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Elite 12cpiCourier 10cpi ItalicKyocera F-2010 w/softfontsKYF20W.PRS01x6X@8,h,h0?'bX@2X kv ?xxx,x6X@8X@Z tTddd,rdp@@?xxx,x6X@8XPt?xxx, x6NhMXH"  dddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddd  =< United States Senate @ Committee on Rules and Administration Washington, DC 205106325 %Hearing on FEDERAL ELECTION COMMISSION BUDGET AUTHORIZATION REQUEST FOR FY 1996 (""""" THURSDAY, JUNE 15, 1995 The committee met, pursuant to notice, at 9:37 a.m., in Room SR-301, Russell Senate Office Building, Hon. Ted Stevens, chairman of the committee, presiding. Present: Senators Stevens, McConnell, and Ford. Staff Present: Mark C. Mackie, Chief Counsel; Christine Ciccone, Deputy Chief Counsel; Virginia C. Sandahl, Chief Clerk; Kennie L. Gill, Democratic Staff Director and Chief Counsel; and John L. Sousa, Democratic General Counsel.  ?P The CHAIRMAN. Thank you very much. Sorry we have to manage the physical space and sometimes it becomes difficult to resolve the conflicts. We do welcome you, Chairman McDonald and Vice Chairman Elliott. I am pleased that you are here to present the 1996 budget request for the Federal Election Commission. Let me just put on the record that the Commission originally requested $31.8 million in funding for the upcoming fiscal year. The Office of Management and Budget, I am told, reduced that request to $29 million before it was submitted to Congress. The budget, even after the Office of Management and Budget reduction, still represents a $2 million increase over the current level. The Office of Management and Budget also trimmed the Commission's proposed staff increase, although the request approved by the OMB still exceeds the level from last year. We look forward to your presentation and hope you have a justification for your requests in excess of the OMB level. Do you have a statement, Senator Ford?  ?% Senator FORD. No, I do not, Mr. Chairman. I appreciate the opportunity to meet with you this morning and I appreciate your timely hearing. I look forward to the testimony and the questions of the witnesses. Thank you, sir.  ?h) The CHAIRMAN. You would be first, Mr. McDonald.h)=0*0*0*ԌTESTIMONY OF DANNY LEE MCDONALD, CHAIRMAN, FEDERAL ELECTION COMMISSION; AND LEE ANN ELLIOTT, VICE CHAIRMAN, AND CHAIRMAN, FINANCE COMMITTEE, FEDERAL ELECTION COMMISSION  ?  Mr. MCDONALD. Thank you, Mr. Chairman. Just very briefly I want to say that we are pleased to be here this morning and, as is the tradition at the Commission, the Vice Chairman of the Commission, Lee Ann Elliott, is the chairman of the finance committee, and she will be giving the testimony this morning. I will be happy to answer questions, as well.  ? The CHAIRMAN. Ms. Elliott.  ?( Ms. ELLIOTT. Mr. Chairman, let me begin by saying that our colleague, John Warren McGarry, is having extensive oral surgery today and could not be with us. He is a member of the finance committee, and we are going to miss him here. Again, I would like to thank you for this opportunity to present testimony and justification for the Commission's 1996 budget request, and would like to submit the full statement for the record. In the interest of time, I can summarize my testimony by focusing on three important points""where we are today, computer initiatives, and Commission productivity. Where we are today is between a Presidential veto and a threat of additional rescission legislation, or as sometimes might be said between a rock and a hard place. As you know, we are a very personnel-intensive agency. In fact, 72 percent of our budget goes to personnel. In order to protect our personnel from RIFs due to the proposed rescission and still spend the expected $972,000 on computer upgrades and electronic filing programs, we had to freeze hiring and make cost reductions in important and needed areas. For example, all workshops and educational programs for candidates and political committees were put on hold. All travel except audit and compliance were cancelled. Printing was put on hold. Training was cancelled. The Clearinghouse Advisory Panel meeting was cancelled. Equipment purchases and repairs were halted. We intend to reallocate savings and personnel cost to computer hardware and software upgrades and electronic filing because we promised to spend $972,000 in 1995. That is why, Mr. Chairman, it is essential for us to receive full funding of our 1996 budget request of $29,021,000 and 337 FTE. Mr. Chairman, no one at the Commission is against electronic filing. But if we had electronic filing in place today not one candidate could file electronically with us. That is because we'0*((@@ have identified seven statutory impediments, including point of entry, we are asking Congress to remove in order for us to have a program that works. Otherwise, Congress may be spending money on a program that no one can or will use. So we especially want to use today's hearing to explain the necessity for Congressional action so that we can proceed. But just because we hit legal roadblocks, we did not stop work on the project. We took this interim period to explore additional ways to develop electronic filing. For example, we are working on a voluntary electronic filing program with the national party committees. They are, by far, the largest filers of the FEC. This way we can get the bugs out of the system before we spend money on programming for other committees. Secondly, we are working with several state and municipal agencies who are also trying to develop electronic filing programs, not all of them successful. But these small state programs make excellent laboratories before making a Federal investment. And third, we are determined to avoid the pitfalls other agencies have suffered with hastily designed systems, such as the SEC's very expensive EDGAR program and Social Security's computer system. Neither will we compromise the high quality of our database by letting incorrect information be electronically filed in it. It is very important to know that 50 percent of all of the reports filed with us are amended, so we cannot take them at face value and add them into the computer base on a raw basis. Fourth, we are currently spending money on an incredibly successful ADP enhancement and digital imaging system. All of these enhancements are the base of any electronic filing. They make electronic data immediately available in public records and throughout the agency. So to summarize this point, we want to put an electronic filing system into place, but we cannot address Congress' concerns unless we are given the statutory tools, the money, and the time to do it. Productivity at the Commission is a good news story. I can summarize testimony on this point by saying that the last 2 years have simply been remarkable. It is important to know that the FEC is an agency whose workload is completely dependent on outside forces. We do not control the number of candidates who run for office, up 34 percent; the amount raised and spent in Federal elections, up 54 percent""  ?# Senator FORD. From where?  ?% Ms. ELLIOTT. These are figures from 1990.  ?' Senator FORD. 1990 to 1994? '0*((@@Ԍ ? Ms. ELLIOTT. That is correct.  ? Senator FORD. Thank you.  ?  Ms. ELLIOTT. ""the number of complaints filed, up 45 percent; or the number of requests for campaign finance information, up 17 percent. This growth, from 1990, has meant we have had to institute numerous internal efficiencies. I have attached several charts to my full testimony that make this point. We have increased by 7,000 the number of transactions coded per full-time employee to 112,000. From 1980, we have cut the average staff time for presidential matching fund certification in half. In 1 year, we reduced the average data coding time for reports by 38 percent. We answer more requests for campaign finance data more quickly than ever before. And we are closing more enforcement cases more quickly than ever before. We issued over 12,000 public record clarifications and referrals in 1994, double what we did in 1986. That was not done by doubling the staff, but by plain, hard work. As my full testimony states in more detail, the Commission was absolutely swamped in 1992. Record spending in that year delayed every facet of our work. We were only able to recover because of the additional staff and resources this committee gave the Commission in fiscal year 1994 and 1995. We have wisely used a combination of training, automation, and thresholds to make the FEC work efficiently. In closing, we anticipate another record election cycle for campaign spending in 1996. Because it is a presidential year, we anticipate campaign disbursements will go up another 20 percent to $2.25 billion. Our budget request of $29,021,000 and 337 FTE, however, only seeks a modest $1.9 million increase and 10 staff dedicated to computerization and audits, three of which will replace auditors GAO will no longer loan to us. It also includes $1.5 million to continue our ADP and electronic filing. If we do not receive our 1996 budget request, we will be right back to the disastrous problems we faced in 1992. We can only keep up with the explosive growth in campaign spending, new laws, and the needs of the public with the help of this committee. Thank you, Mr. Chairman, and I will be happy to answer any questions you might have on this authorization request. [The prepared statement of Ms. Elliott follows:] PREPARED STATEMENT OF COMMISSIONER LEE ANN ELLIOTT, CHAIRMAN, d FINANCE COMMITTEE, FEDERAL ELECTION COMMISSION, WASHINGTON, DC Mr. Chairman, and members of the Committee: '0*((@@ԌIt is my pleasure to present the Federal Election Commission's FY 1996 Budget Request for $29,021,000 and 337 FTE. In recognition of the tight fiscal climate, this figure already represents a $2.8 million dollar decrease from our original request to OMB. The Federal Election Commission This year marks the 20th anniversary of the creation of the FEC. During the last two decades, the Commission has worked to assure this country's campaign finance laws are administered in a fair and impartial manner. Despite our limited budget, we strive to vigorously enforce the Federal Election Campaign Act and the public financing statutes for Presidential elections. But to understand the Commission's budget and operations, it is important to know the FEC is an agency whose workload is completely dependent upon outside forces. The Commission does not control the number of candidates who run for office (up 34%), the amount of money raised and spent in federal elections (up 54%), the number of complaints filed (up 45%), or the number of requests for campaign finance information (up 17%). Instead, the explosive growth in these four areas since 1990 has had an adverse impact on the FEC's budget and operations. Added to this is our absorption of increased personnel costs and GSA rent increases"all of which have created an extremely tight operating budget at the Commission. Despite these circumstances, the Commission continues to show progress in the way we enter campaign finance information into our data base and process the numerous enforcement matters and audits we must undertake. For example, the unexpected and explosive growth in campaign finance transactions in 1994 nearly overwhelmed the Commission's Information, Disclosure and Data Divisions. We were able to keep pace only through round-the-clock efforts by our staff, increased automation, and most importantly, the additional personnel given this agency in FY 1994 and 1995. This new staff was the first real increase for those divisions since the 1988 elections. Any budget reductions now will completely jeopardize the Commission's ability to keep pace with campaign finance activity. We simply cannot afford to be overwhelmed in 1996 as we were in 1992. The same holds true for audits and enforcement. As you know, the Commission is required by law to process matching fund requests and audit every presidential committee that receives public funds. The Commission is proud to report that by the end of 1994, it had released every final audit report for all candidates and committees in the 1992 Presidential elections. This holds true despite the fact that we had to audit 20 committees with $345,000,000 in combined receipts. And as the attached chart shows, we have reduced'0*((@@ the time and staff required to certify and process matching fund submission for presidential candidates for every election since 1980. The Commission was able to cut its audit time nearly in half by instituting numerous internal efficiencies and through the use of auditors from the General Accounting Office. The GAO, however, cannot loan auditors to the Commission anymore. Therefore, we must have the three additional FTE contained in today's budget request to meet the demands of the 1996 presidential election. With respect to enforcement, the Commission recently instituted a prioritization system to handle the absolutely incredible increase in the number and seriousness of complaints filed with this agency. The number of complaints jumped 45% from FY 93 to FY 94; and only four months into FY 95 we are already half-way toward last year's total. Currently, the Commission has a record 353 cases on file with over 1700 respondents. Recognizing the Commission always will lack the staff and resources necessary to pursue every complaint, we now employ numerous thresholds and enforcement criteria before opening a case. The goal is to focus the agency's limited resources on its more significant cases and resolve them in a timely manner. At the same time, the Commission keeps a series of smaller, more routine, cases open to remind the regulated community that we are enforcing all areas of the law. Remaining cases are dismissed on a regular basis when our priorities and lack of resources prevent them from being pursued. Using this new system, the Commission closed 73 cases in the first 3 months of FY 95. This new system ensures the Commission can reach more enforcement decisions more quickly than ever before. To catch up with the backlog of un-reviewed reports from the 1992 cycle, our Reports Analysis staff reviewed over 7,600 reports in one month in 1993. In the four months of peak election activity in 1994, they reviewed an average of 4,400 reports per month. To keep the public record accurate and committees in compliance with the law, this division generated a total of 12,131 public record clarifications and referrals in 1994: nearly double what we issued in 1986! This