‘Gray money’: New Washington law to lift the cloak on PAC funders

OLYMPIA – New Direction. Enterprise Washington Jobs. Mainstream Voters of WA. Conscience of the Progressives.

Every election cycle, Washington voters get bombarded with advertisements, like mailers, from political action committees (PAC). With their generic, soft-focus names, those PACs give little hint about what interests or agenda they promote.

State transparency law has tried to help voters determine PAC ad funders. On the advertisements, PACs must disclose their top five contributors who meet a certain dollar threshold. That could be an individual or an entity such as a corporation or labor union.

But what happens when the donor is another PAC with yet another generic, soft-focus name?

For example, Conscience of the Progressives is actually funded by conservatives and last year sent election mailers to aid Republicans in swing-district legislative races. It is funded almost wholly by another PAC named Send A Message, whose prime donor is Peter Zieve, an aerospace entrepreneur who gave $1 million to support Donald Trump in 2016 and who has drawn scrutiny for expressing anti-Muslim sentiments.

Thus, an election ad by Conscience of the Progressives last year showed Send A Message PAC as the only top donor.

On the other side, New Direction PAC supports progressive candidates. In 2018, three of its top five donors were PACs, according to state campaign-finance records, including two Democratic Party spending groups. And the third PAC? Almost all of its funding came from those two same Democratic spending groups.

It’s a tactic called “gray money” and it’s a popular strategy in Washington and around the nation for shielding the flow of money. Through a series of “nesting doll” PACs, campaigns or political parties can cloak donations by individuals, corporations, industry associations or labor unions.

Now, a measure passed by state lawmakers this year could aid voters by revealing some of the top donors or organizations behind the cryptic groups.

House Bill 1379, sponsored by Rep. Mike Pellicciotti, D-Federal Way, and was signed by Gov. Jay Inslee. It will take effect this July, in time for this fall’s local, state and judicial elections, including Seattle City Council races.

The law takes its own “nesting doll” approach to transparency.

If the top five contributors listed on a PAC’s advertisement include another PAC, the top three donors to any of those committees must be revealed, provided they meet a certain dollar threshold.

If any of those donors are PACs, those top three-three qualifying contributors must be named. And so forth, until three root contributors or organizations have been named.

“The new law is an important step forward to make sure that voters know who’s funding mailers and TV ads during election season,” said Pellicciotti, who on Friday announced his intention to run for state treasurer in 2020.

The bill passed along party lines in the Senate, with Democrats in favor. But state House lawmakers approved the final version by a unanimous vote.

Rep. Jim Walsh, R-Aberdeen, said he didn’t think the bill was perfect – but it is an improvement.

“We want transparency,” said Walsh, ranking Republican on the House State Government & Tribal Relations Committee.

Not everyone approves. The Building Industry Association of Washington (BIAW), whose PAC is a major contributor to conservative causes, said it believes the law won’t increase transparency. That’s because of that existing threshhold to exclude small-dollar donors, meaning those contributors don’t get named.

In an email, Jennifer Spall of the association said that would allow PACs made up of only small donors to not appear at all in disclosures.

Spall said that could include BIAW’s PAC, known as the Washington Affordable Housing Council. In 2018, that PAC got donations from a range of smaller member PACs, such as regional builder associations in Spokane, Olympia, the Tri-Cities and Whatcom County.

“Any member or employee-based organization made up of hundreds or even thousands of small contributions will not be disclosed at all,” she wrote.

The new law also directs the state Public Disclosure Commission, which oversees campaign-finance issues, to develop rules to make sure PACs can’t circumvent disclosure requirements.

But because the law takes effect during the election cycle, the commission can’t make rules during election season, according to spokeswoman Kim Bradford. So that will have to wait until after the election.