The Wall Street Journal-20080205-Campaign -08- Interest-Group Campaign Spending Nears Record- Figure for First Time Could Top --36-1 Billion- IRS Reports on 527s

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Campaign '08: Interest-Group Campaign Spending Nears Record; Figure for First Time Could Top $1 Billion; IRS Reports on 527s

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Spending by interest groups in the current presidential campaign is on pace to far exceed the record amount spent by outside groups in the last presidential election -- and could top $1 billion for the first time, according to new campaign-finance reports.

The data show that spending by 50 of the largest independent political groups -- ranging from American Federation of Teachers on the left to Swift Boat Veterans for Truth on the right -- jumped to $130.8 million in 2007, up 55% from 2003, the year before the last presidential election. There were 28 groups that spent more than $1 million each on politics in 2007, twice as many as in 2003, according to the reports released this week.

If that pace continues in 2008 -- and there is every indication that it will -- the amount of money spent by interest groups to influence elections will exceed $1 billion. Outside political entities spent at least $800 million during the 2003-04 campaign season.

The figures come from new disclosure reports released over the weekend by the Internal Revenue Service. They cover one large set of outside political groups that are called Section 527 organizations for the name of the tax code under which they were incorporated.

Groups formed under Section 527 are obligated to make public their donors and spending. In 2004, the 527 organizations spent $650 million on elections, according to forms the entities are required to file with the IRS.

Spending by another type of interest group, Section 501(c) nonprofit corporations, wasn't included in the IRS report because they don't need to disclose their spending for the most part.

Although no disclosure is required, a Wall Street Journal survey of the largest 501(c) political organizations found $150 million in campaign spending by the organizations in 2004, and that those entities also plan a huge increase in spending this year. Just one of these 501(c) organizations, the conservative Freedom's Watch, plans to spend as much as $250 million on the election.

The 527 organizations were widely criticized for injecting big money into the political system when they first came to prominence in 2004. In August, the Federal Election Commission fined the largest Democratic group, America Coming Together, more than $775,000 for accepting large donations from donors with the premise that the money would be used to defeat President Bush. The fine amounted to less than 1% of the $78 million that group spent in 2004.

Among Section 527 groups, a new Democratic organization called the Fund for America plans to spend $200 million in this election cycle. The group, formed in November, is run by John Podesta, a former chief of staff for President Clinton; Rob McKay, a prominent Democratic philanthropist; and Anna Burger, the secretary-treasurer of the Service Employees International Union. The SEIU gave $2.5 million to the effort. Hedge-fund manager George Soros, who bankrolled massive campaign efforts in 2004, also gave $2.5 million.

Another 527 organization, run by the SEIU, spent $14 million in 2007, more than any other organization, though it didn't make the list of top 527 organizations in 2003. Seven of the top 10 organizations were liberally oriented, the same as in 2003.

The reports showed a large amount of spending by another Democratic group, America Votes. The group, which tries to coordinate get-out- the-vote efforts among independent progressive groups, spent $5.4 million in 2007, according to the filings.

It paid $459,000 for services from Catalist LLC, an organization that uses corporate marketing techniques to find Democratic voters and get them to the polls on Election Day.

Former House Speaker Newt Gingrich, a Republican, in late 2006 formed a group called American Solutions for Winning the Future, which spent $6.8 million in its first year of operation. The group's largest expenses were $1.2 million for telemarketing and $1 million for services of Moby Dick Airways, a charter-jet company.

That group's largest donation was $1 million from Sheldon Adelson, owner of the Sands Casino. Mr. Adelson was the second-largest individual contributor to 527 organizations last year, after Mr. Soros.

Mr. Adelson is also backing Freedom's Watch, the group that plans to spend as much as $250 million this election. Freedom's Watch, which is active in the Iraq war debate, comes under the 501(c) tax rules, so isn't required to file disclosure.

Hotel and casino executive Bill Young, real-estate developer Fred Godley and hedge-fund manager Donald Sussman each gave $1 million as well to 527s.

The newly filed reports show that the group called Alliance for a New America, which ran advertisements backing John Edwards's presidential bid, spent a total of $4.1 million last year, more than the $2.4 million already reported to the Federal Election Commission. The group's largest donations, $3.5 million, or 73% of the total, was from a partnership whose sole member was Bunny Mellon, the wife of late philanthropist Paul Mellon.

A Republican group called the Presidential Coalition LLC spent $3.7 million, about half for polling, but rent and salary expenses were sent to another group called Citizens United, which recently produced a movie critical of presidential candidate Hillary Clinton. A separate political arm of Citizens United recently paid $100,000 for television advertisements against Arizona Sen. John McCain.