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Responding to the Citizens United ruling: Minnesota is not powerless

David Schultz
Courtesy of Hamline University
David Schultz

The Supreme Court’s Citizens United v. Federal Election Commission decision enabling corporations to spend money in campaigns will influence the way federal campaigns are financed and conducted. But the decision will also affect state, local, and judicial campaigns in Minnesota. What exactly did Citizens United decide, how will it affect Minnesota, and what options do policy makers have to respond to the decision?

The law before Citizens United
Beginning with the 1907 Tillman Act, corporations were barred from making direct political contributions to federal candidates. The 1946 Taft-Hartley Act prohibited them from making independent expenditures that directly advocated for the election or defeat of a candidate. Similarly restrictions were placed upon labor unions at the federal level.
The federal ban was not absolute. Corporate officers, shareholders, and employees could raise and spend money for political purposes. Corporations could form separate political action committees (PACs), spend unlimited amounts of money for lobbying, and under First National Bank v. Bellotti, the Supreme Court ruled that they could spend unlimited resources for issue advocacy.

Many states adopted similar legislation. In Minnesota corporations were prohibited from making direct political contributions to candidates, political parties and other political organizations and funds. They could not engage in express advocacy, create or fund PACs but could make unlimited lobbyist expenditures. Corporate officers, shareholders and employees could make political contributions and expenditures, engage in issue and express advocacy, and form and maintain conduit funds. A conduit fund is money collected from individuals and organizations, transferred to another, who then makes a political contribution. Unlike in Wisconsin, where conduit funds are subject to disclosure, there is no such requirement in Minnesota.

What Citizen United decided
Citizen United involved a challenge by a nonprofit corporation to a section of the McCain-Feingold law that prevented electioneering communications (express advocacy) within 30/60 days of a primary/general election. After an initial hearing, the Supreme Court asked the parties to brief a broader legal question: whether the ban on corporate express advocacy was unconstitutional. This question challenged a 1990 decision, Austin v. Michigan Chamber of Commerce, where the Court upheld a Michigan law banning direct expenditures from corporate treasuries.
In Citizens United the court struck down the relevant provision in McCain-Feingold and overturned Austin. The court ruled that the First Amendment protects the rights of corporations to make independent expenditures for express advocacy purposes. The court also stated that the government may “control corporate political speech through disclaimer and disclosure requirements.” The decision probably frees unions to engage in express advocacy.

Citizens United’s impact nationally and in Minnesota
Citizens United has a dual impact, affecting federal, state, local and judicial races in Minnesota. At the federal level, the decision allows corporate and union express advocacy in races for the president, the Senate, and the House of Representatives. The most immediate impact will probably be felt in 2010 congressional elections involving Michele Bachmann and Tim Walz.
The decision also will impact Minnesota law. While the state ban on direct corporate contributions to candidates is still valid, restrictions on corporate express advocacy and formation of PACS are unconstitutional.
Citizens United’s impact is hard to gauge. Besides making it possible for corporations to make unlimited express advocacy expenditures in races for governor, the other constitutional offices, and the state Legislature, they will be free to do the same for local races such as city council and mayoral races. Citizens United also enable corporate express advocacy in judicial elections.

Policy options
Federal elections are regulated by Congress and the Federal Election Commission, meaning that there is little that the state can do here. The Legislature does have options regarding, state, local and judicial elections.
The first is to take the current state disclosure laws and make them applicable to corporations.

The second is increased disclosure and disclaimer requirements. The state could mandate that any corporate expenditure must be disclosed at the time it is made.
A third option is increased disclosure requirements for any corporate PACs. This is necessary to ensure that foreign (non-U.S.) corporations or nationals do not circumvent current laws barring their involvement. Disclosure laws should require that corporations are expending their own resources and not that of subsidiaries. These laws should also demonstrate that individuals in corporations, especially closely held S entities, are not channeling their own private resources into their business in an effort to circumvent contribution limits or disclosure requirements. Finally, Minnesota should mandate disclosure of conduit funds, again in the interest of policing against circumvention of other reporting laws.
Minnesota could require entities incorporated here to obtain shareholder approval before engaging in express advocacy in order to protect shareholders’ First Amendment right not to have their money used to engage in a message they do not support. The state could increase individual political contributions to permit candidates to raise money to combat corporation expenditures.
Finally, Citizens United prompts consideration of two other issues.

First, given the increased ability of corporations to engage in political speech, it may be time to revisit lobbyist disclosure laws and make them stricter.
Second, Citizens United forces a rethinking of what to do with judicial elections.

Before the Legislature are proposals to amend the Minnesota Constitution to address the Supreme Court’s 2002 Republican Party of Minnesota v. White decision. One proposal is to eliminate judicial elections and replace with merit selection and retention elections. But Citizens United now means corporations can spend unlimited amounts of money to affect either current judicial races or retention elections. This fact may require policymakers to rethink the desirability of either.
David Schultz is a professor at the Hamline University School of Business.

Comments (1)

  1. Submitted by Ryan Hagelstrom on 01/26/2010 - 10:14 am.

    My issue with this entire thing is the unequal playing field here between corporate and unions. The biggest Minnesota donors in campaigns are union PAC and tribal PAC. It seems to me that any law, such as those in your policy section, that is applied to corporations should also apply to unions. The entire focus of this decision has been on corporations, and I do agree the change affects them the most, but only because unions have been able to do things that corporations have not.

    I would agree that special interest money warps the political system. If the goal is to get rid of special interest money, then lets get rid of all of it and not write loopholes in laws giving favor to one group over another be it corporation, union, tribal or whatever.

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