, and we\'ve seen this more and

more at this Commission, that State and local

parties have a very difficult time complying. I

think that\'s an accurate assessment.

And I honestly believe, more often than

not, they\'re not trying to game the system. Now,

that doesn\'t mean there aren\'t some that are,

because we certainly have those with a long

distinguished record who appear before us quite

frequently. Actually, they\'re either trying to

game the system or they\'re just never going to get

it. I don\'t know what the answer to that is.

That\'s a different question.

But I would like to just take a minute and

58

just see, I mean, let me just pick out a group, for

example, the League of Women Voters. What do you

take for a group like that? Would they be

restricted in any way, do you think, if they held a

voter drive just before an election, weeks before

the election or months before the election?

MR. RYAN: The statutory provision, the

relevant statutory provision applies to an

association or similar group of candidates for

state or local office.

COMMISSIONER McDONALD: All right.

MR. RYAN: I think Mr. Svoboda made a very

good point when he said that current Commission

regulations do not define what constitutes an

association or group of candidates for State or

local office. The Commission should consider

perhaps adopting a regulation that defines with

greater specificity what that phrase of the statute

means.

Off the top of my head, I would say that

the League of Women Voters does not constitute an

association or group of candidates for State or

59

local office. They typically distance themselves

from individual campaigns, to my knowledge.

Nevertheless, I would need more time to

think precisely what would be the boundaries of a

definition of association of candidates for State

or local office. In preparing for this hearing, I

was focusing my attentions on the inclusion or

exclusion of associations and groups and have not

paid very much attention to what the exact

parameters would be. But I would be happy to think

about and write about with my colleagues, if you

choose to leave the record open, or to initiate

another rulemaking on the contours of that term.

COMMISSIONER McDONALD: I would, of

course, be for both those, but given my status, it

really\--I\'d be delighted to leave it open and you

can have another rulemaking. Yes?

MR. SVOBODA: Commissioner, with respect

to your question about the League of Women Voters,

I think the answer would be it would depend on

who\'s on the League of Women Voters. I\'m not sure

that\--

60

COMMISSIONER McDONALD: That\'s the reason

I\'m asking the question.

MR. SVOBODA: I\'m not sure that a

definition\--for purposes of my client and for

purposes of the State caucuses with which my client

works, I\'m not sure a definition is necessary. I

think we pretty much are in agreement that if

anyone\'s in it, it\'s us. But I can see situations

where it might raise issues.

For example, the National Council of

Mayors, the nonpartisan organizations that engage

in policy development, the National Governors

Association, groups like that, I don\'t know to what

extent they do nonpartisan GOTV, but might fall

within the exemptions under Part 114. I just don\'t

know that as a factual matter. But I think it\'s

worth noting that there are certain types of groups

out there that are not thought of in this context

that brings us here today, but yet nonetheless can

be contended to fall within that definition in the

statute.

COMMISSIONER McDONALD: I think, to me,

61

it\'s a concern. I realize that there\'s going to be

exceptions to every rule and that we may have an

opportunity to try to carve this out, but clearly,

groups even like the League, who I did an extensive

amount of work with when I was secretary of an

election board in Tulsa, Oklahoma, one of the

things that they took great pride in, of course,

was registering voters. Well, there were a number

of other groups that did the same thing. There

were a number of, let\'s see, which groups can I

say\--there were a number of groups who took an

interest, and that was one of their claims to fame,

one of the things they did. The League solicited

the positions of the candidates. They reproduced

the positions of the candidates so that people

would be better informed. This was one of the

things that the League looked at with great pride.

I think there\'s a number of groups who try

to do that, and if they are clearly trying to do it

in a time frame that is consistent with maximizing

their own ability to have an impact on the process,

I was just curious if anyone had any thought about

62

them\--

MR. NOBLE: I think\--again, when you think

about it further, I think they\'d fall under 114. I

mean, I think you have a corporation of nonpartisan

voter registration drives.

COMMISSIONER McDONALD: And you don\'t

think that would be a problem?

MR. NOBLE: No. Again, as long as it\'s

not an association of candidates.

MR. SVOBODA: One question that that would

raise, however, Commissioner, is what if it was an

association of officeholders? I mean, every State

has a League of Municipalities. Every State has a

League of County Officials. And again\--

COMMISSIONER McDONALD: That is a good

question. IACIOT \[sp.\], for example, is a very

active county group, and what would be the thought

on that, from either Larry or Paul, either one?

What do you think about that county association,

for example?

MR. NOBLE: It probably would fall under

it.

63

COMMISSIONER McDONALD: Okay.

MR. RYAN: Under federal law, office

holders are grouped together with candidates.

States go different ways. They go both ways on the

issue. Some States explicitly include, or write

their laws with reference to candidates and

> officeholders. Some do not, but they have adopted

regulations, including within the definition of

candidate officeholders. I think the better

practice is certainly to include officeholders

with candidates, because the potential of

corruption or appearance of corruption that is

sought to be eliminated by Federal campaign finance

laws and campaign finance laws of States and local

governments stems from contributions to candidates

and officeholders and not from whether or not the

candidate has already won office.

COMMISSIONER McDONALD: Thank you, Mr.

Chairman.

CHAIRMAN THOMAS: Thank you.

Next, we move to Commissioner Smith.

COMMISSIONER SMITH: Thank you, Mr.

64

Chairman.

I want to go back to a hypothetical, I

think, or a question I think the Chairman posed at

the outset. He suggested, if I got this right,

what if somebody called a county party office and

asked the question, you know, where do I go to vote

or something like that. My question would be,

wouldn\'t that already be covered as individualized

means of assisting a voter? You\'re talking to a

voter individually and asking a specific question

or answering a specific question, telling him

either how to register to vote or where to go to

vote. Isn\'t that individualized means, assisting

somebody in the act of voting?

MR. NOBLE: You could look at it that way,

and maybe we ought to look at it that way. I was

thinking in terms of if you had a random phone call

to somebody in the office and just said, \"I\'m

looking for my place to vote. Where is it?\" and no

program set up to do that type of thing, whether or

not there would be an exemption for that. But I

understand your point. If you\'re looking at a very

65

broad rule, your present regulation might very well

cover that.

COMMISSIONER SMITH: But you suggested

that you think that should not be covered.

MR. NOBLE: Well, I said that there\'s

obviously going to be areas\--there\'s going to have

to be judgments made in terms of where the line is.

I know the Commission is looking for bright lines

in all of this, but even in the proposals you had

out there, there are a lot of, well, we ought to

take care of some of these issues on a case-by-case

basis.

So I\'m saying that encouraging people

to register to vote needs to be covered. There may

very well be passing conversations where somebody

says, and by the way, you should vote, which is a

practical matter, and end up not being covered.

Where that exact line is will have to be determined

on a case-by-case basis.

MR. SVOBODA: Commissioner, if I might add

a thought to that, I don\'t think the current

regulation would extend to that conduct. The

66

definition applies to contacting registered voters

to assist them in the act of voting. In the

hypothetical the Chairman described, I didn\'t

contact anybody. They contacted me. The E and J also

suggested some level of proactivity on the part of

the party committee or on the association is

required.

So, for example, it talks about

activities, quote, \"ultimately directed to

registered voters,\" and here again, we\'re not

talking about an activity that\'s directed at

anyone. We\'re talking about a wholly passive range

of conduct. So I think that illustrates the

difference between the current rule and the new

rules under consideration and how the new rules

might have a significantly more expansive effect.

COMMISSIONER SMITH: And this would, I

think, address the second hypothetical that was

raised right after that. I believe Mr. Noble

suggested that if you had voter registration

material out on the desk and people came in and

took it, that would be okay. But if you actually

67

told people that you had it out on the desk, that

would be a problem. It seems to me, in other

words, if you\'re totally sort of passive and they

contact you without you doing anything to let them

know that you might be a good source of

information, you\'re okay. But if you kind of

advertise it, call us if you need to know where to

vote, call us if you need to get voter registration

materials, and they then call, at that point,

you\'re\--

MR. NOBLE: What I\'m trying to distinguish

is the individual walking in and just getting some

information to vote versus a plan, a project, an

effort by the party to go out there and register

voters or encourage voting. And the reality is

that\--and I know those who have to actually explain

it to the parties, this may not be considered a

good response, but the reality is, there are a lot

of things that go on that just never rise to the

level of having to deal with it and that\'s why the

world works as well as it does, because, in fact,

you can avoid a lot of these specific issues.

68

I think that that will probably go on.

The Commission will never become aware of it. But

if you see somebody pouring a lot of money into

saying, come into our office and register to vote

and get the cards, then you\'re dealing with a very

different situation.

And one thing I wanted to say before is

one thing the Commission has done after every one

of these\--I think after every one of these

regulations has gone into effect, it has done one

of its training sessions and goes out there and

does an excellent job of training people. And I

think one of the things that happened in 2004, from

at least people I\'ve talked to, is people were

uncertain of what the rules were because people who

were aware of what was going on understood that a

lot of things were still in a state of flux.

And I think once the dust settles on this,

and hopefully sooner rather than later, the

Commission will have to go out and will have to

train people and talk to people, and the last time

the Commission\--when the Commission changed its

69

soft money regulations, I remember two things

happened. Everybody in the regulated community was

upset about it, and then once the Commission went

out and trained them, when the Commission talked

about changing it again, they said, no, no, leave

them where they are. We finally figured this out.

We may not like them. Leave them where they are.

And that\'s just the reality.

COMMISSIONER SMITH: Those are good

points. They\'re not points I want to discuss\--

\[Laughter.\]

COMMISSIONER SMITH: Let me just ask, and

shifting gears a little bit, do you think BCRA has

been a success?

MR. NOBLE: I think BCRA has been a

success, yes.

COMMISSIONER SMITH: Can you point to

instances in which the definitions of voter

registration, or Federal election activity that the

Commission adopted were problems in the 2004

election cycle and have been problems in the 2006

election cycle?

70

MR. NOBLE: No, BCRA is much broader than

that and I haven\'t taken a comprehensive look at

it, and often, I don\'t know what cases you have

right now dealing with that issue.

COMMISSIONER SMITH: Let me ask you a

different question. Do you believe that there

should be no further regulation of campaign

finance, that BCRA has kind of\--we\'ve got it now.

There\'s nothing more that needs to be done. Or are

there other things you would like to see Congress

do?

MR. NOBLE: Well, I get to say, since our

group actually did not support BCRA, we don\'t lobby

on legislation, we\'re going to take a position on

that. I will say this as a general proposition. I

don\'t think there\'s an end game in democracy. I

don\'t think there\'s a point at which you say you\'re

done figuring out how to regulate this. It\'s a

dynamic process, and that\'s good\--

COMMISSIONER SMITH: But how about right

now? In other words, is there anything, Mr. Ryan\--your

group does, I think, take more of a position\--that you guys

71

think should be done, that\'s not been

done by Congress that you think ought to be

regulated?

MR. RYAN: Well, I think one of the

reasons\--you asked specifically whether I knew of

any instances in which this particular aspect of

BCRA was used to circumvent your regulations, and I

think one of the reasons that we don\'t know of any

particular examples is because there was another

avenue for soft money. Soft money went to 527

organizations. There are several legislative

proposals pending in Congress to address the 527

issue. This Commission has explored the issue

extensively. I would like to see greater

regulation of 527s, or greater clarity, I should

say, in determining their status, I mean, what

constitutes a political committee under Federal

law.

COMMISSIONER SMITH: Okay. So we\'re in

agreement that at least some people at the Campaign

Legal Center don\'t agree with the current law.

They think there should be a different law than

72

there currently is.

MR. RYAN: No, I wouldn\'t say that.

That\'s not a fair characterization.

COMMISSIONER SMITH: In other words, you

don\'t want any changes to\--you guys want\--the only

changes that you would enact now to Federal

campaign finance regulation, even one\--

MR. RYAN: I think given this\--

COMMISSIONER SMITH: It would be more

regulatory\--

MR. RYAN: Given this Commission\'s

inaction in defining what constitutes a political

committee in such a way that it would regulate some

527 organizations that went unregulated in the last

election, absent action in the near future by this

Commission to do so, we might support efforts in

Congress to do so.

COMMISSIONER SMITH: I\'ll take that as a

yes, but it\'s a good effort to kind of give

yourself some room for the future.

I raise this point for a reason, and

because we reopened\--the comments submitted by

73

Senators McCain and Feingold and Representatives

Shays and Meehan, and your opening statements,

particularly yours, Mr. Noble, have very much a

sort of a look. You guys don\'t want to enforce the

law, and that\'s the only problem with this law.

And we went around about this about a year ago and

I kind of exploded up here at the table after you

made those exact same allegations. You

specifically addressed some, and then you said, the

problem is that you don\'t want to enforce the law,

and I don\'t know, but I lost my temper, and

inappropriately so.

But in any case, the point I want to make

is that I think we recognize that BCRA is the law

of the land. I think we want to implement it

effectively. I think our goal is to do that in the

regulations, and I have seen repeated comments from

Senators McCain and Feingold and Representatives

Shays and Meehan that the law has worked

magnificently, except for the 527 issue that Mr.

Ryan raises and that I have said before the law was

passed, this is the problem you are going to have.

74

I mean, a lot of people predicted that problem.

But as far as the Commission\'s

regulations, there\'s not been anybody out there

saying, boy, this is\--the law\'s not working because

of these regulations. And we\'ve gone through a

couple of these hearings. I only keep asking the

question, can you give us any example of where this

law is not working because of these regulations,

and we keep getting this answer, well, no.

Sometimes different reasons are given for that, but

the basic answer still comes out, no.

But I guess for you guys down in the

press, I want to point out\--pay attention there,

Ken, Jim\--

\[Laughter.\]

COMMISSIONER SMITH: \--that we keep

hearing, when we get lectured how the court rebuked

the Commission and all this kind of stuff, you

know, for soft money rules that Trevor Potter

helped pass, things like that, and I get this kind

of sense when I hear those, you know, if you look

at what the plaintiffs argued in the Shays

75

litigation and what they said were impermissible

constructions of the law, they lost at least as

often as the FEC did because the court repeatedly

said they upheld some of the regulations and many

of the regulations they struck down, they struck

down not because of impermissible interpretations

of the law but for reasons that, because given the

90 days we had to write the rules and so on, we may

not have explained as well as we might have.

And I mention that to say that there are

legitimate grounds for disagreement here and I

think that we would all benefit a great deal, and I

think your own comments would be much more

effective\--these are kind of my parting, perhaps,

words of wisdom to you as I prepare to leave the

Commission\--if you would begin these sessions with

a presumption that everybody is acting in good

faith and is attempting to properly carry out their

duties as they understand them.

Mr. Chairman, I\'m well over my time.

Thank you.

CHAIRMAN THOMAS: Thank you.

76

We move to our General Counsel, Mr.

Norton.

MR. NORTON: Thank you, Mr. Chairman. I

just have a couple of questions.

Mr. Noble, I just wanted to follow up for

a second on the scenario Commissioner Mason

addressed in Virginia, that is the May, purely

local, municipal election and then the June

election where the Federal candidate is on the

ballot. You pointed out that with the proximity of

those elections, part of what BCRA was after is

stopping the flow of soft money that could be used

to influence the Federal elections and it\'s not

always easy to tease those apart, I took to be your

point.

But varying the example just slightly, if

the local party committee or the organization

Commissioner Mason described was involved in paying

to literally transport people to the polls for that

local election, for that purely local election, is

the fact that that may have to be paid for with

hard dollars just kind of tolerable over-breadth?

77

MR. NOBLE: That\'s a good hypothetical and

that may be one, if there\'s a way to figure out how

to tease that out, and I like your expression, how

to tease that out, where what you\'re doing on that

day is taking people to the polls and that\'s all

you\'re doing, there may be some way to do that.

But the problem is, in trying to tease those things

out, it\'s often hard to draw those lines and not

have all the entanglement with everything else, but

it\'s something you could take a look at.

MR. NORTON: I was hoping you could help

me with that.

Mr. Ryan, in your joint comments, you

expressed concern that the current voter

registration rules would encourage State parties to

bifurcate, was your word, the voter registration

efforts to a two-stage operation. The first, there

would be contacting and encouraging voters to

register, and then that would be followed up at

some later time with individualized assistance, and

that would be a way of using allocated funds for

activity that you think ought to be paid for

78

entirely with hard dollars. So my question is, are

you aware of any evidence from the 2004 cycle that

that\'s what State and local party committees were

doing?

MR. RYAN: The Campaign Legal Center has

not looked specifically for any evidence, any such

evidence, and no, I don\'t know of any. But I would

repeat what I said moments ago in response to

Commissioner Smith, which was there was another

large avenue for soft money to flow into this

election. If or when that avenue is closed, we may

see the development of other soft money loopholes.

The soft money loophole that was closed by BCRA

took nearly 20 years to develop, and the court in

McConnell said very explicitly that the Commission

and regulators, Congress, could act proactively to

prohibit or prevent such circumvention of existing

laws.

MR. NORTON: Mr. Svoboda, could I ask you

whether you\'re familiar with that bifurcation

occurring during the last election cycle as a way

of funding certain encouragement with allocated

79

dollars rather than hard dollars?

MR. SVOBODA: I am not. Speaking for the

circumstances of my practice, if I were aware of a

Republican organization doing it, I would probably

be looking for a notary in the hallway.

\[Laughter.\]

MR. SVOBODA: But I think the point also

bears noting that particularly in regard to my

client and clients like mine, I noted, for example,

the warning that the sponsors gave in the brief in

the Shays District Court litigation saying that if

the GOTV and voter identification exemptions for

associations of State officeholders and State

candidates were allowed to stand, it would provide

a vehicle for evasion, and I think the record

suggests that in the 2004 cycle, that was not the

case. And again, I would emphasize that there are

other aspects of BCRA and of Commission regulations

that help guard against that being the case.

MR. NOBLE: If I could just add something

here, one other thing the Shays court said was that

Congress also made a prediction and the prediction

80

was that there would be attempts to get around the

rules, and I think that is a factually-based

prediction, because that\'s a history of not only

campaign finance laws, but many regulatory schemes.

So just the fact that you can point to one

election, which has not been fully examined yet,

and say, can you show that something happened,

doesn\'t mean that the rule isn\'t a good rule,

doesn\'t mean that the rule isn\'t necessary. I

think really the burden isn\'t on us now to show

that the law stops something or didn\'t stop

something. Rather, the burden is on the Commission

to show that its regulations comply with the law.

So this idea of\--you can go down a litany

of things and say, well, did this happen? Did that

happen? One, we don\'t know yet because there were

other factors at play. And two, just because it

didn\'t happen in one election doesn\'t mean it won\'t

happen in another and doesn\'t mean that Congress

can\'t tell you to have prophylactic rules to stop

it from happening.

MR. NORTON: On the all, I would say that

81

is that I think it\'s your prediction, not the

Commission\'s, in your comments that this would be

an effect of the rule, and I think it\'s at least

fair to look at the last election cycle, and it\'s

now been two election cycles that we\'ve had the

rules, and ask whether it\'s occurred.

Thank you very much. Thank you, Mr.

Chairman.

CHAIRMAN THOMAS: Mr. Staff Director?

Gee, you look much better, younger\--

MR. SCOTT: Thank you, Mr. Chairman.

CHAIRMAN THOMAS: \--more vitalized.

