U.S. Supreme Court Threatens Campaign Finance Reform in NYC

co-authored by Morgan Pehme, the Executive Director of New York Civic.

This article was cross-posted on the Huffington Post and on  LivingtheDream.org.

New York City’s campaign finance system, often lauded as the best in the nation, has a secret. It’s under attack.

On the heels of last year’s devastating  Citizens United decision that opened the floodgates for more corporate spending in elections, the United States Supreme Court may be about to severely curtail the role of public financing in elections. The case,  McComish v. Bennett, involves a challenge to Arizona’s public financing system, specifically a provision granting “trigger funding” to participating candidates facing well-funded opponents. Following oral arguments in late March of this year, it appears the Supreme Court is likely to declare “trigger funds” unconstitutional, a determination that could have wide-ranging implications and affect the way we run elections here in New York.

New York City’s  Campaign Finance Board (CFB), the nonpartisan government agency that administers the city’s campaign finance system, was created in 1988 through a voter-approved referendum aimed at limiting the influence of money on elections by providing neighborhood advocates the resources needed to run competitive races against wealthy candidates without having to depend on money from special interests, like real estate developers, big corporations and deep-pocketed unions.

The way the CFB attempts to accomplish this goal is through a system of matching funds. Candidates who voluntarily abide by the city’s campaign finance rules, like spending limits and maximum donation amounts, are rewarded by the CFB with additional money for every dollar raised by the candidate through small donations from city residents. Currently, the match is  $6-to-$1 up to the first $175 of any contribution, with the ratio increasing in the candidate’s favor if any of his or her opponents decline to participate in the campaign finance system and exceed the spending limit set for the candidates who are playing by the CFB’s rules.

This ascending match bonus, a form of “trigger funding,” is crucial to the CFB system, as it deters wealthy candidates from trying to overwhelm their opponents financially, because the more money a rich candidate spends over the limit, the more his or her opponents receive in matching funds from the CFB. For example, in a 2009 City Council race in Queens, a Democrat named Kevin Kim significantly outraised his opponents and decided to opt out of the matching funds system. Kim was upset in the general election by Republican Daniel Halloran. Halloran, who participated in the matching system, received an  $8.57-to-$1 ratio from the CFB worth $102,568. While Kim still significantly outspent Halloran by a ratio of more than 4 to 1, the matching funds and trigger bonus helped Halloran mount an effective campaign and he narrowly defeated Kim  52% to 48%.

As the ascending match is the principle incentive for candidates to participate in New York’s public financing system and the strongest disincentive for candidates to raise or spend vast sums of money, it is difficult to imagine the CFB functioning as it was designed were it to be stripped of the power to award trigger funds. And yet that is precisely what appears on the cusp of occurring, if the Supreme Court rules as many legal experts predict in  McComish v. Bennett.

In the aftermath of a massive scandal that sent several legislators to prison, Arizona approved a measure in 1998 known as the  Clean Elections Act, which enacted a public financing system in which participating candidates agree to limit the contributions they seek and how they spend them in return for receiving public financing from the state. Like in New York City, what makes this system effective is the trigger funds provided by Arizona when a participating candidate’s opponent spends beyond a certain allowed amount.

While prominent politicians of both parties have taken advantage of Arizona’s public financing system – like Democratic former Governor Janet Napolitano and current Republican Governor Jan Brewer – opponents of Arizona’s law contend that “What this case is about is whether the government can turn my act of speaking into the vehicle by which my political opponents benefit with direct government subsidies,” in the  words of William Maurer, the attorney arguing before the Supreme Court on behalf of Arizona State Senator John McComish and the other petitioners.

Though proponents of Arizona’s law argue, as Justice Elena Kagan seemed to concur during oral arguments in the  McComish case, that the state’s campaign finance system engenders more speech, rather than less, the majority of the Court, including “swing” Justice Anthony Kennedy, appears to agree with Maurer’s contention that the Clean Elections Act limits candidates’ free speech. In a related 2008 case,  Davis v. Federal Election Commission, the Court struck down as unconstitutional parts of the so-called McCain-Feingold Campaign Finance Act that imposed spending restrictions on wealthy candidates as an infringement upon their First Amendment rights to free speech. Furthermore, the idea of the government mandating a “level playing field” was rejected by the Court in  Davis as “ominous.”

Perhaps it is because of the Court’s objection to the concept of a “level playing field” that Eric Friedman, a spokesperson for the CFB, is careful to avoid characterizing its system with the phrase. He maintains that the system “doesn’t level the playing field, it gets you on the playing field.”

