Why Should Delaware Care?
The state treasurer election typically does not get a lot of attention in Delaware, even though it is a high-ranking executive branch position. But this year, two Democratic primary candidates are raking in record-breaking sums of money — from somewhat unique sources. All the while, the candidates are raising questions about each other’s financial transparency.
The upcoming Democratic primary election for state treasurer has broken funding records this month, with campaign spending likely to top $1 million on two candidates in the historically overlooked race.
And some of the money backing leading candidates Ted Lauzen and Michael A. Smith has come from curious sources: Republicans and artificial intelligence-backed donors, respectively.
The role, which manages the state’s cash flow and advises on its investment funds and debts, is one that largely operates in the background of state government. Voters, however, are about to see more campaign messaging around the position than ever before.
Lauzen, a Wilmington investment manager, is making his first run for public office, while Smith, an economist and nonprofit founder, narrowly lost a Democratic primary for a state House seat two years ago.
Each has already racked up notable endorsements through the campaign: the state Democratic Party for Lauzen and the state’s teachers’ union for Smith.
With less than a month until the Sept. 15 primary, though, much of the spending set to occur in the race will come from a national organization and local political action committees.
Historic attention on race
Democratic primaries for the treasurer’s race have not come close to raising the amount of money set to flow this year.
Current Treasurer Colleen Davis, who is not seeking reelection, amassed about a quarter of a million dollars in the 2018 and 2022 election cycles combined.
The closest comparison in recent years was Republican Ken Simpler’s 2014 campaign, in which he garnered about $600,000 between the primary and general elections, or $850,000 in today’s dollars after inflation. He is currently the last Republican to hold statewide office in Delaware.
The 2024 three-way primary race for governor set new records in Delaware campaign spending, with more than $3 million poured into digital ads, pamphlets, billboards and more.
That trend has carried over to this cycle, as law firms, developers, advocates and out-of-state interest groups are now dropping hundreds of thousands of dollars on down-ballot races that previously garnered less attention.
Lauzen’s personal campaign account had raised about $280,000 from donors over the past two years, as of this month, and he loaned his campaign $250,000.
Smith has raised more than $180,000, as of this month, and loaned his campaign about $47,000, but the bulk of his outside support is coming from the State & Local Election Alliance (SLEA), a national advocacy organization that primarily focuses on “defending democracy” by investing in down-ballot races.
The organization has reported spending more than $495,000 in support of his campaign to date, including more than $350,000 in direct advertising.
SLEA’s involvement in Delaware drew attention from political insiders earlier this month after it reported raising more than $6.4 million on state campaign finance filings, but a spokesperson for the organization said that was a reporting error and reflective of its nationwide fundraising efforts, not those squarely for Delaware.
Nonetheless, the organization’s support of Smith has changed the dynamic of the race, as his campaign will now be far more visible to voters in the stretch run to election day.
A third candidate in the race, Mike Miller, has raised about $16,000 in individual contributions and has loaned his campaign $20,000.
Smith’s donors have ties to AI
The large influx of money into what is normally a quiet primary race has caused each of the leading candidates to question the other campaigns’ backing and motives.
Lauzen said it is “scary” that SLEA is spending hundreds of thousands of dollars to support Smith without clearly stating why.
A SLEA spokesperson declined to say specifically what aspects about Smith, or the position of Delaware state treasurer, drew them to spend more than $300,000 in ads supporting his candidacy.
While understated, the position has historically been an incubator for future leaders. Both former Govs. Tom Carper and Jack Markell served as state treasurer before being elected to the state’s highest office.
Regardless of the specific office, the spokesperson said, the candidates SLEA supports “are on the front lines of defending the rule of law.”
“Michael Smith is exactly the kind of leader that we exist to support,” she added.
Smith told Spotlight Delaware he had not heard of the organization before receiving its financial support.
But two advisors Smith hired to work on his campaign through the consulting firm North Node Group also run a separate consulting firm that SLEA hired to run its print and digital ads supporting Smith.
