Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag #moNeYpolitics and #fairelex.

CAMPAIGN FINANCE REFORM AND ETHICS NEWS

NEW YORK

Syracuse Post-Standard Editorializes In Favor of Small Donor Matching Funds for First Time

On Tuesday, the Syracuse Post-Standard editorialized in favor of small donor matching funds for the first time. According to the editorial, when paired with spending limits and other electoral reforms, public financing of campaigns can help address the culture of corruption in Albany. “Public campaign financing will not cure all that ails the body politic. It cannot detect a larcenous heart. But it seems a relatively cheap and sensible step toward restoring confidence that state government – the Legislature, in particular – acts in the public’s interest.” Although opponents have expressed concern about the costs, the Post-Standard points to the $420 million in incentives that the film and television industries received in this year’s state budget. And film and television are only one special interest group out of many that are present in Albany. The editorial notes, “If we value our democracy, we should be willing to invest in it.” Engaging more small donors and making legislators more dependent on their constituents, rather than a few wealthy special interests, offers an added layer of defense against corruption.

Campaign Finance Reform Proposals by Assembly Democrats and Senate Independent Democratic Conference

New York State Assembly Speaker Sheldon Silver has unveiled a new campaign finance reform proposal. The bill, A4980B, includes a small donor matching component, where every contribution up to $250 by state residents is matched with public funds at a 6-to-1 ratio. “We cannot allow elected public service to become the exclusive domain of the wealthy and the well connected,” Speaker Silver stated. Stronger enforcement of the law and penalties for violations will be enforced by a new body, the Fair Elections Board, to be situated within the state Board of Elections. Organizations making independent political expenditures over $1,000 would have to disclose the name of the person or group behind the spending, and report all major contributors (those that donated over $1,000) to the Board of Elections. The Senate Independent Democratic Conference, headed by Senator Jeffrey Klein, criticized the proposal for failing to eliminate political party housekeeping accounts, and transfers between party committees and individual candidates. "Unless these measures are part of a more comprehensive plan to eliminate party slush funds and slash six figure contributions, we'll be right back to where we started.  Our members look forward to discussing these proposals alongside the more comprehensive plan outlined by the Independent Democratic Conference last week," IDC Spokesman Eric Soufer stated.

The Cost of Public Financing is about $2 per New Yorker per Year

Recently, the New York State Senate Republican Conference, which is opposed to publicly funded elections, finally explained how it arrived at its inflated estimate of the cost of public financing. The method was immediately assailed by campaign finance expert Prof. Michael Malbin, who called it “little more than back of the envelope arithmetic based on incredible assumptions.” The Campaign Finance Institute has used peer-reviewed methods to conclude that the cost of public campaign funding under current proposals would be between $26 and $41 million per year. Senate Republicans’ estimate is many times higher. The Republicans’ calculation unrealistically assumes that there would be two candidates in every general election and each would earn the maximum amount of public funds. For primary elections, the GOP analysis assumes that a quarter of senators would participate in a primary, with one candidate per race receiving the maximum amount of public funds. It is important to note that under Speaker Sheldon Silver’s bill, (1) receiving public funds depends on the candidate’s ability to raise money from numerous small donors, so only donations up to $250 are matched with taxpayer dollars and that (2) candidates are limited to a maximum amount of public funds ($400,000 for Senate candidates and $200,000 for Assembly candidates in the general election race). The Senate Republicans’ assumption, that two candidates in every general election would receive the maximum amount of public funds, does not jibe with the experience of New York City, where a multiple matching funds system is already in place. Between 2001 and 2009, only 51 percent of candidates running in New York City elections received the maximum amount of public matching funds. According to the Campaign Finance Institute, under the least expensive scenario, the cost would be $1.34 per New York resident per year, while it would be $2.08 per New York resident per year for the most expensive scenario—a small price to pay for cleaner elections.