MR. SCOTT: I\'m sitting in on behalf of

the Staff Director today, and I appreciate the

opportunity\--

COMMISSIONER WEINTRAUB: Someone get that

man a real nameplate.

MR. SCOTT: I note that Commissioner Smith

was not interested in taking up his time talking

about our outreach effort, but not surprisingly, I

am interested in taking some time to talk about

that. I notice that Mr. Svoboda and Mr. Noble

82

both mentioned the need for us to get out there,

whatever rules are passed, and try to make it clear

to the regulated community what it is they\'re

facing. And I guess, first of all, I\'m looking for

your ideas of ways to do that effectively, and also

in terms of how these regulations might be modified

to make them clearer. Do we need more definitions

of terms? How do you draw bright lines that are

easy for people to understand but at the same time

have the reach that you need to cover all of the

activity we want to cover?

MR. SVOBODA: I would make, myself, two

observations on that. The first is, I mean,

there\'s always a tension between\--one, speaking as

a practitioner who represents regulated clients,

there\'s always a tension between seeking exemptions

on the one hand and wanting less complexity on the

other. The more and more exceptions you layer on,

the more and more kind of pyramidical they seem,

the harder and harder it becomes to understand when

they apply and when they don\'t.

If I were to urge the Commission to enter

83

a particular sort of mindset as they took these

rules back, I would be thinking less in terms of

what exemptions can we graft on, how can we

surgically alter little bits here and there, and

try to think conceptually about what the focus of

the rules ought to be and what conduct Congress

actually wanted to see constrained.

In terms of education, at least at the

State and local level, I think the daunting reality

that the Commission faces is that there are,

despite the efforts of the Commission and despite

the efforts of groups like my client, there are

still myriad organizations that just have no idea

that these rules are out there, and to the extent

they are, they\'re like in the first stage of the

stages of grief, you know, anger that the Federal

candidate cannot endorse them on the flyer that\'s

being sent on election day.

So there is a lot of\--so there is a lot, I

think, that the Commission needs to do, and it

raises one idea that came up earlier in the

testimony, the idea that there might be low-level

84

violations here and there that the Commission can

be well advised to ignore. I don\'t think that\'s an

effective strategy to educate or enforce the law.

I really, truly do not. I think that to the extent

the Commission kind of winks at low-level

noncompliance at the county party or city council

level organization, I think the harder time it is

going to have credibly enforcing the statute as a

whole.

So I think it is important, A, to adopt

rules that are carefully tailored and that make

sense, and B, to aggressively educate people about

them, because otherwise, the enterprise, I think,

that all at the table here would seek will not

work.

MR. NOBLE: I am not advocating letting go

low-level violations. I was just explaining the

reality, that it happens.

Also, I think a lot of those are gray area

issues. But I do think the Commission has in the

past done an excellent job of outreach. I think it

has to increase that job, may want to work with

85

others, as you\'ve done in the past. And I remember

when the Commission passed the soft money regs.

There was a tremendous amount of hostility.

People\'s lives were threatened when they went out

to actually talk and try to educate about the regs,

but it eventually worked and people started to

understand it. I think there has to be a lot of

effort put into that.

As far as making regs clearer, that\'s a

constant battle because there are limits, as is

often said, limits to the language or what you can

do in the language, and if you make a bright-line

rule, then you have a problem that is it over-broad

or under-inclusive. I think you just have to keep

struggling to come up with as clear language as you

can, but always keep looking back at the statute,

whether we agree on not on what the statute says,

but look back at the statute and see, is it serving

the purpose of the statute? You have the 800

number. You have a lot of ways to get information

out there, and I think you just have to really keep

up with those efforts. It maybe requires Congress

86

to give you more money to do those efforts, but I

think those efforts really do work. And when we go

out there and hold those conferences that we hold,

we run into a lot of people who have been to the

FEC programs and really speak highly of them.

MR. SCOTT: Thank you, Mr. Chairman.

CHAIRMAN THOMAS: We have already gone

past the slotted time, but\--or the allotted time or

the slated time, I guess. Are there any

Commissioners who have a question they feel they

just absolutely desperately must ask? Commissioner

Weintraub?

COMMISSIONER WEINTRAUB: Sorry, Mr.

Chairman. I only talked to Mr. Svoboda before and

I really wanted to ask a question of Mr. Noble and

Mr. Ryan. Mr. Brewer in particular, but some of

our other commenters have pointed out that,

particularly at the local party level, although

we\'ve seen a lot of disorganization at the State

party level, and I\'m sure you recall that from your

days here, Mr. Noble, we\'re dealing with

organizations that are not very well organized.

87

They\'re run by volunteers. They don\'t have

federally-permissible funds. They\'re not set up

that way. They don\'t have access to fancy lawyers

and accountants who can organize them into

different pots of money and tell them how to do all

this stuff.

So if we have broad regulations, then

basically they are either put out of business or

put out of what they see as a key part of their

business, things like telling people to get out and

vote, which I actually think is a pretty good

thing, to have a lot of people out there telling

other people to get out and vote. Should we be

concerned about that?

MR. NOBLE: Yes. I think everybody should

be concerned about that, frankly, and one of the

things I was going to say in answer to one of the

other questions is this whole issue of what you do

to get out the vote is much broader than the

Federal Election Campaign Act and the educational

efforts that are needed to get people out to vote,

and that may be something that you should approach

88

Congress about. But yes, it is very much a

concern. However\--

COMMISSIONER WEINTRAUB: But should we be

concerned about the impact on local party

organizations and on associations like the ones

that Mr. Brewer and Mr. Svoboda represent?

MR. NOBLE: Right. I do think you should

be concerned about it. However, that concern can\'t

override what I see as the requirements of BCRA.

COMMISSIONER WEINTRAUB: So it\'s

basically, we\'re concerned, but too bad?

MR. NOBLE: Well, we\'re concerned. We

will take that into account, but we have a law to

comply with and maybe it is something that Congress

needs to take a look at in the future.

COMMISSIONER WEINTRAUB: Comment, Mr.

Ryan?

MR. RYAN: I don\'t have anything to add to

Mr. Noble\'s comments.

COMMISSIONER WEINTRAUB: Thank you for

your indulgence, Mr. Chairman.

CHAIRMAN THOMAS: Any other questions?

89

\[No response.\]

CHAIRMAN THOMAS: Well, Mr. Svoboda, let

me first of all, before we break, apologize for

getting your name wrong. I want you to appreciate

that I live with that all the time. I\'m usually

Mr. Scott, or if I\'m with my wife, I\'m Mr. King, so

at least you\'re much closer\--

MR. SVOBODA: That was very well done.

I\'ll have to buy you a rumza.

\[Laughter.\]

CHAIRMAN THOMAS: We have reached the end

for this particular panel. We will take a, let\'s

call it a ten-minute break\--I\'m sure that the other

panelists are all here\--a ten-minute break and we

will come back at, according to my calculations,

11:35.

\[Recess.\]

PANEL II: FEDERAL ELECTION ACTIVITY

CHAIRMAN THOMAS: Let\'s get underway so as

not to get too far behind schedule. We\'re already

a little bit behind.

We\'re going to have our second panel now

90

on this particular rulemaking that deals with

certain Federal election activity definitions. We

have Mr. Mark Brewer, who is appearing on behalf of

the Association of State Democratic Chairs. We

have Mr. Joe Sandler, who is appearing in his

individual capacity as an acknowledged expert in

the field. And we have Mr. Don Simon, who is

appearing on behalf of Democracy 21.

Going with our alphabetical order concept,

let\'s start with Mr. Brewer. We ask, again, that

you try to limit your opening remarks to five

minutes, and we have a light system to embarrass

you in case you don\'t want to work with that, but

please proceed.

MR. BREWER: Thank you, Mr. Chairman.

I\'ll try to go as quickly as possible.

First of all, thank you for the

opportunity to testify. I am Mark Brewer, the

Chairman of the Michigan Democratic Party and also

President of the Association of State Democratic

Chairs, which represents the collective interest of

56 State, territorial, the D.C., and Dems abroad

91

parties.

A little bit about me, in terms of my

background and expertise, I was first elected Chair

of the Michigan Democratic Party in 1995. I\'m in

my 11th year in that capacity. I have nearly 30

years experience in State and local politics in

Michigan. In Michigan, we organize our party along

county, Congressional district, club, and caucus

lines, and I\'ve been active at all levels, and in

many cases chair or an officer of all of those

types of organizations, starting with my Democratic

club and up through the county and Congressional

district level.

Our party engages in a wide variety of

election activity, a lot of nonpartisan election

activity, a lot of State and local election

activity in both odd and even years. As a matter

of fact, this year, we\'re involved, for example, in

20 nonpartisan municipal elections in the State of

Michigan. So that overall in Michigan in any given

election season, the number of contested Federal

races pales in comparison to what\'s being done in

92

terms of party activity at the State and local

level.

We have found that the Federal regulatory

scheme is so complex for us that I have two full-time staff

who do nothing but attempt to comply

with that scheme as well as having the assistance

of lawyers and accountants, and that burden went up

considerably under McCain-Feingold, so much so

that, for example, as to the so-called Levin funds,

we found the regulation so complex, so difficult to

comply with that we did not attempt to raise or use

Levin funds last year, even though we were a

Presidentially-targeted State.

I also want to indicate, of course, that

at our local party level in Michigan, as in

virtually every other State, all of our party

officers and activists are volunteers. Even before

McCain-Feingold, we had great difficulty finding

people to fill those jobs, particularly the job of

treasurer, in terms of complying with the law.

that difficulty has increased since McCain-Feingold

has passed. We have found that we have had to do

93

even more training under Federal law. My

compliance director spends up to 20 percent of her

time every week answering Federal legal questions

about compliance issues from local parties, and a

lot of times I\'m pulled into that, as well, and

that\'s simply about the Federal regulatory scheme,

not about the other aspects of her job.

Let me turn very quickly and specifically

to the Federal election activity about which we\'re

talking here this morning. As I understand it, the

rules were struck down primarily for procedural

reasons, not necessarily substantive ones. We

believe that the rules should essentially be

repromulgated with the procedural defects

corrected.

Compared to the proposed alternatives, the

rules that we operated under last cycle were

relatively easy to understand. They did, I think,

to a great degree take into account the

practicalities and realities of how State and local

parties actually operate. The proposed

alternatives would add to the complexity and the

94

burden of complying and further deter volunteer

political activity.

I would also like to point out that when

the initial rules were promulgated, we were

speculating. There were a lot of hypotheticals

involved. We now actually have an election cycle

under our belts and so now we need not engage in

speculation about purported evils, things that

might occur. We can look at the actual record and

see if anything actually occurred.

Specifically as to voter registration,

you\'ve asked us for comment on whether we would add

some direction requirement included in the

definition. We would not do so. We would stay

where we are right now. Let me just give you a

couple examples of how this might play out in

practical effect.

This is county fair season in Michigan,

and all around the State at 80-odd county fairs,

Democrats, Republicans at the local level, all

volunteers, are staffing booths at those county

fairs, and it\'s very common to have a pile of voter

95

registration forms at those booths. I realize this

is not an election year, but these fairs occur

every year. Again, it\'s a very common activity for

that to happen. Now, if we\'re to expand the

definition of what voter registration activity

consists of so that providing those kinds of forms

for somebody to pick up as they\'re walking through

the displays at a county fair in Michigan, what\'s

going to happen is when I tell my local party

people that, they\'re going to say, fine, no more

voter registration forms.

Similarly, at both the State party and our

local parties, it\'s very common for people to drop

in the office or make a phone call and ask

questions about how to register to vote, and if the

definition is expanded in such a way that at that

point, the person has to go mute and say,

basically, under penalty of Federal law, I can\'t

answer your question because we don\'t have enough

Federally-permissible funds to pay for my salary

and the activity connected with that, those folks

are going to stop answering those questions.

96

It\'s often easier in a lot of States to

talk to a party person about registering to vote

than it is to find a bureaucrat in the Secretary of

State\'s office or the Department of Motor Vehicles

who is willing to answer your question. So taking

away that option, I think would be very, very

detrimental, and I\'ve got to tell you, the reaction

of an ordinary person who walks in off the street

to a local party office and is told, \"I can\'t

answer your question about voter registration,\"

they\'re going to shake their heads and say, \"What\'s

wrong with our political system? How inane has it

become that I can\'t go into a party office and ask

for some direction about how to register to vote?\"

Turning quickly to GOTV, and then I\'ll

wrap up with voter ID, we would not add to the list

of GOTV activities in your rule. We believe you

should make the list exhaustive. It\'s a relatively

good and clean rule as it was originally

promulgated.

In terms of voter ID, the proposal to

broaden it to cover acquisition information about

97

potential voters completely misunderstands what

party databases are and what they are used for.

Let me just give you some examples currently.

We\'re using our voter file right now for

fundraising via telemarketing, direct mail, door-to-door

events to raise money just to operate the

party. I\'m not raising a single penny right now to

help any candidate, State or Federal, next year.

We\'re also using the voter file to assess interest

in State and local ballot questions or in issue

concerns of voters in Michigan. We\'re using it to

recruit volunteers, precinct delegates, local

candidates. Why should any of that activity come

within the ambit of what should be considered FEA?

So we think that the status quo in terms of the

voter ID rule should remain.

I\'m sorry for exceeding my time, but I\'ll

stop there.

CHAIRMAN THOMAS: Thank you.

Mr. Sandler?

MR. SANDLER: Thank you very much, Mr.

Chairman and members of the Commission. I

98

appreciate the opportunity to testify today, which

I do not on behalf of any specific client but as a

practitioner, together with my colleague, Neil

Reiff, who represents or gives Federal campaign

finance advice to more than 30 of the State

Democratic parties.

Two key points I would just emphasize at

the beginning, and you have heard some of this this

morning. First of all, with respect to the

Commission\'s definitions of voter registration and

GOTV, other than the exception for State and local

officeholders, it\'s clear the District Court said

the Commission\'s construction of the statute is

permissible, period. No requirement of any kind

that the Commission change substantively what it

has done with these rules.

Secondly in that regard, one looks in vain

at the comments of the so-called reform groups and

the sponsors of the legislation for any evidence

that there is any abuse or any problem with the

operation of the Commission\'s rules this past

cycle. To the contrary. We\'ve been through an

99

election cycle. The reformers said, it was

wonderful. BCRA works. Mr. Simon and his

colleagues have been out writing op-eds, making

speeches to that effect for months now. This is

not a record, factual record on\--which seems to

indicate, let alone mandate, some substantive

change in terms of tightening the Commission\'s

definitions.

A couple of quick points on two of the

definitions. With respect to the definition of

GOTV, we believe that it should be, in a sense,

both broadened and narrowed. The time, 72-hour,

reference is not particularly helpful one way or

the other because there are activities that can

occur outside of that which should be considered

GOTV. On the other hand, the examples that the

Commission has given have unnecessarily broadened

and led to confusion about the scope of the GOTV

definition, particularly activities that, or

communications that merely provide information to

voters about polling hours, location of polls, and

the date of the election should not be considered

100

GOTV.

We believe that GOTV should be limited to

physically assisting voters with respect to

providing\--picking up absentee ballots or ballot

applications, providing rides to the polls,

offering rides to the polls, or election day

operations that actually tell people where or how

to vote.

The other thing the Commission should do,

consistent with the representations made by the

agency to the United States District Court is make

clear that mail is not an individualized

communication or means of assistance for purposes

of this rule.

Secondly, with respect to the voter ID

definition, and, of course, the court did require

that acquisition of voter lists be included as part

of the definition of voter ID, we believe this is a

practical matter. Any rule that turns over when

the information or list is used is completely

unworkable and impractical. The rule has to turn

on when payment is made for acquisition of a voter

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list. The attempt by the reformers to de facto

eliminate the Federal election activity window is\--not only

would lead to impractical and absurd

results, but also is contrary to the finding of the

Supreme Court itself in the McConnell case.

And I would call the Commission\'s

attention to Footnote 63 of that decision, which

says that with respect to GOTV, voter

identification and other generic campaign activity,

the FEC has interpreted Section 323(b) to apply

only to those activities conducted after the

earliest filing deadline for access to the Federal

election ballot. Any activities conducted outside

of those periods are completely exempt from

regulation. And it goes on to say the facial

challenge doesn\'t present the question of the FEC\'s

constitutionality\--timely reminders, Mr. Svoboda

said, that lawsuits can be brought from the other

direction\--but the fact that the statute provides

this basis for the FEC reasonably to narrow Section

301(20)(A)(ii) further calls into question

plaintiff\'s claims of facial overbreadth. Clearly,

102

the FEA\--the very law was upheld partly on the

basis that the FEC unreasonably constricted the

time period, so an attempt to reach back makes no

sense.

The final point just on voter

identification, we believe the rule should be

clarified to make clear that list maintenance

activities, not the acquisition, but data hygiene

and maintaining a list and so forth, does not

constitute voter identification activity. We make

that suggestion because of misunderstanding and

misapprehension on the basis of RAD in terms of

picking up on some of these expenses in reports

filed by State parties.

Thank you very much, Mr. Chairman.

CHAIRMAN THOMAS: Thank you.

Mr. Simon?

MR. SIMON: Thank you, Mr. Chairman. I

appreciate the opportunity to testify on behalf of

Democracy 21. I want to make three points in my

opening remarks.

First, I think it\'s a misreading of the

103

District Court opinion in Shays to say that the

Commission\'s existing rules on voter registration

and get out the vote activity were upheld by the

court on Chevron grounds and struck down only on

APA notice grounds. In fact, the court said it

could not tell the scope of the existing rules,

which are limited to State party activities that

assist voters. The court noted that the exact

parameters of this language are subject to

interpretation and that it\'s possible that

encouragement, coupled with direction of how one

might register, could constitute assistance under

this provision. Such an interpretation, the court

said, could remedy what might otherwise be a

regulation that unduly compromises the Act in

violation of the Chevron Step 2 test.

Now, the court did not decide this point

because of ripeness, given that it found facial

ambiguity in the scope of the existing regulation,

but the implication of the analysis, I think, is

clear. If the existing rule is interpreted to

encompass only affirmative assistance in

104

registering and does not extend beyond that to

include, for instance, encouragement coupled with

direction of how to register, the court said it

might hold that the current regulation does

compromise the Act and is, therefore, invalid under

Chevron.

The same is true for the definition of get

out the vote activity. But I do not think it\'s

permissible for the Commission to simply assume it

has only to cure a notice problem here and reenact

the same regulations if those regulations only

narrowly cover assistance activities. At a

minimum, I think the Commission needs to clarify

that the regulation covers more or runs the serious

risk of having the regulations once again

invalidated, this time under Chevron.

Second, in limiting voter registration and

GOTV activity to exclude efforts to encourage

voters to register to vote, these FEA definitions

are strikingly inconsistent with other Commission

rules. In three other existing FEC regulations,

voter registration and GOTV activities are

105

expressly defined to include activities to

encourage registration and voting. That\'s the case

with 100.133, which is titled \"Voter Registration

and Get Out the Vote Activities\"\--it\'s the same

terms used in BCRA\--and encompasses, quote, \"any

activity designed to encourage individuals to

register to vote or to vote.\"

That\'s the case with Section 106.6(b),

which defines allocable activities for non-connected

committees and encompasses, quote,

\"generic voter drives, including voter

identification, voter registration and get out the

vote drives, or any other activities that urge the

public to register or vote.\"

And most ironically, that\'s also the case

with Section 106.7(c)(5), which requires State

parties to allocate voter drives that are not FEA

and defines those to include voter identification,

voter registration and get out the vote drives and

any other activities that urge the general public

to register or vote. Thus, the State party

allocation rules already cover activities to urge

106

or encourage voters to register and vote, so there

can\'t be any definitional problem in using those

broader terms.

