The DNC is nearly broke
September 30, 2013: 10:20 AM ET
As the government nears shutdown, the fundraising arm of the Democratic Party is having a budget crisis of its own.
By Tory Newmyer, writer
FORTUNE -- There's another budget crisis in Washington, and it's unfolding inside the Democratic party. The Democratic National Committee remains so deeply in the hole from spending in the last election that it is struggling to pay its own vendors.
It is a highly unusual state of affairs for a national party -- especially one that can deploy the President as its fundraiser-in-chief -- and it speaks to the quiet but serious organizational problems the party has yet to address since the last election, obscured in part by the much messier spectacle of GOP infighting.
The Democrats' numbers speak for themselves: Through August, 10 months after helping President Obama secure a second term, the DNC owed its various creditors a total of $18.1 million, compared to the $12.5 million cash cushion the Republican National Committee is holding.
Several executives at firms that contract to provide services to the party -- speaking anonymously to avoid antagonizing what remains an important if troubled client -- describe an organization playing for time as they raise alarms about past-due bills falling further behind. And senior strategists close to the DNC say they worry the organization appears to have no road map back to solvency. "They really thought they could get this money raised by the summer," one said, "but the fact is, from talking to people over there, they have no real plan for how to solve this."
DNC national press secretary Michael Czin says the committee is working with vendors on a case-by-case basis to pay down their tabs. And filings show the organization over the last five months has made $4.5 million in payments to the Amalgamated Bank and appears to be hewing to a $1 million-per-month installment schedule now. "While we work to retire our debt, we're not taking our foot off the pedal and are making the investments that will help ensure that Democrats are successful in 2014, 2016, and beyond," Czin said. He pointed to ongoing work by the DNC's National Finance Committee, which met over the weekend in Colorado to discuss fundraising strategy.
Sources close to the DNC say officials there have quietly laid the blame in part on the White House. It's no secret that DNC Chair Debbie Wasserman Schultz, who also represents an area around Miami in the U.S. House, lacks strong relationships inside the administration. But it's not even clear who at the White House should be minding the problem these days, following the exodus of President Obama's top political brains.
By the DNC's count, the President has headlined 15 DNC fundraisers this year. In an indication Obama is stepping up his commitment, two of those took place last week alone -- the first tacked onto his trip to New York for the United Nations General Assembly meeting, and the second later in the week at The Jefferson, a posh hotel a half-mile north of the White House on 16th Street. A White House spokesman did not respond to a request for comment.
Another critical factor that appears to be hobbling the DNC's fundraising is the emergence of Organizing for Action (OFA), the independent nonprofit created by Obama campaign alums in the wake of the election to push the President's second-term agenda. An earlier iteration of that group was housed inside the DNC during the first term, but the Obama brain trust assessed it fell well short of its potential there. Now based in Chicago and headed by Jim Messina, who managed Obama's reelection, the outfit leases the campaign's vaunted email list and controls the @BarackObama Twitter handle (current follower count: 37.2 million), using both to drive its message and raise money.
The group can raise unlimited sums from deep-pocketed donors, and there is some evidence it is siphoning resources from the DNC. All of the top-tier OFA donors this year have been prolific supporters of the DNC in past years. But of the 13 who cut six-figure checks to OFA in the first half of this year, only three gave to the DNC over the same period, according to a review of records from the Center for Responsive Politics. This makes some intuitive sense. While the DNC is engaged in the prosaic work of off-year party-building -- a catch-all portfolio of tasks that involves, among other things, supporting state party organizations, helping down-ballot candidates, and paying for odds and ends, like expressly political travel by top administration officials -- OFA offers the glamour of helping the President wage the battles unfolding day by day on the front pages. That pitch, more or less, is easy: "Supported Obama for a second term? Contribute to OFA and help him secure his legacy." The DNC's by definition is murkier.
"Donors are being pulled in two directions, and there's absolutely no doubt it's impacted the DNC's fundraising," one top Democratic operative said. "I'm hearing it from donors regularly that they're being told to help one and not the other."
Czin acknowledges but downplays the internal rivalry. "Of course there's competition," he says, "but the Democratic family is a big one, and at the end of the day we are all on the same team, our work compliments each other's, and there are enough resources for all of us."
And then there's the issue of the DNC's staff leadership. Patrick Gaspard, who'd served as executive director of the committee since 2011, was tapped in March to serve as ambassador to South Africa. He was sworn in last month, but the DNC has yet to settle on his permanent replacement. Operatives close to the committee say the search process has been chaotic. "It's a surprise to most people that there isn't an executive director at this point," one said. "There have been a number of candidates who pulled their names out after having been floated, but it should have been done by now."
Czin says the committee is "retooling, building our program, and bringing on top talent to do it," with a new digital director starting this week and an acting executive director leading the committee while that search continues. But there's little doubt the extended hunt isn't helping as the committee tries to right itself.
That the DNC has been allowed to drift so much is in part a function of the calendar. But with the 2014 midterms coming into view, expect the party's Congressional leadership to start applying more pressure on the White House to get involved. Without sustained help from the President, the committee will not be in a position to provide material support in that campaign. Mustering that presidential muscle will only get tougher as Obama's second term wears on, once his attention turns to legacy projects like fundraising for his library, and big donors puzzle over whether the committee becomes a stalking-horse for a presidential bid by Hillary Clinton -- or somebody else.