Direct coordination between a candidate’s campaign and any outside organization buying ads to support them is illegal. But one of the two consultants, Matt Krayton, said the overlap does not violate either Delaware nor federal election laws.
In a written statement, Krayton said his firms follow the Federal Election Commission’s firewall policies, which outline guidelines for preventing information sharing between candidates and advertisers who share a common vendor.
Lauzen also criticized the prevalence of out-of-state donors to Smith’s campaign.
About 80% of Smith’s individual donations came from out-of-state residents, compared with about 20% in Lauzen’s campaign. Those donors include employees at Anthropic, the company behind the artificial intelligence system Claude, and other artificial intelligence safety researchers from across the country.
Smith pointed to connections he made during his time with College Democrats of America to explain some of the out-of-state donations. He said he has also been involved in Effective Altruism, a social movement followed by many AI industry workers that aims to find the most efficient ways to solve global problems.
Effective Altruism came under scrutiny in 2022 after the arrest of Sam Bankman-Fried, the former CEO of the crypto exchange FTX, who was heavily involved in the movement. It has since rebounded, though, as many AI company employees have begun to join the movement and donate millions of dollars to charities and political campaigns.
Spotlight Delaware tried to contact many of Smith’s out-of-state donors who had donated the legal maximum limit to his campaign, but only one responded on the record.
Jeff Kaufman, a Massachusetts-based former Google employee and an active member of Effective Altruism forums, said he does not know Smith personally. Several people, however, told him to donate to Smith because he is “good on AI policy.”
When asked why he was interested in the Delaware treasurer’s race, he said having someone who shares his views on AI safety “is important to have across government given how important I expect it to be in the near future.”
Smith said he does not have any specific plans related to AI if he becomes treasurer, but that he thinks protecting Delaware’s assets from AI will become a large part of the role in the future.
“If AI agents or malicious actors are able to hack into our financial infrastructure and take away the money from Delaware taxpayers, that prevents us from lowering costs,” he said.
Smith defended his decision to fundraise out of state, saying he had to raise as much money as possible to counter the large amounts of funds Lauzen raised early in the campaign, including his quarter of a million dollar loan to his own campaign.
Lauzen defends Democratic bonafides
Lauzen said his family decided to pull from their savings for the campaign because he believes it is an important position. He quoted Martin Luther King Jr., saying he believes in the “fierce urgency of now” to do the right thing right away.
“When our family is going to do something, we’re going to do it all in,” he said.
Smith also said he thinks Lauzen is “masquerading as a Democrat” because his father is a Republican politician in Illinois, and he has donated to Republican candidates in the past.
Lauzen said while he grew up in a Republican family, he became an independent in 2017 and registered as a Democrat two years ago. He said his values have changed with age.
He has previously donated to several Republican candidates, including Simpler, the former Republican treasurer, but has donated to more Democratic candidates.
Lauzen also has received donations from several prominent Republicans in this campaign, including former Republican Party Chairman Terry Strine and former State Rep. John Burris (R-Milford).
Both Strine and Burris told Spotlight Delaware their values do not align with the modern Republican Party, and they support candidates they believe in regardless of political party affiliation.
Smith also questioned why prominent developers in the state would be interested in the treasurer’s race.
The First State Service PAC, which has received the majority of its $225,000 worth of donations thus far from two members of the Schell family, paid for several advertisements for Lauzen earlier this week, according to Google Ads Library.
Though the spending on those ads has only totaled $700 so far, it is unclear how much the developer-backed PAC plans to spend on Lauzen in the coming weeks.
Lauzen said he was not aware of the PAC or the advertisements, but that he knew members of the Schell family had donated individually to his campaign and was happy to gain their support.
Smith also criticized Lauzen for receiving a donation from the ABC Merit Shop PAC, an anti-union group. According to his campaign finance report, Lauzen returned that donation in late July.
