by James C. Sherlock
Did anyone notice the reporting last year that Virginia’s 2019 state election drew unprecedented amounts of special interest money from out of state, most of it targeted to turn the state blue? It worked.
Federal laws regulate the use of money in federal elections. The states implement and enforce campaign finance laws for state-level candidates. Virginia is one of only nine states[1] with no limits on any of the five major categories (see below) of political contributions. Virginia’s combination of state elections in years in which there are no federal elections, lack of limits on campaign contributions and our status as a purple state make us the biggest target of all for out-of-state campaign money, before and after elections.
The most widely cited[2] categories of influence-related giving are:
- Individual to candidate contributions
- State Party to candidate contributions
- PAC to candidate contributions
- Corporate to candidate contributions
- Union to candidate contributions
Money Laundering.
Numbers 2 and 3 in the list above represent legalized money laundering. Give a ton of money to a state party or a PAC and those organizations give it to the candidates. To that list I would add candidate-to-candidate contributions rampant in Virginia. Give a ton of money to a candidate who doesn’t need it and he or she will give it to others who do, increasing the donor politician’s influence over the votes of the recipients. I called that “Speaker’s money” in my last essay[3].
That essay exposed the iron grip in which Virginia’s hospitals and health systems hold Virginia laws concerning the business of healthcare. It noted Governor Ralph Northam’s acceptance of $117,500 in “campaign” money from hospital interests after his victory. He is term limited. You also read about Attorney General Herring’s lack of enforcement of the antitrust laws against the actions of Virginia’s regional health system monopolies after he had accepted over $127,000 from hospital and health system donors, including $23,000 since his last election. One state senator outsourced the costs of 20% of his campaign to a lobbyist organization.
The Supreme Court’s decision in McCutcheon v. Federal Election Commission, 134 S.Ct. 1434 (2014), declared that limits on the total amount of money an entity can contribute during an election cycle violate the First Amendment, and are therefore unconstitutional. However, limitations on the amount of money an entity can contribute to a specific campaign can and do remain in place in most states.
Even More Money Laundering. The scandal surrounding hospital and health system political influence in Virginia indicates that this state desperately needs money in politics limits.
That brings us to yet another money laundering operation. Like the others, it is legal. Most Virginia hospitals and health systems are tax exempt as self-declared 501c3 “charitable organizations.” Under federal tax law, a 501c3 “not-for-profit public charity” like some of the biggest corporations in this state (Sentara, Inova, Carilion, others) may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.
When Congress regulated 501c3 political donations, it did not really want them to stop giving, it just wanted to make the collection of those donations more efficient for legislators.
For example, a business league exempt under federal tax code section 501c6 is a membership organization characteristically supported by dues. The common business interests of such organizations may include “attempting to influence legislation germane to the common business interests of an organization’s members”[4].
“Politically active nonprofits – principally 501(c)(4)s and 501(c)(6)s – have become a major force … The term “dark money” is often applied to this category of political spender because these groups do not have to disclose the sources of their funding. These organizations can receive unlimited corporate, individual, or union contributions that they do not have to make public, and though their political activity is supposed to be limited, the IRS – which has jurisdiction over these groups – by and large has done little to enforce those limits. ”
501c3’s give money to those organizations. The intermediary organizations give it to politicians.
Nonprofit, tax exempt Virginia Hospital and Healthcare Association (VHHA) is a 501c6. It has a PAC to influence legislation by contributing to state candidates – HosPAC.
“HosPAC’s purpose is to support state candidates. The HosPAC Board of Directors evaluates candidates on their qualifications for public office, recommendations from local hospital and/or health systems, issue philosophy, voting record, leadership roles, ability to be elected and the need for financial assistance. After weighing these considerations, the Board then disburses money to the campaign committees and candidates who have been determined will best support quality health care initiatives and services that are vital to Virginians.”[5]
Virginia’s tax exempt 501c3 hospitals and healthcare systems give money to tax exempt VHHA. VHHA scrubs it and gives it to state politicians. HCA and LifePoint, for-profit systems, give money directly. In VHHA’s 2015 Strategic Plan[6], there is not a single reference to coordinating or otherwise cooperating with physicians. And it doesn’t.
What to Do? Democracy requires the active support of its citizens. The first obligation is for every citizen to contact his/her elected state constitutional and General Assembly officials demanding they support:
- Strong and meaningful contribution limits across the spectrum of of influence-related giving that prevent wealthy special interests from having undue influence on state and local governments.
- Rules that shut down individual-candidate super PACs and effectively prevent coordination between candidates and outside groups. When super PACs can raise unlimited funds and then work closely with candidates, the candidate contribution limits are ineffective.
- Rules that block candidate-to-candidate money transfers.
- Oversight that tracks donations and ensures that the same interested entity does not set up multiple PACs to avoid limits.
Tell them to copy Maryland Code Ann., Election Law §§ 13-226 and 13-227 and paste it into the Virginia code: $6,000/candidate limits across all categories of influence-related giving. Add a ban on candidate-to-candidate money transfers. Follow the South Dakota election law challenge making its way through the courts and add a ban on out-of-state money in state elections, including state constitutional amendments, if it will hold up in federal court. The Governor should call a special session to consider this law before we vote on the redistricting amendment.
James C. Sherlock, a Virginia Beach resident, is a retired Navy Captain and a certified enterprise architect. As a private citizen, he has researched and written about the business of healthcare in Virginia.
National Conference of State Legislators, State Limits on Contributions to Candidates, 2019 – 2020 Election Cycle
[2] ibid.
[3] https://www.baconsrebellion.com/how-hospitals-exercise-political-clout/
[4] https://www.irs.gov/charities-non-profits/other-non-profits/examples-of-common-business-interests
[5] https://www.epacmanager.com/pass_sol/sol_vahosp/frmABOUT.aspx
[6] http://www.vhha.com/communications/wp-content/uploads/sites/16/2015/08/2015-2020-Strategic-Plan-FINAL-DRAFT.pdf
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