Loans Fuel 37 Percent Of Texas Campaign Spending
- Candidates Borrow $24 Million, Usually From Selves.
- Sanchez Consumes 55 Percent of All Borrowed Funds.
The campaigns of 104 Texas candidates reported borrowing an extraordinary $24,238,614 by the March 2 primary reporting deadline. This borrowed money accounted for 37 percent of the $66 million spent by all Texas candidates filing electronic disclosures.Candidates usually doubled as the lender of most or all of their borrowed funds.1 Other candidates personally guaranteed loans from third parties.
Borrowing more than $13 million from a bank, gubernatorial candidate Tony Sanchez accounted for 55 percent of the $24 million in political loans.
Other big borrowers include comptroller candidate Marty Akins (who loaned his campaign $2.6 million), would-be Lieutenant Governor David Dewhurst (borrowing $2 million from Compass Bank) and Rep. Kenn George (who loaned himself $835,000 for a failed Land Commissioner bid).
Two would-be senators borrowed more than $500,000 apiece: failed senate candidate John Shields and Barbara Canales-Black (who faces a runoff with another big borrower: Juan Hinojosa).
An unusual high-flying borrower is Railroad Commissioner Charles Matthews, who used his airplane to guarantee a $259,658 bank loan—despite the fact that he is not now up for election. Much of his recent “campaign spending” went to maintain his plane.
*Loan guaranteed by the candidate.
Candidates Receiving the Biggest Campaign Loans Candidate, Party Office
(Primary Result)Loans Loans +
DonationsLoan
Share
of TotalPrincipal
Lender(s)Tony Sanchez, D Governor (W) $13,261,663 $18,351,444 72% First Union Nat. Bank* Marty Akins, D Comptroller (U) $2,600,000 $2,975,108 87% Self David H. Dewhurst, R Lt. Governor (W) $2,000,000 $5,587,254 36% Compass Bank Kenn George, R Land Com. (L) $835,000 $1,456,874 57% Self John Shields, R S-25 (L) $700,000 $1,107,604 63% Self Barbara Canales-Black, D S-20 (R) $653,495 $821,025 80% Self/father/others David P. Deison S-30 (L) $300,000 $387,385 77% Texas Bank Charles R. Matthews, R Railroad Com. (NA) $259,658 $405,042 64% City Nat. Bank* Craig L. Estes, R S-30 (W) $237,000 $1,001,296 24% Self Juan J. Hinojosa, D S-20 (R) $196,000 $513,370 38% Self/Texas State Bank* * Loan guaranteed by the candidate.
The Most Loan-Dependent Candidates Candidate, Party Office
(Primary Result)Loan
Share
of TotalLoans Loans +
DonationsPrincipal
Lender(s)Timoteo Garza, D H-80 (R) 99% $135,000 $135,750 Isidro Garza* Glenda Dawson, R H-29 (U) 99% $10,000 $10,100 Self Gary Gates, R H-28 (L) 98% $192,000 $196,315 Self Douglas Cannon, R Education Board (L) 97% $59,000 $60,800 Self Tad Nelson, R H-24 (L) 96% $56,437 $58,612 Self John Whitworth, R H-20 (R) 96% $47,000 $48,850 Self Gordon Lee, R H-8 (L) 94% $5,000 $5,300 Self Bob Richardson, R H-50 (R) 94% $116,000 $123,680 Self Dustin Little, R H-20 (L) 93% $10,000 $10,800 Self Jill Warren, R NA 92% $61,372 $66,397 Self
Piquing interest
Six candidates got more than 95 percent of their money from loans. House candidates Timoteo Garza and Glenda Dawson borrowed 99 percent of their funds.Many candidates made interest-free loans to their campaigns. But the campaign of Aaron Pena (who won the Democratic Primary for the Rio Grande Valley’s House District 40) is paying an interest rate of 11 percent on $114,970 that it borrowed from the candidate and his firm. John Whitworth (who faces a Republican runoff for House District 20 Northeast of Austin) is charging 10 percent on the $47,000 that he loaned his campaign.
Texas law allows politicians to use campaign contributions to pay the principal and “commercially reasonable” interest rates on certain loans. But lawmakers and the Texas Ethics Commission have never defined “commercially reasonable.”2
In contrast, the campaign of banker Tony Sanchez is now paying an interest rate of just 3.5 percent on its First Union National Bank loans, which Sanchez personally guaranteed.3
Loan ethics
After Clayton Williams self-financed his 1990 gubernatorial bid, watchdogs warned that more-successful rich candidates could abuse the post-election, “late-train” fundraising period to lean on special interests to retire their debts, says Suzy Woodford of Common Cause.In 1991, the Texas Legislature put some limits on campaigns using contributions to retire debt. Under that law, gubernatorial candidates can use campaign contributions to repay up to $500,000 in personal loans for each election that they face (primary, runoff and general). Other non-judicial statewide candidates can use contributions to repay personal loans of up to $250,000 per election.
These indulgent limits contain gaping loopholes. While they put some limits on what candidates can repay themselves, they place no limits on the use of contributions to repay third-party loans. To dodge repayment limits, rich candidates such as Tony Sanchez and David Dewhurst have obtained third-party bank loans that are explicitly or implicitly secured by their own assets.4
In another huge loophole, state lawmakers have never imposed any loan repayment limits on themselves. Instead, this 10-year-old law merely instructs the Texas Ethics Commission to recommend repayment limits for legislative candidates, something that the Ethics Commission has never done. John Shields recently illustrated the scope of this loophole when he loaned himself $700,000 for a failed Senate primary run. •
1Like most people, Lobby Watch calls it a “loan” when candidates spend their own funds on their campaigns with the expectation of being reimbursed. Technically, the Texas Ethics Commission says that only third parties can “loan” money to campaigns (see, for example, Ethics Advisory Opinion No. 389, January 16, 1998).2Texas Election Code, Title 15, § 253.042.2(e).
3Sanchez got a floating rate based on the LIBOR rate (2.01 % on March 15, 2002) plus 1.5 percent.
4The Texas Ethics Commission approved this dodge in Ethics Advisory Opinion No. 389, January 16, 1998.
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which tracks the influence of money in politics.