Campaign Finance Reform Can Help Crack Down on Corruption

A 2011 report by the Center for Competitive Politics has been seized upon by opponents of Fair Elections to argue that the public financing system in New York City is characterized by consistent abuse of public funds and corruption. But the facts just don’t support that characterization. Since New York City adopted public financing in 1988 it has not faced a corruption scandal on the same scale as the 1980s. The CCP report outlines 24 scandals related to New York City elections in an attempt to argue that public funding does not deter corruption. Brennan Center counsel Ian Vandewalker’s detailed investigation of the report reveals that several cases have no relationship to public financing, including one involving a state legislator who never participated in city elections. Half the cases involve allegations or investigations that yielded no criminal or election law violation. Furthermore, several others listed describe instances where candidates attempted to violate the rules of New York City’s public financing system, but were caught by the city’s enforcement agency and fined or denied public funds. Enforcement is a necessary component of any effective campaign finance reform proposal. Along with vigilant enforcement of the law, disclosure of contributions, and lower contribution limits, public financing of elections can “end the mad chase for campaign cash that starts some elected officials down the road to corruption and … make candidates dependent on ordinary voters rather than special interests.”

Bad Legal Arguments Can’t Stop Reform

With the introduction of Fair Elections legislation in both chambers, and strong popular support for the effort among voters, opponents are attempting to raise legal barriers to the reform. Specifically, some are alleging that  the New York State Constitution forbids the use of public funds for election campaigns. The Constitution says that “the money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking.” As Larry Norden, deputy director at the Brennan Center, illustrates, elections are, in any sense of the word, competitions for public office. In a 2011 case, Bordeleau v. State of New York, the New York Court of Appeals evaluated the section of the Constitution at issue and ruled that the “burden” of challenging any public financing statute on these grounds is “exceedingly strong.” This is because “enactments of the Legislature” enjoy the presumption of constitutionality, especially when Legislative expenditures are “designed in the public interest.” Furthermore, 46 other statutes that have a similar prohibition on the use of public funds for private undertakings, including Arizona, Connecticut, and Maine, are home to thriving public election financing programs.

New Demos Report Lauds Benefits of Public Financing in Connecticut

Demos has released a new report titled Fresh Start: The Impact of Public Campaign Financing in Connecticut. The study is co-authored by J. Mijin Cha, senior policy analyst at Demos, and Miles Rapoport, Demos president and a former Secretary of State for Connecticut. It chronicles significant changes in the Connecticut Legislature following the state-wide adoption of a public financing system. Public financing of elections has increased the number of small donors because Legislators receive incentives for raising small contributions from a minimum number of in-district donors. The influence of lobbyists has perceptively declined. As one former Legislator recalled, “Before public financing, during the session … there were ‘shakedowns’ where lobbyists and corporate sponsors had events and you as a legislator had to go. That’s no longer a part of the reality.” In addition, elections are more competitive, as new potential candidates are no longer deterred by the large war chests of incumbents. The 2008 election had the lowest number of uncontested seats since 1998, indicating that more candidates were running. Public financing has also proven to be immensely popular with voters, with 79 percent in favor of the clean elections program. Furthermore, voters understand that loose campaign finance laws and mega-donations breed corruption. They were three times more likely to agree with the statement,  “The state needs the Citizens’ Election Program because, in the past, lobbyists and state contractors received special deals in exchange for political contributions which has even landed some politicians in jail,” than an alternative criticizing the cost of the program.

Governor Cuomo Announces New Proposals to Anti-Corruption Agenda

Governor Andrew Cuomo has announced new proposals to his anti-corruption agenda, following the arrest of New York State Senator Malcolm Smith (D-Hollis). The Governor wants to revoke Wilson-Pakula, which governs the process by which candidates can run on a party’s ballot even if they are not members of that party. State Senator Malcolm Smith, a Democrat, is charged with trying to bribe Republican County Chairs in New York City to convince them to allow Smith to run on the GOP ballot for mayor. The Governor is arguing that Wilson-Pakula creates ethical conflicts, as candidates try to bribe or make large donations to political parties to gain ballot access. “You‘ve heard the expression ‘pay to play’,” Cuomo said. “This is pay to run.” The Assembly Democrats are not backing the repeal of Wilson-Pakula. “I don’t think we should preclude people from running on more than one [political party] line,” Speaker Sheldon Silver stated.

