U.S. Supreme Court Ruling on Federal Applicant Loans Unlikely to Affect Non-Federal Applicants in NJ
Wednesday, January 19, 2022 marked the day the United States Supreme Court heard arguments in Federal Election Commission (FEC) against Ted Cruz for the Senate.
U.S. Senator Ted Cruz of Texas has challenged a provision of federal campaign finance law that limits the amount federal candidates can be reimbursed after the election for a personal campaign loan.
The case raises two main issues: 1) whether the senator has standing to challenge the law, and 2) whether the limit violates the free speech clause of the First Amendment.
Section 304 of the Bipartisan Campaign Reform Act (BCRA) of 2002, better known as the McCain Feingold Act, prevents a candidate who gives a personal loan to his campaign from seeking a post-election repayment of more than 250,000 $.
The day before Election Day in 2018, Senator Cruz loaned his campaign $260,000; $5,000 from his personal bank accounts and $255,000 from a loan secured by his personal assets.
FEC regulations used to enforce the law’s repayment limit established a 20-day window after Election Day in which personal loans up to $250,000 can be repaid using donations received before, during or after the election. Loan amounts over $250,000 can only be repaid with pre-election funds during the 20-day period.
Federal Election Commission Rules for Federal Nominee Loan Repayment
|Applicant Loan Amount||Within 20 days after the election||More than 20 days after the election|
|$250,000 or less||Can use contributions collected before, during or after the election|
|Over $250,000||Can use contributions collected before the election||Refund is no longer allowed|
After the 20-day period ends, loans of $250,000 or less can still be repaid, but candidates can no longer tap into campaign accounts to repay loans over $250,000.
After the election, the Cruz campaign had $2.38 million remaining in its account. Instead of using those funds to repay the entire $260,000 loan, his campaign let the 20-day period pass and then was only able to repay $250,000.
While acknowledging that his action was deliberate, Cruz argued that the law still unconstitutionally barred him from recovering $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 application of Section 304 of the BCRA.
The suit claimed the law violated his First Amendment free speech rights.
A three-judge DC District Court panel ruled the senator had standing to challenge the law, saying the unpaid $10,000 portion of the loan constituted “financial harm.”
The panel went on to find that Section 304 violated the constitution because the government had failed to demonstrate that the provision served a quid pro quo interest in preventing corruption.
Following the district court’s decision, the FEC appealed the case to the United States Supreme Court, which is currently reviewing it. A decision is expected this summer.
Several briefs from the Friends of the Court have been filed concerning this case. Two of the filings were made by Senate Minority Leader Mitch McConnell and the Brennan Center for Justice.
As McConnell uses the case to try to strike down what remains of the Bipartisan Campaign Reform Act (previous U.S. Supreme Court rulings have struck down other sections of the law), the Brennan Center is seeking to make so that the Supreme Court rules on Section 304 as constitutional. He argues that allowing candidates’ loans to be reimbursed indefinitely could be corrupt, as it could lead to candidates making political deals with donors to get their loans back.
I think the Brennan Center and Senator McConnell will be disappointed.
Although the composition of the Supreme Court leans conservative, it will not overthrow the BCRA. Some are beginning to call the Court the Thomas Court. They believe longtime Justice Clarence Thomas, a strong conservative, has the most sway over the 6-3 Republican majority.
I believe there is still Roberts Court. Led by Chief Justice John Roberts, the court has struck down portions of the BCRA before and will likely do so again by upholding Cruz’s appeal of First Amendment rights.
But also under Roberts, the court generally respected precedent and tended to move incrementally in campaign finance cases. It is highly doubtful that the court will go too far and completely overrule the BCRA, especially since in recent decisions Judge Brett Kavanaugh has often sided with the Chief Justice.
In addition, the complete cancellation of the BCRA would significantly reduce disclosure related to election advertising. The Roberts Court strongly approved the disclosure of these advertisements in Citizens United v FEC (2010).
“While the justices signaled their support for Cruz’s case, there was no indication that they supported a total overhaul of the BCRA as advocated by Senate Minority Leader Mitch McConnell…” the reporter wrote. Courthouse News, Kelsey Reichmann, after covering the January 19 hearing.
I agree that the Court is likely to rule that Senator Cruz has standing to bring the case and that Section 304 of the BCRA is unconstitutional because it violates First Amendment free speech rights.
The Court is likely to accept Sen. Cruz’s argument that the $250,000 cap requires the candidate to loan no more than $250,000, thereby infringing the candidate’s First Amendment rights.
I also believe that this decision would not impact non-federal New Jersey applicants.
In its wisdom, the state legislature has allowed non-gubernatorial candidates in New Jersey to personally loan their campaign unlimited amounts (debt is treated differently for gubernatorial candidates because they are eligible for funding public) and to have the loans repaid after the election with post-election donations.
Donors cannot exert undue influence on candidates as contributions made after the election are subject to contribution limits for that election and repayment can only be made up to the amount of the loan.
The New Jersey policy appears to be constitutional whether or not the Supreme Court rules in favor of Senator Cruz and finds federal law in violation of the First Amendment.
Jeff Brindle is the executive director of the New Jersey Election Law Enforcement Commission. The opinions presented here are his own and not necessarily those of the Commission.
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