State GOP confronts debt load heading into 2012

The Republican Party remains more than $500,000 in debt as activists gather to approve next year’s budget

On Saturday Republicans will gather in Bloomington for a meeting of the party’s State Central Committee. Among the agenda items for the roughly 350 delegates: electing a new deputy chair and approving the party’s 2012 budget.

The latter discussion is likely to prove contentious. That’s because in recent years, the Minnesota GOP’s finances have been in rough shape. The most recent filing with the Federal Election Commission (FEC) shows that at the end of October, the party had debts of $519,000. It owed FLS Connect, a prominent GOP fundraising firm, more than $70,000 and Trimble & Associates, a law firm that has frequently represented the state party, just over $30,000.

In addition, the party’s cash on hand was listed at a deficit of $121,000 — underscoring significant cash flow concerns. On top of that, the state party agreed in August to pay a fine of $170,000 to the FEC for violating federal campaign finance reporting requirements. The bulk of that money, $105,000, will be paid next year. All told, that suggests that the state GOP owes roughly $750,000 heading into 2012.
Some GOP insiders are worried that the party’s money troubles could hinder campaign efforts in a crucial post-redistricting election year that finds all 201 state legislators on the ballot. “We clearly have made little to no progress this year in paying off the debt that we carried over from 2010,” said Pat Anderson, a member of the Republican National Committee who also sits on the State Executive Committee. “It’s not a good position to be in going into an election year.”

The party’s red ink marks a steep slide in recent years. In July 2009, when Tony Sutton became the state chairman, FEC records show cash on hand of $840,000 and debts of just over $200,000. By August 2010 the party’s debts had swelled to $740,000, while its bank account had dwindled to $13,000.
In comparison, the Minnesota Democratic-Farmer-Labor Party reported $113,000 cash on hand to the FEC at the end of October and debts of $236,000.

Federal records do not provide a complete portrait of either party’s finances. That’s because they are also required to file separate reports with the Minnesota Campaign Finance and Public Disclosure Board. In nonelection years, however, parties are only required to file a single report at the end of the year. At the close of 2010, the most recent state data available, the Republican Party of Minnesota showed cash on hand of $56,000. Its only listed debt was a $30,000 loan.

Multiple factors led to growing debt

Sutton blames the difficult financial situation on a confluence of factors. For starters the state’s political contribution refund program — which allowed donors to be reimbursed for small contributions — was eliminated in 2009. That caused small donations to shrink rapidly over the last two years. According to Sutton, the average small contribution dropped from $60 to $28. He points out that the GOP platform called for elimination of the contribution refund program. “We achieved that goal,” Sutton said. “The irony is we were much better at using the program than any other political organization in the state in either party.”

The moribund economy has, of course, added to the GOP’s fundraising difficulties. In addition the party continues to be hamstrung by a pair of financial decisions made in the last decade. In 2005, Sutton said, it took out a $200,000 loan to pay for the legal defense of then-party Chairman Ron Eibensteiner. Eibensteiner was ultimately acquitted of charges that he helped steer an illegal campaign contribution into state Republican coffers.

In 2003, the GOP signed a 10-year lease for office space at 525 Park Street in St. Paul, near the Capitol. The monthly rent has ratcheted up over the years even as the real estate market has collapsed. Next year the party is slated to pay $174,000 in rent — or $14,500 per month — for the 5,200-square-foot space.
“It makes our fixed costs very high, and there’s not a lot we can do about it,” Sutton said. “It’s a lease. So we’re obligated to pay it.”

Sutton further argues that recent electoral successes — most notably the 2010 takeover of the Minnesota House and Senate — have proven worth the financial price. He insists the party will pay its debts next year and finish 2012 in the black.

As a sign of progress, Sutton states that a $1 million goal for contributions from major donors has already been surpassed for 2011 and that he expects to hit $1.3 million by the end of the year. “I spend the vast majority of my time either raising money or thinking about raising money,” Sutton said.

Rick Weible, a member of the State Executive Committee, agrees that the party is on the right track to financial stability. “Am I concerned? Yes,” Weible said. “Do we have a plan to get out of it? You bet we do.”
But not all GOP insiders are placated by Sutton’s reassurances about the state party’s bookkeeping. They are looking for more than rhetoric. “I think it’s a matter of recognizing the reality and taking action to match our budget to the reality,” Anderson said. “That was not done over the last couple years. That’s why we have the debt that we do.”

A tighter budget for 2012

Sutton and the executive committee have created a lean $4.7 million budget for 2012 that they believe will allow the party to pay its debts and prepare for the 2012 elections. It includes less spending on personnel. Most notably, Executive Director Ryan Griffin will no longer be employed by the party, and there will be no salary for the incoming deputy chair. By comparison the state party’s budget for 2008, the last presidential election year, was $11.3 million — nearly two and a half times more. But that included nearly $5 million in transfers from other political committees, most notably the Republican National Committee. For 2012 the state GOP is conservatively booking just $600,000 in transfers. In fact, the 2012 budget is smaller than in any election year since 1996.

The weekend’s State Central Committee gathering will offer an opportunity for GOP activists to ask difficult questions about the 2012 budget and the overall state of the party’s finances. It also will be the first time delegates have gathered since the party agreed to pay the $170,000 FEC penalty. “The FEC fine is going to be an issue,” Weible said. “In the past, we always had it hanging over our head. … There are going to be a few who are going to be vocal about it.”

Anderson agrees that the party’s finances will be a hot topic at the gathering. “I think that we’ll spend a lot of time on these issues, and we should, quite frankly,” she said. “We all want the party to be successful. We want to get back in good financial shape. We want to have the resources to win elections. Everybody has the same ultimate goal.”