Campaign Reform Would Curb Albany Corruption

By Ian Vandewalker

The public has been shocked at the recent corruption scandals marring New York politics, and calls for reform have grown louder. Addressing the “show me the money” culture in Albany requires a systemic solution, and that solution must include comprehensive campaign finance reform including public financing, lowering contribution limits, and improved enforcement of election laws. Public financing is crucial because it will release candidates from their dependence on big-money donors and restore public trust in government.

Public Campaign Financing Curbs Corruption

New York City enacted a public financing system in response to a massive corruption crisis in the 1980s. Mayor Ed Koch’s administration was slammed with a series of scandals involving graft, bribery, and extortion. Party bosses packed several city agencies with patronage appointments and created a system in which thousands of parking meter attendants and municipal inspectors took graft. With party bosses’ tight control over their agencies, multiple whistleblowers were ignored. In the decade prior to the passage of public financing in 1988, four of the city’s elected officials, including a borough president, were convicted of corruption charges, one was censured by the City Council and later convicted of tax crimes, and another borough president committed suicide as more and more evidence came to light implicating him in bribery and kickback schemes.

Since the enactment of public campaign financing, New York City has not seen another corruption crisis remotely resembling that of the 1980s. Although there have been individuals who sought personal gain at the expense of the public fisc, they have been caught quickly and faced the consequences. The city’s public funding system has succeeded in making elections more competitive, allowing candidates to campaign more than they fundraise, and making sure candidates play by the rules. In its oversight of the 2009 elections, the New York City Campaign Finance Board penalized several campaigns for improper spending: The agency imposed fines and required campaigns to return more than $400,000 in public funds. The system has also dramatically increased the diversity of donors, greatly increasing the influence and voice of small donors without access to large sums of money.

In neighboring Connecticut, comprehensive campaign finance reform with public financing has been a smashing success since it was implemented in 2008. A recent report shows that Connecticut’s system has decreased the number of uncontested elections and reduced the influence of lobbyists. The number of federal public corruption convictions in Connecticut decreased drastically after the adoption of their public funding system as compared to the years immediately preceding reform. And the four-year stretch since reforms were implemented has had the fewest convictions of any four consecutive years since the Department of Justice started reporting this data.

Furthermore, public financing programs are highly popular where they have been implemented. Connecticut voters are strongly in favor of the program, supporting it at a rate of 79 to 15 percent after hearing how it works. And voters understand the connection to the influence of money and corruption: They were more than three times more likely to agree with the statement, “The state needs the Citizens’ Election Program because, in the past, lobbyists and state contractors received special deals in exchange for political contributions which has even landed some politicians in jail,” than an alternative criticizing the cost of the program. Arizona’s public financing system is similarly popular with its voters, and Maine’s system is even more popular, with 88 percent of Mainers in support.

Opponents are Wrong that New York City’s System has Fostered Corruption

Opponents wrongly claim that public financing won’t help to address the problem of money in politics, even suggesting that public financing will increase corruption. Opponents have seized on a 2011 report by the Center for Competitive Politics (CCP) that argues public financing systems in Arizona, Maine, and New York City are characterized by the “rampant” abuse of public funds and corrupt practices.

The CCP report’s section on New York City lists 24 scandals that are supposed to be evidence that the city system has not deterred corruption. But a closer look reveals severe flaws in CCP’s analysis.

Several cases had nothing to do with public financing, including one state legislator who never participated in the city system. Half of the cases involve no wrongdoing: They either describe activity that is legal and not corrupt or cite investigations that never found a crime or election law violation. Finally, there are a number of examples of candidates attempting to violate the rules of the city’s public funding system. Every campaign in this last category was caught by the city’s effective enforcement agency and either fined or denied public funds. This shows that enforcement works, and it is a necessary part of comprehensive campaign finance reform that includes public funding.

The following list breaks down the 24 alleged scandals described in the CCP report to show how little they tell us about the relationship between corruption and public financing, suggesting that the CCP’s zeal to attack public funding motivated it to trump up these cases.

Cases that have nothing to do with public campaign funding

• The report lists one member of the State Assembly who never participated in the city’s public funding system, even though the CCP claims its list consists of “New York City ‘Clean Elections’ candidates.”

