Campaign financing for elections in Texas is regulated by two authorities. The Federal Election Commission regulates campaign financing in federal elections (contests for seats in the U.S. Senate and House of Representatives as well as the President). The Texas Ethics Commission enforces state regulations which are generally much less stringent than federal regulations for all state races. This chapter's feature Federal and Texas Campaign Contribution Limits summarizes federal and state limits.
Modern campaign finance regulation in the United States began with the adoption of the 1972 Federal Election Campaign Act (FECA). This act, which consolidated all existing legislation adopted since Theodore Roosevelt first proposed campaign finance legislation in 1905, was important because it drew regulatory focus to the issue of big money in elections. It was quite limited, however. It merely imposed reporting requirements on political campaign contributions, and it provided no administrative apparatus for enforcement.
In response to reports of financial abuses during the 1972 presidential campaign, Congress strengthened the FECA in 1974. It set limits on campaign contributions from individuals, political parties, and political action committees (PACs). To enforce these limits and the original law's reporting requirements, the 1974 amendment created an independent agency, the Federal Election Commission (FEC). In addition to enforcing reporting requirements and contribution limits, the FEC was charged with administering the program that provides public funding of presidential elections (made possible by a check box on individual income tax returns that originally allocated one tax dollar today three dollars to the presidential election campaign fund). The FECA law also prohibited contributions directly from corporations or labor unions, as well as from foreign nationals. A similar ban on corporate and union contributions to state candidates is also in place in Texas. However, the state does allow corporate and labor contributions to political organizations for costs not directly related to campaigning (such as administrative expenses).
Paralleling the national reform effort, Texas took tentative steps toward campaign finance reform in response to state scandal in the early 1970s. In response to the 1972 Sharpstown bank scandal (involving bribery of state legislators in pursuit of banking legislation), the state legislature passed the Campaign Reporting and Disclosure Act of 1973. As the name indicates, this law was primarily oriented toward reporting. Unlike federal legislation, the Texas law did not limit the actual amount of contributions.
Limited though they were, the 1973 reforms instituted modern campaign finance regulation in Texas. The law altered practices related to the administration of campaign finance, but did not significantly alter the flow of money into state politics. New requirements specified that
Even though the Texas law specified criminal and civil penalties for violators, it provided no means for enforcement. Consequently, reporting of campaign contributions was uneven and unverified at best.
It took another scandal almost two decades later for campaign finance reform to be taken up again in Texas. The 1991 ethics scandal involving five-term Speaker of the Texas House Gib Lewis led to legislation creating the Texas Ethics Commission (TEC). In creating the Ethics Commission, the 1991 law created means of enforcing the reporting requirements specified in the 1973 law.
Under the 1991 law, lobbyists and legislators are required to file reports with the TEC several times each year. These reports are posted on the TEC website and can be searched by contributor and legislator. The 1991 legislation also expanded reporting requirements for lobbyists and legislators, and banned honoraria (payments for speaking at a group's meeting, luncheon or banquet) and pleasure trips paid by lobbyists, unless a legislator participates in the proceedings of a meeting. Notably, the 1991 ethics law did not impose limits on campaign contributions.
The TEC is empowered to hear complaints of ethics violations but has been roundly criticized as passive in the face of the free flow of money in Texas politics. As one editorial critical of the TEC put it, "born deliberately hobbled, 10 years later ... it's a halfway decent clearinghouse for records, but it has been a dismal failure as an enforcer of campaign laws."  Watchdog groups and political campaigns have used the reporting requirements enforced by the TEC to shed light on donors and campaign financing practices. But the Commission has done very little to actively investigate complaints or take action against alleged violations. One dissatisfied observer summed up critics' opinions, suggesting at a 2002 rally on the Capitol steps that the Commission "stinks." Another critic at the rally, also included in the video clip, more coolly and helpfully summarized the legislative mandate of the TEC.
The combination of ambiguity in and lax enforcement of Texas campaign finance laws seems to provide fertile soil for periodic scandal. One recent example of such scandal is the investigation of contributions made through the Texas Association of Business (TAB) and Texans for a Republican Majority (TRMPAC) during the 2002 election cycle investigations that generated a spate of criminal indictments in 2004. Because most citizens knew or cared little about the details of these investigations, Democrats and Republicans in the 2004 campaigns were able to accuse each other of either engaging in unlawful activity or playing politics with the law.
The complexity of the TAB case has also required extensive and time-consuming inquiries, the results of which were still not clear in November 2005, more than three years after the elections under investigation. Nonetheless, two things about the investigation are clear. First, Texas laws regulating campaign contributions and spending are difficult to interpret and enforce. Second, investigations by the Travis County district attorney's office not the Texas Ethics Commission led to grand jury hearings and charges against contributors and political operatives a fact that underlines the passivity built into the TEC.
The 78th Legislature (2003-2004) revisited ethics legislation, but it only slightly modified the Texas Ethics Commission and the laws regulating contributions in the state. The TEC publishes a list of changes to its rules on a page at its website.