The only issue, really, is whether these

activities are paid for with Federal funds as FEA

or with allocated Federal and non-Federal funds as

voter drive activities that are not FEA. The

statute, we believe, requires the former, the use

of Federal or Levin funds.

Final point, the touchstone for analysis

here are the language and purposes of the statute.

State party activities, particularly voter drive

activities, were deliberately covered by Congress

in BCRA because they were perceived to be an

essential mechanism of the soft money system that

Congress intended to end.

The Supreme Court in McConnell upheld the

provisions of BCRA that apply to State parties

because, it said, State committees function as an

alternative avenue for the same corrupting forces

as national parties. The court said that the State

party provisions of BCRA were narrowly focused on

107

regulating contributions to State parties that

posed the greatest risk of corruption, those,

quote, \"that can be used to benefit Federal

candidates directly.\" It then went on to note that

a party\'s efforts to register voters sympathetic to

the party directly assists the party\'s candidates

for Federal office.

It is equally clear, the court said, that

Federal candidates reap substantial rewards from

any efforts that increase the number of like-minded

registered voters who actually go to the polls.

Accordingly, the court concluded that, quote,

\"because voter registration, voter identification,

GOTV, and generic activity all confer substantial

benefits on Federal candidates, the funding of such

activities creates a significant risk of actual and

apparent corruption.\"

This understanding of BCRA applies just as

much to State party activities that encourage

registration and encourage voting as it does to

activities that assist them.

The Commission, I believe, is wrong and

108

inconsistent in excluding these activities from the

definition of FEA and it should reconsider its

position. Thank you.

CHAIRMAN THOMAS: Thank you.

We will begin our questioning with Vice

Chairman Toner.

QUESTIONS AND ANSWERS

VICE CHAIRMAN TONER: Thank you, Mr.

Chairman. I want to thank all the witnesses for

being here during the August recess, particularly

Mr. Brewer. I very much appreciate you coming.

It\'s always, I think, important for us to hear from

people who are comfortably outside the Beltway, not

that this is not the real world, but it may not be

quite as real as your world, particularly if you\'re

having all the county fairs and everything that\'s

going on in Michigan, so I very much appreciate you

coming.

I want to note at the outset that I am

concerned about the potential impact of the

regulations for us on voter registration and GOTV

efforts that are undertaken by State parties, and I

109

personally think that it is appropriate for us to

fashion rules that are designed to protect that

kind of activity, particularly whereas here

Congress has provided no definitions of these

concepts and has delegated these issues to this

agency. So I, for one, am very comfortable

focusing on these kinds of issues. I think,

actually, that\'s our mandate to do so. I recognize

that people can disagree about how best to strike

that balance, but I\'m very comfortable doing so

when Congress has delegated these questions to us.

Mr. Simon, I\'d like to begin with you

because I think you were here for the earlier panel

when there was a hypothetical I asked involving

Reverend Jackson. I\'ll just requote what that

would involve, a voter registration drive in

Columbus, Ohio, a couple of months before next

year\'s mid-term election in which Mr. Jackson says,

\"It is critical that all of you here today register

to vote. Remember Florida in 2000. Remember Ohio

in 2004. If everyone here registers to vote, we

will not be denied again. With your help, we will

110

be successful in November.\"

Do you agree with the earlier panelists

that this should be viewed as voter registration

activity and, therefore, could only be payable with

Federal money?

MR. SIMON: Yes, I do. I would also note

that, even apart from that, I think it is within

the scope of the 106 allocation rules, so already

it is Federalized, regulated, subject to Federal

funding, at least in part. We were just talking

about which pages of the CFR apply to that

activity, not whether Federal law applies to that

activity at all. But for the reasons I stated, I

do think it should be considered Federal election

activity.

VICE CHAIRMAN TONER: So that all of the

event costs associated with any event which a State

party sponsors in which a public official urges

people to vote should be Federalized and payable

only with hard dollars?

MR. SIMON: Well\--

VICE CHAIRMAN TONER: That\'s your view?

111

MR. SIMON: Yes. I mean, your

hypothetical was that this was a voter registration

rally\--

VICE CHAIRMAN TONER: Right.

MR. SIMON: \--and that is, I think, voter

registration activity and under BCRA should be

payable with hard dollars or with an allocated

mixture of hard dollars and Levin funds.

If I could just expand on that for one

minute, because I think there\'s a theme that\'s

running through here which is an important theme

about the concern that you have and Commissioner

Weintraub and I\'m sure all of our Commissioners

have about the impact on voter registration.

I think, obviously, that\'s a legitimate

concern. I do think, however, you are relatively

fettered in your discretion to do much about it\--

VICE CHAIRMAN TONER: Even though Congress

did not define these terms?

MR. SIMON: But Congress\--

VICE CHAIRMAN TONER: And delegated it to

the agency?

112

MR. SIMON: Congress paid a lot of

attention to this question\--

VICE CHAIRMAN TONER: There\'s no statutory

definition.

MR. SIMON: But let me tell you what

Congress did do to deal with this, and this was

done very deliberately to address precisely this

concern. It did two things. One, it raised, it

increased the hard money contribution limits to

State parties and it was precisely for this reason

that we\'re talking about, to give State parties

more resources to do these voter drive activities.

But then that wasn\'t even enough, because

there was real concern on the floor that State

parties still would not be able to do voter drive

activities, and that\'s the genesis of the Levin

amendment. Now, maybe you like the Levin

amendment, maybe you don\'t, maybe you think it

works, maybe it doesn\'t\--

VICE CHAIRMAN TONER: Wouldn\'t we all

agree that it really hasn\'t? There hasn\'t been a

lot of activity in the Levin amendment area. I\'m

113

not saying that\'s good or bad, but wouldn\'t we all

agree that\--

MR. SIMON: I would, and I think that may

be a legitimate point for Congress to hold hearings

on and for Congress to decide whether the

additional room it gave to State parties was

adequate.

VICE CHAIRMAN TONER: Given that there

hasn\'t been a lot of Levin activity, wouldn\'t that

at least be a potential aspect that we should take

into account in fashioning these rules?

MR. SIMON: I don\'t think it\'s a reason\--I

don\'t think it\'s an adequate reason for you to

change the statute. It may be an adequate reason

for Congress to change the statute. But I think

you have to work within the statute Congress gave

you and you have to work within the parameters of

the balances Congress struck\--

VICE CHAIRMAN TONER: But again, Congress

did not define these terms. They delegated it to

this agency.

MR. SIMON: Yes, but there are canons of

114

construction about the discretion an agency has to

define statutory terms, and I think if you narrow

the scope of these activities to address what you

perceive as policy problems with the statute that

Congress dealt with differently, then I think you

run the risk of having your narrowing

interpretations invalidated.

VICE CHAIRMAN TONER: Mr. Brewer, let me

ask you, you are a State party chairman and my

question is this. If the agency adopts the

regulations that have been proposed by a number of

commentators that basically would include as

Federal election activity any effort to encourage

individuals to register to vote, is your State

party going to be prepared to undertake those kinds

of activities?

MR. BREWER: No.

VICE CHAIRMAN TONER: Why not?

MR. BREWER: No, simply because, again, at

that point, where you\'re going to have to raise

more Federal money to do what we\'re already doing.

I would also point out, too, that the common

115

understanding among State parties and local parties

on what voter registration is, like, okay, we\'re

going to organize a voter registration drive on a

particular day at a particular place and whatever.

We\'re going to go out and register voters. Nobody

has a common understanding that voter registration

activity consists of a pile of cards sitting on our

front desk or at a county fair or any of the other

kinds of things that would be brought within the

scope of this rule. So if you\'re talking about

trying to figure out what voter registration

activity is, why don\'t you ask the people who

actually do it, and when we do it, it\'s a drive.

It\'s a concerted program. It\'s an effort. It\'s

not these kinds of things that could be dragged in

within this broadened rule.

VICE CHAIRMAN TONER: And what would your

view be if we took the position that any party

event that your party sponsored at which a public

official urged people to register to vote would be

Federal election activity, you had to pay for with

hard money or Levin money? What would be your

116

reaction to that?

MR. BREWER: I\'d say it\'s absurd.

VICE CHAIRMAN TONER: Do you think you

would be undertaking those kinds of activities?

MR. BREWER: Well, we certainly wouldn\'t

be undertaking them, but on the other hand, too, I

mean, that\'s a common part of speeches that I give,

and I\'m traveling the State all the time now, even

though it may be an off year. A standard part of

my presentation whenever I\'m talking to folks is,

register to vote.

VICE CHAIRMAN TONER: Would it have the

impact of Federalizing an awful lot of your

appearances?

MR. BREWER: Yes.

VICE CHAIRMAN TONER: Thank you, Mr.

Chairman.

COMMISSIONER SMITH: Do we have an

exemption from this for appearing at a Federal

Government thing, when he makes that kind of

statement? Are you here on Federal dollars today?

MR. BREWER: I urge all of you to register

117

to vote.

\[Laughter.\]

CHAIRMAN THOMAS: Next, we move to

Commissioner Weintraub.

COMMISSIONER WEINTRAUB: Thank you, Mr.

Chairman.

You know, I was thinking about this

because I know during 2003 and 2004, every time I

gave a speech, the last thing I would say to

anybody that I talked to was, don\'t forget to vote,

so I don\'t know. Maybe I\'m in violation of the

law, too.

Mr. Simon, I\'ll ask you the same question

that I asked earlier to Mr. Ryan and Mr. Noble

because I think it\'s really important. Should we

be concerned about, and can we take those concerns

into account about the kind of information we\'re

getting from Mr. Sandler and Mr. Brewer that we are

basically, by having broad rules, we are telling

State party committees that they can\'t do voter

registration activities because they don\'t have

Federally-permissible funds? They\'re not organized

118

that way.

MR. SIMON: Well, you know, as I said to

Commissioner Toner, I do think you should be

concerned about it, but I think you are relatively

constrained in what you can do about it. I really\--

COMMISSIONER WEINTRAUB: So like the

earlier witnesses, the answer is, we\'re concerned

but we can\'t do anything about it.

MR. SIMON: I think that\'s right, and if

there\'s evidence that the impact of BCRA is to

unduly constrain State party efforts to register

voters and to depress voter registration rolls, I

am confident the State parties will be very

effective in bringing that evidence to the

attention of Congress and in advocating for

amendments to BCRA to address that problem. It\'s

like the 1979 amendments to FECA.

COMMISSIONER WEINTRAUB: But as you know,

Mr. Simon, when people start to try to amend BCRA,

all sorts of things tend to get added on and

sometimes you end up in a very different place than

119

where you started.

MR. SIMON: I\'m not advocating reopening

BCRA. I\'m just saying that\'s the remedy for the

problem you\'re expressing.

COMMISSIONER WEINTRAUB: I want to be sure

that I\'m clear about this. Is it your position

that there should be no time limit on GOTV

activities?

MR. SIMON: We haven\'t\--we didn\'t contest

in the Shays case, I don\'t think, the definition in

connection with a Federal election.

COMMISSIONER WEINTRAUB: That\'s not

actually what I asked you. I asked you whether

it\'s your position that we should have no time

limits at all?

MR. SIMON: Oh, the 72-hour\--

COMMISSIONER WEINTRAUB: Well, the 72-hour, as you

know, is not exhaustive, 72 hours or

any other limit.

MR. SIMON: I think that the only temporal

limit should be the limit that\'s contained in the

existing rule defining in connection with a Federal

120

election. I don\'t think the 72-hour rule should

remain and I don\'t think there should be any other

time limit.

COMMISSIONER WEINTRAUB: So if we stick to

the current in connection with regulation, for

example, activities that the State parties are

undoubtedly conducting today in New Jersey and in

Virginia to update their voter lists and to engage

in GOTV planning, all that stuff for this year\'s

election of Governors, they can do all that with

non-Federal funds?

MR. SIMON: Yes.

COMMISSIONER WEINTRAUB: And if those

voter lists, if they don\'t throw away the voter

lists but they subsequently use them as the basis

for more GOTV next year, then what?

MR. SIMON: I think\--your question was

about GOTV, but then your hypothetical included

voter ID and I think those are two different cases.

I think the GOTV activity is constrained by the

existing rule. As we said in our comments, the

voter ID, I think should be acquire or use. Now,

121

if you\'re talking about maintenance, I think that

may be a different case. But if they acquire\--

COMMISSIONER WEINTRAUB: What do you think

about maintenance\--

MR. SIMON: Well, let me\--

COMMISSIONER WEINTRAUB: I\'m sorry\--

MR. SIMON: If I could just finish the

answer to the first question, if they acquire a

list now but they use it in the election in 2006,

then I think it should be Federal election

activity.

COMMISSIONER WEINTRAUB: So they have to

throw it away or pay for it with Federal\--

MR. SIMON: Or pay for it with Federal

funds or a combination of Federal and Levin funds.

COMMISSIONER WEINTRAUB: Is it realistic

to expect them to put a lot of effort into

developing a voter list and then telling them they

have to\--their choices are either throw it away or

take all the effort you put into your Gubernatorial

race and pay for it all with Federal funds?

MR. SIMON: I think it\'s what the law

122

requires.

COMMISSIONER WEINTRAUB: So that\'s what I

get for asking my questions too quickly.

\[Laughter.\]

COMMISSIONER WEINTRAUB: Mr. Sandler, you

represent a lot of State and local organizations.

Do you concur with Mr. Brewer that if we broaden

these rules, we\'re going to be discouraging

grassroots activity by these organizations to

register and get people out to vote?

MR. SANDLER: Yes, absolutely, I do, and

particularly local county parties which have

difficulty enough understanding how the BCRA rules

affect them and when they have to use Federally-permissible

funds and what they have to do to avoid

altogether getting caught up in this registered,

you know, being required to register and report as

political committees to the FEC.

COMMISSIONER WEINTRAUB: Let me just close

with a quick comment on something that\'s in, Mr.

Simon, your written testimony, and I think you

repeated it here today, that we shouldn\'t narrow in

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any way what BCRA has set out in the statute when

we do our regulations.

I think that we have a problem as a

Commission. I mean, we could just repeat the words

of the statute in our regulations and then nobody

could say we\'re either narrowing it or broadening

it, but we wouldn\'t really be providing a lot of

guidance. We wouldn\'t be doing much to fulfill our

obligation to interpret it.

If we use any different words at all, then

we are subject to the criticism that we\'re either

overreaching and broadening it beyond what Congress

intended, or we\'re narrowing it, and Congress

didn\'t intend that. I mean, we\'ve got to\--if we\'re

going to provide regulations, some of them might be

narrower, some might be seen as narrowing, some of

them might be seen as broadening, but we\'ve got to

use some words to provide some guidance to the

regulated community. Otherwise, we might as well

not issue the regulations at all.

MR. SIMON: If I can just respond, I

agree, but I don\'t think broadening or narrowing

124

are the only two options. I mean, there are a lot

of regulations that, in the Shays case, we didn\'t

challenge because we thought they were\--

COMMISSIONER WEINTRAUB: We appreciate

that.

MR. SIMON: Well, we thought that they

were permissible clarifications and interpretations

of the statutory language.

COMMISSIONER WEINTRAUB: Thank you, Mr.

Chairman.

CHAIRMAN THOMAS: Commissioner Smith?

COMMISSIONER SMITH: Thank you, Mr.

Chairman.

CHAIRMAN THOMAS: Or is that \"Smythe\"?

COMMISSIONER SMITH: That is \"Smythe.\"

For four years, I\'ve been\--five years\--too much of

a gentleman to correct anybody\--

\[Laughter.\]

COMMISSIONER SMITH: \--but from now on, I

would appreciate\--

\[Laughter.\]

COMMISSIONER SMITH: Mr. Brewer, I

125

appreciate your coming in from out of town in

particular. A fair amount of your testimony seems

to relate to the 25 percent rule, but really, that

is one that the court actually did strike down on

Chevron grounds, so we really don\'t have much

leeway on the 25 percent rule.

MR. BREWER: It\'s my understanding that\'s

the subject of this afternoon\'s panel.

COMMISSIONER SMITH: Okay. So I\'m ahead

of the game. All right.

MR. BREWER: I\'ve got testimony on that,

but for this afternoon.

COMMISSIONER SMITH: All right. Well,

I\'ll come back to you and we\'ll try to get to it.

The other question I have here, we seem to

be talking, the main issue is this question of

encouraging people to vote. I find it kind of hard

to believe that Congress really intended that if

you had, to use an example that Mr. Svoboda\--I

can\'t say it either, now\--Brian, the gentleman from

Perkins Coie gave in the first panel, that if

Jesse Jackson came to speak at a rally for the

126

mayoral candidate sponsored by the local party,

that that would have to be paid for with Federal

funds if he urged people to vote. I can\'t see that

most people in America would have supported that,

or that most members of Congress who have supported

efforts to limit the ability of people campaigning

for State or local office in accordance with State

or local law to encourage people to vote.

We also, when I asked a little bit, I

mean, we saw that there is some question. Maybe

the current reg would cover a lot of the scenarios

that are questionable, or maybe it wouldn\'t. I

think there\'s a lot of difficulty. Mr. Noble said,

well, maybe you could read your reg to cover

handing out voter registration cards in the local

party headquarters or answering the phone and

telling somebody where they could go to vote that

day.

We seem to be given two alternatives here.

One is to add the word \"encourage,\" which I think

has very little meaning and I would guess, Mr.

Brewer, is probably difficult for local officials

127

to know exactly what that means, unless it means

pretty much everything mentioning voting, or to

keep the current rule, which the court didn\'t like

very much, although again, it appears that we could

reenact that, but Mr. Simon says, no, he doesn\'t

really think we could and it would be a terrible

thing if we did, anyway.

And that\'s a very long introduction to

saying, does anybody have any kind of middle

ground? Is there some way to capture this, because

it strikes me that we\'re almost talking about any

of the rules being one that\'s going to lead to

certain ridiculous results. It\'s going to have a

certain amount of real ambiguity. And that nobody

really seems to be able to give me any

demonstrative evidence that it really has much effect

anyway, so I\'m not quite sure what all the

hullabaloo is about. So given that, maybe there\'s

some interim ground, and I don\'t know if anybody

has any suggestions. Anybody want to try that?

MR. BREWER: I\'m not going to offer a

middle ground, just a couple of observations, if I

128

may, Mr. Smith. First of all, I think the rule

worked this last election cycle. I don\'t think

there\'s any evidence that anybody abused it or

otherwise took advantage of it. And I would say if

you talk to elected officials, including the

elected officials who voted for this statute, if

you asked them what a voter registration activity

is, they would think of the classic kind of voter

registration drive and this regulation captures

that, that you are affirmatively going out and

trying to register people as a party organization.

COMMISSIONER SMITH: Let me ask you a

question. Okay, let\'s say we have a big rally, you

know, and they urge people to vote and then they

tell everybody in the big group, and at the back,

here\'s all the registration materials you need and

you can do it. Have they provided individualized

assistance?

MR. BREWER: No.

