How Donorgate Is Keeping The Democrats In Debt

When President Clinton tapped two business-savvy pols to run the Democratic National Committee last winter, they developed an ambitious plan to save the scandal-scarred party from financial ruin. But instead of navigating an IBM-style turnaround, DNC General Chairman Roy Romer and National Chairman Steven Grossman seem more like the helmsmen at a listing Apple Computer.

The problem: Donorgate hearings and criminal probes into campaign abuses are spooking givers and running up legal bills. So with the party still $15 million in debt, Romer--who also is Colorado's governor--and Grossman have developed a new rescue plan. It calls for squeezing costs and increasing revenues through fund-raisers, direct mail, and such marketing tools as affinity credit cards.

"POLITICALLY NAKED." If this effort fails, Democrats could be in desperate straits in 1998 as they compete with well-financed Republicans. After that, Vice-President Al Gore is counting on a smoothly functioning DNC to grease his way into the White House in 2000. "If they can't dig out, we're going to be politically naked going into '98 and beyond," frets a veteran Democratic campaign manager.

But digging out is proving difficult. In the first six months of this year, the DNC raised $19.4 million. The Republican National Committee, with only $4 million in debt, pulled in $24.6 million during the same period.

Some Democratic fund-raisers are frustrated at the response they have been receiving. "People are afraid of getting burned--or subpoenaed--even if they did nothing wrong," says one money-chaser. In addition, many liberal givers, notably the entertainment elite, have become alienated by the incessant big-buck campaigns. That's why the Hollywood Women's Political Caucus disbanded, for example.

In addition, a number of corporate donors who have played both sides of the giving street are reluctant to anger their friends in the GOP Congress by donating to the Dems again. And some Dem loyalists are focusing on the party's separate congressional and senatorial committees--rather than the DNC--because they want their money to pay for campaigns, not defray lawyers' bills and improper-donation refunds.

PRIVATE-SECTOR PARALLELS. Grossman, president of Massachusetts Envelope Co., is keenly aware of the pressures on him. In meetings with donors, fund-raisers, and local party officials, he explains that he can trim the DNC budget by $5 million through such savings as reduced payments to consultants and pooling of state-party business to win volume discounts for direct mail, phone banks, and other services. To ratchet up income, President Clinton has agreed to participate in eight DNC events this year, and Gore has committed to a dozen. Grossman insists that it will only require 15% of the committee's projected 1997-98 revenues of $100 million to eliminate the mountain of debt by his target date of December, 1998. "Roy and I have got our situation well in hand," he says.

Perhaps they do. Democratic business execs such as Sybase Inc. CEO Mitchell E. Kertzman see private-sector parallels in their party's slower-than-expected revival. "It's a classic corporate turnaround situation," says Kertzman, a Grossman friend. "Things are usually more broken than they appear on the surface and usually take a lot longer than you think to fix."

Unfortunately, the party doesn't have the luxury of time. If it lacks the dough to sell its message to voters in '98, the DNC, like Apple Computer, could face the prospect of a reduced market share.

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