Abstract
Abstract
Restrictions on speech will not be accepted by the Supreme Court in the name of equality, but this does not rule out equality and participation as legitimate policy goals. It is both constitutional and appropriate to promote these goals without new constraints on speech by using incentives to increase the number and importance of low-dollar donors. The constitutional theory is straightforward. The empirical question is whether this could work. There are few examples of current policies with this specific purpose. One run by the City of New York gives participating candidates six dollars in matching funds for each of the first $175 that a city resident donates. This article asks whether a similar approach could become a model for others. The argument has three parts. The first is an empirical analysis of New York City's campaign finance records since 1997, showing that (a) multiple matching funds do increase the proportional role of small donors; (b) they have also increased the number of small donors; and (c) they help shift the demographic and class profile of those who give. The second part applies a modeling method to the states to show these results could readily be obtained elsewhere. The third section presents broad theoretical, constitutional, and policy themes. After arguing the futility of using public financing to reduce spending, it urges participation-based public financing to broaden the base. In making this case, the article also presents reasons for preferring matching funds to flat grants or other forms of public financing.
The constitutional theory is straightforward. The empirical question is whether this is just wishful thinking. Would an approach like this actually work? During the 2008 election, some saw technological innovation as enough by itself to accomplish this goal, but that has not been borne out. The Internet lowers the cost of mobilizing small donors and volunteers. But it is still easier for most candidates to raise money in large chunks, so they will try to mobilize large donors first. Past students of participation have argued that one cannot expect most people to give or participate unless they are asked. Mobilization is a necessary, though not a sufficient, condition for participation.5 So the question is whether public policy can alter the incentives for candidates to mobilize donors who give smaller amounts.
There are very few examples of jurisdictions with functioning policies whose specific purpose is to increase participation by small donors. One is the State of Minnesota, which until 2009 offered a rebate of up to $50 to donors contributing to political parties, or to candidates who participate in the state's partial public funding system. Another is the City of New York, which in 2009 gave participating candidates six dollars in public matching funds for each of the first $175 that an individual city resident gives to their campaigns. (The matching ratio was four-for-one for the first $250 in 2001, 2003, and 2005.) The 2009 formula made a $175 donor as valuable to participating candidates as a $1,225 donor was to non-participants.
This article asks whether a matching fund similar to New York City's could and should become a model for jurisdictions across the country. The argument proceeds in three parts. The first is an empirical analysis of New York City's campaign finance system. It shows that (a) multiple matching funds sharply increase the proportional role of small donors; (b) in addition to shifting the proportions, the small-donor focus has also increased the number of people who contribute; and (c) by increasing the numbers of small donors, the system is also shifting the demographic and class profile of those who give, making the system more representative of the population as a whole.
The second part of the article's argument involves a hypothetical modeling exercise in which matching funds are applied to the states. This presents an analysis of state campaign finance records that uses comparable definitions across all of the states—first to measure the current mixture of donors and then to estimate the extent to which a hypothetical matching funds system would alter the balance. The hypothetical system is simpler than New York City's, but patterned after it. The section shows that in the median state, candidates raise about 16 percent of their contributions from individuals who give them $250 or less. Even without major new restrictions on large donors, a multiple matching fund system to stimulate small donors would dramatically increase their proportional importance, making small donors the dominant force in most states' campaign finance.
Finally, the third section of the article presents both constitutional and policy arguments. After showing the futility of using public financing to reduce campaign spending, this section argues for the importance of participation-based policies to build up and broaden the base. In making this case, the article also presents reasons for preferring matching funds to flat grants or other forms of public financing. To obtain the maximum benefits from public financing, it argues for a system in which candidates are required to accept a somewhat lower contribution limit than non-participating candidates, in return for receiving multiple-matching funds. Once candidates have been awarded some maximum amount of public funds to be established by law, the candidates should be able to continue raising an unlimited amount of additional money, but only under the lower contribution limit they accepted when they decided to take public funds.