COMMISSIONER SMITH: So you\'ve spent a lot

of money on that, urging people to vote and telling

them, here\'s the information you need to do it and

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get that all out to them, but that would not be

individualized assistance and, therefore, would not

be covered?

MR. BREWER: No.

COMMISSIONER SMITH: Mr. Simon, what if we

just took out the word \"individualized\"? Would you

be happier then? Would that do it for you?

MR. SIMON: Moving in the right direction.

In terms of your middle ground, it\'s not something

that I\'m advocating, but it is something that the

District Court expressly discussed, which is this

notion of there\'s assistance, there\'s

encouragement, and then in the middle there\'s

encouragement coupled with direction. I think

Judge Kollar-Kotelly was saying, well, that\'s the

middle ground. I don\'t know if the existing rule

covers that or not, and she\'s\--I think she said it

should cover that and it may be that the Commission

will construe it to cover that. And as I said in

my opening remarks, I think, at a minimum, you

should make clear that you do construe it to cover

that, because I think absent that, she might have

130

been inclined to strike it down on Chevron grounds.

That, to me, is a middle ground here. I don\'t

think that goes far enough in and of itself.

I think the outlier here is this FEA

regulation, and I think what you ought to do is

conform it with three other existing regulations on

exactly the same terms that do expressly encompass

activities to urge registration or voting. I think

that is the solution.

COMMISSIONER SMITH: \"Direct\" is the term

used in the court opinion, as you point out, which

sounds to me like, really, what we are talking

about is instruct. So what about instruction?

What about contact with individuals to assist or

instruct them, or something like that? Would that

be something anybody could live with? That, does

that do? Isn\'t that really what Judge Kollar-Kotelly was

getting at?

MR. SIMON: I think that is what she was

getting at. I think that\'s right. She didn\'t go

as far as we were urging her to go, but I do think

that is what\--

131

COMMISSIONER SMITH: \--get a complete and

total rebuke of the Commission?

\[Laughter.\]

MR. SIMON: No, not complete and total.

But substantial and important.

\[Laughter.\]

MR. SIMON: I think that is what she was

getting at, and I think that, you know, if you\'re

looking for a middle ground, that would be in the

nature of a middle ground.

COMMISSIONER SMITH: Mr. Sandler, you\'re

shaking your head. I\'ll ask the Chairman to give

you 30 seconds.

MR. SANDLER: I think this has become

vastly over-complicated. There is no doubt\--I

agree with Chairman Brewer\--what members of

Congress had in mind when they saw this stuff

initially is people going door to door or standing

in a shopping center, assisting voters to register

to vote. I defy Mr. Simon to find one word in the

legislative history that suggests that in a million

years members of Congress would think that a rally

132

or a party meeting\--which, by the way, party

meetings are exempt altogether from Federal

election activity, Congress is very clear about

that\--becomes Federal election activity because

they have cards at the back of the room. It makes

no sense. I think there\'s no need for any middle

ground here. The court opinion doesn\'t require it,

common sense doesn\'t require it. That is not what

the intent of Congress was.

MR. SIMON: Well, if I could just respond

to that, I think what Congress had in mind was the

existing Commission regulations defining voter

registration by party committees in the form of

106.5, which, like the current rules defining voter

registration at 106.6 and 106.7, included

activities to urge people to register.

COMMISSIONER SMITH: I\'m out of time.

Thank you.

CHAIRMAN THOMAS: Commissioner McDonald?

COMMISSIONER McDONALD: Mr. Chairman,

thank you. Mark, it\'s particularly good to see you

again. It\'s been quite a while, I must say, and

133

Joe, as always, and Don, thank you all for being

here.

I\'ve been here so long that Commissioner

Smith has become the voice of reason and

compromise. I\'m very glad to hear that. And I

take his point, by the way\--

COMMISSIONER WEINTRAUB: He thinks he

always was.

\[Laughter.\]

COMMISSIONER McDONALD: Now, I don\'t want

lightning to strike, even on a clear day. But I do

take his point and I think it\'s kind of one of the

interesting and frustrating things that all of us

are trying to grapple with because I think both

sides have made really fairly compelling

presentations and trying to figure out what we can

do in this area.

Let me just try to be the devil\'s advocate

on both sides. Don, I\'ll start with you first, if

you don\'t mind. Now, Mark opened up with the

example about the county fairs that are up and

running now, and this is true out in Oklahoma, as

134

well, or just about to be, another month, I guess.

What is your assessment of that? How do you look

at that, where the parties are operating a booth

along with a number of other groups, registering

people to vote. How do you see that example on the

practical side?

MR. SIMON: I mean, I guess I see it as

within the existing rule as an individualized

effort to assist voter registration. In a sense, I

think that\'s off the table in the sense that it\'s

already covered.

COMMISSIONER McDONALD: And Mark, is that

how you see the existing rule?

MR. BREWER: Not at all, because it\'s

passive. The pile\'s just sitting there. Anybody

can come by and pick it up, and then the local

party people don\'t have to have anything to do with

whether that voter completes it, fills it out.

They don\'t give them instructions. It\'s simply

sitting there, something that they can passively

pick up, just like they\'d find in the party office,

they\'d find in our party office if they dropped by.

135

COMMISSIONER McDONALD: It\'s good to have

the exchange because it certainly clears it up for

us.

\[Laughter.\]

COMMISSIONER McDONALD: Let me ask on the

other side, though, and Commissioner Weintraub

asked this question earlier this morning, we have

been confronted now with what under any other

circumstances I think would be characterized as

fairly direct rebukes, for lack of a better word,

of some of our approaches in these court matters.

And her point earlier was to the first panel that,

like it or not, you ca make a pretty compelling

argument, which I think Don has made, in

relationship to where we\'re being directed to go.

What is your thought about that, either of you,

either Joe or Mark?

MR. SANDLER: I do not agree with Mr.

Simon. I think that the basic idea of Chevron

deference is that this Commission has the expertise

to interpret and give practical meaning to these

rules. In this situation, while there may be

136

rebukes and other subjects that are the subjects of

other rulemakings, the court held that these were

permissible constructions of the statute under

Chevron Step 1 and Step 2, and in spite of,

particularly from this court, I think that\'s a

pretty strong endorsement for the approach the

Commission already chose in its discretion and the

exercise of its expertise to take with respect to

the definition of voter registration.

MR. BREWER: I guess the only thing I

would add to that would be that, and one of the

reasons I\'m here today is to talk about facts,

because that\'s what this is based on. This is

based on how this works. So you can have all the

testimony you want from all the well-qualified

lawyers about what it means, but you\'re a fact-finding

agency. You base your regulations upon

facts, and I think I\'m the only fact witness you\'re

hearing from. So I urge you to look at the facts,

and I think if you make the careful factual

findings that I think the predicate has been

provided for between written and verbal testimony,

137

that you can promulgate regulations which will

withstand court scrutiny.

COMMISSIONER McDONALD: And you did not,

if memory serves me right, you testified earlier

you did not use Levin funds at all, is that right?

MR. BREWER: No, because between the

statute, what the reformers did to the statute and

to what Carl Levin intended to do, compounded by

the regulations, with all due respect, it was just

far too complex to deal with, and so we did not

raise or spend Levin funds last year.

COMMISSIONER McDONALD: Were you

responsible for the creation of the Levin fund?

\[Laughter.\]

MR. BREWER: Senator Carl Levin deserves

all the credit for that idea. He understands the

importance of grassroots politics. The

monstrosity\--

COMMISSIONER McDONALD: Anyway, you\'ve

held your job a long time. That\'s\--

MR. BREWER: The monstrosity that it

became was not his doing.

138

COMMISSIONER McDONALD: Yes.

MR. BREWER: It was not his doing. In

fact, I think it\'s a shame that they\'re still

called Levin funds because what that has become is

not what Senator Levin intended.

COMMISSIONER McDONALD: Can I pursue that

for just a second? What do you think he did

intend, then?

MR. BREWER: Well, and again, this is

faded from me, but look at the original amendment

before it got, I believe in the House, radically

amended.

COMMISSIONER McDONALD: Okay.

MR. BREWER: I think that that captured

the essence of what grassroots activity is about

and that was what Senator Levin intended to do, and

I applaud him for that effort and to the extent I

provided any assistance to that effort, I\'m glad to

be part of it, but not what resulted. You cannot

lay that at Senator Levin\'s door.

COMMISSIONER McDONALD: I find that a

strong disclaimer.

139

Let me real quickly, Don, go back and ask

you, one of the things that strikes me is that

years ago, there was a book written called No Final

Victories by Larry O\'Brien, and Larry O\'Brien told

the story about being out in Ohio, and he was in a

county commissioner\'s office, and we\'ll say it was

your office, and he said, \"Don, if you back Jack

Kennedy, you\'re going to have your picture taken on

the front steps of the White House with the

President.\" And according to Larry O\'Brien, this

county commissioner put his feet up on his desk and

his hands behind his head and he said, \"Hell,

Larry, down here people think I\'m the President.\"

The reason I tell you that story is that

as a practical matter, and this was certainly true

where I grew up, you know, Federal elections were

obviously very important, but the real importance

to us was the State and local activity. The thing

I suppose that troubles me the most about what

we\'ve been hearing, albeit I think very good, is

that as a practical matter, and this is certainly

true in Oklahoma in, for example, the municipal

140

elections, the example given in the first group

today was you have a race in April or May that\'s a

local election and then in June you may have a

Federal primary. In Oklahoma, it\'s a little bit

later than that, but the principle is still the

same.

I don\'t know how you could take a voter

drive that occurred before that election at the

beginning of the year and apply that to the

Federal. Are you of the opinion, like the first

panel, that you could and you should because it\'s

within the same, what, six months or year, maybe?

I\'m just trying to be sure I\'m stating it

correctly.

MR. SIMON: Yes. I am basically of that

opinion. I mean, I think Commissioner Mason raises

a good hypothetical\--

COMMISSIONER McDONALD: Absolutely\--

MR. SIMON: \--that is\--

COMMISSIONER MASON: Can I just clarify

it, because it\'s been referred to as a hypothetical

in the first panel and here. It is not a

141

hypothetical. It is an actual, real world, every

two-year election cycle practice.

MR. SIMON: I think Commissioner Mason

raises a good problem with that application, and if

the Commission in a very narrowly tailored way

wanted to address that problem, you know, that may

be a worthwhile effort, to deal with that practice.

I think what was proposed in the NPRM as a

way of dealing with that problem is way overbroad

and would have the effect of just scissoring out

huge, potentially huge swaths of time from the

definition of Federal election activity and I don\'t

think that\'s the correct way to deal with the

problem. I think it would have to be a much more

narrowly, carefully focused and tailored solution

to that problem.

COMMISSIONER McDONALD: Thank you. I

thank all of you for coming. It\'s good to see you.

CHAIRMAN THOMAS: Commissioner Mason?

COMMISSIONER MASON: Thank you. Mr.

Sandler, when we\'re construing provisions of the

law or the regulation and we have a series of

142

terms, do we normally collapse the series of terms

such that there\'s no distinction among a list that

we have?

MR. SANDLER: I\'m not sure I understand

the question.

COMMISSIONER MASON: Well, Mr. Simon has

referred us to 106.7 and 106.6, and both of those

refer to something called generic, or, excuse me,

something called voter drives, which weren\'t

addressed in BCRA as such, or at least not as

Federal election activity, and both include under

the term voter drives voter registration, voter

identification, get out the vote efforts, and other

efforts to encourage the public to vote or to

register to vote. It seems to me that Mr. Simon is

suggesting that somehow because this list of things

under voter drives includes voter registration,

that what\'s included, or one of the sub-components

of that necessarily incorporates the other, and I

don\'t think that\'s the way we normally interpret

laws and regulations, that the list is\--as it were,

there\'s no separate identity there. So I just

143

wanted to get your comment on that, because what

he\'s suggesting is that because we have this list

of four things that are associated in one part of

the regulations and we have two of those things,

voter registration and get out the vote somewhere

else, that both sections of the regs mean the same

thing.

MR. SANDLER: Right. I agree with you.

Not only does Mr. Simon\'s view violate normal

canons of statutory construction, I really do feel

it\'s at odds with Congressional intent, at least in

terms of how I think, really, the overwhelming

majority of Democratic members who supported this

bill understood these terms.

First of all, there\'s nothing in

legislative history that suggests that they were

importing this regulation wholesale into the terms

and that\'s what it was supposed to mean and that

everything was allocated is now going to be defined

as Federal election activity. If Congress had

meant that, obviously, it could have said it with a

lot more clarity.

144

Furthermore, I think I\'d just come back to

the fact that the members of Congress who voted for

this, and I would respectfully suggest on the

Republican side, as well, understood what these

terms mean and it was basically voter registration

drives when you go door to door or stand on the

street corner or shopping center and register

people to vote. That\'s what members of Congress

understand it to mean. It\'s basically that simple.

COMMISSIONER MASON: Mr. Simon, you talked

about voter list acquisition. Of course, we have

the court language on that. But we\'re all aware of

examples where parties, other organizations, buy

voter lists at a particular time, sometimes for a

particular use, but I have to say I\'m a little bit

bothered by what I take as your suggestion of sort

of a taint theory along with a reach-back. In

other words, it\'s also a common practice for

parties to have a voter list which they maintain

over a long period of time and use for all of their

activities, and I\'m trying to understand where we

have a law that\'s focused on particular time

145

periods, why we would then say that if it\'s used

within that time period, that we now are going to

go back and catch costs that were outside the time

period.

MR. SIMON: Because I think the statute

regulates activities conducted in the time period

and if\--I think the use of the voter list

constitutes such an activity. I think\--you know, I

agree\--

COMMISSIONER MASON: For instance, why

wouldn\'t that be captured by assessing what the

value of the use was at that particular time?

MR. SIMON: In other words, you mean the

sort of discounted value of the acquisition?

COMMISSIONER MASON: Well, there are a

variety of ways that we might be able to do it, but

I\'m just trying to understand why these total\--

MR. SIMON: Yes, that might be fine, and I

think that\'s a good suggestion\--

COMMISSIONER MASON: Allocation.

MR. SIMON: Well, potentially. I think

the point here is the point raised in the NPRM that

146

if the rule focuses solely on the date of purchase,

you could have a lot of voter lists purchased on

December 31 and then that would be totally outside

the scope of the rule and I think that\'s a problem.

That would be a way to evade the meaning of the

law.

COMMISSIONER MASON: Thank you, Mr.

Chairman.

CHAIRMAN THOMAS: Well, I\'m next up. I\'m

going to use some statistics here, just because I

want to sort of try to look into one of the

underlying issues here, which is what impact these

kinds of rules have on party committees. I bear in

mind the admonition that, there\'s a great line,

some people use statistics like a drunk uses a

lightpost, more for support than illumination. So

I\'m willing to admit going into this that

sometimes, you get a little less illumination than

you might like.

But just scratching at some of the numbers

that we pull off of our reports and that we\'ve seen

other groups report, if you look at our own press

147

release on party activity, you can see that in

overall terms in the 2000 cycle, the Democratic

State and local parties reported about \$140 million

in Federal disbursements, and in the 2004 cycle,

they increased that amount by about \$14 million to

a total of \$153.7 million.

Now, in its recent report, the Center for

Public Integrity reviewed overall receipts of State

parties\--that would be Republican and Democratic

and it would be Federal plus non-Federal money\--and

they noted that State and local parties took in

what appears to be \$65 million less in the 2004

cycle than in the 2000 cycle. But once you start

backing out the money that came from the national

party committees, in other words, if you take into

account the reductions that occurred because of

BCRA in national party transfers, it looks like

State parties overall, again, Republican plus

Democrat, increased their fundraising by about \$82

million when you move from the 2000 to the 2004

cycle. So it looks like they were, overall, when

you account for Federal plus non-Federal, a pretty

148

significant increase in their fundraising.

Just looking at Michigan, the State

Democratic Party reported spending about, as I

calculate it, about \$10.7 million for Federal

activity in the 2000 cycle, but increased that to a

level of about \$13.8 million for the 2004 cycle.

The CPI report I talked about, which again adds

both Federal and non-Federal activity and adds

Democratic and Republican activity, shows that

Michigan parties raised about \$28 million for the

2002 cycle, but increased that to receipts of about

\$35 million in the post-BCRA 2004 cycle.

So I\'m trying to give you some numbers

that suggest, at least on the outside looking in,

that it looks like there was some pretty vigorous

fundraising going on and a lot of money was being

made available, and there certainly doesn\'t appear

to be a decrease.

Now, by the same token, if you try to just

measure the impact on voter registration activity

or voter drive activity, party building activity,

the CPI report looks at this activity, and again,

149

comparing 2002 cycle and 2004, it indicates that

spending for this voter registration, voter ID, and

GOTV activity increased from about \$44 million in

the 2002 cycle to \$71.4 million in the 2004 cycle.

And then last, with regard to local

committees, I know in your commentary, you

expressed greatest concern about impact on local

party committees. But looking again at the Federal

reports, in the 2000 cycle, we identified about 24

Federally-registered local Democratic Parties in

Michigan that reported a total of about \$3.1

million, and that\'s the Federal disbursement

activity plus the non-Federal share of allocable

activity, during the 2000 cycle, but 34 Federally-

registered Democratic local parties in Michigan

reported a total of about \$6 million during the

2004 cycle. So we saw an increase in Federally-registered

local party committees apparently in

Michigan and we also saw almost a doubling of the

amount of Federal disbursement activity plus the

non-Federal share of allocable activity for those

committees.

150

And I\'ll put all of this into the record

so that we can have the benefit of going over it,

but I just lay that all out for you.

You\'re here. Those numbers suggest that

even working under the BCRA hard money rules, it

looks like you were able to sort of increase your

resources, so I\'m giving you a chance to explain.

What happened?

COMMISSIONER McDONALD: Giving you a

chance to deny your success, is what he\'s telling

you.

\[Laughter.\]

MR. BREWER: Well, first of all, I think I

would point out, I think you mentioned there are 34

Federal committees at the local level in Michigan,

is that the statistic you just used? That means

that two-thirds of our local committees don\'t have

Federal committees. Why? Because the statute and

the regulations are so complex that they\'re

deterred from doing that. So we can talk about we

may have done better in terms of fundraising, but

two-thirds of those committees can\'t see their way

151

clear to comply with the law, so they\'re just out

of the business. They\'re just out of the business.

And I think it increased maybe by ten since 2000,

so it would be a nominal increase, if any.

I think in terms of fundraising, certainly

when one avenue of fundraising is closed, you have

to increase in other ways, and the DNC, for

example, did a great job of increasing small donor

fundraising and we tried to focus on that, as well.

In Michigan, though, for example, we had a great

advantage in 2004 in terms of fundraising we didn\'t

have in 2000, a Democratic Governor named Jennifer

Granholm. So there\'s lots of different ways and

explanations about why fundraising, either Federal

or non-Federal, would increase. I think it\'s very

difficult to compare from cycle to cycle other than

the obvious that we knew that so-called soft money

was no longer available to us for a lot of

activities and had to be compensated for by raising

hard money. Beyond that, if you have a specific

question, I don\'t know if there\'s anything else I

can add.

