US Supreme Court ruling on federal candidate loans unlikely to affect New Jersey state candidates

Wednesday, January 19, 2022 was the day the US Supreme Court heard arguments Federal Election Commission (FEC) v Ted Cruz for Senate.

US Senator Ted Cruz of Texas has challenged a provision in the federal Campaign Finance Act that limits the amount that federal candidates can receive post-election reimbursement for a personal campaign loan.

The case raises two main questions: 1) whether the senator has the right to challenge the law, and 2) whether the limit violates the First Amendment freedom of speech clause.

Section 304 of the Bipartisan Campaign Reform Act (BCRA) of 2002 — better known as the McCain Feingold Act — restricts a candidate who provides a personal loan for his campaign from seeking post-election reimbursement of more than $250,000.

The day before Election Day 2018, Senator Cruz loaned his campaign $260,000; $5,000 from his personal bank accounts and $255,000 from a loan backed by his personal assets.

FEC regulations to enforce the statutory reimbursement limit provide a 20-day window after Election Day in which personal loans up to $250,000 can be repaid with donations received before, during or after the election. Loan amounts greater than $250,000 may be withdrawn during the 20-day period using only primary fund funds.

Rules of Procedure of the Federal Electoral Commission Federal Candidate Loan Repayments

Amount of candidate loan Within 20 days of the election More than 20 days after the election
repayment options
$250,000 or less May use contributions collected before, during or after the election
More than $250,000 Can use contributions collected before the election Refund no longer allowed

After the 20-day period, loans of $250,000 or less can still be repaid, but candidates can no longer use campaign accounts to repay loans greater than $250,000.

After the election, the Cruz campaigner still had $2.38 million in his account. Instead of using those funds to repay the entire $260,000 loan, his campaign let the 20-day deadline pass and was then only able to repay $250,000.

Although he conceded his action was premeditated, Cruz claimed the law still unconstitutionally deprived him of repayment of $10,000 of the $260,000 loan.

In 2019, Senator Cruz filed a lawsuit in the U.S. District Court for the District of Columbia to prevent the enforcement of Section 304 of the BCRA.

The lawsuit alleged that the law violated his First Amendment right to free speech.

A three-judge panel of the DC District Court ruled that the senator had jurisdiction to challenge the law, claiming that the unpaid portion of the $10,000 loan constituted “financial damage.”

The panel then ruled that Section 304 was unconstitutional because the government could not demonstrate that the provision served an interest in preventing corruption in return.

Following the District Court ruling, the FEC appealed the case to the US Supreme Court, which is currently reviewing it. A decision is expected this summer.

Several briefs have been filed by Friends of the Court in relation to this case. Two of the motions were tabled by Senate Minority Leader Mitch McConnell and the Brennan Center for Justice.

While McConnell is using the case to try to overturn the remnants of the Bipartisan Campaign Reform Act (previous U.S. Supreme Court rulings have invalidated other sections of the statute), the Brennan Center is trying to get the Supreme Court to rule Section 304 to be declared constitutional. It claims that allowing unlimited repayment of candidate loans could be corrupting, as it could lead candidates to make political deals with donors to get their loans repaid.

In my opinion, both the Brennan Center and Senator McConnell will be disappointed.

Although the composition of the Supreme Court is conservative, it will not overthrow BCRA. Some are beginning to refer to the court as the Thomas Court. They believe longtime Justice Clarence Thomas, a strong conservative, has the greatest influence over the Republican 6-3 majority.

I believe the Roberts Court remains. Under Chief Justice John Roberts, the court has already struck down parts of BCRA and will likely do so again, upholding Cruz’s appeal to First Amendment rights.

But even under Roberts, the court has generally respected precedent and tended to take an incremental approach to campaign finance cases. It is highly doubtful that the court will overwhelm and overthrow BCRA entirely, given that Justice Brett Kavanaugh has often sided with the Chief Justice in recent rulings.

Additionally, repealing the BCRA entirely would severely restrict the disclosure of election-related advertising. The Roberts Court strongly endorsed the disclosure of such ads in Citizens United vs FEC (2010).

“While the judges signaled support for Cruz’s case, there was no indication that they supported a complete overhaul of BCRA, as advocated by Senate Minority Leader Mitch McConnell…” wrote Kelsey Reichmann, reporter for the Courthouse News , after covering the January 19 hearing.

I agree that the court is likely to rule that Senator Cruz is competent to bring the case and that Section 304 of the BCRA is unconstitutional because it violates the First Amendment right to free speech.

The court is likely to accept Senator Cruz’s argument that the $250,000 cap obliges a candidate to borrow no more than $250,000, thereby violating the candidate’s First Amendment rights.

I also believe this ruling would have no impact on non-federal candidates in New Jersey.

In its wisdom, the state legislature has allowed non-gubernatorial candidates for office in New Jersey to personally borrow their campaign indefinitely (debt is treated differently for gubernatorial candidates because it qualifies for public funding) and repay the loans thereafter to let election with post-election donations.

Donors are prevented from improperly influencing candidates as contributions made after the election are subject to contribution limits for that election and can only be repaid up to the amount of the loan.

New Jersey policy appears to be constitutional, regardless of whether the Supreme Court rules in Senator Cruz’s favor and finds that federal law violates the First Amendment.

Jeff Brindle is the Executive Director of the New Jersey Election Law Enforcement Commission. The opinions expressed here are his own and not necessarily those of the Commission.

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