Public Matching Funds in New York City
History
New York City's partial public financing system was enacted by the City Council in February 1988.6 For three elections (1989, 1993, and 1997) the city provided a one-for-one matching amount of public funds for the first $1,000 contributed by a city resident to a participating candidate. Those who accepted the funds were obligated to adhere to lower contribution limits and to accept spending limits. The maximum amount of public funds a candidate could receive would be 50 percent of the spending limit. Because city officials at the time believed they did not have the authority to set contribution limits for candidates who chose not to accept public financing, the contribution limits for non-participating candidates remained at much higher levels set by state law. However, if a participating candidate was running against a high-spending, non-participating one, the public matching grant would be increased and the spending limit would be removed.
The one-for-one matching fund paralleled the system used in the presidential primaries and some state elections. From the beginning, however, the city's Campaign Finance Board sought to persuade the Council to reconfigure the formula to favor small donors. By the election of 2001 the city had changed to a four-for-one match for the first $250. This allowed $250 donors to trigger the same $1,000 in public funds as once had been triggered only by $1,000 donors. The election of 2001 was also the city's first in which council members, in a system in which incumbents were highly favored for reelection, were forced to leave office because of term limits. As a result, the multiple-matching funds of 2001 were implemented in an election in which most of the candidates were running for open seats.
The city's elections normally occur every four years. Once every twenty years, however, the city holds an extra reapportionment-driven election for City Council in the middle of what would otherwise be a four year term. The election of 2003 was such an election. The four-for-one matching ratio of 2001 and 2003 stayed in place for the election of 2005, but two other changes that year were significant. City officials decided in 2004 (contrary to their previous legal opinion) that they could impose the same disclosure requirements and contribution limits on non-participating candidates as they did for program participants. As a result, the election of 2005 is the first one for which we have useful data for all city candidates, and not just for participants. For the election of 2009, the city changed the matching ratios again—from a four-for-one match for each donor's first $250 to a six-for-one match for the first $175.
One explicit reason offered for changing from a one-to-one match to multiple-matching ratios for 2001 through 2009 was to heighten the importance of small donors. Our analysis shows that the program in fact has accomplished this objective. Before we present the evidence, however, a brief discussion of method and data is useful.
Contributions, donors, and years covered
Election agencies and others who write about small donors typically present information about contributions as opposed to donors. That is, we are told how much of a candidate's money comes in transactions of a certain amount. This is not a bad rough-and-ready way to talk about the subject, since most donors give only once to most candidates in any given election. However, it also loses a great deal. In the 2008 presidential election, Barack Obama received more than half of his money in contributions (or transactions) of $200 or less, but only one-quarter from donors whose contributions over the course of two years aggregated to a total of $200 or less.7 At the higher end of the donor scale, a lobbyist might well prefer to buy $500 tickets to each of several events over the course of two years rather than giving everything at a single sitting. Therefore, we do not consider contributions to be the best unit of analysis for this study. For one thing, the contribution is not the unit most relevant for policy analysis. When laws place limits on contributions, they are restricting the total amount an individual may give to a recipient. It would make little sense to limit the size of a contribution if a person were permitted to write twenty checks for the maximum amount on the same day. For this reason the law (and this study) is concerned about what we are labeling the donor-candidate pair: the total amount that each donor gives to each candidate.
For some purposes, it might make more sense to make the donor the unit of analysis rather than the donor-candidate pair, aggregating a donor's contributions across all candidates. While we agree that it could be desirable to focus on the donor, as opposed to the donor-candidate pair, it generally is not possible to do so. In most jurisdictions, disclosure is required only for donors whose contributions cross some threshold amount—usually $100 or less at the state level. That means one cannot trace donors whose contributions to a candidate do not reach the threshold. We know that all undisclosed money will be below the threshold for each donor per candidate. We can also make plausible assumptions from past survey and other research to estimate how many donors it probably took to provide each candidate's total of undisclosed contributions. However, there is no way to know which donors under the threshold have given to more than one candidate. Therefore, it is not possible to have an accurate count of donors in any jurisdiction that does not require disclosure of all contributions, no matter how small. Because of this, the donor-to-candidate pair is the most reliable unit for comparative analysis across jurisdictions.