152

CHAIRMAN THOMAS: In terms of trying to

actually conduct what we would all acknowledge was

voter registration activity, whether it involved

encouragement or actually assisting voter

registration efforts and get out the vote efforts

and so on, did you really have a sense that,

overall, your resources were greatly reduced when

you compared the 2000\--

MR. BREWER: Oh, no. Those numbers

indicate what we call our coordinated campaign,

which is our effort in the fall, generally, for the

whole ticket. There\'s no question, the budget went

up. The DNC was very generous to us in terms of

transferring hard dollars, but we also raised more

money in Michigan to do that. It was a very

competitive State. The President tried very hard

to take it and we fought back. We got matching funds

and pretty much dollar-for-dollar and effort-for-effort.

CHAIRMAN THOMAS: And what was the result,

by the way?

MR. BREWER: We carried Michigan for the

153

fourth time in a row, which we\'re very proud, thank

you.

CHAIRMAN THOMAS: Okay. Well, I really

just kind of wanted to lay out those numbers

because I think it\'s important for us to sort of

try to keep things in context. Obviously, these

rules are complicated at a certain level and

certainly if we change them, it\'s going to send a

lot of folks out there having to reinstruct party

folks and you\'re going to have more and more angry

party folks and you might have some that say,

listen, I\'m so sick of this stuff, I\'m just not

going to do anything anymore.

But by the same token, I mean, if there\'s

a way that we can sort of work toward implementing

the statute in a way that seems to reflect

Congressional intent and it leaves party committees

enough breathing room so that, over time, once

everybody gets the rules set and everybody

understands them, you can work with them and you

can raise enough money to be effective, I mean, I

think that\'s a very laudable goal, as well.

154

MR. BREWER: If I may, Mr. Chairman, I

would just disagree with your characterization of

\"some.\" I mean, 34 committees in Michigan engaging

in Federal activity is a small percentage of all

the committees that could do so and that don\'t do

so because of the burdensome regulations and

potential criminal penalties that they face.

CHAIRMAN THOMAS: Just before we finish

that point, we do have an interesting rule that

says that just because you\'re undertaking what is

now labeled as Federal election activity\--it could

be voter registration work, it could be get out the

vote work, it could be voter ID work\--it doesn\'t

mean that that\'s going to trigger registration.

Even though it\'s labeled Federal, it doesn\'t

necessarily cross over into being an expenditure,

which is the kind of term that you have to work

with in terms of registration requirements.

So again, we come back to the fact that

there may be a lot of leeway for local party

committees to go ahead and work with these rules

and avoid actual Federal registration and

155

reporting, but there is still, obviously, the

requirement that they live with the funding and

sourcing requirements. You probably have a lot of

party committees out there, local party committees

that are not registered and reporting with us, but

they are, in fact, I guess, digging in a little bit

to the rules on what happens if this is Federal

election activity and how do we have an accounting

system that can demonstrate we have sufficient

permissible monies.

MR. BREWER: When I mention the words

\"accounting system,\" they go away. I mean, it all

goes back, Mr. Chairman. It just doesn\'t work that

way. You start talking about accounting systems

and Federally-permissible funds and all those kinds

of things, it just does not happen. I\'m grateful

for some of the exemptions and things that you\'ve

talked about in terms of some wiggle room for

parties, but that belies the reality for the Oscoda

County Democratic Party in Michigan. It just

doesn\'t work that way, and no number of phone calls

to me or my assistants or my lawyers are going to

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persuade them that they can engage in this

activity.

CHAIRMAN THOMAS: Well, my time is up. We

have our General Counsel, Mr. Norton.

MR. NORTON: Thank you, Mr. Chairman.

Mr. Simon, I wanted to follow up for a

moment on the Vice Chairman\'s hypothetical about

the Jackson rally just to make sure I understood

your response. In response to the Vice Chairman,

you said\--or you called it a voter registration

rally and he said, \"That\'s right,\" and you said,

\"Well, in that case, it\'s covered.\" I just wanted

to make sure I understand what you\'re saying.

I mean, let\'s suppose it wasn\'t nominally

a voter registration rally but it was a rally for a

candidate or for a couple of candidates or it\'s one

of any number of events, campaign events, Mr.

Brewer attends. Is your position that if at that

event there is a call to register, then it\'s voter

registration activity so that the costs of that

event need to be funded with Federal dollars?

MR. SIMON: You know, I think that\'s a

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hard question and I guess I would treat that

differently than the Vice Chairman\'s hypothetical.

When you\'ve got something that\'s set up and

operated as a voter registration rally or a GOTV

rally, I think it should be treated as such. If

it\'s just a State and local candidate campaign

rally, then I don\'t think a sort of incidental

mention of voter registration activity would

convert the whole rally into Federal election

activity.

MR. NORTON: Well, I don\'t know how

incidental you mean, but if Jackson is one speaker

among three or four or five and gives the speech

that Commissioner Toner read earlier, is that\--

MR. SIMON: I guess I would use something

in the nature of a substantiality test or

materiality test. I mean, it\'s not a bright line

and it may be something that the Commission needs

to kind of work through in terms of advisory

opinions or further flesh out, but I think there is

a difference between a voter registration rally and

a candidate rally.

158

MR. NORTON: Did you want to respond, Mr.

Sandler?

MR. SANDLER: Yes. I think that\--and this

also gets back to a point that was raised in the

panel this morning when Mr. Noble said some of

these things have to be decided case-by-case, it

doesn\'t work that way. When you\'re going to pay

the costs for this hypothetical rally and you have

to cut the check to the hall, you\'ve got to know

how to pay for it. They have to book it a certain

way and you have a certain time to make an

allocation transfer or to pay for it all Federal.

And the idea that you sort of sit there and listen

and think, is this material or substantial, it\'s

absolutely absurd. We need bright-line, practical

rules in this regard and it doesn\'t work to try to

evaluate these things case-by-case after the fact.

MR. NORTON: Mr. Simon, just to come back

to you for a second, I want to make sure we\'re

reading the court\'s opinion the same way. The

District Court suggested that it\'s clear that mere

encouragement doesn\'t fall within the scope of the

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Commission\'s current regulation, but it\'s possible

that encouragement coupled with the direction of

how one might register could constitute assistance

and that that interpretation might remedy her

concerns about the statute.

I assume that you would agree, but I want

to make sure, that if the Commission were to

interpret its regulation in that fashion or to

change the regulation so that it covered

encouragement coupled with the direction of how one

might register, that it would not cover the kind of

events we\'re talking about, the Jesse Jackson

event.

MR. SIMON: Yes. I mean, I think Judge

Kollar-Kotelly was referring in what she, I think,

was posing as the middle ground case, or that

interpretive question, was referring to something

other than mere encouragement. So if you did

clarify the rules to cover encouragement plus

direction, then that was the rule, I think that

would address what she was raising as a potential

Chevron problem. I think if you said, no, no, no,

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this is just pure assistance, then I think, in her

mind, there would be a Chevron problem.

MR. NORTON: Okay. Thank you. Thank you,

Mr. Chairman.

CHAIRMAN THOMAS: Mr. Scott?

MR. SCOTT: Thank you, Mr. Chairman.

I will again take this opportunity, I note

particularly that Mr. Sandler and Mr. Brewer

remarked about confusion among the regulated

community in terms of what\'s permissible, what\'s

not permissible, a lot of the local units opting

out of the process altogether, which really piques

my interest in terms of steps that we could either

take either through the regulations or through

things that my office, that information does, to get

those people back in the process and make these

rules easier for them to understand and comply

with.

MR. BREWER: Well, fewer and simpler

rules, like I\'ve heard here this morning. I think,

frankly, over the last couple of years, I\'ll be

candid, a lot of people have contacted the

161

Commission looking for guidance, haven\'t gotten

much because I think there\'s confusion, with all

due respect, on your own staff about what things

mean. And so the people we naturally turn to to

give us advice as to what this means, because of

the litigation and all these other things, there\'s

been a lot of uncertainty there and that just

increases our fear of doing anything.

I think you do a very commendable job

within the constraints of your budget and

everything to provide information and good

materials and training, but given the tens of

thousands of local party committees out there, I

think it\'s a Herculean task. It\'s beyond your

means at this point. So remedying at that end, I

think, is futile. It needs to be remedied at the

front end, which are simple, clear rules which

don\'t discourage people from engaging in political

activity.

MR. SCOTT: Mr. Sandler?

MR. SANDLER: Yes. Again, we definitely\--State

parties, of course, share Mr. Brewer\'s view

162

that the Commission has done an outstanding job

with the training and outreach with respect to

these rules, but there are two points I would add

to that.

First of all, training RAD. That\'s where

the rubber meets the road for the State parties.

There are too many staff within RAD that do not

apply the regulations that the Commission has

actually enacted. It\'s the Commissioners who get

to make the law here, not the staff.

Secondly, just to echo Chairman Brewer\'s

point, the court has not required the Commission to

change the rule. To continually revise and

complicate and so forth, that\'s the heart of the

problem. I think the reformers\' whole position

doesn\'t add up.

On the other hand, BCRA was wonderful. It

was great. It was a great success. On the other

hand, you have to trash all the rules under which

we operated and finally got the State parties to

understand and realize. And I understand that

you\'re constrained by court decisions, but not on

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this rulemaking and we would urge you to take that

into account. Thanks.

MR. SIMON: Well, I mean, we\'re still in

the kind of shake-down cruise of the new statute

which clearly added complexity to the law and

clearly imposed new obligations and burdens on

State and local parties and it\'s going to take time

for them to adjust to that and I think the shake-down

cruise is being prolonged by the problem with

the initial rules that the Commission promulgated,

and that\'s unfortunate, but I don\'t think that

simple and clear rules, as valuable as they are,

can come at the degradation of the statutory goals

that Congress enacted in the language of the law.

MR. SCOTT: Thank you, Mr. Chairman.

CHAIRMAN THOMAS: Thank you.

Any follow-up? Mr. Vice Chairman?

VICE CHAIRMAN TONER: Thank you, Mr.

Chairman. I\'d like to follow up on the General

Counsel\'s question.

Mr. Simon, I want to make sure I

understand your position. Reverend Jackson comes

164

to Columbus and he says, \"It is critical that all

of you here today register to vote. Remember

Florida in 2000? Remember Ohio in 2004? If

everyone here registers to vote, we will not be

denied again.\" It\'s your view that Reverend

Jackson could say that, the State party could pay

for that event, and it wouldn\'t be voter

registration as long as the event is not called a

voter registration\--

MR. SIMON: No, no, that\'s not my

position. If they have an event where Reverend

Jackson is the featured speaker and he gives a

voter registration speech, I think it constitutes

Federal election activity.

VICE CHAIRMAN TONER: So that statement

that Reverend Jackson makes in Ohio would then be

Federal election activity?

MR. SIMON: Yes.

VICE CHAIRMAN TONER: No matter how else

the event is structured, no matter who else might

appear there?

MR. SIMON: I think if Reverend Jackson

165

comes to an event of the nature you described and

gave that speech, it would be Federal election

activity.

VICE CHAIRMAN TONER: Thank you, Mr.

Chairman.

CHAIRMAN THOMAS: Commissioner McDonald?

COMMISSIONER McDONALD: Mr. Chairman,

thank you.

First of all, I\'d like to urge the Vice

Chairman to refrain from keeping mentioning 2000

and 2004. They\'re just all so painful to me.

This is just a kind of a factual question.

Mark, what size of paid staff do you all have, just

out of curiosity?

MR. BREWER: My current paid staff,

between elections, 15. We\'re one of the larger

State parties in that regard. Many State parties

have one or none, none now.

COMMISSIONER McDONALD: And when do you

ramp up to increase your payroll, roughly, as a

general rule?

MR. BREWER: The summer before an even-year

166

election that would start, and the big numbers

would come in the fall.

COMMISSIONER McDONALD: Just one other

question, going back. You said to the Chairman,

and I take your point, but it also kind of gets to

the underlying theme of BCRA, it seems like to me,

you said that a number of the local party

committees have just dropped out because of the

statute. Am I right about that? Am I\--

MR. BREWER: Well, they just haven\'t been

to participate. I mean, 34 out of well over 100

committees don\'t participate at the level that

would require registration.

COMMISSIONER McDONALD: And how many was

it before? Did they all\--I mean, was it 50, 75?

MR. BREWER: I couldn\'t tell you for sure.

I don\'t dispute the Chairman\'s statistics that it

did go from 24 to 34, that I recall, but it\'s never

been at a very high level at all despite our

encouragement, all of our training and everything

else that we do.

COMMISSIONER McDONALD: So, then, as a

167

practical matter\--just so I\'m sure about this,

because it\'s a kind of important point\--as a

practical matter, then, you wouldn\'t necessarily

say that there was a dampening effect due to that,

just based on your own observation of history in

your own State?

MR. BREWER: Well, I think the dampening

effect, the one I mentioned in my testimony, was

trying to get local officials to even participate

in the local party organizations because they see

this array of regulatory issues. So even assuming

you can get them to volunteer to be a treasurer or

a local party chair, getting them to go beyond that

and do Federal election activity and above the

threshold level is just not going to happen. It\'s

impossible.

They don\'t have\--back to the Chairman\'s

point, I think nationally, in Michigan and other

State parties, we had a lot of success with small

donors. A lot of that was done over the Internet

and so forth. That\'s not a fundraising tool that\'s

available to the local party. We\'re begging our

168

local parties to get on the Internet now along with

all these other things, go into the 20th century

when we\'re in the early part of the 21st. And

again, it\'s no disrespect to them. They\'re

volunteers. To expect them to have the resources

to raise more hard money, to find a lawyer\--there\'s

probably only two or three lawyers in the whole

State of Michigan who have any concept of what the

Federal election law and BCRA are about. So it\'s

just an impossible task to try to get them to that

level.

COMMISSIONER McDONALD: One last thing, if

I might. But as a practical matter, if part of the

argument\--just being the devil\'s advocate, I mean,

I just want to pursue this because Don\'s taken his

share of shots and held up pretty well, I think\--I

just want to be clear, though. One of the themes

which kind of runs through this, and it has great

appeal to me because I really grew up on local and

State politics, not on Federal politics, but one of

the things that strikes me, and it sure would be

true in Oklahoma, first of all, out of 77 counties,

169

there would be three counties that would really get

into any big activities. There would be Tulsa

County, Oklahoma County, and probably Cleveland

County. It just depends. I mean, there could be a

couple more, depending on what\'s at stake.

But if the converse theme is that local

participation, we shouldn\'t concern ourselves

because basically this is about local participation

and we\'re unwittingly getting people under the

guise of Federal activity, which is a real concern

and I\'ll confess that, but if the theory is that

most of these groups are very small to begin with

and they are volunteers and they don\'t get involved

in this activity, it just seems kind of incongruous

to me. I mean, if my pitch on one hand is I\'m

testifying that State and local politics is every

bit as important as Federal, which it is where I\'m

from, a lot more important, as it turns out, most

of the time, you can\'t very well turn around and

say, well, the real problem is that you\'re knocking

us out of the Federal activity which we\'ve already

stipulated is not really that important to us to

170

begin with.

MR. BREWER: Well, let me take the example

of last year\'s election in Michigan. Why, in a

highly-targeted State like Michigan, with the

stakes as high as they were in that Presidential

election, why are three-quarters of my local

committees, you know, we\'ve had more activity in

those local committees than we\'ve had in 30 or 40

years. People are coming forward. They know the

stakes in the Presidential election. Why won\'t

those committees raise the Federal money, get

involved in the Federal system for the most

important election on the ballot? Because they\'re

scared by the complexity of the regulations and

they\'re scared of the criminal penalties.

COMMISSIONER McDONALD: And they were\--

MR. BREWER: If there was ever a time

where those local committees were going to form

Federal committees and get involved, it would have

been last year\'s Presidential election, but they\'re

scared because of the complexity of the law.

COMMISSIONER McDONALD: And they were

171

doing it before?

MR. BREWER: No. What I\'m saying is if

there ever was a time to be motivated to do it, it

would have been the last election.

COMMISSIONER McDONALD: Okay. I take your

point, and it\'s a very good point, but I did want

to be clear that I got the impression that they

weren\'t doing it before, as well. I mean, 2000 was

a fairly important race, as well, and I think you

could make a pretty compelling case for it.

MR. BREWER: Well, I can just tell you,

again, from our\--we did not see the kind of

outpouring of activity and people who hadn\'t been

active in politics in Michigan in 30, 40 years come

out in 2004 that we saw there. So even with all

that and everybody knowing the stakes at the

Presidential level, a minor increase in the number

of Federal committees.

COMMISSIONER McDONALD: I thank you very

much.

CHAIRMAN THOMAS: Commissioner Weintraub?

COMMISSIONER WEINTRAUB: Thank you, Mr.

172

Chairman.

Mr. Simon, I\'ve got to go back to you and

this Jesse Jackson example again because I thought

I was clear and I\'m not.

Do we agree that\--I mean, would you be

comfortable, let me put it this way, would you

think it was consistent with the law if we had

something in our E and J that said that you\'ve got\--

if there\'s an event that everybody agreed was not

generally a voter registration event or a GOTV for

Federal purposes, it\'s a State candidate event or

whatever, you know, let\'s assume that everything

else about the event is purely State and local and

all that happens at that event that is arguably FEA

is that one or more speakers, in addition to

everything else they say, has a tag line either at

the beginning or the end of their speech where they

say, \"Don\'t forget to vote,\" or \"Please register to

vote.\" If we had something in our E and J that said

just that, just that mere exhortation, \"Don\'t

forget to vote\" or \"Please register to vote,\" is it

enough to bring you into FEA? Would that pass

173

muster, in your view?

MR. SIMON: If the underlying rule was

that the rule included efforts to urge or encourage

voter registration, yes, with the explanation that

an incidental reference would not be within the

scope of that rule.

COMMISSIONER WEINTRAUB: And if Jesse

Jackson made that speech at\--

MR. SIMON: I don\'t think that\'s an

incidental reference.

COMMISSIONER WEINTRAUB: That\'s not an

incidental reference?

MR. SIMON: No.

COMMISSIONER WEINTRAUB: What\'s an

incidental reference?

MR. SIMON: Sort of a tag line on the

speech.

COMMISSIONER WEINTRAUB: But if you put it

in the context of what happened in the previous

election cycle, it\'s no longer a tag line?

MR. SIMON: Well, I mean, the example is a

speech about voter registration\--

174

COMMISSIONER WEINTRAUB: No, no, no. It\'s

not a speech about voter registration. All he says

about voter registration is that one paragraph that

Vice Chairman Toner quoted.

MR. SIMON: Well, I mean, this is kind of

a moving target in terms of this discussion\--

COMMISSIONER WEINTRAUB: I know it\'s a

moving target. I\'m trying to try a couple of

different scenarios to see where you are.

MR. SIMON: Fair enough. I mean, it

starts out as a voter registration rally. Then it\--

COMMISSIONER WEINTRAUB: I\'m not asking

about\--

MR. SIMON: I know, but I\'m just saying,

in this discussion over the course of the morning,

this has moved substantially to the hypotheticals

we\'re dealing with. My position is, to the extent

I\'ve thought through exactly all these

permutations, is that voter registration activity

includes efforts to encourage voter registration,

and that\'s been\--that\'s reflected in existing

175

Commission rules. I guess I would want to be

informed by how the Commission has construed and

implemented its existing language about efforts to

urge voter registration\--

COMMISSIONER WEINTRAUB: That\'s what I\'m

trying to ask you, is given\--assume that nothing

else happens at this event that you would consider

to be FEA and all that happens is, in the course of

this event, Jesse Jackson gets up. He makes a

speech about policy, and at the end of the speech,

he puts that paragraph in. Is it FEA?

