How Will the Change in Campaign Finance Laws Affect Nonprofit Fundraising?

Yesterday was a lousy day for democracy, but it may also turn out to be a pretty bad day for anyone who raises money for a think tank or advocacy shop. Why? Because if individual donors motivated by a cause or an ideology can give more money to politicians and political parties, they may give less to nonprofits who are fighting for their beliefs. 

The best way to think about money in politics is that it's a mighty river with multiple tributaries. First, there's the familiar flow of cash directly to politicians and parties. Second, and more recently, there's the money that flows to special non-profit entities that are heavily involved in the electoral process. The third tributary is the money flowing into lobbying. And the fourth, which doesn't get much attention, is philanthropic money that flows to 501(c)3 nonprofits that work to move an ideological agenda or a specific cause.

 

When some engineering group—say, the Supreme Court—comes along and reshapes things by widening or damming one of these tributaries, it affects how much money flows through the others. Thus, for example, some commentators like Steven Hill writing here have already predicted that the McCutcheon ruling is going to reduce the flow of cash to Super PACs, which does seem likely. 

 

It also seems likely that less cash will be coursing through the 501(3) tributary. 

 

Take a place like the Heritage Foundation, which raises the majority of its funding from wealthy individual donors who want to promote their conservative beliefs. Many of these donors also contribute to Republican politicians and party committees—but, of course, there have been limits to how much money they can send that way. It's probably no coincidence that Heritage began its climb to mega budgets in the 1970s, following the passage of campaign finance reform. Or that the foundation started to grow to it current super size—with a $76 million budget in 2012—after the passage of McCain-Feingold in 2002.

 

In fact, a lot of think tanks and cause-oriented nonprofits have experienced major budgetary growth over the past decade. But after McCutcheon, things could be different. 

 

Consider how this may play out for an issue like LGBT equality. Wealthy donors in this space—like Tim Gill —have pursued a highly diversified strategy. They've put money into policy and advocacy shops, they given heavily to politicians and party committees at both the federal and state level, and they've made use of special nonprofit entities. Over the years, some of these funders have surely bumped up against the overall federal cap on direct campaign contributions.

 

But what if those caps hadn't been there? That may well have meant more money going to sway elections and less going into LGBT advocacy groups. And that's the future that LGBT organizations may now face. Ditto for groups operating in other spaces, like the environment. 

 

Of course, the charitable tax deduction will always give nonprofits a leg up in the competition for money. But make no mistake: After yesterday, that competition just got more intense.