Running the numbers on the ‘union loophole’

Fiscal Alliance presents statistical analysis to Supreme Court

IN 2015, TWO family-owned Massachusetts businesses—1A Auto in Pepperell and 126 Self Storage in Ashland—filed a lawsuit challenging the Massachusetts campaign finance “union loophole.” Since 1988, unions and non-profit associations have been allowed by the Office of Campaign and Political Finance (“OCPF”) to use general treasury funds to make donations directly to Massachusetts candidates, in the aggregate of up to $15,000 annually.  This could be sixty $250 donations, a single $15,000 donation, or any other combination. The loophole is an anomaly: under state law, donations by individuals are limited to $1,000 per candidate, donations by PACs are limited to $500 per candidate, and businesses are prohibited from making candidate donations at all.

The 1A Auto plaintiffs argued that the state ban on business contributions—while unions can donate freely—violates their First Amendment freedom of speech and association, and the guarantee of equal protection of the laws under the Fourteenth Amendment.  Last September, the Massachusetts Supreme Judicial Court ruled against the plaintiffs.  In December, they appealed to the United States Supreme Court, which will decide later this spring whether to hear the case.

Last Friday, the Fiscal Alliance Foundation, a non-partisan, non-profit 501(c)(3) organization, filed an amicus brief in support of the 1A Auto petition. We did so because we believe it is important for the Supreme Court to have a solid understanding of the scale and scope of the union loophole—and because we believe the publicly available campaign finance data from the Office of Campaign and Political Finance make this case empirically.

We analyzed the nearly 38,000 entries in the state’s campaign finance database designated as “Union/Association Contribution[s].” Unravelling the data, which goes back to 2001, wasn’t easy: while voluminous, it is far from transparent. For example, the database frequently fails to distinguish between “direct” contributions made by a union’s general treasury versus those made by that same union’s political action committee (PAC). As a consequence, our analysis examined only union contributions to candidates in excess of the maximum permitted PAC contribution ($500) to guarantee we were only analyzing “loophole” contributions. As a result, our analysis underestimates—potentially significantly—the magnitude of direct general treasury union contributions. Our analysis also excluded union-funded super PACs, independent expenditures, and electioneering communications.

For a different take on the size of the “union loophole,” check out this earlier analysis.

Even with these limitations, the data are striking. Between 2002 and 2018, unions made 614 large general treasury union donations to candidates in excess of $500, totaling $1,886,793. The mean average of this type of donation was $3,072 over the 16-year period. Twenty-three donations were for $15,000—the maximum amount allowed—while 62 were for $10,000 or more. Seventy-seven were between $5,000 and $9,999. Overall, 26 percent of the donations were $5,000 or more and 74 percent were between $500 and $5,000. Put another way, 97.4 percent of the 614 large general treasury union donations were for $1,000 or more.

The ubiquity of these donations is also readily evident. The annual mean aggregate of these donations was $110,988, with a median annual aggregate of $68,987. Looking only at even-numbered (election) years, these averages are even higher: a mean of $140,685, and a median of $88,719. In 2018 alone, there were 70 of these donations to 31 candidates in an aggregate amount of $163,399.

Over 100 different unions have made large general treasury union donations—big, small, national, municipal, and across the full array of trades. The donors are also geographically diverse: while 82 percent of all large general treasury union donations came from Massachusetts unions, 18 percent—amounting to $549,786—came from out-of-state unions located in 24 different states and the District of Columbia, as far away as California and Hawaii.

Large general treasury union donations are also made strategically. The state Office of Campaign and Political Finance lists roughly 4,000 unique individuals as candidates for state or local office since 2002. Yet the 614 large general treasury union donations were made to only 126 unique individuals. Of those, 123 were registered as Democrats (607 donations totaling $1,865,043), while three were registered as Republicans (seven donations totaling $21,750). In other words, 99 percent of these donations went to Democratic candidates, while 1 percent went to Republican. Yet beyond this partisan disparity, equally as notable is that even intra-party contests are subject to the influence of these type of  donations. Campaign finance data on “pre-primary reports” shows that 124 of the donations were made to 53 unique individuals—all in Democratic primaries—totaling $333,470.

Why should these data matter to the Supreme Court? For at least three reasons.

First, large-dollar donations in small-dollar races can have outsized political influence. In the 2018 election cycle, House candidates expended a median of about $15,000 through October 19, while Senate candidates expended a median of about $37,000.  It does not seem controversial to think that in such races, even a single large general treasury union donation of $1,000 or more can make a potentially significant difference.

Second, the loophole allows unions to give up to 30 times more to a single candidate than they could using a PAC—and the state campaign finance data indicate that unions are taking advantage of this unfairness in the law.

Third, the loophole allows candidates to receive donations well beyond what they could receive from PACs—but without triggering the statutory limits on total PAC receipts. For instance, under state law, a House candidate may only receive $7,500 annually from all PACs combined. Yet while $500 from a union PAC counts toward that limit, $5,000 from a union general treasury does not. The state campaign finance data suggest that unions strategically contribute accordingly.

Meet the Author

Paul D. Craney

Board Member & Spokesman, Massachusetts Fiscal Alliance
With the benefit of this empirical analysis of nearly two decades’ worth of Massachusetts campaign finance data on the scope and scale of union contributions, we believe the Supreme Court will be in a stronger position to evaluate the legal merits of whether the 1A Auto plaintiffs deserve one final day in court.

Paul Diego Craney is the spokesperson for the Massachusetts Fiscal Alliance and an advisor to the Fiscal Alliance Foundation. Follow him on Twitter @PaulDiegoCraney.