MR. SIMON: And that\'s the only thing that

happens at that rally?

COMMISSIONER WEINTRAUB: That\'s the only

thing.

MR. SIMON: And it\'s that one paragraph?

Maybe that falls in the incidental category, but,

you know, we started with a hypothetical about a

voter registration rally or the hypothetical of a

speech devoted to the importance of voter

registration. I think that is FEA.

COMMISSIONER WEINTRAUB: Thank you, Mr.

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Chairman.

CHAIRMAN THOMAS: We are quite a bit

behind schedule. We planned to bring the other

panel on at 2:00 in the afternoon, so we have kind

of eaten into our own lunch, so to speak. But we

thank you very much for coming here. Your

expertise is most invaluable and we will try to

make sense of this and do it in a way that at least

makes some people happy. No one is going to be

perfectly happy.

I do want to state, I think for purposes

of making sure any additional comments or

statements can be added to the record, I think as

we did in some of our recent rulemakings, without

objection, we will leave the record open in this

particular rulemaking for, let us say, one week, so

that if people have any additional statements or

comments they want to add, they can do so.

Very well. We are done with this

particular session. Thank you very much.

VICE CHAIRMAN TONER: What time are you

resuming?

177

CHAIRMAN THOMAS: Well, I\'m happy to start

later, but I was thinking that if we start on the

scheduled time, it\'s in everybody\'s interest.

Let\'s take it up at 2:00. That leaves us little

time.

\[Whereupon, the proceedings were recessed,

to reconvene at 2:00 p.m., this same day.\]

178

A F T E R N O O N S E S S I O N

\[2:00 p.m.\]

PANEL III: STATE, DISTRICT, AND LOCAL PARTY

COMMITTEE PAYMENT OF CERTAIN SALARIES AND WAGES

CHAIRMAN THOMAS: Let us get underway. I

know that one of my colleagues is not far away.

The Special Session of the Federal Election

Commission for August 4, 2005, will please come to

order. Welcome to everyone.

This hearing concerns a Notice of Proposed

Rulemaking on State and district local party

committee payment of Federal wages and salaries.

The NPRM was published in the Federal Register on

May 4, 2005. It included several proposals for

allocating the salaries and wages of employees who

spend 25 percent or less of their compensated time

on Federal-related activity.

Since our panelists appeared before us

earlier today, I can dispense with the tedious

description of our format and light system. We

will, I guess, still go with our alphabetical

system. Please try to stay with an opening

179

statement of about five minutes and the rest of our

time will be on question and answer.

We have, again, Mr. Mark Brewer here on

behalf of the Association of State Democratic

Chairs. We have Mr. Paul Ryan, who is here on

behalf of the Campaign Legal Center. Mr. Joe

Sandler, who is here in his individual capacity.

And Mr. Don Simon, who is here on behalf of

Democracy 21.

Chairman Brewer, please begin.

MR. BREWER: Thank you, Mr. Chairman.

I\'ll incorporate by reference my remarks of this

morning in terms of my background and the context

in which State and local parties operate.

Let me start by responding to Commissioner

Smith\'s concern expressed this morning. The Court

of Appeals opinion at page 62 specifically allowed

the Commission\--

COMMISSIONER SMITH: My staff informed me

that I\'d forgotten that, so thank you.

MR. BREWER: Sure. I just wanted to

address that, first of all. And we would urge you

180

to do so.

The court analysis and the criticism of

this rule focused on a hypothetical, speculative

possibility that somehow, State and local parties

would spread Federal work over several less than 25

percent employees, if I can call them that, thereby

using non-Federal funds to pay for Federal work.

Frankly, this hypothetical evil was clearly

conjured up by somebody who has never actually run

a State or local party and I think who has spent

far too much time inside the Beltway.

Here\'s the factual reality in terms of how

this would work out there. First of all, the vast

majority of State and local party organizations

don\'t have enough employees to even attempt such a

jujitsu maneuver.

Second, you now don\'t need to rely upon

speculation that such abuse would occur under this

rule. We now have an entire election cycle of

actual experience under our belt and nobody has

come forward to point out a single example of where

this alleged abuse occurred. And let me give you

181

an example, and I\'ll use my own State.

If there was a State where this would have

occurred, you would think it would have been

Michigan, a highly-targeted State. As I mentioned

this morning, we ended up with over 150 people on

our payroll, but let me describe how they were

paid. We had 152 total employees last year. One-hundred-

and-twenty-three of those, or 81 percent of

them, were paid 100 percent with Federal funds

because they were above the 25 percent threshold,

even though, frankly, for many of them, they

certainly didn\'t come close to performing 100

percent FEA-type activity. Twenty-nine of our

employees, or 19 percent of them, were paid 100

percent non-Federal because not only were they

below that 25 percent threshold, but all of their

work, every bit of their work was on State

legislative races.

So we could have abused this rule in two

ways, I guess, had we wanted to, or could have. We

could have manipulated the workload of those 123

employees to keep some below the 25 percent

182

threshold, ostensibly to save Federal hard money,

but we didn\'t. Why? Because anybody who\'s ever

managed campaigns and managed people know that you

cannot micromanage somebody\'s time to do that. I

mean, we have enough to do in a campaign to get

voters registered, among other things, get the vote

out, and so forth without attempting this

accounting task of trying to micromanage somebody\'s

time so they stay under this 25 percent threshold.

It\'s impossible to do, even if you had a lot of

employees to do it, and we certainly don\'t have

that kind of management folks available to us to do

that.

I suppose the other thing we could have

done was that we could have used the 29 employees

who fell under that threshold to do some FEA, but

we didn\'t. I mean, the fact was they were working

100 percent of the time on those State legislative

races and were paid with non-Federal money as a

result.

So I think you can, again, look at

Michigan as an example of where we could have

183

abused it, so to speak, if we had chosen to. We

certainly had every, quote, \"incentive,\" I guess,

to do so, right\--save Federal money, circumvent the

rules, abuse the rules, but we did not because you,

just as a practical matter, can\'t. It\'s just a

management impossibility.

As a matter of fact, I would offer that

under the rule, Michigan and many other States like

us, in fact, overpaid in terms of using Federal

money to pay for these employees because many of

those 123 employees weren\'t working 100 percent of

the time on Federal races. I mentioned earlier

today, we had one major Federal race in the State

of Michigan last year. It was the Presidential.

We also had State legislative races. We had

supreme court races. We had lots of local races.

There were very few, if any, of those 123 employees

who actually spent 100 percent of their time. So I

think in actuality, we overpaid in terms of Federal

money.

Finally, just one thing. I noticed in the

Court of Appeals opinion that, somehow, they

184

speculated that wealthy donors would be willing to

swallow the costs of paying workers to work 75

percent non-Federal if they could somehow get this

25 percent Federal squeezed out of them. With all

due respect to the court, I\'ve dealt with thousands

of wealthy donors over the years, and if I told a

wealthy donor that I need to waste, essentially,

from their perspective, 75 percent of your money to

get this 25 percent, they\'re going to walk away.

They\'re not going to give me a penny. So, again,

with all due respect to the court, that\'s just not

a reality when it comes to the real world.

So we would urge you to repromulgate the

rule because there now exists a record of actual

experience which demonstrates, proves that all the

speculation about abuse was just that, idle

speculation that has no basis in fact. Thank you.

CHAIRMAN THOMAS: Thank you.

Mr. Ryan?

MR. RYAN: Good afternoon, Mr. Chairman,

Vice Chairman, Commissioners, Commission staff.

It\'s a pleasure to be here this afternoon to

185

testify before you in this rulemaking on behalf of

the Campaign Legal Center.

I am here today to urge you to adopt the

proposed rule establishing 25 percent as the fixed

minimum percentage of Federal funds that a State,

district, or local party committee must use to pay

the salaries, wages, and fringe benefits of

employees who spend some of their compensated time,

but not more than 25 percent per month, on Federal-related

activity.

FECA, as amended by BCRA, requires that

any State, district, or local party expenditure for

Federal election activity be made using hard money,

or under limited circumstances using a mixture of

hard money and Levin funds. Under no circumstances

may State parties pay for Federal election activity

using soft money.

Congress included in the definition of

Federal election activity services provided by a

State, district, or local party employee who spends

more than 25 percent of his or her time on

activities in connection with the Federal election.

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In doing so, Congress was aware that under

longstanding Commission allocation regulations,

employees spending 25 percent or less of their time

on Federal-related activities had to be paid with

at least some hard money. Nevertheless, the

Commission in 2002 adopted a regulation permitting

State, district, and local party committees to use

entirely soft money to pay the salaries and wages

of State party employees who spend 25 percent or

less of their time performing Federal election

activities.

This regulation was challenged and

invalidated by the District Court in Shays under

so-called Chevron Step 2 analysis on the grounds

that it compromised the purposes of BCRA, creates

the potential for gross abuse of BCRA, and thus

constitutes an impermissible construction of the

statute. This rulemaking follows the District

Court\'s decision in Shays.

The NPRM for this rulemaking acknowledges

that State party committees are required under FECA

to use at least some Federal funds to pay the

187

salaries and wages of employees spending 25 percent

or less of their time in connection with Federal

elections. The Commission\'s proposed rule to

establish a fixed 25 percent Federal funds

allocation minimum for State party committees\'

payment of salaries of 25 percent or less employees

would ensure that only Federal funds are used to

finance Federal election activity.

We strongly urge the Commission to adopt

this proposed rule, which not only best comports

with BCRA\'s soft money prohibition, but also has

the significant advantage of providing a clear and

readily administered rule.

The NPRM also proposes two alternatives to

a fixed 25 percent minimum approach. The Campaign

Legal Center opposes both alternatives. One

alternative, treating salaries and wages for these

employees as administrative expenses subject to the

allocation ratios in Section 106.7(d)(2), is flawed

because it would allow State party committees to

use soft money to pay a portion of the salary of

such employees during any year in which a

188

Presidential candidate is not on the ballot.

The Commission proposed as another

alternative establishing an allocation percentage

directly proportional to the amount of compensated

time these employees spend on Federal-related

activities. While this alternative allocation

method would, in principle, comport with BCRA\'s

soft money prohibition and with the District

Court\'s opinion in Shays, we do not support this

alternative because it would be unnecessarily

complicated and difficult to enforce.

The Commission also seeks comment on

whether the allocation method chosen by the

Commission for salaries and wages should likewise

be applied to committee payment for the costs of

employee fringe benefits. We urge the Commission

to make clear that the cost of fringe benefits

falls clearly into the category of compensated time

and to require that such fringe benefit costs be

paid in the same manner as salaries and wages.

Specifically, the Commission should

require the cost of fringe benefits of State party

189

employees who spend more than 25 percent of their

time on Federal election activities to be paid

entirely with hard money, Federal funds. The cost

of fringe benefits of State party employees who

spend 25 percent or less of their time on Federal-related

activities should be paid according to the

25 percent Federal funds fixed minimum allocation

method.

And finally, in a matter unrelated to the

District Court decision in Shays, the Commission

seeks comment on whether Regulation 106.7(c)(4)

should be revised to state that Federal funds

raised by a State party at an event where the costs

of the event are allocated between Federal and non-Federal

accounts may be used to fund Federal

election activity. We oppose this revision of

Section 106.7(c)(4). The current regulation is

consistent with and mandated by FECA Section

441i(c), which provides that an amount spent by a

State party, quote, \"to raise funds that are used

in whole or in part for expenditures and

disbursements for Federal election activity shall

190

be made from hard money.\"

FECA requires that hard money and only

hard money be used to pay the costs of a fundraiser

if the funds therein raised are used in part to pay

for Federal election activity. Section 106.7(c)(4)

properly implements this statutory requirement and

any alteration of this requirement would undermine

the statute.

Thank you for your attention. I look

forward to answering your questions to the best of

my ability.

CHAIRMAN THOMAS: Thank you.

Mr. Sandler?

MR. SANDLER: Thank you, Mr. Chairman and

members of the Commission. Again, I appreciate the

opportunity to appear again this afternoon, not on

behalf of any specific client, but as a

practitioner advising a number of State Democratic

Party committees on the Federal Election Campaign

Act and the Commission\'s rules.

We certainly agree, and I won\'t repeat the

testimony of Chairman Brewer as to why the

191

Commission does not need to, under the Court of

Appeals opinion, revise the statute. But if\--or

revise the regulation. But if the Commission

chooses to revisit this issue, there are some

specific provisions we would suggest to\--one in

principle, and then some more technical that would

improve the operation of this regulation.

First of all, we believe the Commission

should amend the regulation to conform to the

statute with respect to what kind of employee

activity we\'re talking about here. The statute

says in connection with a Federal election, not

Federal election activity, which is much broader

than the established meaning of in connection with

a Federal election. Consequently, the statute is

clear that if somebody spends 50 percent of their

time on generic voter registration or GOTV, their

salary should be, under the Court of Appeals rule,

it should be allocated, not paid 100 percent

Federal.

Secondly, we believe that State parties

should have the option of treating payments for

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fringe benefits as administrative expenses rather

than as salary payments. As a practical matter,

often, fringe benefit payments have to be made on a

different schedule or in advance of payroll

payments in such a way that it is very difficult to

figure out how much that employee is going to work

that money, and so it would give a necessary and

practical flexibility to State parties to have the

option of treating them either as salary and wages

or as administrative expenses.

Third, we believe that the Commission

should provide some mechanism for allowing State

parties to adjust payroll payments that have

already been made based on what employees actually

did that month. In other words, if they guess

wrong one way or the other, there\'s no mechanism

now for correcting that in arrears.

And finally, we believe, and this is also

detailed in our written comments, that the

Commission should make clear that where an employee

spends 100 percent of their time on non-Federal

races in a particular month, they can still be paid

193

100 percent with non-Federal money, and that, of

course, is a real situation particularly, for

example, this year when we have 30-plus Governors\'

races up and certain State party employees do

nothing but devote their time to Governors\' races.

Similarly, where State legislative caucuses are

part of the State party structure and those

employees devote 100 percent of their time to the

State legislative races and zero percent to

activities in connection with a Federal election or

even Federal election activity.

Thank you very much.

CHAIRMAN THOMAS: I forgot to do the clock

for you. I apologize, but you were spectacular,

very close to five minutes, I\'m sure.

Mr. Simon?

MR. SIMON: Thank you. Good afternoon.

I\'m testifying once again on behalf of Democracy

21\.

We support the rule proposed in the NPRM

that would establish a simple two-part test for

payment of State party workers. Those who spend 25

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percent or more of their time working on Federal

matters would be paid entirely with Federal funds.

Those who spend up to 25 percent of their time on

Federal matters would be paid with an allocated

mixture consisting of 25 percent Federal and 75

percent non-Federal funds. This proposal is

consistent with the statute and relatively simple

to administer.

The Commission\'s existing rule is a clear

departure from the law. In strengthening the law

to require full Federal funding of certain

specified mixed activity, nowhere did Congress in

BCRA say that other previously allocable mixed

activities could be funded entirely with soft

money. It did not do so for administrative

expenses, for fundraising expenses, or for non-FEA

voter drive expenses. Nor did Congress do so for

salaries paid to State party workers who spend up

to one week per month on Federal election matters.

Yet although the Commission correctly

continued to require allocation for these other

forms of mixed activities, in this one area of

195

State party salaries, the Commission implausibly

read BCRA to weaken by implication the preexisting

requirements.

The District Court in Shays found this

weakening regulation violated the statute and was,

thus, invalid under Chevron. The D.C. Circuit

affirmed the District Court\'s invalidation of the

regulation, holding that the rule was, in its

words, particularly irrational given the FEC\'s

recognition that costs for voter registration, get

out the vote drives, and generic party advertising,

all matters, like salaries, that the FEA definition

specifically addresses, may require allocation even

when the activities do not qualify as FEA. The

court said the Commission\'s rule, again, in the

court\'s words, makes no sense in light of the

justification offered for it and, thus, is

arbitrary and capricious.

Now, it\'s true that the D.C. Circuit,

unlike the District Court, rested its invalidation

on APA, not Chevron, grounds. The court noted

that, technically, the Commission is thus free to

196

repromulgate the rule with a better explanation.

We urge you not to do so.

The D.C. Circuit said that, given the

statutory framework, it was, again, the court\'s

words, skeptical that there is an adequate

explanation to be had for why, in this one

instance, continued allocation is not required when

for all other statutorily similarly situated mixed

activities, allocation is still required.

Further, no explanation that the

Commission could provide would ensure that its

current rule would not become a vehicle for abuse.

It\'s certainly not implausible for a State party to

assign an employee to work on Federal

electioneering matters one week per month and then

pay that employee entirely with soft money. By

extension, the State party could functionally

create a full-time job devoted to Federal

electioneering and funded entirely with soft money

by rotating the Federal tasks among four workers on

a weekly basis. For the Commission to stubbornly

cling to what the court called a particularly

197

irrational rule that was invalidated by two courts

with simply an indication to prolong litigation and

keep the law unsettled.

Let me comment briefly on the two other

topics raised in the NPRM. The Commission, in an

Advisory Opinion, 2003-11, took the position that

fringe benefits for State party workers should be

paid on the same basis of salaries instead of as

administrative expenses. The Commission gave not

one, but four reasons why employee-specific fringe

benefits are like salaries and wages and should be

treated similarly, including the fact that the

Commission has always done so, that BCRA speaks

broadly of compensated time, not salaries, and that

it would, in the Commission\'s words, be an

anomalous result to have different allocation

treatment for the various components of the

compensation package given to the same employee.

We agree and think the Commission should

make clear here that fringe benefits for State

party workers should be paid entirely with Federal

funds for 25 percent and more workers and paid with

198

25 percent Federal funds for others.

Finally, we oppose amending Section

106.7(c)(4). That regulation is directly based on

Section 441i(c) of BCRA and correctly implements

it. It would be a facial violation of the statute

to allow the costs of fundraising to be allocated

on the funds-received method where the Federal

funds raised are to be spent for Federal election

activity. Section 441i(c) simply does not permit

this. In this laborious series of rulemakings to

remedy past misreadings of BCRA, the Commission

should not reach out to create a new one.

Thank you.

CHAIRMAN THOMAS: Very good.

QUESTIONS AND ANSWERS

CHAIRMAN THOMAS: We are ready for

questioning. Commissioner Weintraub?

COMMISSIONER WEINTRAUB: Thank you, Mr.

Chairman.

First, for Mr. Simon and Mr. Ryan, would

you agree with Mr. Sandler that there are some

employees of State parties that do 100 percent non-Federal

199

work and they can be paid 100 percent with

non-Federal funds?

MR. SIMON: Yes.

COMMISSIONER WEINTRAUB: So we could

clarify that in the regulations and you wouldn\'t

have a problem with that?

MR. SIMON: No.

COMMISSIONER WEINTRAUB: Okay, good. One

we won\'t get sued on.

Mr. Brewer, it\'s not that I don\'t believe

you, but Mr. Simon is correct. The court is very

skeptical that\--maybe the court just doesn\'t know

what it\'s talking about. Maybe Mr. Simon doesn\'t

know what he\'s talking about. Maybe you\'re in a

better position because you\'ve actually been in

this business. Nonetheless, if we\'re going to do

what you want us to do, according to this court,

should the FEC\--the appellate court, should the FEC

wish to adhere to its current view in future

rulemaking, it must summon more substantial support

than the conclusory assertions presented to us.

