(FORTUNE Magazine) – EVEN BEFORE Miami model Donna Rice -- and how she spent the night of May 1 -- made headlines, Gary Hart's presidential campaign was in trouble. Though he led the Democratic polls, Hart lagged behind other hopefuls in raising money for the 1988 race and still owed more than $1.3 million for his 1984 campaign. Said William Carrick, campaign manager for Democratic Congressman Richard A. Gephardt: ''In modern presidential politics, no front-runner has ever been in worse financial shape.'' Then publicity about alleged extramarital relationships devastated Hart's already shaky finances. One of the strongest reasons that Hart quit was his realization that the scandal made it impossible to raise more money. Money, which a campaign strategist for Robert F. Kennedy once called the mother's milk of politics, has never been so important to the nourishment of candidates. With neither an incumbent President nor a shoo-in candidate, the 1988 race is the first wide-open contest in 20 years and therefore the first real test of the campaign reform laws of 1974. So far the race has attracted 16 entrants, who will spend millions of dollars to distinguish themselves from each other. Says former GOP Senator Paul Laxalt, who recently announced his candidacy: ''Presidential campaigns have become as much a question of economic as political viability.'' Electing the President in 1988 will cost about $400 million, up from $325 million in 1984, according to Herbert E. Alexander, a University of Southern California professor who is an authority on campaign finance. Since so many convention delegates will be chosen so early in the campaign, candidates will have to come up with the money sooner than ever. Kirk Clinkenbeard, Senate Republican leader Robert Dole's campaign finance director, says, ''It used to be that a candidate needed to raise 35% of his money the year before the election and 65% the year of the election. That ratio has just about been reversed.'' Primaries or caucuses in 23 states, including Iowa, New Hampshire, Illinois, and the Super Tuesday states -- 14 Southern states, Massachusetts, and Rhode Island all select delegates Tuesday, March 8 -- will produce 54% of the pledged seats to the Democratic convention and 56% of the seats to the GOP's by March 15. In 1984 only 37% of the Democrats' seats and 20% of the Republicans' had been selected by then. THE EARLY LEADERS in the money race are surprises. Out in front in the Democratic dollar game is Senator Joseph R. Biden Jr. of Delaware, a second- string challenger who has raised $2 million, twice as much as Hart had before he pulled out. On the Republican side, long shot Marion G. ''Pat'' Robertson, the TV evangelist, has collected $7 million in campaign funds, $3 million more than front-runner George Bush. By year's end, most Democratic strategists say their candidates will need to raise at least $5 million each. Though well-known figures such as New York Governor Mario Cuomo would probably have little difficulty raising that amount if they decide to enter the vacuum Hart's withdrawal has created, candidates without much national recognition will find that a daunting goal. Many Republican financial advisers think they will need $10 million this year to compete with Bush, who plans to raise at least $13 million before the end of the year. Thanks to the campaign finance reform law, candidates must raise these millions with checks for $1,000 or less. That's the limit for an individual contribution; political action committees sponsored by business or labor can give a candidate up to $5,000. But only once an election. Before 1974 wealthy individuals could give unlimited amounts to a candidate. Now even a personal fortune does not give a challenger much of an advantage: Candidates are allowed to contribute only $50,000 to their campaigns. The law affects post- election as well as preelection gifts. So a defeated candidate cannot get help from backers who had already coughed up $1,000. To qualify for federal matching funds, candidates must raise $5,000 in each of 20 states through individual contributions of $250 or less. After qualifying, only $250 of each $1,000 contribution is matched. A candidate must also stick to the law's limits on how much can be spent. By law, candidates can spend only $10 million, plus inflation based on 1974 dollars, to qualify for matching funds. They can also spend another 20% of the total. According to the formula, the 1988 spending ceiling works out to almost $27 million per candidate. The 1974 reforms force candidates to devote more time and money to fund raising and therefore less to formulating and presenting ideas and issues. The most cost-effective money-raising technique is still tapping the big donor, not just for his $1,000, but for his friends and business associates who might also pony up the maximum amount. Campaign strategists frequently woo potential donors at breakfasts, lunches, teas, and