FINDING: The prominent role played by private money in Ohio politics has had two well-documented and negative effects: making it increasingly difficult for many candidates and would-be candidates of modest means to compete for public office, and helping to reinforce the state’s notorious “pay-to-play” political culture.

By any measure, campaign cash plays a significant role in Ohio elections. The correlation between raising money and electoral success is undeniable. In 2004 winning Ohio House and Senate candidates raised 5.5 times more than their opponents, and nearly 93 percent of Ohio legislative candidates who raised more money than their opponents won.

Large campaign coffers do not necessarily reflect a close race or the need for campaign dollars. Eight of the top ten fundraisers easily won elections even though they did not face tight races. Speaker of the Ohio House Jon Husted (R-Kettering), for example, raised $1,416,577 — 103 times more than his challenger — and won re-election by a margin of 30 percent.

Incumbency, naturally, plays an important role in fundraising in Ohio elections. Ohio House incumbents raised 4.6 times more than their challengers during the 2003-2004 election cycle. The 24 candidates for Ohio House and Senate races who did not face opponents in the 2004 general election raised a combined total of $2,507,638.

This comparison also demonstrates the power of incumbency and campaign cash. During 2005, Ohio’s term-limited Governor Bob Taft, despite an all-time low approval rating of 15 percent and an ethics scandal, raised $117,319.

Although there has been considerable attention to “pay-to-play” in Ohio, as discussed above, Ohio’s present contribution and disclosure rules make such practices difficult to police. State law does limit campaign contributions from firms and individuals who receive no-bid contracts ($1000 per candidate in the two calendar years prior to a contract’s approval). But contractors may give more after securing state contracts, and members of the contractor’s company are also allowed to make contributions. In addition, contractors may contribute to state political parties and to state candidate funds run by their county political parties (up to $10,000 per year). There is no special disclosure requirement for government contractors. This makes it difficult to track who is receiving government contracts and whether the government contractors are violating contribution limits. Many large contractors — which can naturally give more to those who award contracts — have an unfair advantage over smaller firms.

FINDING: The Ohio Elections Commission lacks the resources, structure, and authority needed to effectively investigate allegations of campaign finance improprieties.

The Ohio Elections Commission was created in 1974 as a result of the circumstances surrounding the Watergate scandal in the early 1970s. Like the Federal Election Commission, the Ohio Commission was created to enforce the state’s campaign finance and fair campaign practices laws. The Ohio Elections Commission has seven members. Six members (three from each major political party in Ohio) are appointed by the Governor upon recommendation by the Democratic and Republican caucuses of the General Assembly. The seventh member may not be affiliated with either major political party and is appointed by the six partisan members of the Commission.

The Ohio Elections Commission provides advice on Ohio election laws, but it does not have investigative powers. It functions like a court, adjudicating complaints from the Ohio Secretary of State, the county Boards of Elections, or members of the public. The vast majority of its cases deal with candidates, campaign committees, political action committees (PACs), or corporations that either file required campaign finance reports late or fail to file them at all. The remainder of the cases concern alleged failures to include disclaimers on political literature, corporate activities in the political arena, or the inclusion of false statements in campaign materials.

According to the Ohio Elections Commission website (http://elc.ohio.gov/) individuals may file a complaint only if they have direct knowledge of an election or campaign finance misdeed. This makes enforcement of campaign finance and election laws extremely difficult. In 2004, for instance, the Ohio Elections Commission dismissed a complaint filed by Democrat Larry McCartney against former Speaker of the Ohio House Larry Householder. McCartney accused Householder and other Republicans of using three county parties to launder contributions to avoid contribution limits. McCartney’s complaint was based on “following the money” and newspaper reports, but he did not have personal knowledge. The Ohio Elections Commission dismissed the case and refused to probe further.

FINDING: Ohio has experienced several high profile political scandals in recent years, most of which can be traced to the state’s casual regulation of campaign finance practices and the failure to ensure a high level of government transparency.