• Six cases of abuse of City Council members’ discretionary funds are described.* These have nothing to do with public funding or campaign finance. New York State legislators do not have access to discretionary funds.

Cases with no official finding of wrongdoing

• Two candidates accepted public funds for elections that the report claims were not competitive. This is not illegal, and it’s not corruption.

• Eight candidates were allegedly involved in collusion between the Working Families Party and Data & Field Services. Federal prosecutors decided not to file charges against those candidates, and there was no finding of wrongdoing in a civil lawsuit that WFP settled.

• There are two unfounded allegations that candidates spent public funds improperly. The report cites a news article that presents no evidence that the expenditures in question violated the law.

Cases that were caught by New York City enforcement

• Two candidates were found by the Campaign Finance Board found to have coordinated with a labor union, resulting in in-kind contributions that exceeded contribution limits. Both candidates paid hefty fines.                                                                                 

• Four candidates violated campaign finance laws but were caught by the Campaign Finance Board’s routine audits.* The agency either denied the candidates public funds or ordered them to repay all the public funds they had received.

*Former City Councilmember Miguel Martinez engaged in both discretionary funds abuse and campaign finance violations that were caught by routine audits.

In short, three-quarters of the scandals discussed in the CCP report had nothing to do with public financing and the handful that did were all readily caught by the city's enforcement agency.

New York State Needs Comprehensive Reform with Public Financing at its Core

Today, Albany’s corruption problems are threatening to completely destroy public faith in government. In the last 10 years, at least 13 state elected officials have been convicted on charges relating to corruption, and several more have been indicted. The corruption has reached the highest levels of state government: Former Comptroller Alan Hevesi steered $250 million of the state pension fund’s money to a company in exchange for almost $1 million in cash and travel benefits from the company’s founder. Three of the last five Senate Majority Leaders or Co-Leaders have been indicted or convicted on corruption charges: Joseph Bruno is awaiting retrial after his 2009 conviction was overturned due to a change in the law, Pedro Espada pleaded guilty last year and faces a trial on more charges, and Malcolm Smith was charged this month. The damage to public trust is undeniable: A recent poll found that 87 percent of New Yorkers think that corruption is a somewhat serious or very serious problem.

Although no system can stop individuals from behaving badly, public financing combined with strong enforcement, disclosure, and reasonable contribution limits can change the culture of Albany. It will end the mad chase for campaign cash that starts some elected officials down the road to corruption, and it will make candidates dependent on ordinary voters rather than special interests. A system of matching small donations with public funds will encourage New Yorkers to participate in elections and give them a greater sense of ownership of their government. Contrary to the exaggerated claims by ideological opponents like the Center for Competitive Politics, public financing systems have been a crucial element of anti-corruption reform in New York City, Connecticut, and elsewhere.

Bad Legal Arguments Can't Stop Reform

 By Lawrence Norden

With Albany rocked by scandal over the last month, many believe that the time for comprehensive campaign finance reform, with better enforcement, lower limits, and public financing at its core, may finally have come. 

And why not?  The public -- Democrats, Republicans and Independents, all  --  strongly supports it.  With the endorsement of the Governor, Speaker Silver, Senate IDC Leader Klein, and Senate Democratic Conference Leader Andrea Stuart Cousins, we seem to have the votes to make it happen.

Unfortunately, not everyone is on board with bringing real reform to Albany.  Some opponents are resorting to rather silly arguments, in the apparent hope to slow things down. 

In today’s Daily Politics Ken Lovett reports that unnamed Senate Republicans “are raising potential constitutional roadblocks,” to this reform.  Specifically, they point to “Article VII, section 8 of the state Constitution that says that ‘the money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking.’” (emphasis added).

The theory, as we understand it, is that this provision somehow prevents matching funds from being used by a candidate running for public office.  

To be generous, this is a novel interpretation that is almost certainly wrong.  To be ungenerous, it is a desperate attempt by certain legislators to try to protect the status quo by hiding behind a misreading of the State Constitution.  Either way, it should not be taken seriously by those with the power to bring comprehensive campaign finance reform to New York.