New York City requires all contributions to be reported, with no disclosure threshold. This would allow one to move away from donor-candidate pairs to examine individual donors. We nevertheless retain the use of pairs so we can compare New York City with other jurisdictions. Such comparisons give these findings a stronger perspective. The following numbers will give some idea of what might have been lost by using pairs. In the 2009 election in New York City, we counted 91,779 unique donors. Of these, 81,742 donors (89%) gave to only one candidate, 6,760 (7%) gave to two candidates, and 1,766 (2%) gave to three. The remaining 2 percent of the donors gave to four or more candidates, with a total of 58 giving ten or more times. The percentages in 2005 were almost the same, with 64,533 (88%) of that year's 73,287 donors giving only to one candidate. As a result, we are confident that the conclusions we draw from our information about donor-to-candidate pairs in New York City also would apply directly to donors.
To arrive at information about donor-to-candidate pairs involves the following steps. We begin with the contribution records for the jurisdiction in question. If a donor gives more than one disclosed contribution, those contributions are identified as coming from the same donor by matching the names in public contribution records (and indisputable variations of the name) as well as considering their addresses. The amount each donor gives to each candidate is then tabulated by adding all of his or her combined contributions to that candidate in an election cycle. Under this method, a person who writes twenty checks of $50 each to one candidate would be counted as a $1,000 donor to that candidate. This procedure underlies all of the municipal, state, and federal data in this article. The larger project of which this article is part is the first to have applied such a procedure to all of the states, as well as to federal elections. The state records were supplied by the National Institute of Money in State Politics. The city's records came from the New York City Campaign Finance Board.
The elections to be covered in the next section of this article are the 1997 through 2009 City Council elections. This allows us to compare the final election under the one-for-one matching fund system with the multiple-matching fund elections of 2001 through 2009, testing the claim that multiple-match funds would increase the role of small donors over what it had been in a one-for-one matching system. We did not have enough data at this time to include the elections of 1989 or 1993, but 1997 should provide an adequate baseline for 2001–2009. The public records also make it impossible to gather data for non-participating candidates before 2005. As a result, it is not possible to establish a pre-1989 baseline describing a system with no public financing, or to compare participants to nonparticipants before 2005.
One final word about this article's coverage: Mayor Michael Bloomberg's self-financed election campaigns dominated the city's overall campaign money picture in 2001, 2005, and 2009. Our analysis therefore has focused on candidates running for the 51-member City Council, which is the legislative branch of the municipal government. Each member of the City Council represents a constituency of more than 160,000 people, which makes a council district larger than most state legislative districts and therefore a valid comparison for elections elsewhere. The city's districts are mostly controlled by the same political party, but on a district-by-district basis the seats are not substantially safer for individual incumbents than the largely safe seats in many state legislatures or, for that matter, the U.S. House of Representatives.
City Council candidates from 1997 through 2009
We are now prepared to compare the sources of candidates' campaign funds during the elections of 1997 through 2009. Table 1 presents summary information for candidates who were on the primary or general election ballot each election. The table includes all candidates who participated in the public financing system, with separate information for non-participating candidates in 2005 and 2009. The first set of rows under each year presents the percentage of the total funds that participating candidates received from individuals, political parties, and non-party organizations, with the individual donors divided into those who gave the candidates an aggregate amount of $1–$250, $251–$999, and $1,000 or more. Also shown are the number of candidates who participated in the public financing system and the percentage of all candidates who chose to participate. The second set of rows repeats the first, but adds in public funds by allocating the matching money to the specific donor who triggered it. The third set shows the total number of donor pairs under each of the categories of individual donors, as well as the average number of donor pairs per candidate. For 2005 and 2009, additional rows are added to present parallel information for the nonparticipating candidates. Readers who are interested in greater detail may wish to see separate tables like these for incumbents, challengers and open seat candidates. They are made available as an appendix to this article on the Web site of the Campaign Finance Institute.8
NB: Excludes self-financing. *Cells across may not add to 100% because of rounding.
Source: Campaign Finance Institute, derived from data supplied by the NYC Campaign Finance Board.
