Maryland and campaign finance reform

Our view: Gov. Martin O'Malley's support for closing the LLC loophole could be the start of something big — or more of the same

February 16, 2011

Efforts to bring some modest reform to Maryland's loophole-ridden campaign finance laws got a boost this week from Gov. Martin O'Malley. But the top Democrat's newfound interest in closing one of the more glaring deficiencies in state law is tempered by his desire to simultaneously loosen overall limits on political giving.

As Attorney General Douglas F. Gansler's recent task force reported, there are at least two dozen or more holes to plug in Maryland campaign finance law. Mr. O'Malley has thrown his support to closing exactly one — the ability of developers and others to use limited liability corporations (LLCs) to skirt contribution limits.

Here's how the LLC racket works: Under current law, individuals and corporations can give up to $4,000 to a candidate or $10,000 to all candidates for state office during any four-year election cycle. The law treats an LLC as a separate business entity, although the same person or persons may own many LLCs.

In real estate, for instance, it's not uncommon for a commercial property to be owned by its own LLC, and an investor may control a dozen or more. Hence, that person can give $4,000 per LLC, or $48,000 per dozen LLCs, a huge advantage in the political fundraising game.

Legislation heard by the House Ways and Means Committee this week would bring an end to the practice by treating related LLCs as one contributor for purposes of campaign finance limits. In a letter to the committee's chairman, the governor called the current methodology a "gaping hole" that circumvents the state's campaign finance laws. He should know. He benefited mightily from it.

But in the same letter, Mr. O'Malley also supports increasing contribution caps beyond the $4,000/$10,000 limit. That's something the proposed legislation would not do — although such a change could easily be amended into it.

Not so fast. If the LLC was the only problem to be found in campaign finance law — or perhaps even the worst one — higher limits might be justified. Certainly, it won't be terribly hard to find the votes in the General Assembly for "reforms" that result in making it easier for delegates and senators to raise money toward their re-elections.

But as the Gansler report documented, there are many others. The worst may be the "slate" loophole that allows political candidates running on the same slate (a nebulous term under the law) to share donations. Thus, a person who is running — or has merely run in the past — for office can give thousands, even millions, of dollars to a candidate running for an entirely different office, without any apparent limits whatsoever.

A cynic might suggest the slate loophole is a far more useful tool for a sitting governor than the LLC loophole, particularly a second-term governor who is unlikely to run for state office again, but we shall attempt to refrain from such speculation.

Mr. O'Malley might also turn his attention to rules that allow an individual to make a loan of an unlimited amount to a candidate — even, for example, $500,000 on the eve of an election when the polls suddenly look close. The governor may be able to bring to bear some expertise on that issue as well.

Nevertheless, before anybody in the State House decides to raise contribution limits, they need to make some more serious strides in campaign finance reform. Closing the LLC loophole is no more than a nice start.

That may require House and Senate leadership to swallow their collective pride and actually take a look at the 118-page Gansler report, rather than send the topic to summer study. We understand they are miffed because Mr. Gansler did not invite them to participate, but surely overlooking that slight is not too much to ask, particularly after the bruising Democrats have taken with recent political scandals in Baltimore and Prince George's County.

Lest anyone in Annapolis forget, this week's indictment of former Prince George's County Executive Jack B. Johnson for soliciting and taking bribes only underscores how public trust in Maryland's elected officials is on the wane. Serious campaign finance reform, and not some token effort, is just what a skeptical electorate would appreciate right now.

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