As it happens, the New York Court of Appeals recently looked at this section of the State Constitution and made clear that for those who sought to challenge a statute on these grounds, the “burden is a heavy one” because “enactments of the Legislature—a coequal branch of government—enjoy a strong presumption of constitutionality.”  Bordeleau v. State, 18 N.Y.3d 305, 313 (2011) (internal citation and quotation marks omitted).  The burden is “exceedingly strong” where the expenditures are “designed in the public interest.”  Id.  “Indeed, we have recognized the need for deference involving public funding programs essential to addressing the problems of modern life, unless such programs are patently illegal.” Id. (internal citations and quotation marks omitted).  Id.

A public funding program at the core of comprehensive campaign finance reform, passed in reaction to a series of state corruption scandals, would seem to fall squarely into an expenditure “designed in the public interest.”

It is also worth noting forty-six states have a prohibition on the use of public funds similar to that of New York, including other states with public financing programs such as Arizona, Connecticut, Hawaii, and Maine.  None have been successfully challenged on this ground.

Nor has a similar provision been used to challenge New York City’s public financing system, which has existed for 24 years.  In fact, the State Constitution has an arguably stronger restriction on the use of public funds.  Pursuant to Article VIII, section 1 of the state Constitution, “No . . . city . . . shall give or loan any money or property to or in aid of any individual, or private corporation or association, or private undertaking . . . .”

Despite multiple challenges to the City’s program by some of the best anti-reform lawyers in the country, no one has brought this provision up.  Wonder why?  We’re guessing it’s because previous challengers to the City’s public financing system read the same case law we did, and decided they did not want to get laughed out of court.

David Early contributed to research related to this blog post

Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag #moNeYpolitics and #fairelex.

CAMPAIGN FINANCE REFORM AND ETHICS NEWS

NEW YORK

Financial Industry Heavyweights Join NY LEAD

The New York Leadership for Accountable Government (NY LEAD), a group of business, civic and philanthropic leaders organized to push for a citizen-funded elections in New York State, has added several prominent new members to its ranks. Delroy Warmington, managing partner of Delwar Capital Management, and Cynthia DiBarolo, CEO of Tigress Financial Partners and chairwoman of the Greater New York Chamber of Commerce, are two of the recent additions with impeccable business credentials. Dennis Mehiel, chairman and CEO of U.S. Corrugated and Battery Park City and former candidate for Lieutenant Governor in 2002, stated that “We must end the wasteful political arms race that forces so many businesses and business owners to siphon more and more money into election campaigns. A system of small-donor matching funds is a good answer. It will encourage business growth, help constituents hold candidates and officeholders accountable, and ensure fair legislation in Albany.” The complete list of new members is available here.

A Solution to the Corruption Crisis

In an Albany Times-Union op-ed, Jonathan Soros, CEO of investment firm JS Capital Management and co-founder of Friends of Democracy, discusses how the State Legislature can respond to the recent corruption scandal which has tarnished its reputation. Since 2000, twenty-six sitting New York State Legislators have been indicted, arrested, or implicated for corruption. Although enforcement of the law and prosecution of corruption can catch criminal offenses, altering systematic incentives in favor of transparency and responsiveness can take us one step further. Governor Cuomo’s proposal for comprehensive campaign finance reform is one such systematic change that can induce greater transparency and accountability from our elected officials. The proposal matches small political contributions from local residents with a limited amount of public funds in an effort to decrease Legislators’ dependence on big contributions and special interests. Consequently regular constitutions are empowered. Along with the disclosure of campaign funds and effective enforcement of the law by state agencies, matching small donations can increase constituent participation, and create disincentives for reliance on special interests, which breeds corruption.

Riverdale Press Editorial Calls for Campaign Finance Reform

This week, the Riverdale Press embraced campaign finance reform in a Wednesday editorial. Pointing to the recent scandals involving Assemblyman Eric Stevenson (D-Bronx), Malcolm Smith (D-Hollis) and Bronx Republican Party Chair Jay Savino, the editorial stated that this culture of corruption is generated in part by our elections system. “The pay for play culture that periodically crosses over into crime is far from surprising.” The concern is not only about illegal bribery but also about high contribution limits and big donations from a few special interests. The public would certainly be equally as appalled at campaign activities that are perfectly legal under current state laws as they were by corruption of their elected officials.

