The Finances of a Second Chance

Also see: What Happens to the Leftover Money After Each 2016 Candidate Drops Out?

2016 has left the landscape littered with multiple failed candidates like bodies on the roadside in Mad Max: Fury Road. Can any of these candidates arise like zombies to run for a different office? For the most part they can, provided they meet various registration deadlines. But whether they can use campaign money raised for one office to run for another is more complicated. For example, if a candidate wanted to use money raised in a failed bid for a federal post for a state campaign (or the other way around) the candidate would have to comply with both federal and state rules.

Rules on contribution limits are generally still intact even after 10 years of campaign finance deregulation by the Roberts Supreme Court. The Court did rule that Vermont’s contribution limits were too low in Randall v. Sorrell in 2006 and the Court did away with federal aggregate contribution limits for individuals in McCutcheon in 2014.

But individual donations are still limited to $2,700 per election to congressional and Presidential candidates. This is known as the federal “hard money” limit. People who max out their hard money donations to a federal candidate must find other channels for supplying additional funds, such as giving to political parties or Super PACs.

But the United States is a federal system. Each state has its own election rules separate and apart from the federal regulations. In Nebraska, Virginia and Oregon, for example, there are no contribution limits for candidates. Other states have lower limits than the federal ones, such as Alaska ($500), Massachusetts ($1,000) or Montana ($650 for gubernatorial candidates; $170 for legislative candidates). In New York, the contribution “limits” are so laughably high ($60,800 per democratic gubernatorial candidate) that there may as well not be any limits.

But there are special rules about transferring funds between state and federal campaigns. These provisions can mean that a candidate cannot take the remaining money from a failed campaign and simply transfer it to a new one.

For instance, if a candidate lost a primary for state office, they can’t take the left over money and use it to run for a federal post. Federal campaign regulation 11 CFR 110.3(d) states: “Transfers of funds or assets from a candidate’s campaign committee or account for a nonfederal election to his or her principal campaign committee or other authorized committee for a federal election are prohibited.” What the former state candidate can do is refund the contributions for the state race and then ask those same donors to contribute again under the federal hard money limits.

While the federal rules are strict about transferring money from an unsuccessful state race to a federal one, they are permissive about using money from a failed federal campaign to a state race. One caveat is that if a donor gave for both a federal primary and a general election, and the candidate flames out in the primary, then the contribution for the general election must be refunded to the donor under 11 CFR 103.3 and 11 CFR 110.1(b)(5)(ii)(C). A recent Federal Election Commission advisory opinion (AO 2015-16) reaffirms that a federal primary loser cannot keep the money that would have been spent in a federal general election.

But the catch is the money going to a state race from a federal campaign must comply with relevant state law. And there may be limits on how much money, if any, an unsuccessful federal campaign can transfer to a new state effort. In Maryland, for instance, “a federal committee is considered a person under the law and allowed to make contributions, not transfers, to Maryland political committees.” That means the same contribution limits that apply to people ($6,000 per candidate) also applies to money from federal campaigns.

The situation for failed federal candidates in Massachusetts is even worse. Transfers from federal committees to state campaigns are banned. A 2011 memo from the Massachusetts director of campaign finance cites the relevant state law: “No candidate or candidate’s committee shall receive a transfer of funds or assets from any federal political committee.”

And in some states, a failed federal candidate can’t even skirt the law by diverting the money to a PAC. As Vermont advises, “[s]ince Vermont law limits contributions to political committees (PACs) to $2,000 or less in a two-year general election cycle, any political committee (PAC) that receives contributions greater than $2,000 is prohibited from making expenditures related to Vermont election campaigns unless it segregates the compliant contributions for use in Vermont.”

So those candidates who did not make a successful run for federal office and then choose to lower their sights and run for a state post, often have to start fundraising all over again. The bulk of the left over federal money may have to be returned to donors or can’t be used in a state race. And for those hearty losing state candidates who now want to run for federal office, it’s time to schedule a fundraiser: the winner of the average 2012 House race spent $1.4 million.