The $4.2 Million Question

[Editor's note: Our original story said Bill White could move all of his federal campaign money to his state account. That's not so. As with almost everything else in federal campaign finance laws, it's more complicated that it first appeared to be. About $1 million of White's money, we've learned, can't be transferred. You can read our mea culpa here. What follows is a corrected version of the story.]

If he jumps from the U.S. Senate contest to the Texas governor's race, Bill White's fund-raising capacity may soon enjoy an enormous boost.

Speculation over White's ambitions reached fever pitch Monday, as Tom Schieffer, one potential Democratic candidate bowed out, and state Sens. Eliot Shapleigh of El Paso and Kirk Watson of Austin urged fellow Democrats to support the Houston mayor for governor. White's thinking about it. In the meantime, how much of the $4.2 million in his federal war chest could be used for the potential state bid?

Short answer: Most, but not all of it.

"There's nothing barring him from moving those funds over to run for governor," said Kevin Shuvalov, a Republican political consultant. “He can transfer it over because federal campaign limits are different — they're set at a lower limit."

That's partly right. But White can only move money that was available to him for his first election — not money that contributors gave him for later federal elections. As a candidate for U.S. Senate, White is subject to the 1975 Federal Election Campaign Act, which limits individual donations to $2,400 per election. Political action committees, or PACs, may donate up to $5,000 to specific candidates. But since non-judicial elections in Texas are not subject to such limits, White would be able to raise much more money as a gubernatorial candidate.

“There is not a prohibition under Texas campaign finance law for those funds to be transferred over,” said Tim Sorrells, deputy general counsel for the Texas Ethics Commission, speaking only of state law. “The use of those raised federal funds is not prohibited under state law.”

White's donors contributed under the assumption that he was running for U.S. Senator. Does this fact at all hamper his use of funds for a governor's race?

A little bit. There are no restrictions at the state level. But federal law only allows him to transfer to the state account money that he could have used in a special election. Federal donors are limited to $2,400 per election, but many gave White $4,800, knowing he would set the remainder aside for another election later. The common donor practice is to go ahead and donate funds for federal candidates' primary and general elections at the same time. In White's case, that means that only the money available for the first election — the special election or primary election — can legally be "spent" by writing a check to his state campaign account.

White still has plenty of money he can transfer, even under this scenario. He raised at least $4.1 million this year for a primary election and about $1 million designated for a general election, according to White's campaign filings through Sept. 30. The latter donations would have to be refunded should White enter the governor's race. The primary donations, however, could be spent.

"That money would be allowed to be transferred to a state race, subject to state and local campaign-finance law," said Christian Hilland, a spokesman for the Federal Election Commission.

It could all be moot. White's agreed to "consider" the governor's race — you still think there's a question? — but if he stays in the Senate race, the money stays in the federal pot and all of this is academic. It's also a subject that lawyers can, and do, argue over. Don't be surprised if White's lawyers ask for an opinion and something new comes out.

Any money that is transfered can be used for any state campaign purpose.

“There are a few states which utilize what is called the trust concept — if I go out and take some money from you, telling you that I'm running for Senate, then the only way I can convert is to go back to the contributors and ask for permission,” said Buck Wood, a lawyer specializing in campaign finance. “A few states have that, but not many. And Texas doesn't.”

U.S. Sen. Kay Bailey Hutchison performed a similar maneuver last year. Her federal committee donated nearly $8 million to her state committee in three December installments. Since donations and campaign funds are much more closely scrutinized under federal campaign finance laws — subject to more "accounting hoops," as Wood put it — this transfer was viewed as a commitment to the 2010 Texas governor's race.

"Were he to decide to change from the Senate to the gubernatorial race, he would start with a significant advantage," said Jeff Eller, vice-chairman of the Austin-based public affairs consulting firm Public Strategies.

Part of this "advantage" lies in White's loyal donors, who have been hamstrung by the FEC regulations. With no donation limits, White can return to ask them for seconds — and for a larger helping. The White campaign has collected approximately 870 individual donations of $2,400, at least 240 of which maxed out at $4,800. He can use the first $2,400 from each for the state race, and could refund the rest and ask those donors to write a check — for that or a larger amount — to the state campaign. If White's campaign requested and received only another $2,500 from these individuals, the campaign would collect another $2.2 million. And some donors, of course, will probably be even more generous with their pocketbooks.