Daniel Katz, Staff Writer
The New York City campaign finance system was created in 1988 amid widespread scandal in New York City, and has been amended numerous times.1 That same year, the New York State Commission on Government Integrity issued a report outlining reforms that would improve the integrity of the New York City system.2 The report called for many changes, such as banning corporate contributions, treating loans as contributions, and enacting special rules for those doing business with the city,3 that have since been incorporated into the New York City campaign finance system. Because the New York City campaign finance system has been the subject of numerous reports, debates, and hearings over the 20 years that it has been in existence, it is viewed by many as a model for campaign finance reform.4
The New York City campaign finance system contains provisions that would be unconstitutional if mandatory, but which are acceptable because the candidates volunteer to participate, in essence subjecting themselves to the limits. In the declaration of legislative intent and findings, the City Council stated that the goals and purposes of the Act are “to improve popular understanding of local issues, to increase participation in local elections by voters and candidates, to reduce improper influence on local officers by large campaign contributors and to enhance public confidence in local government.”5
Prior to the 2007 amendments, the City’s public campaign financing system was an entirely voluntary system. In order to be eligible for public matching funds, candidates voluntarily accepted expenditure limits, contribution limits lower than state limits, more extensive disclosure requirements than state requirements, as well as a ban on corporate contributions, which are allowed under state law.
In 1998, the New York City Council passed Local Law 48 increasing the matching rate of public campaign funding from 4 to 1 for the first $250 contributed by private contributors, and bonus matching rates were provided for program participants who face high spending non-participants.6 A bonus is triggered when a non-participating candidate spends more than 50 percent of the expenditure limit. The participating candidate then receives a $5-to-$1 match and higher spending limits.7 Due to a charter amendment passed in a referendum in 1998, there was some confusion about the continuing validity of the matching rate, and so the City Council enacted Local Law 21 in 2001 to clarify the validity of the matching rate.8
In reaction to Michael Bloomberg’s expenditure of $73 million of his personal funds in his successful bid for the mayor in 2001, the City Council voted in 2004 to not only lift the spending limit for a participating candidate facing a self-funded opponent, but also to provide the participating candidate with a six-to-one public funds match for qualifying private contributions starting with the 2005 election.9
Prior to the 2005 election, candidates wishing to run for office in New York City had to choose whether or not to participate in the New York City campaign finance system. Those candidates who wished to participate were eligible to receive public matching funds of 4 to 1 on the first $250 of a contribution, but in exchange they could not accept corporate money, had to agree to low contribution limits, had to agree to limit their overall campaign expenditures, and had to make frequent campaign finance disclosures. Candidates who did not wish to participate were not given public money to help finance their campaign, but were subject only to state law, which has much higher contribution limits, no expenditure limits, and less stringent disclosure requirements.
The 2004 amendments also created a new class of participant and further incentives for participation. The new class of participant is the “limited participant.”10 By becoming a limited participant instead of a non-participant, the candidate agrees not to accept outside donations, and to finance his or her campaign with his or her own money. In exchange for foregoing any outside funding, the bonus provisions that provided a higher matching rate and expenditure limits to candidates facing non-participating candidates, would not apply.11
While state law makes it in some ways easier to raise money than City law, because of the state’s higher contribution limits and different rules about who may contribute, most candidates still participated in the City system because any gain was not offset by the loss of public matching funds and the possibility of bad publicity. The lure of public funding proved to be an almost irresistible incentive to participate and resulted in a 90% participation rate.12 Although the voluntary system in New York City had a very high participation rate and was widely praised as a model for reform, the New York City Council enacted further reforms. While few candidates were inclined to run for office in New York City without participating in the campaign finance system after the enactment of increased matching rates, there was one type of candidate that was much better off running for office outside of the New York City system: the self-funded candidate.
