Dean campaign treasury dwindles; Kerry's wins pay off

Friday, January 30th 2004, 12:00 am

By: News On 6

WASHINGTON (AP) _ Howard Dean's record campaign fund has dropped from $41 million to around $5 million, forcing him to cut costs as new front-runner John Kerry's fund-raising fortunes rise.

A source directly familiar with Dean's finances, who spoke on condition of anonymity, said Dean had about $5 million on hand after all bills were paid. A second source, a senior campaign official, confirmed that Dean's cash on hand had fallen to seven figures.

Contributions slowed dramatically in the hours after Dean replaced campaign manager Joe Trippi on Wednesday, but Dean supporters were heartened by a fund-raising pickup on Thursday. His Web site showed he was raising money at a clip of about $10,000 per hour, with more than $1 million in online donations since last Saturday.

When asked whether there would be layoffs as Dean looks to cut costs, a senior official said Dean was serious when he said the campaign would be leaner. The official said that rather than wholesale staff cuts, the campaign would reduce or shift staff as it makes decisions about which primary states to compete in.

Dean, whose Internet-fueled $41 million in fund raising last year was a Democratic record, is now withholding staff salaries and has decided against airing ads in any of the seven states voting next Tuesday.

Dean's belt-tightening came as Kerry raised more than $500,000 over the Internet in the two days since his New Hampshire victory Tuesday night.

Kerry's best day online before his Iowa victory last week brought in just $50,000 to $60,000, spokesman Michael Meehan said. In all, he has raised more than $1.6 million over the Internet since the Jan. 19 caucuses.

Kerry's flood of online donations arrives a little more than a month after he announced he had mortgaged his family's Boston home to secure a $6 million loan to keep his campaign afloat. He hasn't decided whether he will lend his campaign more money, Meehan said Thursday.

``Senator Kerry will make decisions about how he funds and executes his campaign on a daily basis,'' Meehan said, declining to say how much cash the campaign has on hand.

Kerry and Dean are the only two Democrats skipping public financing. Dean raised nearly double Kerry's cash total last year.

By opting out, Dean and Kerry freed themselves of the program's $45 million primary spending limit but turned away monthly government campaign checks.

Those checks won't prove a very lucrative financial lifeline for participating candidates, however, even as they try to make their cash stretch through a monthlong crunch of more than a dozen primaries.

The departures of Dean, Kerry and President Bush from the taxpayer-financed program left it flush enough to give participants their full monthly payment when the first checks went out in early January.

But with little time to replenish itself from tax returns, the program now has only enough cash to give candidates roughly 43 cents to 45 cents of each dollar they're entitled to when new checks go out Monday.

Before word of the shortfall, Dennis Kucinich had been expecting $2.4 million in his February check; Wesley Clark, $1.4 million; Joe Lieberman, about $389,000; and John Edwards, about $302,000.

Candidates will have to take out loans if they want to make up the difference until the program can afford to pay their full shares.

The program matches the first $250 of each private campaign donation, up to about $18.7 million per candidate. Taxpayers can check a box on their income-tax returns to direct $3 to it at no cost to themselves.

In another campaign finance development, Federal Election Commission lawyers have weighed in on how they think the nation's broad new ban on the use of ``soft money'' _ corporate, union and unlimited donations _ for federal election activity affects tax-exempt political groups.

They are recommending that the FEC find such groups must use ``hard money'' _ limited contributions from individuals and political action committees _ when funding ads, mailings or phone banks that name only a federal candidate and promote or attack that candidate.

Get-out-the-vote messages that support or oppose a federal candidate and also mention nonfederal candidates, or those that do not mention a particular federal candidate, can be paid for with a mix of hard and soft money, they said.

The commission is expected to consider the recommendation next week. FEC lawyers made it after a new pro-Republican group formed to counter the soft money efforts of Democratic anti-Bush groups sought guidance on how the law would affect its activities.

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