While the CFB asserts that its public finance system is distinctly different from Arizona’s, and therefore not greatly jeopardized by the outcome of  McComish, Friedman admits that the CFB is closely monitoring the case and has joined an amicus brief on the side of the State of Arizona in an effort to preserve trigger funds. In an indication of just how relevant  McComish is to the CFB, the New York City Law Department, which is responsible for all of the city’s legal affairs including defending the Mayor and the City’s agencies, has also joined the amicus brief, as have the New York City Council and the Public Advocate’s Office.

Experts in New York City elections worry that the impact of  McComish could profoundly affect the CFB system. “There have been numerous instances of candidates who were only elected because of the extra funds they received from the CFB when their opponents exceeded the spending limit,” said Jerry Skurnik, a partner in the political consulting firm Prime New York. “If self-financed candidates are allowed to spend as much money as they want, and there is no way for their opponents to catch up, the City’s public financing system will be severely undermined.”

How the Supreme Court ultimately decides remains to be seen, but should the Court side against Arizona even in a narrow ruling – in contrast to the wide-ranging  Citizens Uniteddecision – it is likely to significantly curtail the ability of cities and states to give candidates who participate in public financing the resources they need to compete with wealthy and well-funded candidates.

Of course, even if the Supreme Court finds in favor of the State of Arizona, New York City’s campaign finance system will remain vulnerable to the power of money. If a candidate’s means are great enough, there is a limit as to how much trigger funds can help a financially overwhelmed candidate. In 2009, Mayor Michael Bloomberg outspent City Comptroller Bill Thompson  $108.4 million to $9.4 million, even with Thompson receiving  $1,641,508 from the CFB, based on an ascending ratio of $8.57-to-$1. Notably, even with this lopsided advantage and Thompson’s failure to raise enough in contributions to receive the  maximum possible CFB match of $7,697,500, Thompson still came within less than  five percentage points of dethroning the relatively popular two-term incumbent, no doubt, in part, because the matching funds Thompson received helped enable him to run a viable campaign.

It is understandable why a billionaire like Bloomberg would calculate that deluging his opponents with money would be worth it to secure the most high-profile and influential municipal office in the nation, but why would someone spend millions of dollars to become, say, one of 51 City Councilmembers? Beyond the lure of ego – even the lowliest of Councilmembers is generally better known than all but the  crème de la crème of hedge fund managers – there are great financial incentives for wanting to buy a Council seat. For example, there is a tacit etiquette in the Council that on land use issues, the full Council will generally vote in accordance with the position of the Councilmember who represents the area in which the development is to take place. In the case of a massive, multi-hundred-million-dollar project like Atlantic Yards or the planned Vornado Tower, where the developers stand to make far more than their colossal investment, it becomes clear why a real estate mogul might want to drop a mere million dollars to win a Council seat, if that outlay virtually assured approval of a controversial building or complex.

Trigger funds are a key safeguard against this type of brazen manipulation of the system, because they prevent all but those with Bloomberg bucks from overwhelming the political process with money. Though certainly a robust campaign finance system is not without its cost – the CFB distributed $27 million in taxpayer dollars in 2009 – the expense is relatively small in relation to its effectiveness in limiting the power of special interests in shaping government policy and public works. If the Supreme Court rules trigger funds unconstitutional, it is likely that local candidates will find themselves trapped in a financial arms race, where the temptation of selling out to special interests for campaign cash will be increasing difficult to resist.

We do not know yet what the Supreme Court will ultimately decide. But in oral arguments in  McComish, Justice Stephen  Breyer made it clear that he believes that campaign finance reform is fundamentally in danger of being dealt “death by a thousand cuts.”

That is why the New York City Council must begin thinking seriously about legislative remedies now. Rather than naively hoping for the best in  McComish, the Council must immediately turn its attention to preserving a campaign finance system that has succeeded in amplifying the voices of regular citizens, while keeping at bay, to a degree, the special interests who already far have too much say in how we are governed.

It is hard to envision a viable public financing system stripped of the ammunition to award trigger funds. If the Council does not dedicate itself to writing new laws that protect the core mission of the CFB now, we are in danger of letting the system crumble beneath our feet.

Janos Marton is an attorney at Hogan Lovells and a former legislative aide to Councilmember Rosie Mendez.

Morgan Pehme is the Executive Director of New York Civic.