Campaign Finance Ruling May Make NYC a Model for the Nation

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A year after the Citizens United ruling opened the tap to allow corporate money to pour into elections, the Supreme Court appears poised to weigh in on whether public financing is a constitutional way to combat the influence of money in electoral politics.

In the next week, the U.S. Supreme Court will rule on the constitutionality of a program in Arizona that provides matching public funds to candidates for office who face opponents with greater resources. If that program is struck down, public financing programs nationwide may need to be reconfigured, and New York City's public financing system may become the new model. 


McComish v. Bennett

This week, once again, the court will rule whether it believes that limiting the influence of money in campaigns is equivalent to stifling political free speech. This time the case in question is McComish v. Bennett, a case brought by the conservative group the Goldwater Institute.

In 1998, voters in Arizona approved the creation of the Clean Elections program following serious state corruption scandals. Candidates who collect a certain number of $5 donations and agree not to accept money from special interest groups become eligible to receive a lump sum of public funds for their campaigns. Those candidates can also be issued “trigger matching funds,” which kick in for candidates running against high-spending, non-participating challengers, or those backed by big-spending outside groups. Trigger funds kick in as soon as the participant's opponent spends more than the initial public funding amount allocated to the candidate.

Proponents of the program say it helps decrease corruption and increase electoral competition. Because publicly funded candidates can run viable campaigns against opponents with much deeper pockets, matching funds encourage participation, and because each individual contribution is enhanced, candidates are encouraged to court their constituents rather than private interest groups. Candidates who participate agree voluntarily to limit their spending, but there is no limit on how much privately financed candidates can spend. In 2010 the program paid out $4.9 million dollars, up from $2.2 million in 2008.

In 2008, the Goldwater Institute filed a legal challenge against the Citizens Clean Elections Commission (CCEC) program, charging that through the use of trigger funds, “the state government is using public money to dilute the political speech of one group and promote the political speech of another."

A U.S. District judge agreed with the Goldwater Institute, ruling that the program violated the First Amendment. An injunction was issued, which the CCEC then appealed, and the case moved to the Ninth Circuit Court of Appeals, who unanimously reversed the ruling. The Goldwater Institute appealed that, and in 2010 the Supreme Court reinstated the injunction pending their ruling, placing the program on hold mid-election. That's prompted some court observers to speculate that when the court rules, it will be against the Arizona model.

A Model for the Nation in New York City?

If the Supreme Court rules against the Clean Elections program, a number of campaign public finance programs nationwide may be in for a redesign. Jessica A. Levinson, Director of Political Reform at the Center for Governmental Studies said that because the Arizona case specifically targets trigger funds, it “will likely have long-reaching implications for other jurisdictions that have similar provisions.”

“Every jurisdiction that provides additional funds to publicly financed candidates in the face of either high spending, in the face of a privately-financed opponent or an outside expenditure group will have to reevaluate those provisions and probably take them off the books.”

The ruling would apply not only to so-called “Clean Money” jurisdictions that provide lump sums, but to any jurisdiction that changes the law to provide extra funding for candidates that are outmatched in resources.

New York City provides its public funding to candidates through a straight 6 to 1 match, which is unaffected by the amount of money available to the opponent, so it is likely that New York City's program would still stand even if Arizona's program is found to be unconstitutional.

How New York City's System Works

The Campaign Finance Act was adopted on February 29, 1988, as part of ethics reform legislation in New York State. The Campaign Finance Board was created as an independent and nonpartisan agency, charged with limiting the influence of private money in politics. They match private donations with public funds and publish a voter guide with campaign finance information. All candidates, regardless of whether they join the program, are bound to follow New York City contribution limits and disclose where the money comes from and how it is spent. The CFB audits and publishes this information for the public.

What differentiates New York’s program is that it looks to level the playing field less between candidates and more between donors. For every dollar donated by a private citizen, the board provides a 6 to 1 match, so that instead of spending their campaigns courting the groups with the most money, candidates who want to win can be out shaking hands and hearing from voters.