dinners with the candidate: usually the fewer the invitees, the greater the financial expectations. Another fruitful fund-raising technique is sponsoring concerts and other performances by well-known entertainers. Since each ticket sold is considered an individual contribution, a candidate benefiting from, say, a successful rock concert could legally report 20,000 contributions of $10 each. A single $200,000 donation would be illegal. The most expensive money-raising operation is direct mail, those computerized letters asking for support. The costs of what some recipients consider waste basket filler come to 40% or more of the amount they generate. Hart's much-publicized debt problems have helped make campaign borrowing much tougher this season. (Bumper stickers in Colorado read: ''Honk if Hart owes you money.'') However, Hart was not the only candidate to deal with angry creditors by repaying them cents on the dollar or nothing at all. According to the Federal Election Commission, 19 former presidential candidates, including John Connally and Jimmy Carter, still owe about $9 million. The best credit risks seem to be candidates who are incumbent members of Congress. John Glenn was allowed to use money in his Senate campaign coffers to repay old presidential debts. Banks are not eager to lend to this year's crop of candidates. And many vendors now require them to pay cash up front or put down hefty deposits for products and services. Donald Rumsfeld, a former Secretary of Defense and former chief executive of G.D. Searle, recently dropped out of the GOP race because he did not want to spend so much time worrying about money. Just to establish a base in Illinois, he needed to deposit $6,000 on a $600-a-month office and more than $1 million for a phone system. A disgruntled Rumsfeld says: ''Multiply that 1,000 times around the country, and you see what candidates are experiencing.'' TO MAKE matters worse, at least one once-reliable revenue source may soon shrink: the purchases of seats on the campaign bus or plane by news organizations. The law allows a candidate to charge reporters a pro rata share of the cost of a trip, plus 10%. In 1984 Hart received $864,000 and Mondale more than $1 million from such charges. But cost cutbacks at TV networks, newspapers, and magazines may result in fewer boys (and girls) on the bus. One of the most skillful navigators of these treacherous financial waters is Pat Robertson, 57, who by the end of April had raised a stunning $7 million. Not bad for a dark horse who has not yet formally announced his candidacy. He aims for a record $30 million -- half by year's end. Even after the sex scandal of fellow televangelist Jim Bakker, contributions to the Robertson campaign continued to pour in. If Robertson hits the $30-million mark, he will not qualify for federal matching funds. Most of his money has come from direct mail and fund raising by a few bigwigs such as Texas tycoon Nelson Bunker Hunt. Robertson is the first presidential hopeful in history to have his own 24-hour TV network, the ! Christian Broadcasting Network, and an hour-long talk show, The 700 Club, which airs three times a day in most areas. After he announces his candidacy, probably in September, Robertson says he will give up the show to avoid running afoul of government rules requiring stations to give candidates equal time. With only 5% support among Republicans nationwide in a May Yankelovich poll, Robertson will have a tough time winning the nomination. But political strategists are unwilling to write him off. Besides his money and his partly free TV time, Robertson has about 75 full-time campaign staffers, including 25 in Iowa, New Hampshire, and the Super Tuesday states. No. 2 in the money game is Vice President Bush, the early favorite of GOP voters and establishment financiers. From February 15 to the end of April, Bush, 64, raised an impressive $4 million, most of it by soliciting the support of influential donors. The Vice President's finance committee reads like a Who's Who of GOP and corporate elite. It includes top Reagan fund raisers Robert Mosbacher Sr. of Houston, Holmes Tuttle of California, and Ted Welsh of Tennessee, plus corporate chairmen Robert Galvin of Motorola, Richard Wood of Eli Lilly, James Ferguson of General Foods, and David Kearns of Xerox. With such heavyweights leaning on their friends and colleagues, Bush has an excellent chance of reaching the $27-million maximum. Bush's lead in the polls has narrowed since Irangate, but his money will let him outspend most competitors in the critical early primaries and caucuses. If he does well, he could have the nomination locked up by mid-March, five months before GOP delegates convene in New Orleans. Even if he falters, he will probably have enough money left to push hard through the remaining state contests. Says Norman Ornstein, a campaign expert at the American Enterprise Institute: ''If Jack Kemp or Bob Dole do poorly