For the past year, Massachusetts libertarians have worked with a new method of organizing their organization’s finances. Our objective was simple: Make sure that money is spent where it should be spent, on doing real politics.
Our approach to managing spending put the controls where they belong: at the front end.
Massachusetts Libertarians have two major sources of money: dues and donations. We also have two sorts of campaign accounts: State and Federal. Only state money raised under state funding restrictions can be spent on state campaign activities, such as supporting non-Federal candidates. Only Federal money can be spent on supporting Federal candidates or on Federal Election Activity. The definition of Federal Election Activity is very wide. For example, if we register someone to vote within 90 days of the Federal election, including elections in which we do not have a libertarian candidate, it is Federal Election Activity.
The restrictions on raising state funds are much more rigid than the restrictions on raising Federal funds. We can accept single Federal donations of up to $5,000. We can accept single state donations of no more than $500.
To control spending, we had to have a budget. However we have no idea in advance as to how many members will pay dues, we have no idea in advance as to how many members will give us donations. Those numbers have fluctuated wildly in recent years, so if looking at the past is a reasonable answer, the reasonable answer is: Your guess is as good as ours.
What we did was to invert the budgeting schemes used by other groups. We said: We know the missions we want to accomplish. We know that we have certain fixed expenses. What we will do is to allocate each dues payment and each donation as it comes in, and see what we can do with the money that we actually have. We also agreed that after six months we would revisit our allocations, and ask if they were working well.
To make life more interesting, we finally brought the state organization into the 21st century. We now offer electronic memberships, in which your newsletter is shipped to you as a PDF file. We now offer family memberships, so that if several people living under one roof are all members, and if they agree to share their newsletter, the extra family memberships are only charged at a minimum rate. We charge $25 for a paper membership, $15 for an electronic membership, and only $5 for a family membership.
In allocating dues payments, we first said that $10 of each paper membership is put into a distinct financial account — the money is all in the same bank account — to be used only for printing and publishing the paper newsletter. That decision guarantees that there will always be enough money to print and publish a newsletter in each and every month. We then asked what are other costs were.
Like every state party we have certain fixed administrative costs. We rent a post office box. We own a list of URLs that must be renewed. We have a website and must pay for hosting. The web site offers e-mail forwarding, which could have come as an extra expense. We have a list of Meetup groups subsidized by the State Committee. These facilities are used for what is legally Federal Election Activity — whether we happen to have a candidate in the race or not does not legally matter — and must be paid for with Federal hard money.
We also have a range of objectives:
Membership renewal
Volunteer incitement and support
Fund raising and membership recruitment
Candidate recruitment and outreach
Candidate and issue support
Administrative costs and reserve funds
For normal memberships, supported by donations to the Federal PAC, the allocation of funds went Newsletter (if paper) $10.00. And of the remaining membership dues:
Membership renewal — 20%
Volunteer support 20%
Fund raising and membership recruitment 30%
Candidate recruitment and outreach 20%
Administrative and reserve funds 10%
For donations other than membership renewals, the allocation went:
Candidates and issues 50%
Administration and reserve funds 10%
Fund raising 40%
Our fundraising documents give members the choice of giving money for renewals or giving money as donations. However, if a member gives more than $100 in the calendar year, we give the member a one year extension on membership for each hundred dollars, up to a five year limit. The expense is $10, and that only if the member is receiving the newsletter in paper rather than electronic form. We also passed a rule that monthly donors of $5 a month or more are placed in a special membership category in which their membership does not expire so long as they’re a monthly donor. If they stop giving, they still have whatever months are remaining on their original membership.
We are allotting $3 per member for a renewal effort. That means that we can do five distinct mailings to each member. We’re currently up to three new mailings, and I expect we’ll do the fourth and fifth after our forthcoming state convention. Fortunately, one of our members owns a Xerox Phaser, and is willing to print the newsletter so long as he is reimbursed his costs. Those costs, with substantial use of color, are lower than the costs for commercial printer giving us black and white prints. The Phaser has also given us upgraded full color brochures, brochures for candidates and neighboring states, and colorful recruitment flyers.
I am quoting the above numbers after we adjusted them a bit. At first we had allocated 30% to fundraising, and 20% to administrative and reserve expenses. A 30% allotment to fundraising requires that for each dollar you spend on raising money, you bring in $3.40. That number turned out to be unrealistically high. We raised the fund raising percentage to 40%, meaning that for each dollar spent on fundraising we have to bring in $2.50. That number seems to be working. On the other hand, a vigorous program of contacting former members and others, urging them to renew and coin, has meant that our membership decline has reversed; membership is now growing. That program is sustainable because we have a budget for membership recruitment. With an increasing membership, our fixed costs are spread over more people, and therefore we were able to reduce the administrative cost allotment.
At some point you actually have to spend the money you have raised. Very recently, our State Committee agreed to spend a thousand dollars from the financial reserve to support the Joe Kennedy for Senate campaign. That’s close to half the reserve funds. Joe Kennedy is a member of our national party, who volunteered and is running for the U.S. Senate seat vacated by the death of the late senator Edward Kennedy. He is not except very distantly related to the Senator. Joe needs 17,000 raw signatures to get on the ballot, meaning that he needs about $17,000 or he will fail to achieve ballot access. If Joe does not raise the money needed to get on the ballot, his campaign is for naught.
But the decision to help support the Kennedy campaign was not without risks. If Kennedy fails to get ballot access, our members will justly complained that we threw their money away. On the other hand, if we had not supported Kennedy, our members would justly complain that we were failing to support the campaigns of our party members when they ran for office. Fortunately, our fund allocation scheme both assured that we had some money available to help support Kennedy, and assured that some of our money was locked away where we could legitimately explain why we did not spend it on his campaign.
The larger part of our money for Kennedy went to petitioning. A segment of our money went to sending a full color three page fund raising letter to all of our current members, all of our current national members, and a select list of strong-propensity-to-give past libertarian donors, urging them to support Kennedy. We also sent a nominating paper for signatures to each member of the state organization who receives the newsletter in paper form. The nominating papers must be printed on 60lb. canary yellow 8.5×14″ stock, so there was no utility to sending people electronic files of the nominating papers that they could print.
That’s the Massachusetts scheme for ensuring that dues money and donations actually gets spent on politics. The money is allocated to legitimate political purposes, and to administrative costs, when it comes through the door. Once allocated, it stays where it belongs. When it comes time to do real politics, we know how much money we have for that purpose. On the other hand, because the money is pre-allocated particular accounts, there is no possibility that a huge administrative overhead will eat up all of our income, so that we are reduced to the point where we would have no ability to support candidates, do outreach, recruit members, or do any of the other political things that justify the existence of our organization.
As someone has let the kitten out of the yarn, it is no longer a secret that there is a strong effort to draft me to run for National Chair again. I agreed that I would run if there were a legitimate draft. When I explained this to the Libertarian Party of New Hampshire State Convention on Saturday, a majority of the delegates present voted that I should be the National Chair candidate to receive one pre-pledged delegate vote.
An important part of the leadership role of the National Chair is to ensure that our party actually spends money on doing politics, rather than on nonpolitical tasks that do nothing to advance us toward a Libertarian future. If elected, I will strongly urge the National Committee to go over to some suitable variation on the Massachusetts scheme for budget allocation.
Obviously, there will need to be some variations. For example, a reasonably run a national committee will set aside $100,000 a year or a bit more for presidential ballot access. 50 state ballot access is a reasonable objective, but you can’t get there if you can’t pay for it. A reasonable budgeting scheme will help ensure that money is available when we need it for each of our purposes.