Impressionistically, it does look from this table as if there is a connection between multiple-matching funds and low-dollar donors. Participating candidates in 1997 raised 28 percent of their private funds from individuals who gave $250 or less. This came from 23,999 donor-candidate pairs, or an average of 240 small donors per candidate. The percentage role of small donors was higher in every election after 2000, with higher absolute numbers of donor-pairs in every election but one.
However, it would not be satisfactory to let matters rest with this first impression. The five elections in this series had substantially different mixes of candidates driven largely by the introduction of term limits, which took effect with council members who were finishing their second terms in 2001. In 2001, only 11 incumbent council members ran for reelection, compared to 28 in 1997. In 2003, 45 incumbents ran for the council's 51 seats. Thirty-eight ran in 2005 and 42 in 2009. To smooth out the effects of these differing electoral contexts, therefore, the following table (Table 2) combines the four elections with multiple-matching funds and then separates the incumbents, challengers, and open seat candidates.
At first blush, the results seem quite negative for one of the two hypotheses put forward here. The table does seem to support the claim that multiple-matching funds produced an increase in the proportional importance of small donors. The left-hand set of columns shows that the proportion of private money that came from small donors went up by 35 percent for incumbents, 62 percent for challengers and 40 percent for open seat candidates, without even taking account of the multiplying role of the matching funds portrayed in the middle set of columns. However, the claim that this would bring a larger number of small donors into the system seems brought into question by the right-hand set of columns in Table 2. The table shows an apparent increase for incumbents and open seat candidates but is negative for the challengers.
To help interpret this finding, an additional control was introduced into the table. From Table 1, we had noticed that the number of small donors had increased (from 23,999 in 1997 to an average of 40,264 in the 2000s) but there was also an increase in the number of candidates (from 100 in 1997 to 154). The large number of candidates helped bring the average number of donors per candidate down, which was the number presented in Table 2. This opens the possibility that the mixture of candidates—particularly non-incumbents who raised little money and did not earn many votes—may help explain the low percentage increase in Table 2's third set of columns. To test this, the next table presents the same information as Table 2, but limits the candidates in all years to those who could reasonably be described as being viable or competitive. A candidate is defined as being competitive if he or she received at least half as many votes as the winning candidate in a primary or general election (the equivalent of 66/33 in a two-candidate race). The results are shown in Table 3.
This table shows a substantial increase not only in the proportional role of small donors but in their absolute numbers per candidate. Incumbents raised money from a 27 percent larger number of $1–$250 donors in the 2000s, competitive challengers went up by 56 percent and competitive open seat candidates went up by 20 percent. This, combined with the data in Table 1, provides strong support for the claim that multiple matching funds focused on small donors brought more low-dollar donors into the system, both more per similarly situated candidate as well as more overall.
While the data strongly support the claims comparing the multiple-matching systems with the older one-for-one system, we find at best mixed support for the shift from one form of multiple-matching system (the 2001–2005 four-for-one match) to another (the 2009 six-for-one match). Table 4 is similar to Table 3, with competitive candidates, but presents only the “percentage change” columns.
This table shows significant increases in the incumbents' percentage of money from small donors as well as their numbers of small donors, but the conclusions are mixed for the challengers and open seat candidates. From this information we cannot conclude that the 2009 change had a strong impact beyond the one already introduced in 2001. To some extent, this may be an artifact. The 2001 election, with its extraordinary number of open seats because of term limits, had very high rates of low-donor participation affecting the 2001–2005 average. Later tables showing only 2005 and 2009 suggest more positive results for 2009, but more elections under the new formula will be needed to establish the effects of the 2009 change with greater certainty.
