(FORTUNE Magazine) – Federal law restricts how much government and political party money the presidential candidates can spend on their general election campaigns, but George Bush and Michael Dukakis know how to tap more cash. The Federal Election Campaign Act of 1971 limits each candidate's government funds to $46 million this year and party money to $8.3 million. Now comes the kicker: what some call soft money, perfectly legal funds that may influence the course of the election.

-- State and local branches of the political parties raise their own money, and plenty of it. They also get funds from the national committees. In 1984 Republican state and local branches spent $15.6 million to support the ticket. This year the Republicans aim to raise $18 million, the Democrats an astounding -- and probably unrealistic -- $42 million. Although state and local organizations cannot advertise for Bush or Dukakis by name, they can put the candidates' names or faces on bumper stickers and pins so long as they're distributed by volunteers. State party funds also support voter registration drives, phone banks, and door-to-door canvassing to get out the vote. -- Unions can spend unlimited money to contact members and their families about the election. ''Letters to one Machinists union local in northern New Jersey with 1,000 members would translate into making pitches to 4,000 voters,'' says a political consultant. -- Political action committees (PACs), independent organizations, and individuals are free to raise and spend money for their nominee as long as they do not discuss plans with him or his organization. Of the $17.5 million that these groups spent in 1984, $15.8 million went to Reagan, most from conservative groups. This year they may spend less. Several conservative PACs got stuck with debts after the Democratic victories in the 1986 congressional elections. Contributors beware: Conservative groups soliciting funds have proliferated ( from fewer than two dozen to about 200. Not all are legitimate, and a few have not had any political influence at all. C.H.