A candidate that chose to fund his or her own campaign but wished to participate in some way in the New York City campaign finance system would be limited in the manner in which they could raise money for their campaign. If the candidate were a participant, he or she would be limited in what they could contribute, would have to raise money from other contributors within the rules of the city system, and would be required to make extensive disclosure, which would limit the benefit of being able to self- fund a campaign.13 If the candidate were a limited participant, then he or she could only use their own money for the campaign and could not raise money from others.14 In contrast, a candidate that was a non-participant could spend an unlimited amount of his or her money on his or her own campaign, could raise money from a wider variety of sources, and until the 2004 amendments would not have to make as frequent or detailed disclosures.15
In 2004, in an effort to rein in what was perceived by some as an advantage, the New York City Council amended the law that applied to non-participating candidates to require participation.16 Beginning in the 2005 election, the New York City campaign finance system was expanded to require that all candidates, including non-participating candidates, make disclosure under the more stringent New York City system.17 The 2007 amendments require that both limited and non-participating candidates shall comply with the same requirements as a participating candidate regarding donations from people doing business with the City, exclude donations from those people doing business with the city, including lobbyists and government contractors, from being matchable donations, and limit the amount that people doing business with the City may contribute to less than 10% of what may be contributed by a member of the general public.18
Most significantly, the 2007 reforms also require that “a non-participating candidate, and the authorized committees of such a non-participating candidate, shall only accept contributions as limited by the provisions of paragraphs (f) and (l) of subdivision one of section 3-703, [and] subdivision 1-a of section 3-703.”19 Paragraph (f) prohibits a candidate from accepting amounts that:
in the aggregate: (i) for the office of mayor, public advocate or comptroller shall exceed four thousand nine hundred and fifty dollars, or (ii) for borough president, shall exceed three thousand eight hundred and fifty dollars, or (iii) for member of the city council, shall exceed two thousand seven hundred and fifty dollars.20
Paragraph (l) prohibits a candidate from accepting corporate donations.21 Subdivision 1-a of section 3-703 limits what a candidate can accept from a person who has business dealings with the city to an amount that “does not exceed: (i) for the office of mayor, public advocate or comptroller four hundred dollars; (ii) for borough president three hundred twenty dollars; (iii) for member of the city council two hundred fifty dollars.”22 The result of this is that a non-participating candidate is bound not to accept more than a participating candidate from any source other than the candidate’s own funds.23
So as not to strip the non-participating candidate distinction of all meaning, the statute goes on to state that:
- notwithstanding any contribution limitations . . ., a non-participating candidate may contribute to his or her own nomination for election or election with his or her personal funds or property, in-kind contributions made by the candidate to his or her authorized committees with the candidate’s personal funds or property, and advances or loans made by the non-participating candidate with the candidate’s personal funds or property. A candidate’s personal funds or property shall include his or her funds or property jointly held with his or her spouse, domestic partner, or unemancipated children.24
This functionally reduces non-participating candidates from any person who does not wish to participate in the city campaign finance system, to only those people who are using their own resources to finance a campaign.
The application of New York City’s campaign finance system to non-participants results in a system in which all candidates for office in New York City are subject to the requirements of City law to the maximum extent permissible under the federal Constitution. Buckley established that contribution limits, and disclosure requirements may be required of all candidates without impinging on the First Amendment, but that limitations on expenditures and contributions to a candidate’s own campaign may only be limited as part of a voluntary system. If non-participating candidates are not voluntarily agreeing to participate in the New York City campaign finance program, then the City cannot require non-participants from abiding by expenditure and self-financing restrictions. Because the disclosure and contribution limits apply to all candidates and cannot be avoided, the law is a mandatory law.
The recent United States Supreme Court decision in Davis v. Federal Election Commission made clear that campaign finance laws that create an asymmetrical campaign contribution scheme applicable to candidates based on how much of their personal wealth is used to finance their candidacy infringe on a self-financed candidate’s First Amendment rights. Campaign finance law usually applies uniformly to all candidates for office, but Section 319(a) of the Bipartisan Campaign Reform Act of 2002 (BCRA),25 the so-called “Millionaire’s Amendment,” as interpreted by the Supreme Court in Davis v. Federal Election Commission, states that:
- [w]hen a candidate’s expenditure of personal funds causes the [“opposition personal funds amount” (OPFA)] to pass the $ 350,000 mark (for convenience, such candidates will be referred to as “self-financing”), a new, asymmetrical regulatory scheme comes into play. The self-financing candidate remains subject to the limitations [of the normal system], but the candidate’s opponent (the “non-self-financing” candidate) may receive individual contributions at treble the normal limit (e.g., $ 6,900 rather than the current $ 2,300), even from individuals who have reached the normal aggregate contributions cap, and may accept coordinated party expenditures without limit.26
The Court quoted its discussion in Buckley of an expenditure cap for self financed candidates, noting that:
- a candidate . . . has a First Amendment right to engage in the discussion of public issues and vigorously and tirelessly to advocate his own election” and that a cap on personal expenditures imposes “a substantial,” “clea[r]” and “direc[t]” restraint on that right. We found that the cap at issue was not justified by “[t]he primary governmental interest” proffered in its defense, i.e., “the prevention of actual and apparent corruption of the political process.27