A brief word about non-participants in 2005 and 2009, the only years for which non-participant data are available. Candidates who chose not to participate in the public financing system in the 2005 election received only 9 percent of their money from donors who gave $250 or less; the non-participants of 2009 received 15 percent. Both numbers are substantially below the 28 percent for participating candidates in 1997, which in turn is below any election in the 2000s. The six non-participating incumbents who ran in 2005, and the one who ran in 2009, raised 8 percent and 9 percent of their money respectively from donors who gave $250 or less, and they had relatively few small donors. In contrast with the incumbents, four of the seven open-seat non-participants were in high-spending competitive races and had a relatively large number of $250-or-less donors—enough to approach the participating candidates' average. But the proportion of money they raised from small donors looked more like the incumbent non-participants: they raised between 6 percent and 15 percent. We therefore should not make too much of them here. They form a small and skewed sample. They do show (as did Barack Obama) that public financing is not a necessary condition for a few candidates to persuade small donors to give. However, they do not negate the conclusion that for most candidates matching funds alter the fundraising landscape.
In sum, the information so far supports the claim that multiple-matching fund systems focused on small donors can have a significant effect. When we consider the paths through which this might have occurred (about which more will be said) we conclude that the law seems to have had a noticeable structuring effect on the incentives of candidates, donors, or both. This structuring in turn has affected the mixture of money in city elections.
Testing two paths—Reshuffling versus increased participation
The data so far show that the shift to multiple matching funds was associated with an increase in the number of $1–$250 donor-candidate pairs as well as an increase in the percentage of money coming from those pairs. Skeptics might counter that it makes little difference to politics if this is only a big-donor shell game—that is, if rich donors who once gave larger amounts now divide the same money among several candidates. Consider the following hypothetical, using 2005's four-to-one ratio. If a donor gave $1,000 to one candidate in 2005, the contribution would have had a value of $2,000 to the candidate ($1,000 in private funds, with the first $250 matched four to one). If the same donor gave $250 to each of four candidates, the same $1,000 in private funds would have generated $4,000 in matching funds. So there would have been an incentive for potentially large donors to spread their money around by giving each candidate $250 or less. This is one way in which the law could stimulate the result we have seen, in which candidates received more of their money on average from donors who give them each $250 or less. Another possibility is that the law does not simply work on donors who spread their money around, but gives candidates an incentive to look for new donors. Piggy-backing on this is the possibility that potential new donors' knowledge of matching funds (generally transmitted by the candidate) increases their willingness to give.
We can see evidence of both paths by comparing the results of 2005 with 2009. In 2005, the city matched each of the donor's first $250 on a four-for-one basis. In 2009, it matched each of the first $175, six for one. We should expect some strategic donors, therefore, to have given exactly $250 per candidate in 2005, so they could spread their money around. In 2009, similar considerations should lead the highly strategic donor to give exactly $175 and then save the remaining $75 for another candidate or purpose. To test this theory, Table 5 breaks down all of the donor-to-candidate pairs of $250 or less into ones that gave less than $175, exactly $175, from $176 to $249, and exactly $250.
NB: Excludes self-financing.
In 2005, City Council candidates who participated in the public financing system raised 13 percent of their funds from 4,925 donor-candidate pairs who gave exactly $250. Nonparticipating candidates raised only 4 percent of their funds from 264 donor-to-candidate pairs of exactly $250. This makes sense. Participating candidates had an incentive to urge donors to get up to $250, and at least some of the donors who could afford to give more had reason to stop there (or divide their money between themselves and their spouses) to make their money worth more for other candidates. Equally interesting as the difference in $250 donors between the participants and non-participants is the fact that almost nobody (only 112 donor-to-candidate pairs) gave exactly $175 in 2005. That also should not be a surprise. In 2005, that dollar amount was essentially a random number (or a random multiple of 25).
In 2009, non-participating candidates once again received very little from donor-to-candidate pairs of exactly $175, and they received just about the same percentage of their funds from donor-to-candidate pairs of exactly $250 as their counterparts had in 2005. However, participating City Council candidates saw a drop in their $250 donor-to-candidate pairs and an increase in their $175 ones. Participating candidates raised 7 percent of their funds from 2,678 donor-to-candidate pairs of exactly $250 (down from 4,925 such pairs in 2005, when they were responsible for 13 percent of the candidates' funds). But these same candidates in 2009 received another 5 percent from 3,055 donor-to-candidate pairs of exactly $175 (up from 0.2 percent of their money from 112 donor-to-candidate pairs in 2005). This is very strong evidence in support of the claim that people who were knowledgeable about the law—most likely candidates—were educating potential donors and influencing their behavior.