was not accomplished by doubling the staff, but by plain hard work. Mr. Chairman, we also are very proud of our Disclosure and Information Divisions. The Federal Election Commission placed a premium on customer service long before there were initiatives to reinvent government. The quality of our data base, the accuracy of our personnel and information systems, and the ease at which the public can access campaign finance reports have won world-wide attention. '0*((@@ԌWe are proud to say that more campaign finance information is made available to more people more quickly than at any other time in Commission history. This is true despite the fact that in the 1992 and 1994 election cycles, the Commission's small staff routinely received over 15,000 inquiries per month, and in one month responded to a total of 28,000 informational requests. Recent improvements in our Disclosure and Information Divisions include: providing Direct Access via computer to the Commission's disclosure database; a flashfax system that makes Commission materials available by fax; and the installation of a document imaging system in Public Records so campaign finance reports are more quickly and clearly available to the general public. We also continue to receive high marks for our seminars, workshops, publications and 800 phone line. 1996 Fiscal Year Budget Request Mr. Chairman, we anticipate another record election cycle for campaign spending in 1996, with total disbursements for all federal elections probably increasing another 20% to 2.5 billion dollars. Our budget request, however, seeks only a modest $1,915,000 increase over last year's appropriation and an additional 10 FTE over FY 1995. In fact, most of FY 1996's budget increase is dedicated to two on-going automation initiatives our oversight and appropriation committees have encouraged the Commission to undertake. Fully 1 million of our 1.9 million dollar budget increase is scheduled for further work on inaugurating an Electronic Filing program for FEC reports and an Automated Data Processing program (EF/ADP). Further, when $1 million for EF/ADP is added to the cost of GSA's mandated rent increase and the FY 96 cost of maintaining FY 95 personnel, the Federal Election Commission actually will have less support funds for its base staff than in FY 1995. Although we are requesting a budget increase, the support costs we can control have been reduced for the core staff of 327 FTE. 1. Personnel It is critical that the staff funded in FY 1995 be carried over into FY 1996. Otherwise, the gains made since 1988, and recovered in 1994, will be lost. In 1992, no amount of productivity improvements could cover the work involved; the extraordinarily high amount of campaign finance activity plus a limited budget meant the Commission actually lost ground in terms of enforcement and the timely processing of documents and data. The Commission cannot afford to be overwhelmed in 1996 as it was in 1992. We cannot tolerate delays in our audits and enforcement programs, data and information systems, and analysis of'0*((@@ reports. This is especially true during a highly contested and expensive presidential election campaign. Losing the use of auditors from GAO means the Commission must have the additional three FTE it has requested for our presidential audit program. Otherwise, the timely audit of presidential candidate committees will be in jeopardy. In addition, the Commission must have four new FTE for a viable non-presidential audit program in presidential election years. Much like IRS audit programs, the Commission believes general compliance with the FECA is enhanced when Committees can be audited for cause in each election cycle. The four FTE requested will provide for 10-15 additional audits and enforcement activity. With over 8,200 committees projected to be on file with the Commission in 1996, we consider this a reasonable and timely program. 2. Electronic Filing & Automated Data Processing Lastly, our request provides for three additional FTE and one million dollars to continue work on two major computerization initiatives: Electronic Filing and enhancement of the Commission's ADP system. The Commission's work toward developing an Electronic Filing program is fully discussed in the attached Issue Summary on Electronic Filing and need not be repeated here. Suffice it to say an electronic filing program cannot be competently developed unless the Commission receives adequate funding and Congress makes the legislative changes we have recommended in this area. (See Issue Summary at pages 5-7). Under current law, any electronic filing will be for only party committees and PACs. Congressional committees could not file electronically with the Commission if they continue to file their reports directly with the Clerk of the House and Secretary of the Senate. The Commission anticipates dedicating ample resources to this project within our FY 1996 base budget. We also anticipate increased developmental work on the project, but only if we receive the additional one million dollars sought for computer programs in our FY 1996 request. Next, the Commission will spend approximately $750,000 in FY 1995 on upgrading its existing ADP systems to a networked PC environment. We have dedicated four FTE to these two projects in FY 1995 and the base for FY 1996, with three additional FTE requested in the FY 1996 appropriation request. With the expenditure of only 4 FTE and $750,000 in FY 1995, plus $1.5 million and another 3 FTE in FY 1996, implementing ADP enhancements and an electronic filing initiative will require further funding in FY 1997 and beyond. Stretching-out the funding'0*((@@ will delay implementing any part of an electronic filing program until the 1998 elections. We also project needing 7 FTE in future fiscal years to operate and maintain the two systems. Conclusion Mr. Chairman, I must re-emphasize the importance of our FY 1996 appropriation request. We are a very small agency with a very big job. I'm sure you'll agree, Mr. Chairman, an electoral process is the cornerstone of freedom: and it is our mission to protect its financial integrity. Our workload, however, is completely dependent on outside forces, and we have no room for budgetary discretion or error. Through productivity enhancements, increased staff and sheer hard work, we improved our performance Commission-wide in 1994, despite record campaign spending.But to maintain these successes, and keep up with the exploding growth in campaign finance activity and the needs of the public, we must have our FY 96 budget request of $29,021,000 and 337 FTE. On behalf of the entire Commission, I wish to thank this Subcommittee for its support, and look forward to working with you to successfully implement and enforce the federal campaign finance laws in 1996 and beyond. I will be glad to answer any questions you may have regarding this appropriation request.  ? The CHAIRMAN. It does seem to me, Ms. Elliott, that the problem is the detail that you seem to want. You say that you cannot get this information and take it through electronically into your database because they will not give you the information you want. I think we ought to review that, because clearly you are spending more and more to encode more and more information. And yet, the information, I think, could be available from candidates in sufficient form to get the data that is needed to judge the compliance of those candidates with the law without the necessity of your taking it in raw form and putting it on computers when it is already on computers. There has to be some way that this logjam can be broken and we can bring about the electronic transfer to your records base, your database. There may be these legal impediments that you are talking about, but I do not know of any impediment that you have to accepting voluntary filings, other than your own. It seems to me you are protecting a whole series of people who are hired to put stuff on computers but it is already there in the computers of the individual candidates, simply because it does not come in in the form you want it. We are having a hard time defending you up here. ' 0*((@@ԌAs a matter of fact, I would say we won the one battle so far, but we are on the razor's edge of defending your agency because I think that"maybe I speak out of turn, but I think the former chairman and I agree. We agreed when he was chairman, and I assume we still agree now that I am chairman, that the basic concept of the FEC is in the public interest. But you seem to be standing in the way, the Commission itself, standing in the way of modernization to the point that we can reduce some of the costs associated with this function. And that appears to be the basic dispute we are going to have in the balance of the year. I want to ask you again, why can't you take voluntary filings on floppy disk? Tell me that again? Why can't you do it?  ? Ms. ELLIOTT. You mean other than the legal impediments that""  ? The CHAIRMAN. The legal impediments are not legal impediments to voluntary filing, as I see it. What are the legal impediments to voluntarily filing data on floppy disks? It may be an impediment to your forcing people to do it, but I do not think there is any impediment to your accepting voluntary filings.  ?0 Ms. ELLIOTT. We have been advised that there are some provisions in the Act"let me give you just one example.  ? The CHAIRMAN. Pull that mike up"we cannot hear you.  ? Senator FORD. Act like you are mad, or get mad, it does not matter.  ?p Ms. ELLIOTT. Okay, I can raise my voice a bit. Just as an example, the law requires a filing to be signed by the treasurer. You cannot have a signed document, filed electronically.  ?  The CHAIRMAN. All you have to do is sign a transmittal letter with a floppy disk and that complies.  ?x Ms. ELLIOTT. But we were thinking of electronic filing as coming to us by modem, for example.  ? The CHAIRMAN. We did not ask you to take modems, we only asked you to take floppy disks.  ?(# Ms. ELLIOTT. Well, that is a clarification.  ?$ The CHAIRMAN. That is in the letter. It was in my question last year. 1993, pardon me.  ?' Ms. ELLIOTT. Believe me, we have the same goal as you do in doing this. But we have to work through the fact that we have to' 0*((@@ use this information, so we have to have it accurate. For example the name of the committee that the disbursement was made payable to. Sometimes it comes in Stevens For Senate. Sometimes it comes in Committee to Elect Senator Stevens. All of that goes in and becomes impossible to read on computer. We have to put that in a form that makes it readable by computer. We can do those things and we are working on taking out some of these little things that make it usable by someone who wants to see it. But one of the questions that we need to know and seems to be""  ?` The CHAIRMAN. Let us go back to that. I do not know why you have to reformat much of my data for someone who wants to see it. All you have to do is make available to them what I file. The law only requires me to file with you. It does not require me to put it in exactly the form your people want it, so they can read it. We have had a lot of these things in my committee, if you want to see me get mad, because we are a small committee. We do not have any paid employees on this, but we have had to hire people to go back and redo your reports on nitpicking stuff. It has just been absolutely nitpicking, nothing substantial that you would have declared that I was in violation of the law. But you just wanted it. If a person says they are self-employed, you come back and want to know at what? What are they doing? Self-employed is enough for the law, but it is not enough for you. You have got some nitpickers in your agency, and that is what is going to destroy you this year unless you listen to us now. We want this commission to survive, but it cannot survive when all these people are past candidates who have been nitpicked to death by some of your people. Now again, I comply with the law if I give you a floppy disk. All you need to do, if someone wants to look into my file, is let them get into my file. And if I have not complied with the law, let them disclose it to the public. You do not have the duty except to see if I comply with the law. That is where we are getting into a lot of additional expense with your commission, to have us comply with the things someone in your staff wants, that someone on my staff says you do not have to have.  ?`" Ms. ELLIOTT. I understand that.  ?# The CHAIRMAN. Let the public decide whether we are right or wrong in what we have filed with you. If it is insufficient, my opponent is going to hold me up to the public and say look, he does not comply with the law. ' 0*((@@Ԍ ? Senator FORD. Like a piece of tissue paper in front of a light bulb.  ?X The CHAIRMAN. Right. But you people are really exhausting the patience of a lot of volunteers out there and requiring us now to hire C.P.A.'s to come in and look at these things before we file it to you. I have got to tell you, you are increasing the costs of campaigns. I think you ought to go back and tell your people to work out a procedure to accept the filings of candidates on floppy disks. And you can come up with your people, come back to me, and say that filing does not comply because of A, B, C, or D. And I am going to have someone look at it and say have we complied with the law or not? And if yours are nitpicking, I am going to tell my people to let my opponent have at it, because I think John Q. Citizen is tired of the nitpicking of the Government, period, and I think they would understand us when we say we are not going to spend more of this money it is so hard to raise in order to go back and fill in what self-employed means. I have got that one, you know. That is a true request of your people, to clarify self-employed.  ?P Ms. ELLIOTT. Mr. Chairman, I am very happy that this is on the record because it is going to be very important and very good guidance for the Federal Election Commission.  ?p The CHAIRMAN. Are you going to do it?  ? Ms. ELLIOTT. Oh, yes, absolutely. Oh, yes.  ? The CHAIRMAN. Will you accept floppy disks?  ?  Ms. ELLIOTT. Yes, we will. We will accept floppy disks. We cannot do it at this moment, but we will very shortly. We are, right now, working toward that end. But Mr. Chairman, one other thing that we really do not know is how many candidates are on computer and would choose to file.  ?! The CHAIRMAN. That is true. That is true.  ?