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Democrats start year with more debt than Republicans

New campaign finance reform law in effect

From Robert Yoon and John Mercurio
CNN Washington Bureau

The RNC reported no debt, while the DNC owed about $107,000 to campaign vendors.
The RNC reported no debt, while the DNC owed about $107,000 to campaign vendors.

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WASHINGTON (CNN) -- Despite having raised over $466 million in an unsuccessful attempt to stave off Republican gains at the ballot box last November, Democrats began the new year saddled with more debt than their GOP rivals, according to reports filed Friday with the Federal Election Commission.

All three national Democratic party committees owed more money than they had banked by the end of the year. Most notably, the Democratic Senatorial Campaign Committee was $6.2 million in debt and had just $38,000 on hand. Most of the DSCC's debt was from bank loans.

Meanwhile, the National Republican Senatorial Committee, the DSCC's counterpart, reported $757,000 in cash on hand and $349,000 in debt, most of which the committee owes to campaign vendors.

In fund-raising circles, debt owed to campaign vendors is preferable to bank loan debt, which accrues higher interest and has more stringent repayment requirements.

"It's not unusual to have debt, but it is a significant amount," said DSCC spokeswoman Tovah Ravitz-Meehan, who noted that the committee posted $4.5 million in debt at this point in the last election cycle.

Republicans predicted that Democrats will have a difficult time paying off their debt now that the McCain-Feingold campaign finance reform law, which went into effect on November 6, has outlawed so-called "soft money" -- the unlimited and unregulated contributions from labor unions, corporations, and wealthy individuals.

Parties will now have to rely on regulated "hard money," which has proven more difficult for Democrats to raise. The DSCC raised $86 million in soft money last year, compared to $36 million in hard money. The NRSC raised $45 million in soft money and $34 million in hard money.

The disparity is more apparent when comparing the fund raising of all Democratic and Republican national party committees. In the two-year election cycle that just ended, the Democratic and Republican parties each raised roughly $250 million in soft money, yet Democrats raised only $220 million in hard money, compared to $402 million for Republicans.

"The Democrats are staring down the barrel of a gun," said NRSC spokesman Dan Allen.

Challenging electoral landscape

While party committees routinely report debt at the end of a campaign cycle, the size of the DSCC's debt, especially compared to the NRSC's relatively low debt, is an additional headache for Senate Democrats, who not only lost control of the chamber last November, but also face a challenging electoral landscape in 2004.

Aided largely by President Bush, the Republican National Committee was also in better financial shape than its Democratic counterpart. The RNC raised about $217 million in the midterm election cycle and had nearly $5 million on hand on December 31, while the Democratic National Committee took in $139 million during the cycle and had $1.6 million in reserve at that time.

The RNC reported no debt, while the DNC owed about $107,000 to campaign vendors.

Guillermo Meneses, a DNC spokesman, said that despite the Republicans' fund raising and cash advantage, "the [Democratic] party is in better shape than ever before. To come out of a midterm with minimal debt has never happened before."

Meneses said that in addition to supporting candidates in 2002, much of the DNC's expenses came from investments in party infrastructure, including about $15 million in computer and other technology upgrades and roughly $15 million for a new headquarters.

The battle for the House left both Democratic and Republican campaign committees in debt at the end of the year.

The Democratic Congressional Campaign Committee, which raises money for House campaigns, raised $95 million over the two-year campaign cycle and posted $1.1 million in the bank on December 31, but still had $6 million in debt. The National Republican Congressional Committee, the DCCC's GOP counterpart, raised a hefty $183 million over the last two years, but ended the year owing about $5.7 million.

Democrats lost two Senate seats last November, returning Republicans to power. Republicans bucked historical trends and picked up six House seats, while retaining a one-seat majority of governorships.

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