A poll conducted in November 2005 for the George Gund Foundation by Belden Russonello & Stewart found that political corruption was the top concern of Ohio voters — higher than jobs, schools, crime, and high taxes. Moreover, 57 percent of the respondents said Ohio was on the wrong track, while 71 percent said they had “little confidence” in state government. In light of a series of disquieting and highly publicized developments in recent years, these results are not surprising.

In April 2000, The Columbus Dispatch reported on a September 10, 1999 letter, in which Governor Bob Taft requested donations for the Ohio Republican Party’s operating account. Governor Taft asked donors to give between $25,000 and $50,000 to become part “Team Ohio.” Perks of membership in Team Ohio included a reception at the Governor’s residence and a seat in the governor’s box at an Ohio State football game. Ohio law did not then require disclosure of the contributions to the political party operating accounts, so the donors were completely secret. These operating accounts were used for basic operating expenses (such as electricity) and party building (promotion of the political party, but not candidates). The Team Ohio controversy prompted prominent Republicans including Governor Bob Taft and Secretary of State Ken Blackwell to call for improved disclosure of party money.

Other scandals also prompted Ohioans to call for reform of the campaign finance system. In 2004, two of former Ohio Treasurer Joe Deters’ aides were charged in connection with a pay-to-play scheme that allegedly steered state investment contracts to sometimes unqualified political donors. Deters’ campaign solicited a $50,000 contribution from Cleveland broker Frank Gruttadauria, who is currently serving time for bank fraud, securities fraud, and identity theft. Deters’ former chief of staff and one of his fundraisers pleaded guilty to lesser charges in July 2004. The lobbyist who helped facilitate the relationship between Deters and Gruttadauria also pleaded guilty to misdemeanor charges.

Although Joe Deters never faced criminal charges, he ultimately admitted that he steered contributors to the Hamilton County Republican Party and that these contributions were then given to his campaign. This use of a county political party allowed the Deters campaign to circumvent contribution limits. Republican county political chairs in Hamilton and Cuyahoga County admitted that they had established a policy that money raised by candidate committees for the county party would later be given back to the candidate committees. They created this policy to avoid the “earmarking” of campaign contributions, which is prohibited by campaign finance law.

Ohio political parties play a fundamental role in moving money from candidate to candidate. There are no limits on candidate-to-candidate or candidate-to-political party giving and there are no limits on in-kind contributions from the political party committees to candidates. This means that it is very easy for candidates to avoid contribution limits. Although earmarking is illegal, vendors for the state of Ohio may avoid stricter contribution limits by supporting the political party with a tacit understanding that their contribution also supports the candidate that bestows contracts. It can also be very difficult to track the source of contributions. During the 2004 election cycle, statewide and legislative candidates raised $72,267,617. During 2003-2004, these candidates gave $10,213,803 to Ohio political party committees and an additional $69,930 to party clubs like the Young Republicans and Young Democrats. These candidates also gave over $1 million to other candidates.

In the spring of 2004, a series of reports surfaced claiming that political consultants with close ties to the former Speaker of the Ohio, House Larry Householder, were encouraging their clients to use political party accounts to raise large amounts of money. The clients were allegedly encouraged to fund ostensible “issue advocacy” campaigns that would, in reality, be used to help particular candidates. Although the consultants were never officially charged with wrongdoing, their efforts to skirt campaign finance law drew attention to loopholes in Ohio’s campaign finance system.

Three types of loopholes received the greatest attention:
(1) the use of county party “state candidate funds” to obscure donor identity and funnel impermissibly large contributions to specific candidates;
(2) the use of secret party “operating accounts” to advance the interests of particular candidates; and
(3) the use of issue advocacy groups to circumvent Ohio’s prohibitions on corporate contributions to individual candidates. Although it has been alleged that Householder and some of his top aides accepted kickbacks from campaign vendors, he has denied those allegations and has faced no criminal charges.

FINDING: Ohio’s most recent campaign finance law (House Bill 1) has left the system even more vulnerable to corruption.