(# Senator FORD. Let me make a point right here. You have to be on computer. There is no way to get away from it. You have got to get a computer, you have to get a computer operator, you have to be trained in FEC, then you have to have your C.P.A. come in and go over it, and then you have your treasurer go over it because he is the fellow whose neck is on the line. And when you sign it and put it in, you pray nothing comes back.' 0*((@@ԌNow that is what happens to a candidate, and we are sweating. They forget to put I-L-L. That is Illinois, is it not? You ought to understand that. I get it sent back because we did not put the state in, and I get reported that I have a false filing. Now it makes it tough out there. We are spending all kinds of money, doing everything we can, and we just put Chicago and forgot to put Illinois, and we get a red circle around it, and that sucker is sent back. So I get written up in the paper that my report has been questioned. We are on the other end of this, you know. You go through all of those categories and report $1 on up. I report $1 on it, I do not have any trouble. I do not have to worry about the $200 limit or anything like that. We just report it to you. Hell, let them go through it. Just the very idea that you get red circles for""  ? The CHAIRMAN. Before you comment, let me get in on that, because that is easier for us to report everything because it is on our computers, and we would rather give it to you. But you want us to go back and pull out and only report those in excess of the minimum amount. What is wrong with giving you everything?  ? Ms. ELLIOTT. Well, it means that because the law says that we have to examine all of these and look at those who had given over $200""  ? The CHAIRMAN. Now we are coming to it. What you really need is a software program so that you can look at what we give you on a floppy disk and see what is in error with regard to those that are over the $200. That is not hard to do, it would not take a rocket scientist to do that.  ?X Ms. ELLIOTT. That is right. I need to make it clear to you, though, that we are already on computers. We already analyze the data by computer.  ?@ The CHAIRMAN. Only after you put it in. You do not take my data through by computer. You hire somebody to take it off the forms I give you and put it on computer the way you want it on computer.  ?`" Ms. ELLIOTT. No, that is only partially true. What we do is""  ?# Senator FORD. It is mostly true.  ?% The CHAIRMAN. Tell me what is not true.  ?' Ms. ELLIOTT. It is electronic imaging. So in effect, it is taking a picture of it, without touching the data, without' 0*((@@ inputting it in the usual sense. It is called imaging. PAC reports are imaged for analysis on computer. That is how they are examined.  ?X The CHAIRMAN. I have got to tell you, it is printed off of a computer that we make floppy disks on to store it for our protection. Now why should we not just give you the floppy disks?  ?x Ms. ELLIOTT. We will be able to accept floppy disks. That is coming. That is not far away.  ? The CHAIRMAN. What about this database problem? What do you need for a software program so that you can use floppy disks? Have you examined that?  ? Ms. ELLIOTT. We are examining it right now. We are going to hire a consultant to do a cost analysis of it, because we have been asked to furnish the information by another congressional committee. That will make it very clear as to where our paths go once we adopt this.  ? The CHAIRMAN. I asked you in 1993 and I think I asked you before that. And each time we have been told we are going to do this. I have to tell you, if you people want to continue to be in existence, and we want you to be, you are going to have to come into the computer age. That is all there is to it. There is no reason why you cannot even do audits by computer if you have the right software. I do not understand this. You did not complete the audits of the 1992 election before the 1994 election. The audits ought to be able to be done on a gross basis within a matter of months after the election.  ? Ms. ELLIOTT. Basically the only audits we have been able to do, because we are so short of auditors, are the presidential"and it is very difficult to do a presidential, all the presidential committees' audits, and get them out within a 2-year period.  ? The CHAIRMAN. Have you talked to the IRS about their audit scanners?  ?@ Ms. ELLIOTT. They are having a terrible time. They are a disaster. We would not look to them for guidance.  ?! The CHAIRMAN. They are doing a lot more and getting them done a lot faster than you are. You are doing just a handful compared to what they do. I know that they have got some problems and some bugs in their programs, but they are doing their audits electronically to begin with. And they kick them off to see if they have to have some examined. You are not doing them electronically and having them kicked out, as I understand it. Substantial compliance ought to be able to'0*((@@ be done, reviewed on an electronic audit, within a month after you get everything.  ?X Mr. MCDONALD. Mr. Chairman, may I respond to a couple of points? I know the first time I testified and vice chairman Elliott testified at our confirmation hearing, Senator Ford pointed out then, and he asked, rightfully so, why is it that we would not account for every dollar, which is set out under the statute. It is not that we do not want to account for every dollar. The problem is one of trying to reduce the workload on committees. And, to be very candid with you, I gather there was a general consensus in the Congress that anything below $200 simply did not impact enough on the process. We do not argue at all, when the contributions are reported, whether it is $1 or more. Obviously, it is going to take a little more work and a little more resources, but we thought it was kind of, if you will, a nitpicking argument we are trying to help get away from, too. A lot of committees take the position if you have to report every dollar, it is much harder. This is how that issue has evolved over time. On another point, the information we seek on a request for additional information actually keeps you out of the public arena, and that is the reason we request the information. We know people are going to be looking at all the reports. So when you hear from the agency, you are not under the gun when you are asked for additional information. It gives you the opportunity, if you are so inclined, to want to clear it up so you do not have that problem with the media, quite frankly. This is the reason requests for additional information are sent out. The example given by Senator Ford, I have no doubt, is exceedingly irritating. It is a judgment call, but we think you ought to be at least afforded an opportunity to correct it before it gets into the public arena. That is one of the reasons you often hear from us. Maybe it is not the wisest thing to do, but we think it is fairer to the candidates and there is an effort to try not to make just every issue a public issue.  ?! The CHAIRMAN. Mr. McDonald, we had this discussion before, too. I do think that the burden is on the Commission to decide what is  ?(# de minimis. If it is de minimis, why even ask? You know where Chicago is.  ?% Senator FORD. Of course, it could have been from another state.  ?' The CHAIRMAN. But we have paid somebody to look at that and send it back to the committee, and the committee has to pay'0*((@@ somebody to go through and just correct that. There ought to be  ? some way to have a de minimis item deleted or not put on a checklist to send back to the candidate. But what we are saying beyond that is, you do not even seem to understand it. We have to keep track from the first $1 because it says when we get over $200 that has to be reported. You seem to think we are not keeping track of everything under $200, but we do. It is on computer.  ? Mr. MCDONALD. Mr. Chairman, I do not think that at all.  ?` The CHAIRMAN. I told my people to forget about deleting those, send them the whole thing.  ? Mr. MCDONALD. Yes, sir. I do not think that at all. As long as there is not a misunderstanding, I apologize. My point was just in terms of the actual record keeping and the law itself. We do take every threshold that we have, by the way, in terms of whether it is a response to the employer or the amount of money. We have  ? incorporated a number of de minimis rules that we simply do not pursue certain problems as a practical matter. This does not mean it is not out there in the public and that you might be under attack for it. Your points are very good points. Maybe the best thing to do is just let that ride.  ? The CHAIRMAN. What portion of the money that we provide did you spend for auditing data from candidates and what portion do you spend on enforcement? Do you know? Have you got a breakdown?  ? Mr. MCDONALD. We do, and I apologize. I do not know if I have it with me. As you know, we basically just do presidential committee audits at this point. I think, on the non-presidential side, the last cycle we audited 20 committees out of over 8,000. We just do not have the resources to get into the non-presidential activities. We try to keep a presence there, obviously, because it is under the statute. But as a practical matter, outside of the presidential realm, we have not had much of an opportunity to be in the audit business at all.  ?`" The CHAIRMAN. I am correct that we wanted the balance between the expenditures on financial disclosure obligations, as compared to enforcement activities. I hear what you are saying, but I think the difference is if you really went to total electronic data and scanning of that, and had a program that examined it, you could have audits of everybody. '0*((@@ԌWe make mistakes. Gosh, we ran across several. We noticed that people had given us more money for the cycle than we are allowed to take from them. We had to go back and file it, and we filed a disclosure that we had returned some money. Everybody has those things, when you are dealing with volunteers in particular. You know, I deal with a State that is one-fifth the size of the United States, and I do not have C.P.A.'s in every town. We have got a little committee in every town, and they try to comply with the law and send the money into a central office in Anchorage, and we try to get them to comply with the law both in contributions and expenditures, and that is not easy. When the data comes in from them, we do our best to see to it that we go back to them and get everything we need for you all, but again, if they misspell Akiachak, I think you would not spell it right to start with anyway, so I would tell them not to worry about that.  ? Mr. MCDONALD. I think I would agree with that.  ?h The CHAIRMAN. Our problem is in trying to find a way to comply with this and not spend so much money on it, because I think what is raising the cost of campaigns in and of itself, is compliance with the nitpicking that is going on in your agency.  ?P Mr. MCDONALD. Senator, if I might comment on electronic filing for just a moment, as the vice chairman pointed out, very rightfully so, and you too are right, we have had these discussions over the years. This year the first thing we had tried to do was install computer stand-alone units at all employees' workstations. We were right in the midst of that in March when we were informed about a possible rescission. The House subcommittee recommended a rescission of about $2.8 million. We stopped everything in its tracks. We quit work on the computers because there simply was not enough money. Currently we are spending money and we are seeking a consultant to come to grips with what you are talking about. There is the issue of whether electronic filing is voluntary or not. We think that is right. What information can we have in? Would a candidate like yourself have an opportunity to amend his report? I think candidates always ought to be able to amend their report so they do not get themselves into difficulty. We are not interested in trying to trip up candidates. As you know, and we have testified here many times, a number of people have a different opinion. If you are filing electronically and you are getting your information out readily to the public and some of it, as you point out, may be satisfactory and some of it may not be, you might feel a little chagrin if your opponent is not involved in that at all. If he gets the advantage of not filing electronically, if the system is, in fact, voluntary,'0*((@@ and his advantage is, in his way of thinking, that the information gets out to the public later or maybe in a different form, it is just a tough balance. These are things we are not taking lightly at all, and we are trying to work on the process of implementing electronic filing. It would be helpful to us, to be very candid about it, if we had some sense of where we were in the budget. I think we took the biggest hit of anybody under the Treasury and Postal Service Subcommittee. We basically have deferred everything for months on end. The Senate was good enough to restore half of the money, which was critical to us. As you know, we are in the process now of waiting to see whether the President and Congress are going to work something out on the rescission or not, and we do not know exactly where we stand. But we are looking at these things. We would like to work with your staffs because we think it is critical.  ? The CHAIRMAN. Let me just ask one more question and then I will turn it over to Senator Ford. How do you divide your work load in presidential years? We are going into a presidential year. You have got audits there. You are auditing people who are receiving Federal money there. How do you allocate your time and your budget in a presidential year? Can you tell us what portion of the budget is dedicated to the presidential system and what to the congressional system?  ?8 Ms. ELLIOTT. Yes. We have answered this question, so I can give it to you in some detail subsequently. Basically, we have just about dedicated our audit staff to the presidential because so many candidates are involved and because we have a shrinking staff. The GAO used to give us five auditors during the presidential time. They cannot do that anymore, so we were down five auditors. We have gradually added some back in, but we still need to recoup some of these, and that is what is partially in our FTE request, and also in our budget, because we have to have more auditors in order to get the job done. People are equivalent to time. They are using all the modern techniques. They do as much as they can by computer. They have all the scanning-type computers available to them, and they have picked up"I mean, they are very fast now. In fact, this time we will have completed the audits within a 2-year period for the presidential. We are aiming at that.  ?' The CHAIRMAN. Senator Ford? '0*((@@Ԍ ? Senator FORD. I do not have many questions, just one or two. Commissioner Elliott, you said in your report that 50 percent of all reports are amended. What did you mean by that? Everybody's, presidential, congressional, or everybody's?  ? Ms. ELLIOTT. Everybody.  ?x Senator FORD. Give me some idea of what the amended reports contain. What is the number one item? Do you have any idea?  ? Ms. ELLIOTT. I would guess that the biggest one is incomplete information, where they have to give us data and they did not have it when they filed the report, and they add it in.  ? Senator FORD. Insufficient data about what?  ? Ms. ELLIOTT. What is required by the law for individuals who give more than $200. They have to give more information and sometimes they have to find that information in order to provide it. I would guess that would be the highest number. We also have a great number of schedules that do not add up, and are not reflected correctly on the summary page. We have a lot of mathematical errors, things of that type.  ? Senator FORD. When you add those up, do you try to work it out and if you find that they are off $2,486, do you look for that or do you send it back to the campaign headquarters and say find it, you are short or you are over?  ?p Ms. ELLIOTT. We send it back.  ? Senator FORD. These auditors that you have had, are they on loan or are they permanent from GAO?  ?X Ms. ELLIOTT. No, they were on loan during the high peak of the presidentials.  ? Senator FORD. What is high peak? Full-time?  ?@ Ms. ELLIOTT. No, it is when the requests come in. It is for a certain number of months when our matching fund requests come in and when that part is looked at.  ?`" Senator FORD. So that will be from basically now until the end of"so you have 18 months to 2 years, and these auditors are free?  ?$ Ms. ELLIOTT. Then they go back to GAO.  ?H& Senator FORD. Tell me about what is meant by point of entry? '0*((@@Ԍ ? Ms. ELLIOTT. Sir, if you were on computer and were going to send us a disk, you would not be sending it to us. You would be sending it to the Secretary of the Senate.  ?  Senator FORD. Or the Clerk of the House.  ? Ms. ELLIOTT. Right, whether or not they could read it. Ordinarily, as it works out, when you file on paper, those papers are duplicated and sent to us and we get them secondhand from the candidates. Sometimes they are not as readable as we would like for them to be. But we get them and"but I have to say that, in doing that, 234 reports were misfiled because they did not come directly to us last year. So it is not a perfect system. It is one that we have a great deal of problems with. With respect to the point of entry, people expect us to have it instantaneously and we sometimes do not get it in a timely manner from the Clerk of the House or the Secretary of the Senate. Even in those cases, just a handful of cases, we have everything ready for public inspection within 48 hours. We have had no complaints, not one, of people not being able to look at a candidate's reports within 48 hours. Now we do not get everything on computer that fast, but we do get it on in a remarkably fast way and have it available within just a few weeks. But anyone who is looking at your reports, has a need to look at your reports, can do so within 48 hours because we meet that deadline. It is in the Federal Election Campaign Act, and we obey it.  ? Senator FORD. You say in your statement that you audit about 20 outside of the presidential. Are those 20 audits that there has been a charge filed with you against?  ?  Ms. ELLIOTT. Yes, they are always for cause.  ? Senator FORD. Otherwise you would not bother to do any checking?  ? Ms. ELLIOTT. That is right.  ?! Senator FORD. So you only have about 20 complaints about fund raising and filings every 2 years?  ?# Ms. ELLIOTT. Oh, no, we have a lot more.  ?% Mr. MCDONALD. No, it is simply a question of resources, Senator Ford. '0*((@@Ԍ ? Senator FORD. You mean if I file a charge against candidate X or X files charges against me, if you have the resources you will try to comply and if you do not have the resources, why I do not have to worry about it? And if I am a losing candidate I do not have to worry about it anyway, do I?  ? Mr. MCDONALD. I think resources always determine what you can and cannot do. Let me be clear, audits also are internally-generated under the statute as well if, for whatever reason, the books simply do not add up. We have, quite frankly, rather high thresholds so that we do not get into the kind of concerns that Senator Stevens alluded to earlier. And we would not have the resources if we wanted to get into them, as a practical matter. There are many more individuals and committees. And, although candidate committee compliance always is pretty good, we do not get beyond the tip of the iceberg. It is just not feasible.  ? Senator FORD. When I said 20 audits and I saw your brow furrow a little bit, because that meant you had a lot more, are these just complaints that were filed and you make a decision on that and you do that rather quickly? Or do I ask a question of what my opponent has filed or he asked of mine? How do you handle all that, because that is more than an audit? You are not asked for an audit, are you, under those circumstances?  ? Mr. MCDONALD. Senator, I hope I have not confused the issue. The fact is there can be an externally-generated complaint about either yourself or your opponent. Normally, if the complaint alleges something that, in fact, might encompass matters relating to audit activities"that is the ability to financially handle your records correctly"maybe you would get into it from that side. Most externally-generated complaints, however, are not complaints that say we would like to audit Senator Ford. They would be complaints about the nature of excessive contributions, or perhaps contributions from prohibited sources. Those are the kinds of external complaints we normally get. Internally speaking, if we were looking at your records and, for whatever reason, we were not hearing back from your committee and, for example, there were thousands of dollars that did not add up on a summary page as well as a number of financial activities that are outside the normal course of business"then the Commission may decide to conduct an audit. The same matter also may be in the compliance track as well. You may have it come from the audit side and you may have it come from the enforcement side, as well, because the audit may reveal enforcement violations.  ?' Senator FORD. What is your position if Senator McConnell is up for reelection and he has area fund raisers or periodically held'0*((@@ fund raisers, and I buy a ticket for $50 and go to his fund raiser. He is not required to report that. But then I buy another ticket for $50. The next one, he is required to keep that total, so that becomes $100. To make a long story short, I have purchased four $50 tickets over a year or 6-month period of time. That triggers him, so he has to report that. What if he reports my contribution each time, of $50, and does not get into the $200. Does that meet the standard?  ? Ms. ELLIOTT. He would also have to aggregate total contributions every time after the first.  ?( Senator FORD. Subtotal?  ? Ms. ELLIOTT. A cumulative total, so that it would show total contributions to date.  ? Senator FORD. I understand. I know what is on the form, but I am just saying what kind of"if I reach the $200 mark then, what is the difference? I understand the form and how you have to fill it out. We have computerized those forms, too, you know, so we can do those. What obligation do you have, or what obligation does the candidate have or the treasurer for the candidate"the candidate does not have any obligation at all"to show that $200 contribution?  ?P Ms. ELLIOTT. He must report each contribution that adds up to that amount and the total amount.  ? Senator FORD. On the fourth one that shows the $50 and it is in his report, and it would show that I have totally given $200. So I am in two different categories, technically.  ? Ms. ELLIOTT. It would not be on the report at all. It is not necessary for him to report that at all until he crosses $200.  ?  Senator FORD. I understand that. I understand that, but he reports everything, like we talked about a while ago, is the easiest way. Just put it down and send it to you, and we do not have to worry about it. So then at the fourth contribution, he has to make a different entry, or just makes another entry, Wendell H. Ford, $50, total $200? That is all he has to do?  ?! Ms. ELLIOTT. Yes.  ?(# Senator FORD. I am glad I answered one of my questions, Mr. Chairman. I thank you, sir.  ?% The CHAIRMAN. Let me ask one, and then I will yield""  ?' Senator MCCONNELL. Could I just say one quick thing, Mr. Chairman?'0*((@@Ԍ ? ԙThe CHAIRMAN. Yes.  ? Senator MCCONNELL. If Senator Ford contributes anything to my campaign, no matter what the amount, I will report it. [Laughter.]  ?x Senator FORD. That works two ways, you know. I will stand on the courthouse steps and give him 30 minutes to draw a crowd if he gives anything to me. [Laughter.]  ?( The CHAIRMAN. Let me just ask you one question. We file not only with the Senate, but we also file with the State Government. It is for the purpose of public access to our filings, right? Now if we give you a floppy disk, that floppy disk is going to be available, as you say, on your computer system immediately. If you have a page system, you could just flip it on the Alaska page one, which would be"since I am senior, I would be there. They would only have three pages in our book. But as a practical matter, anyone that wanted to look at it would look at it. Now if I file a revised statement with you, all you have to do is delete what I filed and file the second one, because it is the one that takes the place of the first one, we file an amended disclosure. You do not even have to keep the first one. You just"that is the basic disclosure that we rely on, the amended form, right?  ?8 Ms. ELLIOTT. Yes.  ? The CHAIRMAN. What is wrong with that? What is wrong with the concept that you just use the system everybody knows. It is on World Wide Web. And if it is there 2 days ahead of my opponent who files by paper, that is his problem, rather than mine. I think the public relies on full disclosure. Why cannot you set up a page system and just have the disclosure work immediately and do your analysis later?  ? Ms. ELLIOTT. We can do that, but in addition you would still have to file with the secretary of state in your State because the law""  ?# The CHAIRMAN. Well, I can give him a floppy disk, too.  ?% Ms. ELLIOTT. You could do that. I doubt if they would be able to read it, but"" '0*((@@Ԍ ? The CHAIRMAN. I do not think there is a secretary of state in the country who does not have a computer system.  ?X Ms. ELLIOTT. What I was going to explain was that about 25 secretaries of state are online with our computer at the present time. If this was amended in a way that we would hope, then when we got the floppy disk, we would like for the law to say that having it on our computer and their having access to our computer would satisfy that requirement, so the candidate would not have to do anything in addition to filing with us. We would like to make it as easy as possible, because otherwise, the way it now stands, they would have to be able to read it in the way that we do.  ?( The CHAIRMAN. I would just make a comment that I think that compliance with the Federal Election procedure has become a sword for opponents when they use attacks to have partial exposure. I think there is protection for everybody, including the public, if we have full disclosure and everything is available for everybody at the same time. The problem comes when you delay the disclosure. I think you do when someone on your staff decides that there has not been full compliance. Am I wrong? Do you not have a period in which you come back and say you have not given us the proper disclosure here and there?  ?P Ms. ELLIOTT. Only a small delay on computer. The report as you have filed it is available within 48 hours.  ? The CHAIRMAN. Thank you very much. Senator?  ?8 Senator MCCONNELL. Thank you, Mr. Chairman. I wanted to start out by talking about a specific case. I recently received a letter indicating that the FEC had decided to take no further action on a complaint filed by the Republican party of Kentucky alleging substantive violations of Federal election laws in 1990 by the Kentucky and National Democratic parties, which also involved the Association of Trial Lawyers of America; a wealthy donor, now deceased, by the name of Mary Bingham; and my 1990 opponent, Harvey Sloan. What happened is that Mrs. Bingham contributed $250,000 to the National Democratic party, which the next day transferred the same amount of money to the Kentucky Democratic party. The next day ironically there were commercials on the air, not mentioning my opponent by name, but the same film, the same people in the film, same message. Similarly the ATLA, the American Trial Lawyers Association, contributed $100,000 to the Kentucky Democratic party which apparently converted the money in a similar way. '0*((@@ԌNow the reason I am so curious as to why this case has been finally dropped after all these years, is that I believe in the course of the Commission's review of the case it found reason to believe that each of the parties I have named violated Federal election laws, including the limits on contributions, reporting requirements, and the prohibition on expenditures by corporations, banks and unions. So my question is, given the fact that the Commission obviously concluded that laws were broken, and that we are not talking about pennies here, we are talking about $350,000, what happened to the case?  ?