“I think it is very likely that many jurisdictions, both on the local and state level, will look to the success of New York’s program and will adopt that kind of small-donor model where there is an initial amount of money that a candidate raises and then there is a high match,” said Levinson.

The voluntary program provides public matching funds to candidates for mayor, public advocate, comptroller, borough president, and City Council, as long as they qualify and agree to abide by spending limits. The matching funds program matches each dollar a city resident gives, up to $175, with six dollars in public funds, for a maximum of $1,050 in public funds per contributor.

That means if you run for council, and I support you and give $100, the CFB matches it six-to-one, adding $600 to my $100 contribution. Now I've given your campaign $700! So when I tell you the sewers are backing up on my block, maybe you will do something, because you know, you do kind of owe it to me. 

Nearly everyone who runs for office uses the program. Of the 282 people who declared that they were running for City Council in 2009, nearly 78 percent participated.

And if you look at the winners of those elections, it’s even more everyone. Of the 53 winners, all but one participated, whether they ended up using the matching funds or not. Peter Koo (R-20) was the lone refrainer. Koo's chief of staff, James McClelland, explained that while Koo believes in the program, he felt the money unnecessary for his campaign.

“Councilman Koo is a successful businessman. He is fortunate enough that he could do it himself, and didn’t believe that he should be supplemented with finance money.”

Increasing Individual Donations, Displacing Organizational Money?

In 1989, total donations from individuals (excluding those from the candidate or their family) to candidates for City Council totaled about $1.5 million. After ten years of public financing, they totaled over $35 million in 2009. Between 2001 and 2009 the percentage of campaign funding from individual donations has only increased .2 percent, that percentage makes up a huge share of campaign budgets—87.3% of funding in 2009 was from individual donors.

That means less than 13 percent of campaign funds came from organizations, otherwise known as special interests. In 1989 contributions to the city council candidates from business entities totaled just over $400 thousand. A decade later, that's down to just over ninety thousand.

But a deeper look shows that this decrease it is not linear, nor is it consistent. The pattern appears more closely linked to the economy than to the program. In fact, in 1997, the amount of donations from businesses nearly doubled—from $556,320 in 1993 to a whopping $1,179,316 in 1997!

In the first day of 2008, a law took effect banning candidates from accepting money from LLC’s and partnerships. While LLCs and partnerships had already donated 3.2 percent of all contributions in the 2009 elections, that category of donation will be gone entirely by the next elections in 2013. It is possible that the role of PACS—political action committees—may rise as organizational money looks for new channels in, but that remains to be seen. 

But New York City Does Account for Spending Disparities Between Candidates

New York does, in fact, have a bonus system for candidates facing opponents with large outside spending. According to Eric Friedman, spokesperson for the Campaign Finance Board, when a candidate in the program faces a high-spending non-participant, the matching rate is increased, as is the maximum payment of public funds, and the spending limit goes up or is lifted completely.

The difference between New York's bonuses and Arizona's trigger money is that in Arizona, the payments can be triggered by independent spending. If a candidate is opposed by a large independent expenditure campaign, he or she may get extra public funds to respond. In New York City, disclosure of independent expenditures was not mandated until this year. Additionally, in Arizona, the system matches any spending over the spending limit dollar-for-dollar, up to twice the original spending limit, whereas in New York City, funding remains a matter of matching, so the amount of candidates' bonus payments are still based on the amount of small contributions they collect rather than on their opponent's spending.

Friedman says in both systems the primary rationale is to limit the possibility and perception of corruption by balancing the influence of large contributions and special interest money with public funds.

"The bonus system helps encourage candidates to join the public financing program. The larger, anti-corruption aims of public financing can only be met if candidates join the program. But if candidates feel the public financing program limits their ability to compete against a wealthy, uncapped opponent, they will be less inclined to join. So these bonus systems bring candidates into the program."