in the early races, it will be much harder for them to survive. But money enables Bush to stick it out. That gives him a huge advantage.'' To compete with Bush, Dole's campaign strategists believe they need to raise at least $6 million in 1987, and they are aiming for $10 million. That's a tall order since Dole will be wooing much the same crowd of party stalwarts as Bush. But the 63-year-old Kansan has proved himself a powerful fund raiser, particularly among business leaders and political action committees that see a contribution to Dole, be he President or Senate minority leader, as a sound + investment. Among his top business supporters: Philip Anschutz, president of Anschutz Corp., a Colorado oil and gas company; Herbert E. Collins, chairman of the Greater Boston Group, a real estate company; David Owen, president of Owen & Associates, a Kansas City investment counseling firm; and C. Howard Wilkins Jr., president of Maverick Development Corp., a Kansas franchisee of Pizza Hut. To start with, Dole has some $2 million left over from his 1986 Senate campaign, which the Federal Election Commission is expected to allow him to use for the 1988 race. In only 20 days in March, he and his staff raised $625,000 by working the phones. Dole is concentrating on Reagan conservatives, particularly in regions of relative strength for him like the Northeast and Midwest. If Bush stumbles, Dole is the Republican most likely to pick up support -- and dollars. New York Congressman Jack Kemp, 51, who is running third in the polls for the GOP nomination, is not exactly rolling in dough. Although the ex-Buffalo Bills quarterback raised about $1.5 million by the end of April, insiders say he's already spent much of it on staff and direct-mail solicitation. His strategists feel frustrated by the restrictive financing laws and the extra- early primary schedule. Says Kemp finance director Rod Smith: ''You can't buy enough TV time to impact Super Tuesday unless you raise money this year. But no one cares about the election this early, and not that many people are willing to give $1,000 so soon. It's an absolutely lunatic system.'' Kemp's goal is to raise a modest $4 million to $5 million this year and pour it into Iowa and New Hampshire. The idea is to do well in those two states, then hope the press coverage and money flood in. Says Kemp campaign strategist Charles Black: ''We're running an underdog campaign modeled in part after Bush's strategy in 1980 and Hart's in 1984.'' Former Nevada Senator Laxalt, 64, a close friend of Ronald Reagan's, is well positioned to draw on the President's extensive fund-raising base and spoil the party for everyone else. Says Dole campaign director William B. Lacy: ''Laxalt could do damage to Kemp with conservatives in New Hampshire. He could hurt Bush with people who see Laxalt as Reagan's true successor. And he could give us problems in the West, where we're courting Reagan's 1980 network.'' The other GOP candidates are less likely to make a mark. Former Delaware governor Pete du Pont, 52, has already spent most of the $1.4 million he's raised, with little apparent impact. Former Secretary of State Alexander Haig, 62, is just getting started. WITHOUT HART, the battle for the Democratic nomination is likely to be long and tough. Of course there's still time for some unexpected late entry to make a brilliant run and sweep the nominating convention. But except for Jesse Jackson, none of the current contenders has much national recognition, and each will try to use the early primaries and caucuses to pull away from the pack. That will be expensive. As soon as Hart quit, the other candidates started to compete for his fund raisers. Among them: Florida lawyer Marvin Rosen, Philadelphia insurance executive William Batoff, New York investment adviser Mike Johnston, and San Francisco stockbroker Philip Schaefer. In the money race Senator Biden, 44, is off to the most impressive start. He raised $2 million by the end of April -- and has no campaign debts. Traditionally, dark horses like Biden get most of their support in their home states. But while the three-term Senator did well in Delaware, his biggest chunks of cash came from young professionals in Florida, New York, Illinois, Pennsylvania, and Southern California. Says Edward E. ''Ted'' Kaufman, Biden's campaign treasurer: ''So far our donors have been mostly very idealistic people in their 30s and 40s who are now successful entrepreneurs. Biden is a very inspirational guy, and it seems he's reaching this postwar generation.'' Biden, who chairs the Judiciary Committee and is a senior member of the Foreign Relations Committee, is also a favorite among liberal Democrats. Among the most enthusiastic are Jews who like his record on Israel and social issues. The Senator's goal is to raise $6 million or $7 million before the Iowa caucus, enough to separate himself from the second tier of challengers. Dole campaign director Lacy