UPDATE: Added comments from the McKenna campaign below the main post.

It’s been a bumpy week for campaigns on both sides of the political fence in the Washington state governors race, one that Politico ranked today as the top most competitive gubernatorial race in the nation. Though Politico gave Democratic contender and 1st District Congressman Jay Inslee the edge in the contest due to some less-than-smooth handling of a Democratic paid stalker, a reversal of fortune appears to be cause for a minor recalculation of the odds.

Since last week, Republican candidate Rob McKenna has suggested that a $1 million transfer by Inslee from his Congressional campaign fund to his gubernatorial coffers was “illegal.” Now, the State Public Disclosure Commission has placed the question of legality in a kind of campaign finance purgatory or limbo. Washington State Democratic Chair Dwight Pelz quickly went on the offensive, taking shots at McKenna’s legal knowledge and alleging that his campaign was “lying” for political gain.

Well, Dwight, it appears thou doth protest too much.

Though the PDC had first stated that the transfers were lawful, a partial about-face Friday by the campaign finance compliance agency should have the Inslee campaign and Democrats dining on crow and dialing past donors for a while.

Our understanding of the PDC’s present position is that Inslee may transfer from his congressional fund as long as he a) has permission from any donors and b) counts the transferred amounts against the individual donor limit of $3,200 per election cycle. We have inquired with the PDC for clarification on this point.

Washington State Republican Party Chair Kirby Wilbur issued a rapid statement in response to the ruling, a peppery demand for his Democratic counterpart to recant charges that Republicans had been lying about possible problems with Inslee’s $1 million transfer.

“Dwight Pelz should make sure of the facts before issuing public statements with such certainty,” said state Wilbur, referring to previous statements by Pelz defending Inslee’s actions as legal and proper.

“I also believe that a fine by the PDC is appropriate in this case. I would suggest $2 million, with $1 million suspended,” said Wilbur.  “The state could use the money.”

UPDATE: I spoke with McKenna campaign manager Randy Pepple by telephone Friday afternoon who said, “Hopefully Inslee has learned a lesson to play by Washington state rules instead of Washington D.C. rules.”

Moments later a press release arrived from Friends of McKenna that also suggested that there is still more to the matter than what the PDC has sought to clarify:

After learning key facts about Congressman Jay Inslee’s attempt to transfer federal campaign cash to his run for governor, the state Public Disclosure Commission advised him today that his dubious scheme is not legal and will not be allowed.

“I was confident that the PDC would see through Congressman Inslee’s illegal scheme to secretly transfer federal money to a state campaign without identifying who gave the money or obeying our state’s limits on contributions,” said Randy Pepple, campaign manager for Friends of Rob McKenna. “The voters of Washington state like clean and open elections, and Congressman Inslee’s attempt to slip around the rules shows he is willing to put his pursuit of yet another political office ahead of following the law.”

Congressman Inslee had sought to move his federal campaign funds to his campaign for governor in a lump sum. He planned to do this secretly, without attributing the donations to specific donors, and without those donations counting toward Washington state’s campaign finance limits.

Congressman Inslee’s campaign must now divulge the names of the donors who were part of a transfer listed on his first PDC report for Governor filed earlier this month.

It appears that Seattle weather isn’t the only thing heating up as we head into the month of August.