Pension Fund Wins Greater Disclosure from Companies

New York State Comptroller, Thomas DiNapoli, has reached an agreement with five Fortune 500 companies to disclose their political spending. The companies, including Southwest Airlines, Dr Pepper Snapple Group, Plum Creek Timber Company, Harley-Davidson and Noble Energy, have committed to publicly disclose all their direct and indirect monetary and non-monetary political contributions to campaigns and politically active trade associations. As the trustee of the New York State Common Retirement Fund, which holds millions of dollars of shares in numerous corporations, DiNapoli argues that such information is important for investors. “Shareholders have a right to know how companies are using corporate money for political purposes. These companies deserve credit for embracing transparency and reducing potential risk to shareholder value by disclosing direct and indirect contributions made with corporate funds,” DiNapoli said in response to the agreement. DiNapoli has filed 26 shareholder resolutions in 2013 on the issue of political spending disclosure, reaching agreement with eight companies, including Qualcomm, KeyCorp and PepsiCo.

Cuomo Proposes Criminal Justice Response to Corruption Scandals

Governor Cuomo has unveiled a series of tough reforms seeking to reduce corruption in Albany. The proposal, known as the Public Trust Act, would change the state’s definition of bribery to conform to federal standards to allow greater leeway for prosecutors and increase penalties for official misconduct and misuse of taxpayer dollars. Under the proposed law, elected officials as well as other state and local government workers could be charged with misdemeanors if they are aware of bribery schemes but fail to report them. The plan would also bar anyone convicted of public corruption felonies from holding public office, serving as a lobbyist or doing business with the state. Attorney General Eric Schneiderman and State District Attorneys have welcomed the proposal but request greater resources and authority to probe the executive and legislative branches. Good-government groups have similarly praised the plan but insist that the entrenched culture of corruption cannot change unless campaign finance reform is also instituted. Karen Scharff, executive director of Citizen Action, said she hopes the Governor will take the next step and reform the way campaigns are financed. Currently candidates have to rely on large donors and special interests for campaign contributions, which breeds a “show me the money” culture. “From day one, you’re stuck in this pay to play system,” Scharff stated.

NATIONAL

Governors’ Associations Turn to Dark Money Groups

Non-profit groups affiliated with the Republican Governors Association and the Democratic Governors Association have spent millions of dollars in state political battles without being required to disclose their donors. Non-profits do not have to disclose their donors if they spent less than half of their funds on political activities. The Republican Governors Association Public Policy Committee spent $10 million in 2011, and America Works USA, which is tied to Democratic Governors Association, funded ads worth $4.4 million. Both non-profits in turn channeled some of their funds to other non-profits creating a network of untraceable political contributions, which is being called the “Russian nesting doll” technique. For example, the Republican Governors Association Public Policy Committee gave $200,000 to a D.C. based non-profit called ReAL Action, an organization “dedicated to renewing America through the restoration and application of biblical values.” In turn, ReAL Action then dispersed funds to three conservative non-profits, one of which funneled the money to a political committee called Iowa for Freedom. Iowa for Freedom ran ads against “liberal, out-of-control judges ignoring our traditional values,” in an attempt to unseat three state judges in 2010.

Hawaii Public Financing Bill Continues to Advance

In Hawaii, a bill creating a comprehensive public financing program for state House elections has passed through both houses of the legislature. A conference committee must now reconcile differences between the House and Senate versions. According to House Bill 1481, candidates qualify for public funding by raising 250 $5 donations and collecting 200 signatures from voters in their districts. Participating candidates have to abide by lower contribution limits. The amount of public funds available will be determined by the average sum spent by winners across all districts in the previous election cycle; the current number is around $35,000. In defense of the cost, Kory Payne, executive director of Voter Owned Hawaii, stated that “The taxpaying public ends up paying for elections by not paying for them. We pay for them in the form of kickbacks to special interests, bad policies, corruption and infrastructure mismanagement.” A new poll by Public Campaign and Lake Research shows that 83 percent of voters in Hawaii think the state should “overhaul” or “make modest changes” to campaign finance laws.