FROM: Kim Alexander
DATE: May 20, 1999
RE: FEC to permit matching funds for online donations

Hi Folks,

Presidential hopeful Bill Bradley recently asked the Federal Election Commission to allow credit card donations raised over the Internet to be eligible for federal, public matching funds. Today the FEC met and discussed the Bradley campaign's specific request for an advisory opinion, as well as a more general rule to permit other presidential candidates to raise online credit card donations that can be matched with public funds.

While political campaigns are allowed to accept credit card donations, Presidential candidates, who are eligible for public financing, are generally held to a higher "paper trail" standard to ensure that only contributions that are legal under federal laws are matched with public funds. The request from Bradley included an explanation of how that campaign will verify online credit card donations, and appears to have satisfied the FEC's concerns.

Below is a story from the May 20 edition of the San Jose Mercury News, which features an excellent review of the situation and includes some comments from me expressing support for online campaign fundraising.


Published Thursday, May 20, 1999
Copyright San Jose Mercury News

Online campaign donations ready to take center stage

by Jim Puzzanghera
Mercury News Washington Bureau

WASHINGTON -- Federal elections officials are poised to fully open the Internet to presidential campaign fundraising today, making online credit-card contributions eligible for matching funds.

The move, stemming from a request by former Sen. Bill Bradley's campaign, could help underdogs like him compete in the increasingly big-bucks world of presidential politics, experts said. It also would signal the Internet's arrival as a political fundraising tool that soon could rival direct-mail and glitzy dinners.

"It's a very powerful symbol that online fundraising is an important and expected part of American campaigns," said Phil Noble, president of PoliticsOnline, a company that provides Internet and fundraising tools for politicians. "It hasn't come of age yet, but it's just been born."

The Federal Election Commission is expected to approve the disbursement of matching funds for online credit-card contributions at a meeting in Washington this morning. It comes as the FEC begins grappling with issues involving the Internet and politics, including how to regulate banner ads for candidates on Web sites and links to candidate pages from other Web sites.

Under the draft proposal, credit-card donations made since Jan. 1 would be eligible for matching funds. FEC commissioners today may consider making credit-card donations that are not made online also eligible for matching funds, said FEC official Ian Stirton. The request by Bradley, a Democrat, only involved online contributions.

Federal funds match up to $250 of each contribution with public campaign money. Each candidate can receive up to about $16.75 million in matching funds for the 2000 election. Matching funds are only available for presidential races.

Soliciting donations online

Several candidates or their exploratory committees are soliciting credit-card contributions on their Web sites using secure servers, including Bradley and such Republican candidates as Texas Gov. George W. Bush, Sen. John McCain of Arizona and publisher Steve Forbes. But Bush's Web site, for example, specifically warns contributors that credit-card donations are not eligible for matching funds.

Federal election rules are more stringent on the disbursement of matching funds because they involve the use of taxpayer money, Stirton said. One concern with credit-card donations is that it could be hard to determine the true identity of the contributor, allowing people to skirt rules that cap individual donations at $1,000 and prohibit contributions from foreign nationals.

But the Bradley campaign has proposed a series of warnings on its Web site and blanks that contributors must fill out properly in order for the contribution to be accepted. A contribution would be kicked back, for example, if the credit-card billing address were different from the person's home address. A credit-card processing company also would screen the information to make sure it was correct.

Paul Gronke, a Duke University political scientist who has studied the Internet's impact on politics, said it was inevitable that federal elections officials would have to deal with online contributions. Still, he warned that such contributions could be open to fraud. A foreign national, he said, could get somebody in the United States to open a credit-card account and use that to funnel contributions.

"I can within five minutes show you how to (make anonymous) who you are on the Internet," said Gronke. But he said fraud using online contributions would probably be no easier than it would be using the current system

The FEC also is working with Congress to require candidates to file fundraising reports electronically, to be posted immediately online. As legislation advances, Bradley and Vice President Al Gore last month became the first major presidential candidates to voluntarily file campaign disclosures electronically, said Kim Alexander, president of the California Voter Foundation.

Should the FEC approve online matching funds, underdogs would have another weapon to battle the more organized and better-financed campaigns of big-name rivals such as Gore, she said.

Grass-roots political tool

"We live in a capitalist democracy where people speak with their dollars. My feeling is the electoral process needs to adapt as times change in order to make it as possible for as many people as possible to speak with their dollars," said Alexander, whose Sacramento-based non-partisan group advocates using new technologies to give voters more information. "The Internet is a tremendous tool for grass-roots political organizing, and if you can make it more convenient for people to support your cause, more people are likely to support your cause."

Bradley representative Eric Hauser agreed.

"The Internet is one of the best tools to reach out to new voters or people who have left the process. That applies to organizing and volunteers and money," Hauser said. Bradley's campaign has raised slightly more than $100,000 through the Internet so far, he said, though he did not know how much came from credit cards and how much came from checks. The campaign had raised a total of $4.3 million through the end of March, the most recent filing period.

Though no figures were available, McCain's campaign has seen a "steady stream" of credit-card donations made on its Web site, said campaign representative Howard Opinsky. The campaign would welcome the ability to match those donations with federal funds, he said.

"We don't foresee the Internet fundraising component is going to make up a large portion of our donations, but like so much with the Internet, who knows what it's going to be six months from now or a year from now?" Opinsky said. "It could end up being important."

Copyright San Jose Mercury News