says, ''Biden is off to a very good start. The question is whether he is a sprinter or a marathoner. If he continues to raise money at his current pace, he'll be a very formidable factor in the Democratic race.'' Also off to a good start is Missouri Congressman Richard Gephardt, 46, who raised $1.1 million through the first quarter of 1987. His goal is to collect $5.8 million by year's end and, much like Kemp, concentrate his efforts on Iowa and New Hampshire. If his showings are strong there, his organization will swing into a fund-raising frenzy. Says Gephardt finance chairman Terence R. McAuliffe, who wrestled a lively alligator to raise $10,000 for Jimmy Carter's 1980 race: ''We plan to have thousands of people in place across the country manning phone banks to cash in on the surge in support.'' Half of Gephardt's early money has come from his home state. But he has also become a strong national fund raiser by playing up his role as head of the strategy-setting Democratic Caucus in the House. He was one of the early champions of tax reform, but he left that cause for the trade deficit issue. His protectionist solution: the Gephardt Amendment, which passed in the House version of the trade bill. The amendment would force many countries with huge trade surpluses with the U.S. to cut them 10% a year or face stiff sanctions. Among his colleagues who have chaired or are planning to chair fund-raisers for him: Ways and Means Chairman Dan Rostenkowski, Energy and Commerce Committee Chairman John Dingell, Majority Leader Tom Foley, whip Tony Coelho, and Florida's Claude Pepper, 86, the Pied Piper of the senior citizens. MONEY TALKED Albert Gore Jr., 39, into running for the Democratic nomination. Maryland developer Nathan Landow heads Impac '88, a group of Mondale moneymen who banded together after his defeat to influence the 1988 Democratic nomination. Out of the 48 members, Landow found that Gore, the first-term Tennessee Senator, attracted the most supporters -- 17. Nine Impac members backed Hart, five went to Gephardt, four to Biden. The Impac members who support Gore argue that the Democrats need someone who could win the South. Senators Dale Bumpers of Arkansas and Sam Nunn of Georgia would also do well in Dixie, but so far they have not announced that they would run. The son of a former Senator, Gore is a Harvard-educated Vietnam veteran who worked as an investigative reporter for the Nashville Tennessean before serving eight years in the House and two in the Senate. He distinguished himself on issues as diverse as organ transplants and arms control. Predicts Ornstein: ''In the next decade Al Gore will be the most talked-about Democrat, and deservedly so.'' Still, if he doesn't take off in Iowa and New Hampshire, he could be out of the running before it hits his home turf on Super Tuesday. Other Democratic contenders are well behind the leaders in the money race. The Reverend Jesse Jackson, 45, has just launched a committee to explore his candidacy, and it has come up with less than $100,000. By the end of the year Jackson hopes to raise a modest $3 million. His grass-roots strength, particularly in the Super Tuesday states, may make up for his lack of money. Former Arizona governor Bruce Babbitt, 48, has drummed up less than $1 million, mostly from his home state. Illinois Senator Paul Simon, 58, is also expected to do well at home, as is Governor Michael S. Dukakis, 53, of Massachusetts. Dukakis is running far ahead in the polls in neighboring New Hampshire, where a resounding victory might bring money and momentum. Money won't guarantee victory, of course. Former Texas governor John Connally spent $12.6 million in 1980 and won only a single delegate to the Republican convention. But money is critical, and candidates roundly agree that the financing laws make it too difficult to come by. No one disputes the value of financial disclosure or federal matching funds. But almost everyone seems to support raising individual contribution ceilings. Says Donald Rumsfeld: ''Campaign financing laws, though well-intentioned, erect barriers to entry. To raise a minimal $6 million to $8 million, I would have had to spend all my time fund raising, or risk ending up in debt like Hart.'' While necessary, scrounging for money should not be the driving force in the process by which Americans chose their President.

CHART: MONEY PAID MONEY PAID RAISED STAFF RAISED STAFF REPUBLICANS THROUGH MEMBERS DEMOCRATS THROUGH MEMBERS APRIL APRIL

Robertson $7,000,000 75 Biden $2,000,000 40 Bush $4,000,000 40 Gephardt $1,300,000 50 Dole $3,000,000* 40 Babbitt $825,000 30 Kemp $1,500,000 40 Gore $225,000 1 du Pont $1,400,000 30 Simon $150,000 20 Haig $400,000 18 Jackson $85,000 8 Laxalt $120,000 3 Dukakis N.A. 25 *Includes $2 million from 1986 Senate campaign.

CREDIT: ILLUSTRATION BY JUAN SUAREZ BOTAS CAPTION: NO CAPTION DESCRIPTION: See above. Color illustration: Heads of elephant and donkey with dollar signs for eyes.