I have a feeling that if we say, but Mark

200

Brewer said this isn\'t the way it works, that that

probably is not going to satisfy the Court of

Appeals. So I\'ll let you respond to it if you want

to, but to the extent that we have any leeway on

this, I think that if you want to try in the next

week to summon some more support that we could use

in our E and J should the Commission, and I\'m not

guaranteeing that we would do that, want to go down

that road, I don\'t think we can do it just based on

your testimony.

MR. BREWER: Thank you. I guess two

responses. First of all, it\'s not Mark Brewer,

it\'s the only factual witness in front of you\--

COMMISSIONER WEINTRAUB: I understand

that.

MR. BREWER: What amazes me about this

panel and all these proceedings today, I feel like

I\'m back in law school where we had the luxury of

sitting in an office in D.C. and speculating

endlessly about what might happen. One of the

reasons I was so glad to get out of law school and

start to practice law was to go out where people

201

actually\--there are facts and there are actually

events that are occurring.

I don\'t have the luxury of sitting here in

D.C. like people from the reform organizations and

speculating endlessly in the comfort of my office

as to what I might do. I have a party to run and

I\'m not going to spend my time trying to evade

rules because I\'ve got more important things to do.

But beyond that, if you want a more factual

record, everything I\'ve said here today can be

confirmed if you go on the road and talk to State

and local party people\--

COMMISSIONER WEINTRAUB: But I can\'t do

that. I mean, in terms\--

MR. BREWER: Why not?

COMMISSIONER WEINTRAUB: In terms of this

rulemaking, that\'s not going to happen. I\'m not

going to go on the road and start interviewing

people. We\'re going to do it based on the record

that\'s presented to us in this hearing and the

other comments that have been submitted. That\'s

the way we do these things, and\--

202

MR. BREWER: Why not get outside the

Beltway, with all due respect, and talk to some

real people who run real parties in the real world?

All of them are not as fortunate as I am that I was

able to take a day and spend the money to come be

with all of you. They\'ve got a lot of important

things to do. Go see them and learn from them and

I think they will confirm everything that I\'ve

said.

COMMISSIONER WEINTRAUB: It\'s not that I

disbelieve you, it\'s just that the practical

reality is that we\'ve got a lot of rulemakings to

do and this particular issue, I\'ve got to tell you,

is probably not the most significant one that we\'re

going to confront. So the Commission is not going

to spend six months on the road. I mean, that\'s

just the reality. Maybe my colleagues are going to

disagree with me, but I think that\'s the reality.

We\'re not going to go out there\--

COMMISSIONER McDONALD: I\'ll have some

time\--

\[Laughter.\]

203

COMMISSIONER WEINTRAUB: \--and do that.

So I think the onus is on you guys. If you want to

collect some stuff from some of your colleagues and

other State party organizations, maybe reach across

the aisle, all I\'m saying is that I don\'t see any

way, honestly, that we can do what you want us to

do without more support. I don\'t think it\'ll pass

the test of this court, and that\'s what we have to

do. As much as we might be sympathetic to you and

as much as we might think that you are the only

fact witness and the best person to opine on this,

I hear what you\'re saying and it\'s not that I don\'t

credit that. It\'s just that I need to support the

rulemaking and I need to do it in the context of

everything else that I have to do here.

So that\'s just my invitation to you. You

want to get us some more support? We\'d be happy to

look at it. But that might be the best that I can

offer.

Let me ask a question of Mr. Ryan. I like

simple rules, too, and I think that was our

decision, that this straight 25 percent rule would

204

be the simplest way to go. But one of the other

commenters suggested that we ought to give State

parties the option and let them decide whether they

think it\'s too complicated or not. If it\'s worth

it to them to be able to use ten percent hard money

to pay somebody who\'s really only working ten

percent on Federal races and they\'re willing to go

through what they have to go through to document

that, why shouldn\'t that be their option? Maybe we

should put that into the rule. It\'s their choice.

They can do 25 percent or they can do an actual

allocation based on time spent if they can document

it.

MR. RYAN: I think, of the proposed

alternatives, I think the actual ratio, allocation

ratio, is the second most desirable only to the

flat 25 percent and the only reason I would prefer

the flat 25 percent over the actual ratio is for

simplicity\'s sake.

If you were to go with one of the

alternatives other than a flat 25 percent rate, I

would say that that option, leaving that option

205

open to parties, allowing them to allocate

precisely the percentage of time spent, you know,

to pay for that amount in Federal funds, that would

be acceptable under BCRA and under the court\'s

decision.

The other alternative proposed, which is

using the administrative expenses allocation

ratios, is far less desirable because it would

permit some activities in connection with the

Federal election to be paid with soft money in non-

Presidential election years.

COMMISSIONER WEINTRAUB: Thank you, Mr.

Chairman.

CHAIRMAN THOMAS: Commissioner Mason?

COMMISSIONER MASON: Mr. Brewer, you were

talking about your employees essentially were, all

but the set who were devoted exclusively to State

legislative campaigns were 100 percent Federal last

year. What\'s your situation this year?

MR. BREWER: Well, we\'re paying people

under the administrative provisions.

COMMISSIONER MASON: And so your

206

assessment of your employees\' activities this year

are that they are less than 25 percent in

connection with Federal elections, and how do you

make that judgment in any given month? I mean,

let\'s take ourselves forward to January of next

year.

MR. BREWER: Well, in order to cope with

the complexity of this rule, one of the things we

did, we altered our time sheets so that I make each

of my employees certify for every weekly time sheet

they turn in how many hours of this activity they

engaged in, and then we hold periodic instructions

of them as to what falls into that category, and

then you\'re to report how many hours you spent in

that particular week on that category.

So I think we\'ve more than complied with

the Commission\'s requirements that we be able to

document how we reach those conclusions. It\'s a

pain in the neck, but we do it.

COMMISSIONER MASON: And so as you move

into the election year, and particularly the

Federal election year, what you\'re saying is just

207

through experience, you\'re finding that by perhaps

December of the year before, or\--I\'m not trying to

tie you down to some particular month, but January,

February, March, some time in there, these people

start tripping over the 25 percent threshold.

MR. BREWER: Yes. There might be a shift,

depending on what the person does. Sometimes I

change a person\'s job. They may shift over to

full-time campaign work from a more regular staff

job. But yes, we keep an eye on that, and like I

said, we do these regular trainings. We monitor

what our employees are doing, and when we think

it\'s appropriate, switch over.

COMMISSIONER MASON: And how do you handle

the sort of central and administrative staff, I

mean, people such as yourself, you probably have a

receptionist, you probably have\--you mentioned

accounting, assistants, you know, that are

essentially services or are connected with the

operation of the whole organization?

MR. BREWER: Again, that would vary from

person to person. I think I recall at some point

208

last year, I switched myself over. I mean, what we

did here, and this is completely consistent with

what I talked to you about, we weren\'t trying to be

cute and play games and maximize use of non-Federal

money. If it was even close, we switched over.

That\'s why all those employees were being paid with

100 percent Federal money, and I think I\'m fairly

typical of State parties and local parties in that

regard. We\'re not playing games with this because

the penalties are too severe. If it was even a

close question, we switched over to 100 percent

Federal.

COMMISSIONER MASON: And these employees

who you had who were devoted to the State

legislative races, was that an arrangement you had

typically had before, or did you for that category

of employees change any responsibilities or

operations, in essence, to keep them 100 percent

non-Federal?

MR. BREWER: Those were not employees who

were on the party staff pre-election. They were

added for the purpose of those State legislative

209

races, and we have always had people on our payroll

who were devoted exclusively to State legislative

races. The number may vary from cycle to cycle,

but those were not preexisting staff. They were

hired exclusively for that purpose.

COMMISSIONER MASON: Mr. Sandler, I see

your point in connection with the Federal election

versus Federal election activity. Can you tell me

what you would expect to be the difference?

MR. SANDLER: Yes, absolutely. The

generic voter registration, generic activity in get

out the vote that does not reference a Federal

candidate is Federal election activity, of course,

under the Commission\'s definitions under BCRA. It

is not activity in connection with a Federal

election as that term has been defined by the

courts over the years. Consequently, the first

problem is the Commission\'s existing regulation is

vastly too broad, sweeps in work by State party or

takes into account work by State party employees

that the statute does not permit as written to be

taken into account and is vulnerable to challenge

210

on that ground.

COMMISSIONER MASON: And so at least one

of the principal effects would be, for instance, to

allow a State party to have an employee designated

to generic, that is to say, non-candidate-specific

voter drives to fall out of this 100 percent

Federal category.

MR. SANDLER: Right, or just how that time

is accounted for, you know, is counting towards the

25 percent or not.

COMMISSIONER MASON: And how does that

match up with the requirement that the Federal

election activity be paid Federally or with a

Federal-Levin mix, which doesn\'t really exist many

places?

MR. SANDLER: I think\--

COMMISSIONER MASON: In other words, since

that generic voter drive is FEA in and of itself,

then the expenses of that, presumably including the

expenses of an employee devoted exclusively to it,

would need to be Federal for reasons other than the

employee time rule.

211

MR. SANDLER: Well, I think the fact that

the statute specifically addresses how employee

time is supposed to be accounted for, separate from

the other activities, and the fact that Congress

has used the term\--decided specifically not to use

the term \"Federal election activity\" basically

trumps the other\--treating it as one of the other

categories.

COMMISSIONER MASON: Thank you, Mr.

Chairman.

CHAIRMAN THOMAS: Thank you. It looks

like I\'m next up.

Let me follow up on this same issue. I,

frankly, hadn\'t focused on that aspect of our

regulation that seems to define what\'s covered in

the wages reg, not just in terms of in connection

with a Federal election, but also Federal

election activity. I note that at a couple of

other places in the statute that deals with all of

the soft money restrictions coming out in Section

441i, it appears in a couple places where there\'s

a reference to expenditures or disbursements in

212

connection with an election for Federal office,

including expenditures or disbursements for Federal

election activity. That kind of phraseology

appears twice in 441i and I\'m just curious\--I

gather your read is that since that same kind of

qualifier doesn\'t appear regarding the wages

provision in the statute, that we wouldn\'t construe

the statute that way? Is that\--

MR. SANDLER: Exactly right.

CHAIRMAN THOMAS: Here\'s your chance.

Tell me how that differs from your perspective.

MR. SIMON: I think it\'s a clever

argument. I think it\'s utterly implausible. You

know, I think the whole concept of the statute is

that the \"in connection with\" standard is the sort

of umbrella standard and the Federal election

activities are kind of specific forms of activity

under that umbrella. The whole premise of

requiring\--I think Commissioner Mason was going to

this point, which I think is a correct point, that

the whole premise of requiring Federal funding for

Federal election activities is that those

213

activities are Federally related. They\'re in

connection with Federal elections. That\'s the

basis on which Congress determined that generic

activities, for instance, should be Federally

funded. I think the legislative history is just

replete with observations that generic activities

do impact Federal elections and that is the basis

for requiring Federal funding of them.

So Federal election activities, I think,

are, as a statutory matter and as a matter of the

sort of underlying premise of the statute,

activities in connection with a Federal election.

CHAIRMAN THOMAS: What canon of

construction do you bring to us so that we can say,

well, they include the parenthetical phrase

including Federal election activity in a couple

places, but didn\'t in the other\--

MR. SANDLER: I mean, I guess what I would

rely on is simply the words themselves in

connection with an election being the broader

applicable standard here. I mean, I could go

research your specific question in Sutherland and

214

provide you something next week if you want.

CHAIRMAN THOMAS: You can always find

something in Sutherland, can\'t you?

Just to come back to you, Mr. Sandler, in

your comment on page eight, you talk about\--you

say, in connection with a Federal election is a

legal term of art that covers only activities that

directly influence a Federal election, such as an

activity that expressly advocates the election or

defeat of a Federal candidate or activities that

result in an in-kind contribution to a Federal

candidate.

Obviously, if you just limit it to those

concepts, it could greatly constrain the reach of

the salary part of this FEA definition. Do you

have in mind that that was just kind of an

inclusive description and that there might be, for

example, other things, like activities that relate

to generating communications that promote, support,

attack, or oppose that wouldn\'t necessarily involve

express advocacy?

MR. SANDLER: Well, that\'s an interesting

215

twist on it. I mean, I think we have more in mind

the question of whether it was intended that that

portion of the State party employees\' work that is

by its nature generic and not related to specific

Federal races, whether that should be counted

towards the 25 percent, and would respectfully

suggest that the reformers can\'t have it both ways,

read the statute exactly for what it says when it

serves their purposes and not when it doesn\'t.

Here, it doesn\'t say Federal election

activity. It says, in connection with a Federal

election. It means something different. There are

dozens of court cases on it.

CHAIRMAN THOMAS: Okay. With regard to

the real world, while we\'ve got you here, you

talked about how you implemented some systems to

try to keep track of people\'s time. I guess from

your perspective, you\'re telling us that you would

prefer to have perhaps use of the general

allocation rules for administrative expenses to

fall back on, say, for fringe benefits and so on,

but I\'m just curious, since you\'re already out

216

there keeping track of time on, it sounds like a

weekly basis, why not go with a system that gives

you sort of like maximum flexibility?

You could just have the percentages in the

below 25 percent area reflect what people actually

do. If they do zero Federal, you could put them at

zero, obviously. But if they do five percent

Federal, you could have five percent of their

expenses, and so on, paid for that way. I mean,

it\'s a flexible sliding scale that lets you

actually compensate them Federal/soft according to

what they\'re really doing.

MR. BREWER: Beware of government agencies

bearing gifts. That flexibility also entails\--means that

we have to keep additional records to

justify the flexibility. So I would prefer clean

rules that are simple to follow over an excess of

flexibility which requires us to keep additional

paperwork to justify the decision we made.

CHAIRMAN THOMAS: I would have to just

quickly, on my own initiative, I suppose, if left

the decision to do it myself, I think I would

217

probably go with let\'s just treat this below 25

percent category as administrative and let you work

with those same percentages, because that lets you

deal with this problem of not knowing in advance

necessarily how things are going to work out. You

can plan, at least, with that kind of a

formulation.

MR. BREWER: Yes. If you don\'t

repromulgate the rule, something like that would be

good\--better\--than having to deal with each employee

individually on an ongoing basis.

CHAIRMAN THOMAS: Thank you. Commissioner

Smith?

COMMISSIONER SMITH: Thank you, Mr.

Chairman.

Mr. Simon, Mr. Ryan, the \$64,000 question,

can you give us any examples that you believe that

would indicate abuse of this provision in the last

election cycle?

MR. SIMON: No, and let me explain. I

mean, this is an issue that comes up at every hearing\--

COMMISSIONER SMITH: Right.

218

MR. SIMON: \--and let me give you my kind

of world view on that question, which is that I

don\'t think that the onus is on us to show that in

the last election, there was, in fact, an abuse

that we have identified and that we know about,

that we bear the burden of showing that in order to

get the Commission to write a rule that correctly

reflects the statute.

You know, Mr. Brewer said, and I respect

him for this, that he\'s not trying to be cute and

play games and maximize the use of non-Federal

money, and I believe him. But when he says there\'s

no historical record here, I don\'t agree with that.

I think there is a historical record here and I

think there\'s a historical record that shows the

State parties did try to be cute and play games and

maximize the use of soft money, and that is the

story of what happened to the soft money system in

the 1990s, when the State parties became integral

parts of the mechanism for funneling soft money

into Federal elections, when national party soft

219

money funds were transferred down to the State

parties. I think as the Congressional Record shows

and as the record in McConnell shows, those

transfers were made for the specific purpose of

playing games and gaming the Commission\'s

allocation rules and maximizing the use of soft

money to influence Federal elections.

Therefore, I think Congress, when it wrote

and enacted the statute, was justifiably suspicious

of what kinds of games would be played in the

future, and I think Congress intended, and the

Supreme Court construed the statute as a

prophylactic statute, because even if there weren\'t

certain evasions going on today, if Congress could

look forward and suspect that evasions might take

place in the future and that very creative lawyers

might devise new mechanisms for maximizing soft

money, that it was entirely legitimate for the

statute to reach out and cover those situations.

And therefore, because something didn\'t

happen in 2004, I think is no guarantee that it

won\'t happen in 2006 or 2008 or somewhere down the

220

line.

COMMISSIONER SMITH: Mr. Ryan, anything to

add, or ditto, or\--

MR. RYAN: The only thing I would add is

that, as was mentioned in this morning\'s panel, we

don\'t know what types of enforcement actions are

pending with this Commission and we may not know

for several years. So for all we know, there may

have been abuses. Those abuses may be under

investigation right now\--

COMMISSIONER SMITH: Okay. I mean, that\'s

not even\--but we would know what cases are up. I

guess\--I agree with Mr. Simon. Obviously, the

burden is not on witnesses to prove that there have

been abuses in order to get a correct rule under

the statute. On the other hand, you don\'t have a

court ruling suggesting or stating that the rule we

adopted is incorrect under the statute. That\'s

what the whole question is, again. We\'re back to

what is the correct interpretation of the statute,

and we know that oftentimes there can be a couple

of interpretations because Congress leaves certain

221

things sort of up in the air and they don\'t tie

down\--in fact, they intentionally often will send

things over to an agency known for its expertise.

And I do think that\--well, obviously, when

we adopted the rule, we didn\'t know exactly what

would be the case in the next couple of years. I

do think the fact that over three years, the

Commission\'s determination seems to have been

proved correct should probably be evidence as we

now consider repromulgating the rule or changing a

rule. And I think it\'s perfectly legitimate for

the Commission to look, as well, and say, maybe

there were abuses of the soft money prior to BCRA,

but a lot of the potential for those is not here in

this case.

For example, just the example you use,

obviously, national parties aren\'t transferring

soft monies down to the states anymore because

they\'re not raising soft money. But it might be

decided that there are various other things on this

particular rule.

So I think the point is well taken, but I

222

guess I think at the same time, as we look at this\--and I

guess I\'d say to my colleagues, sure, I\'d go

around the country. Why not? I\'m not going to be

here. It does sound, in a way, kind of silly, but

I\'m sure that\--

COMMISSIONER McDONALD: We\'re like a team

coming on here\--

COMMISSIONER SMITH: Yes. I\'m sure you\'d

like to be in San Diego in January. But more

seriously, one of the problems we see with most of

these regs, they were not struck down as being

contrary to law. They were struck down because the

Commission, under a very, very tight statutory

deadline\--I don\'t know why the deadline was set so

tight. I mean, I have reasons. I remember at one

time advising the former President of Common Cause

way back, Ann McBride, it was a real mistake to

always be putting these deadlines and the immediate

court challenges on it and that reformers

themselves always complained that Buckley was

decided in such a hurry. We didn\'t have a lot of

time, and maybe we should really take the time and

223

get it right.

Commissioner Weintraub, if you\'re kind of

thinking this, it sounds like maybe you are, that

our original rule, for which you weren\'t here, but

you\'re kind of thinking, it\'s a pretty good rule,

but we\'re not sure you\'ve got enough of an

evidentiary basis in light of the court\'s

skepticism, well, maybe we should take the time and

get it right so that we\'re not back here again,

because we see these things come down to judgment

calls. There\'s no promise not to sue us. It

strikes me a lot of what we\'re looking at is almost

semantics.