Second path—Increased participation
But Table 5 also suggests that the second mechanism was also at work and that new donors were being drawn into the system. Again looking only at the participating candidates for City Council, the donor-to-candidate pairs of $1–$174 make up a large majority of the total number of donor-to-candidate pairs of any size in both 2005 and 2009: 69 percent in 2005 and 75 percent in 2009. These $1–$174 donor-to-candidate pairs were not likely to be made up of strategic givers who were spreading their money around, and there was a big jump in this group's number, as well as its financial importance from one election to the next.
• In 2005, 11 percent of participating council candidates' money came from 25,662 donor-to-candidate pairs of $1–$174. • But in 2009, participating candidates received 21 percent of their money from 39,716 donor-to-candidate pairs of $1–$174.
The 2009 election thus saw a 55 percent increase in the number of donor-to-candidate pairs below $175. This clearly was a substantial increase in participation and not simply a reshuffling of old money.
As noted earlier, we are not comfortable claiming from the evidence we have that the change in the law between 2005 and 2009 fully explains the increase in small donor participation across those two elections. Nevertheless, we take note of the fact that the increased donor participation of 2009 was occurring during the same election as voter turnout in the city declined to a record low of 26 percent, down from 33 percent in 2005.9 Typically, the number of small donors will go up with the level of excitement about an election. In this situation, the number of donor-to-candidate pairs went up during an election when voting rates went down. This is another indication that the law may have been independently effective in helping to structure the incentives for candidates and donors. And whatever the difference between 2005 and 2009, it seems clear that the law in both years stimulated participating candidates to bring proportionally more small donors into the system than their non-participating counterparts did in those two years, or than participating candidates under the one-for-one system.
More of the same, or more and different?
We turn next to ask why one should care whether more small donors participate. Let us consider two possibilities. The first is that the matching funds bring in more donors, but the donors are essentially the same kinds of people as always have given to election campaigns—people of well above average wealth and education, mostly white, with life experiences not all that different from the major donors. The second possibility is that matching funds give candidates an incentive to look for new and different kinds of people to become active in politics as donors, as well as an incentive for the potential donors to become involved. There are policy arguments in favor of both of these objectives, but they are different.
If the matching funds provide incentives for essentially the same kind of donors as were previously participating, then the mere presence of more donors would have one kind of value. At a minimum, having more small donors in the system would reduce candidates' dependence on the narrow circle of donors who have an incentive to give regularly in large amounts. Some major donors act out of concerns about policy or ideology—especially in highly visible national races for the presidency. But in state and city politics, and often in congressional politics, the donors who give $1,000 often have concerns about issues that will affect their particular economic interests.10 Moreover, surveys in which we have participated have shown that the major donors in state elections are far more likely than small donors to work after the election to lobby elected officials to further their particularistic interests through public policy.11 Creating alternative pools of donors therefore will make office holders less dependent upon the previous sets of major givers who come to them with special pleading in mind. This will be true even if the new donors have personal backgrounds not all that different from the old ones.
But let us now suppose the new donors bring a different set of political experiences to the table. For this to have happened, the candidate raising the money will have to make a point of reaching out to new people. That candidate will be spending time with a more diverse set of constituents than he or she would if all of his or her fundraising engaged the upper middle class and rich. To test this possibility, we placed the residence of each donor to New York City's 2009 candidates whose address was listed in the disclosure records within his or her Census Block Group (BG). According to the U.S. Bureau of the Census, a block group “will generally contain between 600 and 3,000 people…with an optimal size of 1,500.”12 This is about the equivalent of one city block with apartment houses. New York City's five boroughs have a total of 5,733 census block groups. The above table (Table 6) describes the block groups in which New York's small, medium, and large donors reside. The table uses data from the 2000 census (provided by GeoLytics, Inc.13), but the results are strong enough as to be unlikely to change much when 2010 data become available.
Source: Campaign Finance Institute, based on data from the New York City Campaign Finance Board and U.S. Bureau of the Census data provided by GeoLytics, Inc.