The court also reaffirmed its rejection of the
- argument that the expenditure cap could be justified on the ground that it served “[t]he ancillary interest in equalizing the relative financial resources of candidates competing for elective office.” This putative interest, we noted, was “clearly not sufficient to justify the . . . infringement of fundamental First Amendment rights.28
The Court clarified that in Buckley, they
- held that Congress “may engage in public financing of election campaigns and may condition acceptance of public funds on an agreement by the candidate to abide by specified expenditure limitations” even though [the court] found an independent limit on overall campaign expenditures to be unconstitutional . . . [but in that case] a candidate, by forgoing public financing, could retain the unfettered right to make unlimited personal expenditures, [while] § 319(a) does not provide any way in which a candidate can exercise that right without abridgment.29
The government made an equal protection argument that the asymmetrical limits are justified because they “level electoral opportunities for candidates of different personal wealth . . . [and] Congress enacted Section 319. . . to reduce the natural advantage that wealthy individuals possess in campaigns for federal office.”30 The court rejected this argument, stating that there is “no support for the proposition that this is a legitimate government objective. . . . [and] the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.”31
The government argued in its brief that contribution limits
- make it harder for candidates who are not wealthy to raise funds and therefore provide a substantial advantage for wealthy candidates. Accordingly, § 319(a) can be seen, not as a legislative effort to interfere with the natural operation of the electoral process, but as a legislative effort to mitigate the untoward consequences of Congress’ own handiwork and restore “the normal relationship between a candidate’s financial resources and the level of popular support for his candidacy.32
The Court noted that such any advantage that wealthy people enjoy is a result of the disparate treatment of contributions and expenditures adopted in Buckley, and
- [i]f the normally applicable limits on individual contributions and coordinated party contributions are seriously distorting the electoral process, if they are feeding a “public perception that wealthy people can buy seats in Congress,” and if those limits are not needed in order to combat corruption, then the obvious remedy is to raise or eliminate those limits. But the unprecedented step of imposing different contribution and coordinated party expenditure limits on candidates vying for the same seat is antithetical to the First Amendment.33
The Court next considered § 319(b)‘s disclosure requirements and found them to be unconstitutional. The court held that “there must be “a ‘relevant correlation’ or ‘substantial relation’ between the governmental interest and the information required to be disclosed,” and the governmental interest “must survive exacting scrutiny.”34 Because “the § 319(b) disclosure requirements were designed to implement the asymmetrical contribution limits provided for in § 319(a), and . . . § 319(a) violates the First Amendment. . . . it follows that [the disclosure requirements] too are unconstitutional.”35
Because Davis held that the asymmetrical contribution limits provided to non-self financed candidates facing self financed opponents and self-financed candidates under FECA violate the First Amendment, the New York City System is also likely to be unconstitutional. The Court emphasized,
- The fundamental nature of the right to spend personal funds for campaign speech [and] [w]hile BCRA does not impose a cap on a candidate’s expenditure of personal funds, it imposes an unprecedented penalty on any candidate who robustly exercises that First Amendment right. Section 319(a) requires a candidate to choose between the First Amendment right to engage in unfettered political speech and subjection to discriminatory fundraising limitations. Many candidates who can afford to make large personal expenditures to support their campaigns may choose to do so despite § 319(a), but they must shoulder a special and potentially significant burden if they make that choice.
New York City forces self- financed candidates to make an almost identical choice to the choice that FECA required. Candidates are similarly required to either participate in the campaign finance system with all of its attendant contribution and expenditure limits, or to remain a “non-participating candidate” where the candidate must still abide by contribution limits applicable to participating candidates, but if the non-participating candidate spends too much money from his personal funds, the participating candidate may accept much larger contributions. New York City allows for the additional category of “limited participant,” where a self financed candidate would not trigger higher contribution limits for his opponent, but at a cost of not accepting any contributions from outside sources at all.
The Supreme Court has only approved of a campaign finance system in which “a candidate, by forgoing public financing, could retain the unfettered right to make unlimited personal expenditures.”36 As in the statute in question in Davis, the New York City system
- does not provide any way in which a candidate can exercise that right without abridgment. Instead, a candidate who wishes to exercise that right has two choices: abide by a limit on personal expenditures or endure the burden that is placed on that right by the activation of a scheme of discriminatory contribution limits.37
Because the New York City system provides asymmetrical contribution limits to candidates facing self financed candidates similar to those held to be unconstitutional in Davis, the New York City system is likely to be unconstitutional.
New York City could amend its campaign finance law to remove the asymmetrical contribution limits that apply to self-financed and non self-financed candidates. The City is free to increase contribution limits to a level that it thinks appropriate to run a campaign while still combating corruption or the appearance of corruption, but it cannot provide different limits for different candidates as a consequence of one candidate’s expenditure of personal funds. If a candidate’s acceptance of a larger campaign contribution when he or she is facing a candidate who can rely on his or her own wealth and the contribution is most needed does not implicate the threat of corruption, it is hard to see why larger contribution limits at all other times would not similarly not lead to corruption.