I mean, it seems to be agreed that a lot

of the times, it\'s going to come down to the

Commission making a judgment call on the

particulars of a factual case, and what I keep

hearing from some people is, but we don\'t want you

to tell anybody what those particulars are going to

be in advance. We want to keep that secret until

you get there, and I\'m not sure that\'s right, but

if we need to build a factual record to get it

224

right, that\'s exactly why Congress delegates

agencies like this.

And if we determine that State agencies

can\'t afford to get out here, State and county

parties, they don\'t have multi-million-dollar

foundation budgets like the Campaign Legal Center,

what should they do? Well, maybe we should take

the show on the road and go out there and say, we

need to hear from local parties and the only way we

can do this is if we go out to them. Our statute

authorizes us to meet anywhere in the country. It

might be a great idea.

So with that, I hope that was not too

terribly unconstructive. Thank you, Mr. Chairman.

COMMISSIONER WEINTRAUB: I don\'t want to

disagree with you, Commissioner Smith. I\'m happy

to go to every State in the Union. Sounds like a

blast.

COMMISSIONER SMITH: We don\'t need to do

that, but\--

CHAIRMAN THOMAS: All right. Commissioner

McDonald, Ambassador McDonald, as you were once

225

known, speaking of travel.

COMMISSIONER McDONALD: Thank you. Well,

first of all, I\'m really put out with Commissioner

Smith. I mean, why didn\'t he think of this a year

ago so he and I could be on the road? It\'s a

little late now, for God\'s sake.

I do want to address that for a minute,

the business about input from real players. I take

Mark\'s point for sure, without any question.

Hubert Humphrey was once asked\--he was being

interviewed by a number of small-town journalists,

as it was characterized on an hour interview, and

some guy got up and just railed and railed against

Humphrey and inside the Beltway and so on and so

forth, whereupon Humphrey said, \"Do you have any

idea where I\'m from?\" And, of course, Humphrey was

from, I\'m told, a very small town. And he said,

\"Do you know where most of my colleagues are from?\"

And I\'m always struck, because it\'s just

so\--I take certainly you at your word and I can

think of many examples that exemplify what you say,

but it always makes me a little nervous. The

226

Chairman, I think, is from the big town of, it

seems like Buffalo or someplace. Is that where

you\'re from, Wyoming? I\'m from Sand Springs,

Oklahoma, which was about the size of this room

when I was growing up.

I take your point, but I also think, and I

can\'t speak for all my other colleagues, but you do

try to factor those things in and what Commissioner

Weintraub said is absolutely right. As a practical

matter, it\'s going to be hard to do in this day and

time, particularly given the time and expense, and

that\'s why I think it really is good that you could

come. But in this day and time, it\'s awful easy to

send e-mails to the Commissioners. It\'s awful

easy\--it\'s much easier than it used to be to get

the information that the Commission is putting out

there.

And it may well be that if the results are

not satisfactory in the final analysis, that the

State party chairs are going to have to band

together and constructively put forward their

thoughts to us. I mean, I think we\'d want to

227

engage them and vice-versa any way we could. I

think we really do. I mean, the goal is not to

say, gotcha. The goal is just to try to figure out

what will work and what the law, as Don has pointed

out, is, and we can have disagreements over that.

One of the things that some party

officials could do, which wouldn\'t be true in your

case, but you might know some, is take a 25 percent

rule, for example, then rail against it and be for

it. You can say, well, obviously, you\'re really

only working only ten percent on a project, but it

just shows you how screwed up the Federal

Government is and you\'re delighted if you have a

bright line test. That\'s not unheard of. People

do that kind of stuff all the time.

And so at the end of the day, I really do

take your point, and I think it\'s a very good one.

But if the issue is giving information to us about

what is going on, the parties can do that, and they

don\'t have to come to town to do that. They really

can do that.

You and I were talking about a mutual

228

friend of ours at the break. I can assure you, he

can avail himself of it. I\'ve been in his law

office probably a thousand times in my life\--and he

owns the building, by the way, so he\'s probably

able to get online and give us the kind of

information. He\'s been county party chairman and

State party chairman of the party in Oklahoma.

But I take your point and I think it\'s a

very good one, but I would say if the discontent

level is high, which it will be no matter what this

Commission does, focus is on a lack of information

to this Commission. I would hope that you could

encourage folks to get the information to us,

because if it means that much to them, I think

they\'ve got to want to do that, it seems like to

me, because I think what Commissioner Weintraub

said is right. No matter how much we would like to

do X, Y, and Z\--I\'d just say something else about

the law, in general.

The law is passed by people from all over

this country, from rural America, from major

cities, from every aspect and walk of life, and

229

they are a pretty good reflection of their

constituencies. There are a number of reasons why

people are overwhelmingly elected or reelected, and

we could talk about money or we could talk about

gerrymandering or anything else, but in the final

analysis, they are very representative of what goes

on.

I hope that this Commission will be looked

at the same. But we have tried, I think, very

diligently over time to at least get the comments

and the different points of view.

Thank you, Mr. Chairman.

MR. SANDLER: Commissioner, I don\'t think

the issue is about the experiences of the

Commission or of an inside-the-Beltway mentality.

It goes with the question that Mr. Simon raised

about the burden.

The scenario that the courts put out

about, you know, maybe this will happen and the

people will split up the time and so forth, that is

not part of the record, this extensive factual

record on which BCRA was built. The question is,

230

is there a factual basis for that in this case, and

I do feel often I\'m living in, in administrative

law terms, an Alice-in-Wonderland when you appear

before this Commission. I mean, if environmental

groups came before the Administrator of the

Environmental Protection Agency and said, we have

this great new change in the primary source rule.

We would impose \$2 billion of new costs on the

industry, but we don\'t have any evidence that

there\'s any problem. We just think it\'s something\--it\'s

ridiculous, right?

The burden should be\--this agency is

entitled to Chevron deference because of its

expertise, and if nobody comes forward with any

evidence, or they tell you they\'re not aware of any

and they don\'t have a single shred of evidence that

this abuse, this hypothetical abuse that these

courts are speculating about, is anything more than

a paranoid fantasy, why isn\'t that entitled to

deference under fundamental principles of

administrative law? That\'s what this is about, not

questioning a Commissioner\'s, you know, obviously,

231

expertise and experience and\--

COMMISSIONER McDONALD: Oh, I didn\'t take

it personal, Joe, I really didn\'t. My point was

that, as a practical matter, and I think Mark made

a very good point. My point is that the Commission

is not without at least cogitating about that and

trying its dead level best to at least get the

comments and to make the framework. That\'s my

point.

MR. BREWER: Certainly, Commissioner

McDonald, my Beltway reference wasn\'t aimed at any

of you individually. You all come from outside the

Beltway. It was as Joe indicated\--

COMMISSIONER McDONALD: I\'ve been accused

of a lot worse than that, Mark. Don\'t worry about

it. I\'ve done it, too, but\--

MR. BREWER: But the premise here is that

my 111 colleagues are represented here today by me,

in my written testimony, in my verbal testimony. I

mean, I don\'t know, will our friends from the

reform community stipulate that if all 111 of them

were here, they would say the same thing I would

232

say, because I can guarantee you they would. If

you want to hear them say it, come to our State

chairs\' meeting next month in Phoenix and we\'ll

arrange for all of you, or one representative of

the Commission, one of your staffers, to go through

all this again. We\'ll give you whatever record you

think is necessary to back up what you\'ve heard

from me, both in written and verbal testimony. And

that\'s what associations are for\--

COMMISSIONER McDONALD: Sure.

MR. BREWER: \--so that all those people

don\'t have to come here and you don\'t have to hold

a week of hearings and hear the same testimony over

and over and over again.

COMMISSIONER McDONALD: Commissioner Smith

and I will be available.

CHAIRMAN THOMAS: Okay. Let\'s move to

Vice Chairman Toner.

VICE CHAIRMAN TONER: Thank you, Mr.

Chairman.

I appreciate Mr. Sandler\'s comments about

the Chevron deference authority. The Environmental

233

Protection Agency, going forward, if we could have

the same level of deference, I think we\'d be in

good shape at the EPA.

\[Laughter.\]

VICE CHAIRMAN TONER: I guess we all came

and worked at the wrong agency. The next time,

we\'ll go be the Administrator at the EPA and have

Chevron deference afforded there. Thank you, Mr.

Chairman.

Mr. Simon, I\'d like to begin with you, and

it is this 106.7(c) issue. We have a lot of issues

that we have to deal with because of the Shays

ruling and then we have this issue on top of it.

As I understand your position, 441i(c) basically,

in your view, prohibits a State party from using

Federal funds that are raised at events at which

soft money is also being raised when the funds-

received methodology is used, that 441i(c) bars a

State party from using those kinds of Federal funds

for any FEA.

And as I understand it, the outgrowth of

that approach would be that basically there would

234

be two kinds of Federal funds, one set of Federal

funds that could be used for FEA as well as to make

contributions to Federal candidates to do

coordinated expenditures, those kinds of things,

and then sort of a lesser class of Federal funds

that could be used, again, to make contributions

for Federal candidates and coordinate expenditures

but could not be used for FEA.

And my question is, first of all, am I

accurate in terms of what your position is, and

second of all, wouldn\'t it be kind of an anomaly

where Federal funds raised at events where soft

money is also being raised could be used to make

contributions to candidates, direct contributions

to Federal candidates, but couldn\'t be used for

FEA?

MR. SIMON: I can\'t figure out any other

way to read 441i(c). I mean, whether you think

it\'s good policy or bad policy, to me, this is as

clear a Chevron Step 1 issue as anything we\'ve

talked about all day, and that if you do what

you\'re proposing to do, I think that\'s really a

235

serious problem under the statute.

Now, let me just point out one other

thing. I mean, I was struck that in the NPRM, in

talking about this problem, the discussion failed

to even mention 441i(c), which is the statute

that is underlying the current regulation, and to

talk about changing the regulation without even

trying to justify that change in the context of the

statutory language struck me as a fairly weak

proposal.

But it\'s not just 106.7(c)(4). I found

three other regulations that stand for the same

proposition and I think you have to deal with all

of them. It\'s 106.7(e)(4), as well as 300.32(a)(3)

and 300.33(c)(3).

VICE CHAIRMAN TONER: We\'ll just tack

those on for good measure.

MR. SIMON: Well, I mean, you know, you\--I

think here\'s an instance where you\'ve correctly

implemented the statutory language on its face and

you\'ve put it kind of throughout these regulations.

And to say, well, this has some anomalous results,

236

therefore we\'re going to just assume we\'re free to

ignore the statute, strikes me as not smart. I

mean, if it\'s a problem, then I think this is

precisely what your legislative recommendations

should be about.

VICE CHAIRMAN TONER: So just to be clear,

we\'ve historically viewed Federal funds that are

raised under the funds-received method to be fully

Federal funds\--

MR. SIMON: Yes. Yes.

VICE CHAIRMAN TONER: After all, there is

no soft money subsidizing the raising of the

Federal funds, because after all, Federal funds are

being used in exactly the same proportion to pay

for the fundraising event. But it is your view

that for whatever reason, Congress in BCRA

disturbed that approach\--

MR. SIMON: Yes.

VICE CHAIRMAN TONER: \--and, therefore,

that money can\'t be used for FEA.

MR. SIMON: I think that\'s right.

VICE CHAIRMAN TONER: As a matter of law,

237

we have no discretion?

MR. SIMON: As a matter of law, you have

no discretion.

VICE CHAIRMAN TONER: Mr. Sandler, do you

agree with that?

MR. SANDLER: I think you really have to

go back and look at the Advisory Opinion where the

Commission addressed this\--

VICE CHAIRMAN TONER: Two-thousand-four-twelve\--

MR. SANDLER: Exactly, and the question

is, if that Advisory Opinion was correctly decided,

then the answer is no.

VICE CHAIRMAN TONER: But as you read

441i(c), are we legally required to take that

position?

MR. SANDLER: No. To take the position

Mr. Simon suggests?

VICE CHAIRMAN TONER: Yes.

MR. SANDLER: No.

VICE CHAIRMAN TONER: I\'d like to follow

up. Mr. Sandler, at page seven of your comments,

238

you talk about a couple things, if I can find my

notes here. You say that\--you recommend, as I

understand, a possible safe harbor, where if you\'ve

got a State party who thought that an employee was

going to be over the 25 percent rule but ends up in

a given month, ended up working less than 25

percent on Federal activities, an effort really to

sort of recoup the Federal money by reimbursing the

appropriate account within a certain period of

time?

MR. SANDLER: Right, and vice-versa\--

VICE CHAIRMAN TONER: And vice-versa.

MR. SANDLER: \--so in a situation where

they thought an employee would work less than 25

percent on activities in connection with the

Federal election, in fact, they worked more and

they would then have to make up that.

VICE CHAIRMAN TONER: Would you view that

as sort of analogous to the current 70-day period

that we have for the paying of joint Federal/non-Federal

expenses, where we allow those

reimbursements to occur after the fact?

239

MR. SANDLER: Yes, exactly.

VICE CHAIRMAN TONER: Mr. Simon, what are

your thoughts on that? Is that something that you

think we should focus on? Again, let\'s assume that

they tried to act in good faith, but the employee

ended up not working on those Federal activities\--

MR. SIMON: I don\'t have a problem with

some remedy mechanism, which I think is what Joe

was suggesting. I think that\'s reasonable.

VICE CHAIRMAN TONER: Okay. Thank you,

Mr. Chairman.

CHAIRMAN THOMAS: Thank you.

Mr. Norton, all yours.

MR. NORTON: Mr. Sandler, I wanted to come

back to your point earlier about the Commission

regulation that assists in determining when a staff

member\'s time exceeds 25 percent, and your point

was that it\'s overbroad because it covers both

Federal election activities and in connection with

the Federal election. I was looking at the statute

as we sit here, and I\'d understand if you\'d want to

think about it further. I\'m looking at 441i(e),

240

which is the prohibition on Federal candidate soft

money, and there the prohibition reads, shall not

solicit, receive, direct, et cetera, or spend funds

in connection with an election for Federal office,

including funds for any Federal election

activities.

MR. SANDLER: Right.

MR. NORTON: And then this similar

provision applying to tax-exempt organizations and

that the raising of funds for tax-exempt

organizations, it says that, under certain

circumstances, funds can\'t be raised for an

organization that makes expenditures or

disbursements in connection with an election for

Federal office\--

MR. SANDLER: Right.

MR. NORTON: \--including Federal election

activity. Does that provide enough of an

indication that Congress considered Federal

election activity a subset of in connection with

the Federal election?

MR. SANDLER: No. I think that the

241

normal\--the proper way to read that is when

Congress wanted to include Federal election

activity for purposes of defining class of

activity, it knew how to say so and did so in all

of those cases you mentioned.

MR. NORTON: Okay. Thank you.

CHAIRMAN THOMAS: Mr. Scott?

MR. SCOTT: Thank you, Mr. Chairman.

My questions really go toward

practicalities in terms of implementing really any

of the three allocation proposals that are in our

current regulation. I noted that Mr. Ryan and Mr.

Simon were both advocating the fixed 25 percent

method, whereas Mr. Sandler seemed to favor the

administrative allocation rules we currently have

now. And I just wondered, in terms of practical

application, if you see advantages or disadvantages

to the particular methods that are proposed in the

rules.

MR. BREWER: As I indicated, I think in

response to the Chairman\'s question, if you\'re not

going to repromulgate the rule, I\'m with Joe in

242

terms of the administrative expense because that\'s

something that the parties have been using for

years, so it\'s not a new, yet another formula or

regulation we\'ve got to deal with. Let\'s go back

to what we\'re used to dealing with.

MR. SCOTT: Did I understand you correctly

that, in fact, you\'re using that method now\--

MR. BREWER: I misspoke. We\'re using the

25 percent rule. We\'re paying 100 percent non-Federal when

we\'re under that threshold. Thank

you. I misspoke. Thank you.

MR. SCOTT: Okay.

MR. SIMON: I thought I was in the

position, unusual for me, of advocating actually

the simplest methodology. I\'m rarely in that

position\--

\[Laughter.\]

MR. SIMON: \--but I was just picking up on

what the NPRM had suggested, which is that the flat

25 percent rule for 25 percent and under employees

was the simplest way to address the problem.

MR. SCOTT: That\'s all I had. Thank you.

243

CHAIRMAN THOMAS: Anybody have any follow-up

questions? Vice Chairman Toner?

VICE CHAIRMAN TONER: Mr. Sandler, you

noted in your comments that you thought we should

think about allowing State parties to create a

payroll account\--

MR. SANDLER: Right.

VICE CHAIRMAN TONER: \--to alleviate some

of the practical problems in, I guess, the

administration of payroll under the current rule.

Could you just elaborate on what those challenges

have been and what you think would be achieved if

we did that?

MR. SANDLER: Yes. It has to do with, and

this also relates to the payment of fringe

benefits, that basically, when the payments have to

be made to a payroll company, estimating in

advance, estimating after the fact, separate

payments for the fringe benefits, it would just

make it easier if we could have an account into

which the proper amounts could be put so that one

check could be\--we could always\--

244

VICE CHAIRMAN TONER: Would this be

similar in your view to sort of an allocation

account\--

MR. SANDLER: Yes, exactly.

VICE CHAIRMAN TONER: \--where funds could

be moved into it, great, they sit there, and then

when you know from your payroll company how things

play out, you can debit off of that?

MR. SANDLER: That\'s exactly the idea.

VICE CHAIRMAN TONER: Okay. Thank you,

Mr. Chairman.

CHAIRMAN THOMAS: Could I just move a

little bit off the immediate target here? I\'m

coming out of these two different sets of hearings

today somewhat concerned. I mean, I\'ve been

hearing this for quite some time, but I\'m somewhat

concerned that party committees are taking the

position that the rules related to raising and

using Levin funds to pay the non-Federal share are

just so difficult to deal with that they are just

opting not to use that option. I mean, I had

thought that the Levin fund rule was actually, on

245

balance, a fairly good way to deal with this

reality, but I have to agree with you that in terms

of the various qualifications that attach, it does

become somewhat difficult.

I would urge all of you to put some energy

into not only focusing directly on Congress any

suggestions for revision, but if you could find a

way to recommend to us what we should recommend to

Congress, I mean, every year, we have an

opportunity to recommend legislative changes to

streamline the law, there might be a way to

basically hold the line so that we don\'t have a

system where big, unlimited soft money donations

from prohibited sources are being applied for these

kinds of party-building activities that affect

Federal elections and yet there would be some way

to work within the basic contours of the Levin

amendment so that these kinds of things could be

continued in using funds that come in in amounts of

no larger than \$10,000.

I mean, maybe there\'s a sort of a

concurrence that we can all reach in terms of a

246

better way to deal with it so that party committees

can at least avail themselves of some of these

kinds of resources. I think Congress contemplated

that there would be a way to use them. Obviously,

some folks have decided it just isn\'t worth it.

But, as I said, that\'s a little bit afield

from the focus of our hearing. Any further

comments, questions?

\[No response.\]

CHAIRMAN THOMAS: Jokes? No?

Well, thank you again for coming. It\'s

been a helpful day for us. It\'s been long and

difficult for you, I suppose, but anyway, we do

appreciate it, and thank you for helping us out.

\[Whereupon, at 3:12 p.m., the proceedings

were adjourned.\]