There were bound to be gaps in a 2019 revision to New Mexico’s dense elections transparency law that sought to force independent groups who aren’t required to register as political committees to disclose the money they spend in elections.
The changes were quickly put to the test the next year, during the 2020 election cycle, when a new independent expenditure group found a loophole so big it evaded reporting who donated hundreds of thousands of dollars it spent on political advertising.
Under the current law, if a group crosses a spending threshold for political advertising, it must report all of its donors who’ve given more than $5,000 – with one exception. If a donor puts in writing that their donation can’t be used for politics, the group isn’t required to disclose in its campaign finance reports who that donor is or how much they contributed.
That provision was exploited by a nonprofit formed in May of 2020, called the Committee to Protect New Mexico Consumers.
To get around reporting its donors, the group claimed that because it had it in writing from its donors that their funds couldn’t be spent on politics, it didn’t have to report the amount given or by whom.
Never mind that the group went ahead and spent the money on political advertising anyway, despite the written instructions. They followed the letter of the law even if they flouted its spirit.
The group initially argued it didn’t have to report its spending, as well, because advertising in support of a ballot measure to transform the state’s Public Regulation Commission from an elected to an appointed body was educational, not political.
In the end, the group did disclose the $260,000 it spent, and to whom payments were made, in a settlement agreement with the State Ethics Commission.
But the public still doesn’t know who provided the money, and voters approved the ballot question the group supported.
This year, Sen. Peter Wirth, a Democrat from Santa Fe who shepherded the decade-long effort to pass those 2019 revisions, hopes to close that loophole and other gaps in the law with Senate Bill 42, co-sponsored by Sen. Katy Duhigg, D-Albuquerque, and Rep. Matthew McQueen, D-Galisteo.
The bulk of the bill addresses existing loopholes, Wirth told the Senate Rules Committee last week. “…it’s an important effort to keep our campaign finance code as up to date as possible and to do as much as we possibly can to determine where funds are coming from.”
Jeremy Farris, executive director of the New Mexico State Ethics Commission, told the committee the bill in part was “reactive” to cases the commission has handled over the last three years, noting that his office tended to face lawyers from Washington, D.C. and New York. “It’s out-of-state money, and they have sophisticated attorneys,” Farris said. “And so in order to react to gaps that the smart lawyers from out of state kind of see in our law, we have to respond.”
The bill spells out in more detail about when donations or spending would have to be publicly disclosed. It speeds up reporting by independent groups; they would have to file reports in the final week of an election as candidates and political committees do.
And it adds a second requirement for these independent groups wishing to keep certain donors undisclosed. In addition to the donor putting in writing that their donations can’t be used for politics, the donations would have to be placed in a separate bank account that isn’t used for political spending.
The legislation is also “proactive,” said Farris, in making several other changes.
One has to do with personal loans that candidates make to their own campaigns.
Currently, candidates for public office can loan an unlimited amount of money to their campaign account and repay themselves later from money they accrue through campaign fundraising. Nothing in the law prevents them from paying themselves interest on the loan they made, nor are they required to prove they actually made the loan.
The big concern, said Farris, is that a candidate’s campaign could repay interest on a loan the candidate made to the campaign, while keeping the original loan on the campaign’s books, effectively turning campaign contributions into a source of income. New Mexico has nothing in the law to guard against that sort of occurrence, he said.
Under Senate Bill 42, candidates would have to offer proof they actually loaned the money, and would be barred from charging interest on those loans. The changes would only apply to loans made by the candidate.
The bill would also further tighten fundraising during a legislative session.
Currently, lawmakers and certain other public officials aren’t allowed to solicit campaign contributions during the “prohibited period,” which runs from the first day in January through the end of the legislative session (for the governor, the period runs through the 20 days after the session ends as decisions about whether to sign a bill into law are being made).
In addition, registered lobbyists are barred from contributing money during that period.
But otherwise, public officials covered by the prohibited period rules can accept money from non-lobbyists, if they didn’t ask for the funds.
This bill would change that – no longer could they accept those funds, with the exception of small donations up to $100. And the bill would add the same prohibitions to political committees, legislative caucus committees that raise money, or people running for those offices.
New Mexico in Depth looked at how much money was donated to lawmakers in 2022 during the prohibited period, and found $51,400 given primarily to those in leadership positions. This bill would bar lawmakers from accepting most of such funds while in the midst of changing or creating new laws.
The Senate Rules Committee approved the legislation last week on a six to three vote. The bill goes before the Senate Judiciary Committee next. It hasn’t been scheduled for a hearing yet.