1 New York City Campaign Finance Board: A Brief History of the CFB, http://www.nyccfb.info/press/info/history.aspx (last visited Mar. 16, 2009).
2 New York State Commission on Government Integrity, Unfinished Business: Campaign Finance Reform In New York City (1988).
3 Id. at 9, 14, 26.
4 Ciara Torres-Spelliscy & Ari Weisbard, What Albany Could Learn From New York City: A Model Of Meaningful Campaign Finance Reform In Action, 1 Alb Gov. L. Rev. 194, 197 (2007); see also NYPIRG, Good Government, http://www.nypirg.org/goodgov/reformny/finance.html (last visited Mar. 15, 2009).
5 Local Law of the City of New York No. 8 § 1 (1988).
6 Local Law of the City of New York No. 48 § 1 (1998), available at http://www.nyccouncil.info/pdf_files/bills/int0344a.htm.
7 New York City Campaign Finance Board, The Impact of High-Spending Non-Participants on the Campaign Finance Program (2006), 6, available at http://www.ci.nyc.ny.us/html/records/html/govpub/gover3.shtml.
8 Local Law of the City of New York No. 21 § 1 (2001), available at http://www.nyccouncil.info/pdf_files/bills/law01021.pdf.
9 See New York City Council Local Law 58, §6, (2004) (amending Section 3-706(3) of the Administrative Code of the City of New York), available at http://www.nyccouncil.info/pdf_files/bills/law04058.pdf. The six-to-one match is capped at $1500 in public funds per contributor, and the total public funds payment capped at 125% of the expenditure limit for the office the candidate is seeking. See also Richard Briffault, Home Rule and Local Political Innovation, Journal of Law & Politics, Vol. 22, p. 1, 2006, available at: http://ssrn.com/abstract=894481.
10 New York City Administrative Code § 3-702(13), available at http://public.leginfo.state.ny.us/menuf.cgi (follow “Laws of New York” link under search, then follow “ADC” link at the bottom of the page, then follow link for Chapter 7 under title 3, and link for 3-702).
11 New York City Campaign Finance Board, supra note 1, at 8.
12 New York Campaign Finance Board, A Report on the 2005 Elections, 1 http://www.nyccfb.info/PDF/per/2005_PER/2005_Post_Election_Report.pdf.
13 New York City Administrative Code § 3-703(h), available at http://public.leginfo.state.ny.us/menuf.cgi (follow instructions supra note 10).
14 New York City Administrative Code § 3-718, available at http://public.leginfo.state.ny.us/menuf.cgi (follow instructions supra note 10).
15 New York City Administrative Code § 3-719, available at http://public.leginfo.state.ny.us/menuf.cgi (follow instructions supra note 10).
16 New York City Administrative Code § 3-703(6), available at http://public.leginfo.state.ny.us/menuf.cgi (follow instructions supra note 10).
17 § 3-703(2).
18 New York City, N.Y., Local Laws No. 34, at 7 (2007), available at http://www.nyccouncil.info/pdf_files/bills/law07034.pdf.
19 Id. at 14.
20 New York City Administrative Code § 3-703(1)(f) (2007), available at http://public.leginfo.state.ny.us/menuf.cgi (follow instructions supra note 10).
21 § 3-703(1)(f)
22 New York City, N.Y., Local Laws No. 34, at 7 (2007), available at http://www.nyccouncil.info/pdf_files/bills/law07034.pdf.
23 A participating candidate may only accept money from a PAC that has been registered with the CFB, while a non-participating candidate may accept money from an unregistered PAC, but neither may accept any corporate money. See New York City Campaign Finance Board: Frequently Asked Questions, http://www.nyccfb.info/press/info/faq.aspx (click on “Who is prohibited from contributing to a candidate?”) (last visited Mar. 16, 2009).
24 New York City Administrative Code § 3-718(1), available at http://public.leginfo.state.ny.us/menuf.cgi (follow instructions supra note 10).
25 116 Stat. 109, 2 U.S.C. § 441a-1(a) (2002).
26 Davis v. Fed. Election Comm’n, 128 S. Ct. 2759, 2766 (2008).
27 Id. at 2771 (quoting Buckley v. Valeo 424 U.S. 1, 52-53 (1976) (citation omitted).
28 Davis, 128 S. Ct. at 2771.
29 Id. at 2772.
30 Id. at 2773.
32 Id. at 2774.
34 Id. at 2775.
36 Id. at 2772.