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Originally published Wednesday, April 25, 2012 at 8:48 PM

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Candidate Inslee tests boundaries of campaign-finance regulations

Throughout 25 years in politics, Inslee has meticulously managed his campaign cash while relying heavily on his closest allies rather than average voters, according to an Associated Press review of campaign-finance records.

The Associated Press

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OLYMPIA — Three months after his first quest for governor ended in 1996, Jay Inslee began draining the $6,000 surplus in his campaign account by sending out a refund of $1,000 — to himself.

With the opportunity to return contributions to any of the hundreds of people who had donated to his failed candidacy, he first chose only three other recipients, giving $1,100 to his wife and $2,200 to his in-laws. After a little more cash came in from unused media buys, he managed a handful of other refunds a few weeks later, sending cash to his parents and his two brothers and four other supporters.

His account was then empty.

Throughout 25 years in politics, Inslee has meticulously managed his campaign cash while relying heavily on his closest allies rather than average voters, according to an Associated Press review of campaign-finance records.

None of Inslee's activities was illegal, but he has already pushed the boundaries of finance laws in this year's race for governor, in which he is the de facto Democratic candidate. The state's elections watchdog has pushed him back on his plans related to fund transfers, leading Inslee to pursue an alternative course that effectively allows him to circumvent the rules placed on him, according to federal finance reports released this month.

Inslee campaign spokesman Sterling Clifford said the campaign was pleased to have contributions from more than 20,000 people in Washington state.

"We're very pleased by the level of engagement and support the people of Washington have shown our campaign," he said.

Inslee's gubernatorial opponent, Republican Attorney General Rob McKenna, had largely been unable to fundraise for months during the recent legislative session because of standard restrictions on state officials. Still, he and Inslee have raised similar amounts from individuals and businesses.

Inslee holds a fundraising edge — $4.8 million to $4 million — because he has substantially more cash from political allies such as the state party and political-action committees.

Inslee's 1996 contribution refunds are in contrast to how McKenna has handled his excess campaign cash over the years. While some of that money has been sent to political groups, McKenna donated most of it to community organizations, such as schools, domestic-violence programs and a theater program for children.

Todd Donovan, who teaches political science at Western Washington University, said Inslee's refunds were the actions of somebody who had no plans to run for statewide office again.

"You're setting yourself up for coverage that's not going to look good," Donovan said. "I don't know how you spin that."

Inslee has since made some charitable contributions from his federal campaign account, including $1,500 to Seattle Children's hospital in 2010.

Campaign cash that Inslee is compiling for the governor's race can, in some ways, be traced to a decade of fundraising during his time in Congress. While serving in a relatively safe congressional seat, Inslee has for years been stockpiling extra cash from his elections, growing his account from near depletion after the 2000 election to nearly $1.2 million at the end of the 2010 election.

That was three times more cash than any other Washington member of the U.S. House.

During his career in Congress, he received more than $4 million — more than one-third of all his federal campaign cash — from political-action committees.

Inslee's campaign and the state's Public Disclosure Commission believed earlier this year that he could gain approval from donors to simply transfer about $1 million of that money to his state account without any of it being subject to contribution limits. Under that plan, a donor who previously gave to his federal campaign would approve a transfer and be able to contribute the maximum amount on top of that.

The disclosure commission eventually decided against Inslee, saying transfers would be subject to contribution limits. Still, Inslee effectively bypassed that rule earlier this month by transferring $155,000 from his federal account to the state Democratic Party to aid get-out-the-vote efforts that would boost his campaign.

The state party has already been buoying his campaign with $700,000 in transfers, helping him keep a fundraising lead on McKenna even during a months-long period when McKenna was largely unable to fundraise because he holds state office.

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