In December 2004, Governor Bob Taft called the Ohio legislature into a special session to address the problem of loopholes in campaign finance regulations that the “Team Ohio,” Deters, and Householder controversies revealed. The Ohio Senate and House proceeded to rush House Bill 1 (H.B. 1) through the legislative process.

House Bill 1 made the campaign finance system in Ohio much more complicated. It created some limitations on the mobility of campaign cash, but did not effectively address the need to stop the legal funneling of contributions between and among candidates and political party committees. There are still no limits on candidate-to-candidate or candidate-to-political party giving, and there are no limits on in-kind contributions from the political party committees to candidates. This effectively means that there are no limits on transferring funds between and among candidates, which allows candidates to circumvent contribution limits. For the political parties, this has another upside — candidates and office holders who are good fundraisers can help candidates in more competitive races.

In some respects, H.B. 1 took a dramatic step backwards. Campaign contribution limits were dramatically increased in H.B. 1 and, for the first time since 1908, direct corporation and union contributions were permitted to flow to political parties for restricted uses.

H.B. 1 did not address contributions from those seeking contracts with the State of Ohio, and did little to address the “pay-to-play” culture in state politics. What H.B. 1 did attempt to do is to improve transparency through disclosure. Although its effort to create more stringent disclosure was a step in the right direction, it simultaneously quadrupled contribution limits to $10,000 per election cycle (five times more than the contribution limits for individual donors to federal candidates). H.B. 1’s increases in contribution limits threaten to exacerbate both corruption and the appearance in corruption in state government.*

In November 2005, Ohioans voted on a campaign finance ballot initiative, Issue 3, that was part of the Reform Ohio Now package. Issue 3 included lower contribution limits, improved disclosure and restrictions on candidate-to-candidate giving. Issue 3 failed overwhelmingly (66.86 to 33.14 percent). In arguments in favor of Issue 3 for the Secretary of State’s official Issue Report, Reform Ohio Now stated “Vote yes to restore confidence, level the playing field and reduce the influence of big money contributors in politics by significantly limiting campaign contributions…” Those opposed stated “The proposed amendment would change how Ohio political campaigns are funded to benefit the wealthy and labor unions, to the disadvantage of all other Ohioans.” In these circumstances, it may have been difficult for some voters to distinguish fact from fiction
.
Finding: Ohio’s pay-to-play political climate encourages abuse and corruption.

Since the passage of House Bill 1, the holes in the state’s system of campaign finance regulation have become even clearer. As noted above, The Toledo Blade has engaged in an ongoing investigation into investments managed for the Bureau of Workers Compensation by Thomas Noe — an investor, coin dealer, and high-profile political donor. The investigation revealed that a state investment in gold coins, valued at upwards of $300,000, was missing. This discovery and further investigation by the Blade and federal and local authorities led to an acknowledgement by Noe’s lawyers that at least $12 million in investment assets could not be accounted for. As these investigations unfolded, it became clear that Noe’s investment contracts and appointments to state boards, such as the Turnpike Commission, were more the result of generous contributions to Republican candidates over the years than his competence or integrity.

Noe, a college drop-out, was appointed first to the Bowling Green State University Board of Trustees and then to the Ohio Board of Regents in 1995. In 1997, the Ohio Bureau of Workers' Compensation started an “emerging managers” program, which allowed the Bureau to experiment in alternative investment strategies, other than traditional stocks and bonds. Noe created the Capital Coin Fund to buy and sell coins. Under his contract with the Bureau, 80 percent of the profits from the fund were supposed to go to the state worker's compensation fund, with the remainder going to Noe's business. Noe was given the authority to invest $50 million of the Bureau’s money. Noe’s contract also allowed him to invest in a variety of collectibles, including political memorabilia, comic books, and Beanie Babies.