( Ms. ELLIOTT. Well, it went through the usual process. It was assigned a number. Everyone mentioned in the complaint received a copy and also had the opportunity to respond to us. On the basis of that, we received and approved a report from the General Counsel recommending reason to believe a violation had occurred and started an investigation. I believe depositions were taken. I cannot recall exactly, but it ended up with a report that will be available shortly in our public records, and we can send you a copy of the last report, the summary report.  ? Senator MCCONNELL. Is it correct that there is still an avenue here, that under the law the Commission has until November of this year, roughly 5 months, to file suit in order to obtain a civil penalty in the case? That could have been done, right?  ?p Ms. ELLIOTT. In this particular case, or in any case?  ? Senator MCCONNELL. I suppose in this particular case.  ? Ms. ELLIOTT. We have interpreted a recent court decision to mean that our agency, as all other Federal agencies, have a 5-year statute of limitations if penalties are sought. However, we can get some disgorgement. We can do other things if illegal money is in a campaign. But we do have a 5-year limitation.  ?@ Senator MCCONNELL. So you could still do this until November of this year, technically, because that is when the statute of limitations runs, I suppose.  ?`" Ms. ELLIOTT. I do not know when it started, so I really cannot say.  ?$ Senator MCCONNELL. Is it true that one of the chief reasons given by the Commission for not pursuing further action in this case is it felt it just did not have enough time to get its case ready? Is that true or not? Can anybody tell me? Anybody behind you?'0*((@@Ԍ ? ԙMs. ELLIOTT. I cannot say that. I do not know that.  ? Mr. MCDONALD. Senator, I apologize, someone was whispering to me. Would you mind stating that again?  ? Senator MCCONNELL. My question was, is it not true that one of the chief reasons given by the Commission for not pursuing further action in this matter is it felt it just did not have enough time to get its case ready?  ? Mr. MCDONALD. I am not sure of the status of this case, but I will be happy to tell you, generally speaking, we have dropped a number of cases across the board. We have done so, quite frankly, because of the criticism from this committee and others that we simply have gotten too far behind and we have pursued old and outdated cases. These are always very tough calls. We have made a number of priority decisions about which cases to pursue and which ones not to pursue.  ?h Senator MCCONNELL. Let me interrupt on that. What is an important case? I hear from colleagues who are dealing with what most Americans would think would be trivial matters, regarding designations and refunds and that sort of thing. Here we have got 350-grand, a case in which your own people concluded that there was a violation of Federal laws, including the limits on contributions, reporting requirements, and a prohibition on expenditures by corporations, banks and unions. What is an important case?  ?p Mr. MCDONALD. Let me address that. I think that is a pretty fundamental question. What this Commission has done for years, and I think it is the only way this law can be administered, is that we have created thresholds to keep ourselves focused that all of us concur with across the board. You are right. The magnitude of that case, and a lot of other cases we had to drop over time, is discouraging. That does happen. I would not kid you about it.  ?@ Senator MCCONNELL. I am familiar with plenty of others that were not dropped that were dealing with such matters as refunds of a few hundred dollars, inadvertent designations and that sort of thing. Thus, my question. What is an important case?  ?(# Mr. MCDONALD. You know much better than I, from your background in the law, that as a practical matter, we try to take a portion of each and every type of violation established under the statute. We know we will get to some of them, and we know we will not get to a lot of them. We constantly have to make these judgments. '0*((@@ԌWe find out, and your point is an excellent point, what you feel is in dispute. We always are faced with exactly the same thing. A Senator said to me the other day that he was very unhappy we had not pursued his opponent who I think spent about $12,000 in total against him in his campaign and had not complied with the law.  ?x Senator MCCONNELL. But you are quoting him. I am asking you whether you think $350,000, $100,000 in the case of one contribution, is an insignificant case?  ? Mr. MCDONALD. Not at all. In fact, I would urge you to look at my vote on that.  ? Senator MCCONNELL. And do you think 5 years is long enough to look? Because your letter to the chairman of the Republican party, dated June 8, 1995, says Yet, even if the Commission were to devote substantial resources to this matter, it is virtually inconceivable that the deadline would be met. I am not sure which deadline it is referring to here, the November deadline.  ?h Mr. MCDONALD. Let me just say""  ? Senator MCCONNELL. Five years.  ? Mr. MCDONALD. Let me be very clear. I agree with you. I do not think it is insignificant. I have just been handed a note, and I apologize because I did not review the case prior to coming here, the Commission found no probable cause to believe, on a four to two vote, regarding the soft money account. I do not see a date on this. When you ask me what I think, all I can tell you, Senator, is I would be happy for you to look at my record.  ?X Senator MCCONNELL. I do not want to belabor it any further. It is perfectly clear to me where your priorities are. The FEC authorization request justification states, The average staff person coding documents for itemized data realized a 52 percent increase in productivity in 1994 over 1990. I am curious as to what accounts for this astounding increase in productivity? Is it overtime, technology, or the same people simply working harder? We know they were not working harder on the case I was just referring to, but what were they doing?  ?# Ms. ELLIOTT. It was technology, and it is a matter that we have assigned good personnel. We have been able to get specialists, people who do this well. It is a combination of them working harder, better people on it, and technology. '0*((@@Ԍ ? Senator MCCONNELL. Shifting to the Presidential Election Campaign Fund, I understand the first recipients of fund money for the 1996 election will be the political parties for the purpose of putting on their respective nominating conventions in Chicago and San Diego. When will they receive their checks and for what amount?  ? Ms. ELLIOTT. The amount that we anticipate is $12.5 million, I believe. I will be very happy to give you the exact amount.  ? Senator MCCONNELL. That is close enough.  ? Ms. ELLIOTT. It was $11 million each last time for a total of 22.  ? Senator MCCONNELL. Who was the first candidate to qualify for primary matching funds for the 1992 presidential election?  ?H Ms. ELLIOTT. 1992?  ? Senator MCCONNELL. Yes, do you know?  ?h Ms. ELLIOTT. By time?  ? Senator MCCONNELL. Who was the first to qualify for the 1992 presidential election?  ?P Ms. ELLIOTT. I do not know, but I can find that out and get that to you.  ? Senator MCCONNELL. I do. Let me tell you. The answer is Lenora Fulani of the New Alliance Party, the California Peace and Freedom Party, the Illinois Solidarity Party, the Vermont Liberty Union Party, and the South Carolina United Citizens Party. Ms. Fulani has received $3.5 million in presidential election campaign funds for 1984, 1988, and 1992 candidacies. In what years, either of you, has Lyndon LaRouche been a presidential candidate and received money from the fund for his campaign?  ?@ Ms. ELLIOTT. I have that exactly here, Senator. He was first a candidate, I believe, in 1980. That was the first time, and he has been in every presidential election since then.  ?`" Senator MCCONNELL. Was he in prison during the 1992 presidential election?  ?$ Ms. ELLIOTT. Yes, he was, or for part of the campaign.  ?H& Senator MCCONNELL. How much tax money did Mr. LaRouche receive for the presidential campaign while he was in prison? '0*((@@Ԍ ? Ms. ELLIOTT. I believe he was in prison when the U.S. Court of Appeals ordered the FEC to certify him eligible for matching funds. The Commission certified an initial payment of $100,000. His final net public funding (after repayments) was $278,416.99.  ? Mr. MCDONALD. We voted, as you know, Senator, not to give him that money and lost that case in the courts.  ?@ Senator MCCONNELL. The check-off rate has declined significantly over the last 15 years. In fact, President Clinton's 1993 budget tax bill tripled the check-off from $1 to $3 in order to wring more money from fewer people checking yes. Is it true that after the check-off was raised 300 percent the money diverted into the fund increased 258 percent while the check-off rate decreased 23 percent? Is that essentially accurate?  ? Ms. ELLIOTT. That is essentially accurate but I can give it to you in figures. In 1993, $27,636,982 came in. In 1994, $71,188,575 came in. So that was a substantial increase. However, on the number of people, an additional 3,890,791 fewer people contributed the $3 than had contributed the $1 the last time. But the highest participation was when 28.7 percent checked off in 1980. In 1993, it is down to 14.5. We do not have the IRS figure for 1994 but it is likely to be in the 12 percent range.  ? Senator MCCONNELL. Thank you. I am curious, based on your projections, what you think the impact on the check-off rate would be if the taxpayer actually had to pay it.  ? Ms. ELLIOTT. There has been a recent study that shows the various States that have a system where you add $1, either by adding $1 to what you owe or taking $1 away from your refund.  ? Senator MCCONNELL. I am sorry, would you say that again?  ?X Ms. ELLIOTT. I said there has been a recent study done on those various plans and it shows definitely, if there is an add-on, the number that contribute goes from less than 1 percent up to maybe 3 or 4 percent.  ?@ Senator MCCONNELL. Focusing on the general counsel's office for a minute. Of your total full-time employee positions at the FEC, how many are employed in the counsel's office or in support of the counsel?  ?(# Ms. ELLIOTT. I do not seem to have that, but I can get that for you.  ?% Senator MCCONNELL. Anybody behind you have that? The question is, of the total full-time employee positions at the FEC how many are employed in the counsel's office or in support of the counsel? '0*((@@Ԍ ? Ms. ELLIOTT. About 60 are attorneys and there are about 100 in the whole office.  ?X Senator MCCONNELL. There are 100 in the counsel's office? Now how many total employees are there at the FEC?  ? Mr. MCDONALD. The low 300's, Senator; around the 310 range, 320 range on a given day.  ? Senator MCCONNELL. So it is roughly one out of three that are in the counsel's office or in support of the counsel's office?  ?` Mr. MCDONALD. Yes.  ? Senator MCCONNELL. What was that number, if you know, say 10 years ago, just the ratio?  ?H Ms. ELLIOTT. I cannot give you that but I will furnish that.  ? Senator MCCONNELL. Anybody got an idea of what the ratio was 10 years ago?  ?0 Mr. MCDONALD. Roughly the same.  ? Senator MCCONNELL. Looking at it another way, what percentage of the FEC's funding is spent by or in support of the counsel's office?  ? Ms. ELLIOTT. We can furnish that information because we do have summary figures that tell us how much personnel and benefits, pay and benefits go into each division. We have that readily available.  ? Senator MCCONNELL. Anybody got a rough estimate? I will take the specifics when you can get them for us, but anybody got a rough estimate behind you there?  ?  Ms. ELLIOTT. No. We will supply that information for the record.  ?x The CHAIRMAN. Senator, I have another witness and I have another meeting.  ? Senator MCCONNELL. I am almost through, Mr. Chairman.  ?`" Mr. MCDONALD. Senator, I apologize again. Roughly about a third. I am told it reflects about the same.  ?$ Senator MCCONNELL. The same as the composition"  ?H& Mr. MCDONALD. Roughly, yes, sir; I think that is correct. '0*((@@Ԍ ? Senator MCCONNELL. What do you think is the more important function of the Commission, disclosure or enforcement?  ?X Ms. ELLIOTT. In my opinion, they go hand in hand. Without enforcement we would not necessarily have disclosure.  ? Mr. MCDONALD. I concur with that, Senator.  ?@ Senator MCCONNELL. Since the chairman is anxious to move along, I have got some other questions which I am going to submit for the record, Mr. Chairman. Hopefully we can get answers.  ?` Mr. MCDONALD. May I just comment on one point because I know it is important to you and I apologize for not being better prepared earlier. Regarding the matter you brought to our attention involving the Kentucky case, I want to be sure one thing was not left out in the overall context, the Commission did take a formal vote on that. It took a formal vote some time ago and found four to two that there was not probable cause to believe. What I was trying to get across to you, Senator, and I am sure you had this problem in your capacity as judge"there will be a number of cases that we are going to get to and a number of them we are not. We did go through the entire process in that case. There was a vote taken on that case. The Commission decided to take no further action on the case for a variety of prosecutorial reasons which will appear in the file once it is placed on the public record.  ? Senator MCCONNELL. Do you have the vote in front of you. I was curious as to who voted how. Is that a published vote?  ? Mr. MCDONALD. Yes, they are all published and will be part of the public record. We will provide a copy to your shortly.  ?X Senator FORD. Had to be a Republican vote with you because it is divided three and three. So if the vote was four to two, it was a non-partisan vote.  ?x Mr. MCDONALD. You may be in shock, actually I voted with you, Senator. It is one of the reasons I was hesitant to get into this. I was not trying to pick on any of my colleagues.  ?! Senator MCCONNELL. We will take a look at that. Mr. Chairman, I will just submit the balance of my questions in writing if that will help you. Thank you.  ?$ The CHAIRMAN. I forgot something and I hope you do not mind. We have a policy now that we are going to swear witnesses before this Committee until we get the law changed that the court"that it was not proper to have held to answer unless they were"for unsworn testimony. So I want you to now swear""'0*((@@Ԍ ? ԙSenator MCCONNELL. Swear to what you've already said.  ? The CHAIRMAN. Do you swear that the testimony you have given before this Committee has been the truth, the whole truth, and nothing but the truth, so help you God?  ? Mr. MCDONALD. Yes.  ?@ Ms. ELLIOTT. Yes.  ? The CHAIRMAN. Very good. Thank you very much.  ?` Senator FORD. I have no further questions for them, Mr. Chairman. But I might say, Mrs. Bingham is deceased and she died at the time the city was honoring her. It was right interesting that she said, I am so happy that I hope a pink cloud will come down and take me away, and it did.  ? Senator MCCONNELL. Ms. Bingham's philanthropy is not the issue here.  ?h The CHAIRMAN. Let me call the next witness. Thank you all very much. Mr. Brent Thompson. Is there anyone with you, Mr. Thompson, that you wish to have""  ? Mr. THOMPSON. Just me.  ? The CHAIRMAN. Do you swear that the testimony you are about to give is the truth, and nothing but the truth, so help you God?  ? Mr. THOMPSON. I do.  TESTIMONY OF BRENT THOMPSON, EXECUTIVE DIRECTOR, FAIR GOVERNMENT FOUNDATION, WASHINGTON, DC  ? Mr. THOMPSON. Mr. Chairman, members of the panel, I have a lengthy statement that I will submit for the record if that is all right.  ? The CHAIRMAN. Yes, sir, we have that.  ?! Mr. THOMPSON. I will simply highlight a few things in that. I do not intend to talk on each of those matters. Some of them have been raised here. I would like to start off, however, as the first matter in my testimony indicates, talking about the question of the legitimacy and importance of congressional oversight. I think what we witnessed here today is an outstanding example, and indeed one that unfortunately has received criticism over the years; is Congress' 0*((@@ giving vigorous oversight to the Commission? I would like to talk a little bit about that. Number two, I would like to talk about the question of the blue ribbon commission on campaign finance reform very briefly. And third, on the question of the Presidential Election Campaign Fund.  ?x The CHAIRMAN. If you do not mind, our subject is the Federal Election Commission. We all have other meetings. We will hear your comments orally on the Federal Election Commission, but take the balance of your comments for the record.  ?` Mr. THOMPSON. All right, I will then speak with respect to the congressional oversight. To do its job effectively the FEC needs guidance from Congress and vigorous oversight is indeed necessary. Unfortunately, the job has been frustrated in part by critics and press alike. They stand at the ready to tag Congress for interfering with the Commission any time Congress strays from a posture of deference. I would cite as a recent example a Washington Post editorial where the writer took to task House appropriators for undertaking a full-scale review of the FEC as part of the process. The effect of congressional scrutiny, it was charged, may well be to keep political corruption cops from doing their jobs. Mischaracterizing the FEC as political corruption cops and denying the legitimacy of congressional oversight is a disservice to the Commission and to the Congress. Confusion about the appropriate role of Congress in overseeing the FEC and in establishing policy for the conduct of Federal elections is very common. Much is made of the fact that the FEC is the only regulatory agency in Government that gets its money from the very people being regulated. While interesting, it is totally irrelevant to the question of what public policies concerning campaigns and elections ought to prevail. The FEC is not, and cannot be as a constitutional matter, a policymaking power under itself. Indeed, it can only exercise that power granted by Congress. Contrary to those who have been quick to accuse Congress of improper influence over the Commission, Congress has arguably taken too deferential an approach. When compared to routine oversight hearings of other agencies, the FEC has historically had very little oversight and guidance from Congress. We would note that during the 10-year period 1984 to 1993 the FEC appeared before Congress an average of about three times a year. I think to avoid confusion about the appropriate level it is instructive to emphasize the difference between trying to influence an open, particularized enforcement case and providing oversight in the development of rules of regulations. My testimony does talk'!0*((@@ about personal use regulations. There are a lot of criticism of members of Congress who tried to influence that process; an issue that has a very dramatic effect and fundamentally changes, I believe, the nature of the FEC's mandate. In recent years there have been a good number of cases in which members of Congress have been called to account for trying to influence enforcement actions. There is no disagreement as to the impropriety of that. But policymaking is another matter entirely. The Commission exercises authority derived from Congress and the fact that they live under those rules should not be a reason to forgo that oversight. In conclusion, we would submit that what happened here today ought to happen frequently and ought to be very important. I think we saw Vice Chairman Elliott indicate that it was very instructive in getting the clarification from you; perhaps an issue that has been outstanding for some months or other period of time and through the oversight process they are now moving swiftly on the question of floppy disks. So I would submit that as an example today of why Congress, I think, needs to continue to do that and not to in any way be influenced by critics, because there will be critics and there may be critics of the hearing today. So I will submit the rest of my comments for the record. [The prepared statement of Mr. Thompson follows:] d PREPARED STATEMENT OF BRENT THOMPSON, EXECUTIVE DIRECTOR, FAIR @ GOVERNMENT FOUNDATION, WASHINGTON, DC Mr. Chairman and Members of the Committee: My name is Brent Thompson and I am executive director of the Fair Government Foundation, a non-profit, non-partisan organization that undertakes research and public education in the area of political action, campaign finance and government ethics. Thank you for inviting me to testify. I have divided my testimony into two parts: first, recommendations concerning the general operation of the Commission and observations that should bear on reauthorization, and second, comments on two substantive issues we are recommending the Committee address through the reauthorization process. 1.Recommendations and Observations. a)` ` Vigorous Congressional Oversight is Appropriate and Necessary.(#` To do its job effectively, the FEC needs guidance from Congress. Vigorous congressional oversight is both appropriate and'"0*((@@ necessary. We understand that critics and the press alike are always poised to criticize Congress for what they deem interfering with the Commission's operation. The latest example  ?X appeared in Sunday's Washington Post. David Broder took House appropriators to task for undertaking a full-scale review of the FEC. In his column, Broder made the absurd suggestion that the effect of congressional scrutiny of the FEC may well be to keep the political corruption cops from doing their job. Broder's careless rhetoric does a disservice to the Commission and to the Congress. He mischaracterizes the agency as political corruption cops and denies the legitimacy of congressional oversight. Broder knows better. The FEC has a narrow and clearly defined statutory role"to facilitate and enforce disclosure standards. The FEC does not, and was never intended to have, a broad mandate to attack political corruption. It is not institutionally or structurally suited to such a task. Congress rejected such a model, in point of fact, during consideration of the FECA. The Department of Justice was believed at the time to be, and remains today, fully empowered to be political corruption cops. The Public Integrity Section was designed for just such a purpose. The FEC is what Congress designed it to be"neither fish nor fowl, a conciliator and a cajoler, not a cop. To knowingly suggest the FEC is, or was ever intended to be, something else is to cleverly employ strawmen to reach a preordained conclusion. Broder and other critics are similarly confused about the appropriate role of Congress in overseeing the FEC and in establishing policy for the conduct of federal elections. Much is made of the fact that the FEC is the only regulatory agency in government that gets its money from the very people being regulated. While interesting, it is totally irrelevant to the question what public policies concerning campaigns and elections ought to prevail. The FEC is not, and cannot be as a constitutional matter, a policy-making power unto itself. It can exercise only that power granted by Congress. Actions that exceed that grant are, as a matter of law, null and void. No amount of posturing or editorial writing can make it so. Article I of the Constitution grants to Congress the power to regulate federal elections. Whether or not Congress finds it easy to exercise that authority, the regulation of federal elections is too weighty a matter to delegate. Further, even if it were able to delegate legislative authority, the matter of authorization and appropriation of funds is alone that of Congress. Broder indicts vigorous exercise of that authority. Not because the authority is invalid but because he evidently does not prefer certain outcomes. Unfortunately those who should know better use the ambiguous nature of the FEC as a sword to fight for policies the Congress has rejected or is disinclined to adopt.'#0*((@@ԌContrary to those who have been quick to accuse Congress of improper influence over the Commission, the Congress has arguably taken too deferential an approach. When compared to the routine and, at times, almost ruthless oversight of other federal agencies and departments, the FEC historically has had very little oversight and guidance from Congress. In fact, during the ten year period 1984-1993, the Commission has been called before Congress"House and Senate combined"exactly 33 times, typically for routine budget hearings. That averages out to 3.3 times per year. To avoid confusion about the appropriate level of congressional oversight, it is instructive to emphasize the very  ?` substantial difference between trying to influence a particular enforcement action and providing oversight in the development of rules and regulations affecting the political process. In recent years, there have been a good number of cases in which members of Congress have been called to account for their efforts to influence the outcome of particularized enforcement matters before other agencies. There is no disagreement as to the impropriety of such actions. Policymaking is another matter entirely. The Commission exercises authority derived from Congress. The fact that members ultimately live under the rules promulgated by the FEC is no reason to forgo overseeing the Commission as it attempts to carry out the will of Congress. If you believe the FEC is exceeding its statutory authority or straying from its policy mandate, we submit that it is not only permissible but essential that the Congress, and this committee in particular, voice its concerns. b)` ` The FECA Should be Amended to Establish a Reasonable Limitations Period for Action on Complaints.(#` The Commission has repeatedly complained to Congress about being overwhelmed by a growing enforcement case load and routinely seeks additional resources as a consequence. As Vice Chairman Elliott testified, [t]he Commission does not control . . . the number of complaints filed. With the number of complaints having risen 45 percent, Vice Chairman Elliott noted that such explosive growth has had an adverse impact on the FEC's budget and operations. A substantial portion of the FEC's budget"over 25 percent"is allocated to the General Counsel's office, the bulk of which funds enforcement activities. It thus makes sense to examine the enforcement process in attempting to identify operational efficiencies and budget savings. I underscore that in doing so, the goal, clearly, must be to maintain or increase the current enforcement bang, but to do so with less enforcement buck. The rationalization of the FEC's enforcement process began in 1993 with the Commission's move to a prioritization system. This new approach was described as a sweeping change[] to the way [the FEC] would enforce election laws, including prioritizing its'$0*((@@ caseload and using prosecutorial discretion to select the most significant cases to pursue. The Commission is correct in bringing to bear a stronger sense of prosecutorial discretion. Limited resources is a fact of life with which all enforcement authorities must grapple. After 24 months of operation, however, the returns on the FEC prioritization system are decidedly mixed. For example, although 1994 saw a marked increase in the amount of civil penalties assessed, the number of cases conciliated was only 113. This is  ? down form a recent high of 262. (See Figure 1). Our informal polling of a number of individuals who regularly represent clients before the Commission, moreover, suggests there remain serious problems with the way the FEC administers its enforcement program. The chief concern is there appears to be a disconnect between the seriousness of a case and the length of time required for its disposition. Anecdotal evidence suggests that seemingly straightforward cases too often become drawn out by protracted investigation and negotiation. Some have described the conciliation process as a test of wills that often has little to do with the underlying merits of the case. As a result, it is not uncommon for cases to remain on the Commission's docket for years, frequently not concluding until well into the next election cycle. As part of its priority system, the Commission has sought to greatly increase the collection of civil penalties. We are fearful that the push to maximize assessment of civil penalties contributes to delay and works at cross purposes with the goal of enabling the FEC enforcement staff to concentrate on major cases. As between the two goals, we believe a more efficient enforcement process is the more important and comports more closely with congressional intent. We propose therefore that the Committee consider adopting a reasonable limitations period, say two to three years, during which time the Commission must act upon or dismiss a case. We believe a limitations period would be helpful in encouraging a more expeditious handling of cases and in forcing the Commission to be more discriminating in its choice of cases to pursue. c)` ` The FECA Should be Amended to Establish a One Term Limit for Commission Service.