Doug Ellis, the Executive Director at the Public Disclosure Commission, sent an email to the treasurer of Jay Inslee's gubernatorial l campaign today to alert him that there's been some "confusion and misinformation" about Inslee's plan to transfer $1 million from his congressional campaign fund to his 2012 race for governor.

The AP had reported that the PDC gave Inslee the green light, but Ellis tells PubliCola that he corrected the record in the email he sent today. Inslee's camp, he said, had misinformation about a so-called "surplus fund." "Surplus funds," money left over from one campaign that can be transfered to another—must come from fundraising in state elections.

Does that mean Inslee can't transfer his federal campaign money? No.

Ellis says the Inslee camp simply needs to get permission from the Federal Election Commission to transfer Inlsee's congressional campaign money to the governor's race. Inslee has about $1.2 million. Once he gets the green light from the feds, Inslee would have to get permission from each contributor to transfer the money. Once Inslee has written permission from the individual donors (a PDC requirement), he can transfer the money.

But the money will not be considered as "surplus funds." "Federal campaign money is not state money, it cannot be considered a surplus fund," Ellis says. The significance is this: "Surplus funds" can be transfered to a new campaign without being subject to contribution limits; in other words, when "surplus funds"  are transfered, the cash doesn't count toward a contributor's total when the contributor makes a separate donation to the new race.

The AP had reported that the Inslee transfer wouldn't be subject to limits, but Ellis says once the federal campaign money is transferred, it comes under state purview, but unlike state "surplus funds," donors would be held to the $3200 limit—as opposed to the federal $10,000 limit.

Rob McKenna's campaign had been calling Inslee's plan to transfer his federal money "illegal." This morning the Democrats raised strong objections to that characterization. "It's shameful for any candidate to make unfounded accusations of illegal actions," Washington State Democratic Party Spokeswoman Reesa Kossoff told me. "But for the attorney general? It's downright irresponsible."

Ellis didn't call anything "illegal." But any plan to transfer Inslee's money without limits has certainly been checked by Ellis' clarification. The Republicans pounced late this afternoon. In a press release Washington State Party Republican Chair Kirby Wilbur said: “Dwight Pelz [his Democratic counterpart] should make sure of the facts before issuing public statements with such certainty." Pelz issued a press release earlier this week trashing the GOP for calling the transfer illegal.

Meanwhile, Randy Pepple, McKenna's campaign manager,  says the Inslee campaign shouldn't be able to transfer the money because it was never put into a separate account. They point out that Inslee's year-end reports after the 2010 general election, show the $1.2 million in the same congressional campaign account, not a separate account as Inslee's folks told the PDC.

The report shows that Inslee raised $5,499 dollars in December 2010, but spent  almost $70,000.

"I know Democrats are in to deficit spending," Pepple jokes, "but in the real world you can't bounce checks like that."

And Inslee didn't bounce any checks, Pepple points out, because the report also shows that Inslee had $1.19 million cash on hand. That would be the same cash that Inslee plans to transfer to his gubernatorial bid. If that cash was in a separate account, why is it there covering the expenditures in the congressional campaign account, Pepple asks.

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