Insights

Texas Ethics Commission Proposes Rules to Address “Campaign-in-a-Box” Reporting

Thursday, September 22, 2016

If the Texas Ethics Commission has its way, then candidates, PACs, and politically active corporations are going to be responsible for showing (and knowing) how their political consultants spend their money.

The Commission published a new rule entitled “Expenditures Involving Consultants” that is designed to address situations where an entity – be it a candidate, political committee, or corporation – pays a lump sum to a political consultant who then purchases various campaign-related services. The idea is to bring greater transparency to the “campaign-in-a-box” situation where a political consultant is paid a fee and then goes on to procure all of the services essential to a political campaign – media, mail, lists, fundraising, personnel, and so on.

The Commission proposes to define a consultant as “a person who performs consulting services in a professional capacity.” “Consulting services” means “services provided outside the traditional relationship of employer and employee to assist in a campaign . . . including fundraising activities, voter outreach, creation and distribution of political advertising, and providing advice and strategy in conducting a campaign, but not including legal services.”

Under the proposed rule, a filer would be required to disclose the ultimate payee of an expenditure made by a consultant on behalf of the filer.

The proposed rule includes an example of what would be considered compliant reporting under the new rule:

Candidate X hires an independent consultant to provide consulting services by helping to produce and purchase political advertising to be broadcast on television. The candidate gives the consultant $100,000.

  • Of that amount, the candidate pays $5,000 as compensation for consulting services to produce the advertising. The candidate must disclose a $5,000 expenditure to the consultant as the payee, the acceptable category is “consulting services compensation,” and an acceptable brief description is “political advertising.”
  • The remaining $95,000 is used to purchase broadcast airtime on the three major broadcasting stations. The acceptable category of each expenditure is “advertising expenses” and an acceptable brief description is “political advertising.”

The Commission blasted out an email to the regulated community soliciting comments on the proposed rule. The comments were wide-ranging, and included the following nuggets:

  • Multiple commenters anticipated difficulty in identifying the ultimate payees.
  • In the example set forth in the rule, one person questioned whether the payee of the advertising expense would be the consultant or each of the three broadcast stations.
  • One commenter – a district judge – applauded the new rule, asserting that it would “force consultants to be more transparent, and more easily sued if they subject themselves to libel actions.”
  • Another commenter criticized the rule for requiring political consultants to reveal “trade secrets,” akin to a baker having to disclose the recipe for her award winning cherry pie. This same person also worried that detailed disclosure would lead to political pressure being applied to a consultant’s subcontractors.
  • One person questioned the legal authority of the Commission to even adopt the rules, noting that the “founding fathers had the wisdom not to give the authority to write laws to six unelected, washed up former politicians . . .”

The rule will be considered at the Texas Ethics Commission’s October 14th meeting and, if adopted, would apply to expenditures made after January 1, 2017. Stay tuned for more updates on this issue!

Ross Fischer of the Gober Group is the former Chairman of the Texas Ethics Commission and an expert in the field of Texas campaign finance and lobby laws.