Dark money: Despite $4 billion spent, midterms hinge on hidden funding

Ten years ago, it was 527 groups and Pioneer bundlers for George W. Bush. In 2008, Barack Obama took the nation’s top office by storm as soft money ruled. Last election cycle, super PACs were all the rage. In 2014, campaign finance reform has given way to dark money, with unknown sources of indirect campaign spending dropping hundreds of millions of dollars to influence federal races.

“Who are these people, and what do they want with the state’s Senate race? Who are these interests, and what is motivating them?” asked Sheila Krumholz, director of the Center of Responsive Politics, in reference to the burgeoning political fundraising tactic.

Dark money, about $200 million of which has been spent nationally this election cycle, is secretive money generated by nonprofit organizations whose primary purposes are not legally considered "political".

“We can see where the money comes from going to the candidates’ campaigns and going to some of the outside groups,” Krumholz said. “But for politically active nonprofits, we have absolutely no idea who’s bankrolling their efforts.” She blamed anonymous donors for giving voters “inaccurate, misleading and deceptive information to make up their minds.”

The North Carolina Senate race between incumbent Democrat Kay Hagan and Republican challenger Thom Tillis has set records for out-of-state funding: $75 million as of Oct. 30. The candidates combined have raised only half as much as outsiders have dished out, and the total race spending exceeds $107 million.

Over $20 million of the outside money has been spent attacking Tillis – more than on opposing any other candidate nationally. Hagan has benefited from the Senate Majority PAC and Democratic Senatorial Campaign Committee, the two largest contributors. But much of the money spent against Hagan, who carries a slight lead, is not reported to the Federal Election Commission (FEC), and so it cannot be tracked precisely. However, there is somewhat of a paper trail for broadcast negative ads.

Not far behind the North Carolina face-off are close Senate contests in Iowa, where Republican Joni Ernst is polling just ahead of Bruce Braley for an open seat, and Colorado, where Democratic Sen. Mark Udall is fending off a challenge from Republican Rep. Cory Gardner. Outside spending makes up more than two-thirds of overall funds used to influence both outcomes.

These races are also considered virtual toss-ups, though the Republicans appear to have a slight edge in recent polls.

While dark money spending has favored Democrats in North Carolina and Colorado, such heavy spending on many of the key contests could ultimately win the day for the GOP, as much less dark money overall is being used to aid Democrats. A network of organizations funded by brothers Charles and David Koch, including Americans for Prosperity, has spent more than $50 million alone.

While $140 million in dark money spent on "express" candidate advocacy was reported so far this year, another approximately $60 million used for generic issue advocacy is obfuscated and is not reported to the FEC.

Jacob Fenton, a data expert at the Sunlight Foundation, said this latter type of advertising was epitomized by indirect messaging that says, “Did you know that your senator wasted billions of dollars? Call your senator to say he wasted billions of dollars!”

Although dark money is only 5 percent of the more than $4 billion in election spending this record-breaking cycle, according to estimates by Sunlight, it’s a disproportionate chunk of the donations for swing races that will determine whether Republicans take control of the Senate.

The top three sources of dark money are the U.S. Chamber of Commerce, Crossroads GPS and the NRA Institute for Legislative Action, which together have spent tens of millions supporting Republicans and attacking Democrats.

“We are seeing money spent by groups that have anodyne, positive-sounding names,” Krumholz said. “That makes people lean in and listen more. If it’s organizations with which people are familiar, they can make up their minds about whether it’s a credible organization and whether they agree with the message and messenger.”

“But if it's an organization with which they’re not familiar, they’re more likely to give them credibility they would not otherwise be due,” she said.

In the complex world of campaign finance where jargon masks the money trail, political action committees tied — or "connected" — to specific corporations or unions are crucial to most campaigns' success. So are super PACs, which were enabled by the 2010 Citizens United decision and essentially pool unlimited funds as expressions of free speech.

And there’s plenty of dark money that is ping-ponged into super PACs and then to other committees, leaving its true origin in doubt. Some have compared the arrangement to matryoshkas, or Russian nesting dolls.

Individual campaign committees may not coordinate directly with super PACs, although they do coordinate outside money from the national party committees. There are strict limits on many types of spending into and out of the vast campaign finance system.

“Outside spending continues to grow as a share of what is spent overall on elections,” said Viveca Novak of OpenSecrets. “Dark money looks like it may overtake super PAC spending as the category of outside groups most active in elections.”

“There’s plenty of room for campaigns to be aware of what outside groups are doing, and that’s not illegal,” she said. “They can publicly announce it and often do let each other know. What they’re not supposed to do is plot strategy together.”

Novak said there is not much hope for a constitutional amendment tackling unrestrained campaign financing that flopped around the Senate Judiciary Committee in January. One of the biggest proponents of looser regulations is Sen. Mitch McConnell, R-Ky., who could soon become majority leader. Of the $10 million in dark money spent in his race, 82 percent was to oppose Alison Lundergan Grimes, the Democratic challenger.

In addition, advocates fear more sections of the landmark 2002 McCain-Feingold Act, which tightened the rules on campaign financing, could be further weakened by an unsympathetic Supreme Court.

“To say [the outlook] is pretty dim is overstating the issue,” said Novak. “We are where we are for the time being.”

There’s also an ongoing legal battle between Republican members of the Federal Election Commission and the commission’s own report about the potentially illegal use of dark money to influence politics. Citizens for Responsibility and Ethics in Washington, a watchdog group, originally filed the complaints to force the organizations in question to name their contributors.

In the final days leading up to the Nov. 4 midterms, an estimated $20 million will be spent daily on federal campaigns alone. Despite advocates' efforts, U.S. elections will become only more expensive — and real campaign finance reform more elusive.

“Midterms,” a three-part documentary from director A.J. Schnack, goes inside four key political races in three swing states. The final episode airs Sunday, Nov. 2, at 9 p.m. ET/6 p.m. PT.