RNC Raising, Spending More Than Anticipated

The RNC is likely to begin the midterm election year with less money in the bank than its Dem counterpart, thanks to unprecedented levels of spending that the party says will reap millions over the next decade.

In his first several months in office, chair Michael Steele cut staff and, consequently, spent little on overhead. But with the RNC ramping up its political operations ahead of elections in VA and NJ, the payroll swelled. The RNC has now spent more than it has raised in every month since July.

When reports are submitted at the end of the month, the RNC will show having raised somewhere north of $90M during '09, at least $12M above the initial estimates. But by the end of Nov., the party had just $8.75M on hand, and that number is not expected to increase because of the rate at which the RNC is spending money.

Through Nov., the RNC has raised $84.28M this year, including $71.1M after Steele took over as chair in late Jan. During his tenure, Steele has spent at least $85.2M, not counting Dec. expenditures, and the rate of spending is increasing.

But the party says its efforts have borne fruit. Capitalizing on excitement within the GOP base, the RNC has spent $11M on donor cultivation, bringing in 370K new donors. RNC CoS Ken McKay said in a memo last week those new donors will be worth $100M to the party over the next 10 years, based on past performance.

Other money Steele has spent has proven useful: The RNC spent a combined $13M on GOV races in NJ and VA last year, both of which the party won, including a 19-point win in VA. The committee has also spent at least $2M on a campaign aimed at derailing health care legislation, legislation that has seriously hurt Dems in national polls. Part of that cash went to a national radio spot featuring Steele himself, a first for a national chair.

"Our financial situation now places the RNC, state parties and our candidates in a great position for unprecedented success in 2010," McKay wrote in the memo. "Of course, all of this couldn't be done without the great work of Chairman Steele, the staff at the RNC headquarters, the dedication of the members of the national committee, and the millions of donors, volunteers and activists that spread our message across the country at all levels of government. The financial investments we make combined with the human resources involved will ensure great accomplishments this November."

An initial estimate adopted by the RNC's budget committee suggested the party needed to raise $78M in '09 to cover its operations, and that any amount over that number would be kept in reserve for the '10 midterm elections. In fact, the party raised much more than that, yet it spent far more than anticipated.

But the success doesn't tell the whole story, and sources said the RNC's prodigious fundraising comes at an historically high cost, as well. Steele has relied on small-dollar donors to raise money, while the party has traditionally raised more money from larger contributions.

Small donations cost more money to solicit, whether via phone, email or mail, meaning the net gain from any given contribution is less. All told, the RNC spent $11M on donor cultivation they had not planned on spending at the beginning of the year.

Steele has come under fire from large donors who say they are being ignored. Steele is currently on a book tour, which has also drawn criticism from those who say it is distracting his attention from what should be his full-time job.

In a statement emailed to Hotline OnCall, McKay defended Steele's record.

"I am proud to go on the record to say that because of Chairman Steele's effective leadership the RNC has exceed expectations for 2009 in both electoral victories and in its fundraising efforts. Our focus is not on beltway chatter but building grassroots coalitions, raising money and winning elections. After a successful 2009 where we won over 30 races across the country the RNC is well poised for victory in 2010."

The embattled RNC chair spent last week pushing back, asserting that his leadership has led to several GOP wins.

"I think I am a passionate leader of this party," Steele said on "Meet the Press." "I believe passionately in [GOP] principles that have -- that drew me to this party. And I get angry sometimes when we walk away from those principles. I get angry and frustrated when I see those principles not being regarded because they have been the foundation for generations."

Touting his electoral success, Steele pointed to his fellow guest, VA Gov./DNC chair Tim Kaine: "I've won two gubernatorial races that no one thought I could, could win, one in his backyard."