(#` As a general good government suggestion, we recommend that the Committee consider amending the FECA to limit the length of service for commissioners. Currently there is no legal limit to the number of terms one can serve. And in light of the current membership of the Commission, there does not appear to be a practical limit either. Of the current membership, only one commissioner is serving in his first term, one is in his second term, three are in their third'%0*((@@ terms, and one has been a member since the Commission opened its doors in 1975. By the time the current FEC membership complete their present terms, they will have served in toto a staggering 92 years, which computes to an average service of 15 years each. Recognizing the value of experience and long-term perspective, we believe that periodically bringing new blood, enthusiasm and perspective to the Commission can only be considered positive. So that I am not misunderstood, our recommendation should not be taken as a personal criticism of any current or former member of the FEC. That is not our purpose. Our specific recommendation, therefore, is to amend the Act so that no person can serve more than one complete six year term and, to permit some degree of continuity, the balance of any unexpired term to which they are appointed to complete. Thus the longest any individual could serve would be roughly 11 years and 11 months. Since the Fair Government Foundation first proposed term limits in testimony before the House Oversight Committee in April, support from disparate sources has grown. House Appropriations Committee Chairman Bob Livingston has indicated his support and even the left-leaning Center for Responsive Politics supports the concept. d)` ` Observations Concerning Campaign Finance Reform.(#` The Committee will undoubtedly be called upon in the future to consider once again the issue of campaign financing. To get a jump on the debate, the Committee may find it worthwhile to consider data from the most recent election.  ? 1. Incumbents took a beating. Although incumbents standing for reelection were overwhelmingly reelected, that fact masks how competitive elections were in 1994. Some high profile incumbents lost, and many who saw the handwriting on the wall decided to retire. Control of the House of Representatives changed hands for the first time in 40 years.  ?x 2. Participation by individuals increased. Contributions by individuals rose 13 percent from 1992, while PAC contributions declined 8 percent from 1990. Of the $740 million raised for the 1994 election, $402 million"nearly 55 percent"was from individuals (half in increments of $500 or less). In contrast, PACs gave only 24 percent.  ?# 3. The number of PACs declined from 1993, with corporate PACs dropping by over 100.  ?H& 4. Campaign spending increased slightly from 1992 (6  ?' percent), but in real terms dropped. (See Figure 2). '&0*((@@Ԍ ? 5. Campaign spending was once again not decisive in election  ? outcomes. e)` ` Observations on Repeal of the Presidential Election Campaign Fund Act.(#` Budget Committee Chairman Pete Domenici's mark proposes repeal of the Presidential Election Campaign Fund Act. Senator Mitch McConnell is among the chief repeal proponents. Momentum for repeal derives significantly from the fiscal imperatives facing the nation. It is an entirely legitimate question to ask whether in the face of $200 billion deficits as far as the eye can see, Congress can continue to justify spending upwards of $45 million a year on presidential elections. At a time when every federal expenditure is coming under scrutiny, it is difficult to make the case that presidential election funding should be exempted. From the Fair Government Foundation's perspective, the issue of repeal should not be prejudged. The right questions should be asked. If they are satisfactorily answered, a consensus to continue the program will likely emerge. Reflexive retention of public funding, however, cannot be considered responsible. The 900 pound gorilla standing in the corner is the propriety of public funding of elections. This is particularly the case given the limited government revival sweeping the country. Salient to the consideration of repeal is the withering public support for the program. Each year taxpayers, through the tax form checkoff, are accorded an opportunity to cast a ballot on public financing of elections. The returns are unambiguous. By progressively diminishing percentages, the American people are reflecting waning  ?8 support for the program. See Figure 3. When proposals for repeal surfaced, there was an immediate outcry among prominent editorial writers. The program was hailed as a model of good government; an almost unalloyed success. One writer described it as the one attempt at cleaning up politics that actually has worked. From an empirical perspective, it is difficult to make such a case. Ignored is the fact the several other reforms were enacted simultaneously. Not least of which were systematic disclosure rules and contribution limits. To draw intelligent conclusions about the effectiveness of the program, it is necessary to separate the remedial effects of these reforms from those of the public funding provisions. In attempting to do so, one cannot overlook the fact that congressional elections also have been largely free of charges of serious financial corruption. Yet, as we all know, public funding is not a feature of House and Senate elections. We are not convinced at this time that the case against repeal is self-evident. The budget reconciliation process will inevitably bring the matter before this committee. A sober and searching''0*((@@ review of the Presidential Election Campaign Fund Act can only be considered a responsible, good government initiative. We look forward to participating in that process. II.Substantive Issues a)` `  Personal Use Issue Should be Addressed Through Legislation.(#` The standard refrain of the Commission is to decry the lack of resources. While we are sympathetic to the fact that a considerable amount of the Commission's work load is out of its hands, as the number of complaints filed and the number of candidates per election cycle are highly variable, they should not be heard to complain when they begin to reap what they have sown with the promulgation of personal use regulations. With the personal use regulations, the Commission has stepped off a steep cliff it has wisely avoided for years and has turned down a path the architects of the FEC explicitly denied would occur. In the committee report accompanying the Federal Election Campaign Act Amendments of 1974, which created the FEC, the majority stated emphatically: X [o]pponents of campaign reform . . . argu[e] [it] will lead to bureaucrats in Washington telling candidates how to run their campaigns. This objection is unfounded. The bill makes clear that candidates are permitted full flexibility and discretion in their electoral efforts, subject only to limitation on the dollar amounts of expenditures and contributions. [S. Rept. 93-689 at p. 9 (1974), accompanying S. 3044]  Interjecting itself into the issue over how candidates spend campaign contributions is a needless expansion of federal regulation of campaigns that will result in a crush of additional complaints, burdening an already out of hand enforcement docket. Adopting personal use regulations, moreover, was a gratuitous use of authority"authority, no less, that is itself of questionable clarity. In the notice adopting the final rules, the Commission cited their general grant of power to prescribe rules, regulations and forms to carry out the provisions of the Act as its basis for proceeding. Such an analysis of the Commission's authority is wholly circular. For the issue is not whether the FEC has authority to adopt rules and regulations, but is rather, what are the substantive contours and limits of that authority. It is axiomatic that agencies only have as much authority as that granted by Congress. The Commission has not made a convincing demonstration that Congress intended it to regulate in this area. Irrespective of the authority question, we believe that the appropriate use of campaign funds is in the first instance a question for candidates and their constituents. If detailed'(0*((@@ regulation of campaign contributions is called for, the Congress, not the Commission, should establish such policy. That defining the permissible use of campaign funds is a question best left to Congress is demonstrated by the continuing efforts of Congress to legislate in this area. Indeed the Senate in January of this year tabled by a 2 to 1 margin a proposal to amend the FECA's personal use provision. Finally, regulating the use of campaign funds continues the unfortunate trend of rendering the pursuit of elective office a highly legalistic undertaking. Lawyers, accountants and consultants become that much more indispensable, raising the bar ever higher for anyone but professional politicians to seek office. In the end, regulation of the use of campaign funds amounts to one more election lawyers full employment act. b)` `  Member Regulations Should be Reviewed by Congress.(#` In 1993, the Commission adopted revised rules defining the term member. The new rules have been the subject of a legal challenge since and are currently before the D.C. Circuit Court of Appeals. Given the hardships imposed by the rules, the absence of a compelling public policy purpose and the fact that they burden the exercise of core First Amendment rights, we recommend that the Committee review the regulations and consider appropriate legislative changes. Under federal law corporations are prohibited from making expenditures in connection with elections for federal office. To ensure the unfettered right of certain membership organizations or corporations to communicate with their members or stockholders with regard to political matters, H. Rep. 93-1239 at 4 (1974), the FECA was amended in 1974 to exclude communications by membership organizations to its members. Since 1977 the Commission defined member as persons who are currently satisfying the requirements for membership in a membership organization . . . . 11 C.F.R. 100.8(b)(4)(iv), 114.1(e) (1993). Under the new rules, membership organizations are no longer the principal judge of whom constitute their members. The adoption of the revised definition by the FEC is yet another example of the Commission straying from its central mission of disclosure. Although the stated reason for the change was to reduce the need for individual membership organizations to seek advisory opinions, 57 Fed. Reg. 46346 (1992), there is little evidence to suggest a serious problem existed. Their justification rings hollow when one considers that the revised rules have required all membership organizations to reevaluate their circumstances in light of the changes and for many to seek further guidance from the Commission. That the Commission expected such would occur is reflected in the fact the regulations provide that')0*((@@ the Commission may determine, on a case by case basis, that persons seeking to be considered members of a membership association do qualify even though they do not precisely meet the requirements of the general rule. 11 C.F.R. 100.8 (b)(iv)(C). The immediate consequence of the adoption of the revised definition is to jeopardize the ability of membership organizations, whose membership structure has long been a settled matter, to communicate with their members. The most compelling examples are the U.S. Chamber of Commerce and the American Medical Association (AMA). Under the new rules, the U.S. Chamber was informed by the FEC General Counsel that only 63 of its 220,000 members should be considered members for FEC purposes. The AMA was advised that of its 290,000 members, 44,500 would not meet the new definition. Our search for understanding why the Commission felt it must devote its time and precious resources undertaking the definitional change and then litigating the case over the course of years has come up empty. It is difficult to make a case that either by virtue of documented abuse or because of compelling public policy reasons, the membership issue demanded the Commission's attention. It is at best a unnecessary distraction and at worst a squandering of resources. This matter is ripe for congressional intervention. The Committee should explore revising the FECA to avoid the absurd results evidenced by the U.S. Chamber and AMA cases. There appears to be no disagreement about the intent of Congress or the goal of the section. Membership organizations who happen to be incorporated, should not be prohibited from communicating with their memberships. Conclusion That concludes my testimony. I will endeavor to answer any questions you may have. I would be happy to work with the Committee should you choose to address the issues we have highlighted. Thank you again for this opportunity to testify.  ?@ The CHAIRMAN. I appreciate that very much, Mr. Thompson. I have looked at your statement, the reasonable limitations on action for complaints. I think we need to look at that. We are going to try to look at the question of term limits for Commission service. Those, I think, are legitimate questions to be raised and we hope to have some further hearings perhaps on the Commission itself later in the year. But I take your comments to heart concerning the oversight function. We do try to pursue that. It is a matter of time for a committee like this. Everyone that is on this Committee is either chairman of a full committee or a subcommittee and it is hard to get time to have really full attention to an issue. '*0*((@@ԌI do think we want to make this system more viable. I think our colleagues raise substantial questions about the eligibility for matching funds. That is something I think we ought to go into. That ought to be constitutionally possible to limit those people who are merely seeking to have employment every 2 years by running for office in terms of that matching"every 4 years, having matching funds come out of the Treasury. I think it is possible. We are working now on a concept to see if we cannot limit a candidate to just literally matching funds from the Treasury until that candidate carries a full State delegation to his or her  ? convention. So that the de minimis candidates would not have any matching money in excess of the amount they have raised until they get to that level. We are getting a historical study to see how that would impact the fund. But I do not believe that we should have money going to people who are in jail, and I do not believe we should have monies going to just perennial candidates who file and get the qualification"they raise $100,000 then they automatically get $2 million. That is ludicrous and we have got to get at that. We appreciate watchdogs like yourself and I do not have any further questions. Do the gentlemen have any questions?  ? Senator FORD. I do, but you go ahead. I have several. So if you have just one""  ? Senator MCCONNELL. I just wanted to ask one. Mr. Thompson, you recommended a one-term limit on service of FEC commissioners; a length of 6 years. I gather you think experience is a bad thing in this field. Is that your conclusion?  ? Mr. THOMPSON. I think one of the complaints is the question of recent experience in campaigns and essentially feeling or being on the other side, or feeling the burden as some of the senators have expressed today, about the day to day operation of a campaign and the headaches, if you will, that are brought to bear. So I think a strong case can be made that people who have toiled in the vineyards recently have a very keen appreciation for the administrative burden, if you will, and how to perhaps minimize that and to recognize that the FEC has a very substantial effect on how campaigns are run.  ?`" Senator MCCONNELL. I guess my thought is, would that reasoning not extend to the general counsel equally as well? I mean, if we should have term limits for commissioners on the FEC, how about some of the unelected folks down there who have an enormous impact on the process. I think, for example, of the general counsel or maybe the deputy general counsel. What would be your reaction to that? '+0*((@@Ԍ ? The CHAIRMAN. Would you yield to me just for a minute? I am going to have to leave and I would leave senators to ask Mr. Thompson questions, but I do want to limit the scope of the hearing.  ? Senator MCCONNELL. This is related to the FEC.  ?x Mr. THOMPSON. I think so. I think that the FEC is a little different than some of the other agencies with respect to the power of the chairman. I do not know how I come out on this, but I think you do see in some of the other independent agencies that when a new chairman comes in there is some movement at the senior staff level and some changes. I know, of course, the FEC was deliberately designed to avoid perhaps capture of the agency by the current chairman. So I think there are some impediments, given the design of the Commission, to affect who is serving in those senior staff positions. But I think that you can make that comment and I think it is an accurate comment with regard to a lot of Federal agencies. The question that I think is frequently asked is, how much power does the staff have and are they in any way undermining or having undue influence on the opinions of the people who are appointed as the policymakers?  ? Senator MCCONNELL. Does that mean you think a term limit for the general counsel might be as good an idea as a term limit for commissioner then?  ? Mr. THOMPSON. We did raise in our testimony before the House the question of staff longevity. I think that you have to look at them in tandem.  ? Senator MCCONNELL. Thank you, Mr. Thompson. I guess I'm presiding. Senator Ford?  ? Senator FORD. You can leave any time you want to. I have got about 5 minutes. Mr. Thompson, I wanted to remind you that you are under oath. I want to ask, are you the Brent Thompson of 425 2nd Street, NE, Washington, DC, or have you lived there?  ?`" Mr. THOMPSON. No.  ?# Senator FORD. Sir?  ?% Mr. THOMPSON. Never lived there, no.  ?' Senator FORD. You are not the Brent Thompson of 425 2nd Street, NE?',0*((@@Ԍ ? ԙMr. THOMPSON. No, sir, I have not lived there.  ? Senator FORD. Is that the address of the National Republican Senatorial Campaign Committee?  ? Mr. THOMPSON. I believe it is.  ?x Senator FORD. In your testimony, Mr. Thompson, you state that the Fair Government Foundation is a non-profit, non-partisan organization and that you are concerned with issues of campaign finance, lobbying, and government ethics; is that correct?  ?` Mr. THOMPSON. That is right.  ? Senator FORD. It is my understanding that this organization was founded last fall; is that correct?  ?H Mr. THOMPSON. That is correct.  ? Senator FORD. And it is my understanding that you received start-up funds from the National Republican Senatorial Campaign Committee; is that correct?  ? Mr. THOMPSON. Yes, sir.  ? Senator FORD. In the amount of $50,000 in October of 1994 and $19,384.62 in February of this year; is that correct?  ? Mr. THOMPSON. Yes, sir.  ?p Senator FORD. When were you appointed the executive director?  ? Mr. THOMPSON. In fall of 1994.  ? Senator FORD. Could we say the month of October 1994?  ?  Mr. THOMPSON. Yes.  ? Senator FORD. I understand that you personally received salary payments from the National Republican Senatorial Campaign Committee in October, November, and December of last year while you were at"so you were getting dual salaries?  ?! Mr. THOMPSON. No, sir.  ?(# Senator FORD. But at least you were working for this foundation while being paid also by the Republican campaign committee?  ?% Mr. THOMPSON. That was part of the seed money, or efforts at""  ?' Senator FORD. That is in addition then to the other money, your salary?'-0*((@@Ԍ ? ԙMr. THOMPSON. That is correct.  ? Senator FORD. I am concerned"the reason I ask this, we talk about all these things that we worry about"that an organization which claims to be concerned with important issues as government ethics, campaign finance, and lobbying reform would represent to this committee that it is non-partisan. Do you say that you are non-partisan?  ? Mr. THOMPSON. Yes, sir.  ? Senator FORD. How do you account for that?  ?( Mr. THOMPSON. Number one, the issues that we debate""  ? Senator FORD. No, how you were started and how you were given seed money and how you were being paid at the time to set this up"do you consider that to be non-partisan?  ? Mr. THOMPSON. Yes, I do. We have""  ?h Senator FORD. Your view of being non-partisan and mine is somewhat different.  ? Mr. THOMPSON. Ultimately, we would like to be judged on what we say and what we advocate. We do not engage in statements with regard to candidates. We do not engage in lobbying. It is a well-known fact that Senator Paul""  ? Senator FORD. What are you doing now if you are not lobbying? You are representing. You are doing a form of lobbying if you want to put it in broad terms. That you are here testifying as it relates to the action and activities of government and you want to impress us in a certain manner so that our votes would be based on your recommendation to the committee; is that not correct?  ?  Mr. THOMPSON. Two things. One, we certainly are engaging in a public dialogue and certainly Congress is very important to that and is a hub for that. When I said we do not lobby I was being a little bit more specific. There are definitions in law. We have, of course, limitations given our 501(c)3 status what we can do. And of course, an invitation to testify before a committee is in fact not lobbying as a legal matter. More generally however, I would say that we are not engaged in walking around up here, knocking on doors asking you to support or oppose a particular measure. What we do and what we are going forward with is to emphasize the research and the public education and to engage in the dialogue. With respect to the question of partisanship, sir, these issues truly are, I believe wholeheartedly, non-partisan issues. I'.0*((@@ think there are any number of matters that we could discuss here today that fundamentally do not split on party lines. Of course, one of the most recent is the question of the Presidential Election Campaign Fund Act which the Senate recently voted on and it had bipartisan support, of course, of you and the chairman of this Committee. So I think that is an outstanding example.  ?x Senator FORD. While I appreciate your testimony, I question your representation that this organization is non-partisan.  ? Mr. THOMPSON. May I offer""  ?` Senator FORD. We all know the positive implications that the term non-partisan creates and that term, in this senator's opinion, not be used loosely. I think it is important for this committee and the general public, which will review your testimony, to be aware of your funding sources so that we and the public can draw our own conclusions about just how non-partisan your organization really is. So I ask that a copy of the May 20, 1995, National Journal article and copies of the National Republican Senatorial Campaign Committee filings with the FEC indicating salaries paid and so forth be included as part of the hearing.  ? Mr. THOMPSON. Senator, if I might ask if I could submit for the record"and I do not have it with me"is a letter from DNC chairman Don Fowler in response to correspondence from me indicating that he felt that the Fair Government Foundation was a valuable and admirable undertaking and he wished us""  ? Senator FORD. It is probably like a senator's office"it came to some staff member who thought it sounded all right and turned around and wrote you a letter and put his signature on it.  ? Senator MCCONNELL. Nevertheless, we will make that a part of the record. I might say, Mr. Thompson, you do not put your principles in escrow just because you may have formerly been employed by the National Republican Senatorial Committee. There is another group Senator Ford and I are aware of called Public Citizen which is funded by the Trial Lawyers, one of the biggest special interests in town, probably the richest special interest in town, and they portray themselves as non-partisan. And Joan Claybrook""  ?`" Senator FORD. I say to my friend, they do not go around saying they are non-partisan.  ?$ Senator MCCONNELL. They certainly do. And Joan Claybrook, who is the head of Public Citizen, was in the Carter Administration. So I do not think the fact that Mr. Thompson may have worked with the senatorial committee in the past necessarily comprises his point of view.'/0*((@@Ԍ ? ԙSenator FORD. I doubt seriously if any of those that you are referring to have been paid by the party for several months while they are putting the organization together. So Mr. Thompson received, and I have the dates from the filing from the National Republican Senatorial Campaign Committee, the dates that he was paid and the amounts that he was paid. I just put that on the record. We can all go back, I can go back, to the reason we have a Federal Election Commission; it was because of President Nixon. We can go all back to those things. But the point is that this is here and now. You have just recently been organized. I understand what you are trying to do. I just think we ought to reveal it to the public.  ? Mr. THOMPSON. If I might respond, I would suggest that the beginning of examining an organization for whether you believe they are partisan or not perhaps starts with their support base. But ultimately, organizations ought to be judged on the strengths and merits of their arguments, what they say and what they do. We would hope that you would accord us that courtesy as well.  ?0 Senator FORD. That is perfectly all right, but I want to know where you came from, and how you got started, and where your money comes from. I did not know that a senatorial campaign committee was giving seed money to start up non-profit organizations that have certain things to do. Now you have got too much money in that committee, and maybe you ought to loan us some on our side. We do not have enough. We do not have the ability to go out here and start non-partisan foundations. I know who the chairman is and we can go through all of that. So I just think that it is a different procedure now that the campaign finance committees are getting into all of these things. My colleague understands where I am coming from, and I understand where he is coming from. We are not kidding each other. But there were a lot of strange contributions under the last chairman whom he lost to by one vote, I believe, or less, or two. But anyhow, those strange contributions were made out of a campaign committee. So we are getting into the Federal Election Commission. Here is a campaign committee that got its money based on support for candidates for the Senate that are funding non-partisan organizations out here to talk about ethics, to talk about lobbying, and talk about all these things. But I think there is a tinge here, and I just wanted it to be part of the record.  ?H& Mr. THOMPSON. I do not think it is illegitimate at all to raise those questions and we welcome them. I would simply note that one of the reasons why our funding base is subject to scrutiny is that'00*((@@ we had made a decision to make that public. So we certainly under the law""  ?X Senator FORD. Did you make the National Republican Senatorial Campaign Committee funding public?  ? Mr. THOMPSON. Yes, sir.  ?@ Senator FORD. When did you do that?  ? Mr. THOMPSON. It appeared in a number of articles and""  ?` Senator FORD. Just recently though.  ? Mr. THOMPSON. Yes.  ? Senator FORD. Not the salaries.  ? Mr. THOMPSON. No.  ? Senator FORD. The salaries"you were being paid while you were starting this up, and you were given seed money by the Senatorial Campaign Committee.  ? Mr. THOMPSON. Yes, sir. But what I am getting at is that henceforth we have a policy of disclosing contributions. Those who are engaged in this debate, and I will mention a couple by name"Common Cause, Public Citizen, in particular"have steadfastly refused to do that and we would call on them to do the same. They should be""  ?8 Senator FORD. I wish they would. I have been for it for some time.  ? Mr. THOMPSON. They should be subject to the same scrutiny and we would welcome that as well. But ultimately, I think that you have to stand or fall on the strength of your ideas and that is how, of course, public policy operates. If people happen to support those ideas and give money to the organization then that is a positive thing. But we would hope we would be judged ultimately on the strength of our ideas.  ? Senator MCCONNELL. I guess the hearing is adjourned on a high note. [Whereupon, at 11:09 a.m., the Committee was adjourned.] H'_______