In August 2005, the Toledo Blade reported that Noe used his American Express corporate credit card to contribute $10,000 to California Governor Arnold Schwarzenegger. The Blade later reported that just prior to Election 2004 there was an elaborate plot by the then-head of the Bureau of Workers Compensation, Jim Conrad, to keep the loss of $215 million under wraps until after the election.

Noe was one of President George W. Bush’s “Pioneers" because he raised at least $100,000 in campaign contributions to the President. On May 31, 2006, Noe pleaded guilty to laundering money for the 2004 Bush reelection campaign. Four prominent GOP politicians from Toledo have also been convicted on ethics charges related to Tom Noe's scheme to funnel $45,400 illegally to the reelection campaign. On June 28, 2006, Lucas County Commissioner Maggie Thurber, Toledo City Councilwoman Betty Shultz, former Toledo Mayor Donna Owens, and Sally Perz, ex-chairman of the Republican Party's Lucas County organization, lobbyist, and former state representative, were convicted of failing to file state ethics forms disclosing money that Noe had given them, which then was forwarded illegally to the Bush campaign.

These and related matters are still being investigated by state and federal officials.

The Noe coin scandal reveals systemic problems in the state’s system of campaign finance regulation. It has been a common practice to award investment contracts to those who contribute large sums to political campaigns. The Cleveland Plain Dealer has reported that two-thirds of the over 200 investment managers hired by the Bureau of Workers’ Compensation gave to Republican candidates, to the tune of almost $5 million, between 1997 and 2004. In August 2005, the Plain Dealer reported that the Securities and Exchange Commission (SEC) warned the state that its fund for injured workers was paying too much in brokerage fees. Yet surprisingly, the SEC received no response. There have also been incidents outside the bureau, where big-money contributors received lucrative contracts. The Noe scandal is just one example of a pay-to-play system that is alive and well in Ohio.

Ohio’s contribution limits should be tightened. State law should be amended to impose lower limits on contributions from individual donors to candidates, from candidates to other candidates, and between candidates and party committees. There should be a ban on corporate contributions to candidates and parties, as is done in most other states, and contributions from contractors to state and local candidates should be strictly limited (for example, $250).

In order to increase transparency, the state should create a centralized database of campaign contributions, registered lobbyists, ethics/financial disclosure statements of public officials, and bid/no-bid contractors. It should also create a General Accountability Office to review bid/no-bid contract selection and address the gaps in the enforcement of campaign finance laws.

Major donors and registered lobbyists should be prohibited from serving on state boards or commissions.

*Among the specific changes Campaign finance changes made by House Bill 1 are:

Increasing individual contribution limits from $2,500 to $10,000 per election cycle. Individuals could give a maximum of $20,000 ($10,000/primary; $10,000/general – provided candidates faced a primary challenger) during any calendar year.

Increasing political action committee (PAC) limits from $5,000 to $10,000 per election cycle. Political-action committees could give a maximum of $20,000 ($10,000/primary; $10,000/general – provided candidates faced a primary challenger) during any calendar year.

Ohio has not faced an election cycle under the new contribution rules, and we will learn much more following Election 2006. What we do know is that, between March 31, 2005 and August 31, 2006, there have been more than 600 individual contributors who have each given $10,000.00 or more to statewide and legislative candidates.

Requiring disclosure of all monies given to political parties, including the formerly ‘secret’ operating accounts – now called ‘the restricted funds.’

Requiring county parties to disclose donors to their state expense accounts.

Prohibiting children under the age of seven from campaign giving.

Permitting corporations and labor unions to give directly to political parties ($10,000 per calendar year to political parties’ restricted funds and $10,000 during federal election years to the parties’ “Levin accounts.”

Permitting only those who reside in a county to contribute to that county’s party or its “designated state campaign committees.”

A chart of campaign contribution limits is available on the Secretary of State’s website .Requiring disclosure of all monies given to political parties, including the formerly ‘secret’ operating accounts – now called ‘the restricted funds.’

Permitting only those who reside in a county to contribute to that county’s party or its “designated state campaign committees.”

A chart of campaign contribution limits is available on the Secretary of State’s website