Of the city's 5,733 census block groups, only 809 (14 percent) had one or more donor-to-candidate pairs of people who gave $1,000 or more to a candidate. Mid-range donor-to-candidate pairs of people who gave $251–$999 to a candidate lived in 1,651 (29 percent) of the census block groups. Donor-to-candidate pairs giving $250 or less lived in 5,267 (92 percent) of the city's block groups. In fact, 5,128 block groups (89 percent) were home to at least one donor-to-candidate pair of $100 or less. These block groups were not at all random in their variation. The census blocks with small donor-to-candidate pairs had lower median incomes than the block groups with mid-range donor pairs. They also had higher levels of poverty, higher percentages of non-whites, higher percentages of adult residents who did not complete high school, and lower percentages of adult residents with a bachelor's degree or beyond. And on every one of these measures, the block groups with mid-range donor-to-candidate pairs fell between the small-donor donor-to-candidate-pair block-groups and the high-donor ones. There can be little doubt that bringing more small donors into the system in New York City equates to a greater diversity in neighborhood experience in the donor pool. Increasing the number of small donors has been more than a means to dilute the power of the major givers. It has also led candidates to reach out to and engage a more representative set of constituents as they raise their campaign funds.
Would New York City's Results Transfer?
The impact of New York City's matching funds on participation by small donors is impressive. But could these policies produce similar results elsewhere? The answer is yes. To set a baseline for explaining this answer, the following table (Table 7) shows the sources of 2005–2006 campaign contributions to all of the major party, general-election candidates for governor and state legislature in thirty-three states. (Preliminary results for 2010 show a general consistency across the two election years.) The table lists the thirty-three states in increasing order of the percentage of money that came in 2005–2006 in donor-to-candidate pairs of $250 or less, using the same methodology as we used for New York City. The table does not include state candidates' self-financing, support from a candidate's immediate family, or public funding in the states (where it exists). For comparative purposes, the table also interlineates five rows for New York City Council elections: non-participating candidates in 2009, participating candidates (private funds only) for 1997 and 2009, and participating candidates (private funds plus allocated matching funds) for 1997 and 2009. Also interlineated are the comparable percentages for U.S. Senate and House candidates in 2008 and for Barack Obama's 2008 election campaign. Obviously the different years, offices, and contexts do not allow strict comparisons between jurisdictions. Nevertheless, lining them up in this way does offer a broad sense of perspective.
NB: State totals exclude candidate self-financing and public financing (except two NYC lines). The table also excludes two states with full public funding systems (AZ, ME) and one whose disclosure records do not permit comparable analysis (TX).
The federal lines (asterisked) are different in the following ways: (1) the donors categories are $1–200, $201–$999, and $1,000 or above. The column labeled here as “party” is used for U.S. House and Senate elections to include all “other” sources of funds, which (unlike the state and city lines) includes self-financing.
Source: Campaign Finance Institute, based on data from the National Institute on Money in State Politics, New York City Campaign Finance Board and U.S. Federal Election Commission.
As is shown, candidates in the various states received anywhere from 4 percent to 40 percent of their money from donor-to-candidate pairs of $250 or less, with one outlier state (Minnesota) at 60 percent. The median state was Tennessee with 16 percent. Non-participants in New York City's 2009 City Council election raised 14 percent of their money from small donors, which is roughly the same as the median state and U.S. Senate candidates. It was about double the level for New York State's candidates or U.S. House candidates. Barack Obama's 2008 small-donor fundraising (24 percent) would have put him in the top quartile of the state in percentage terms (although higher in dollars), but lower than the percentage of private money raised by participating New York City council candidates in 1997 (28 percent) or 2009 (38 percent). The 2009 private-money percentage was below that of only two states in this chart. When the value of public matching money is added to the New York City council candidates' mix, small donors were responsible for 39 percent of the candidates' money in 1997 and a massive 63 percent in 2009. The 63 percent figure is literally the highest number on the chart. The only other jurisdiction that comes close is Minnesota, which is a state whose public policy also puts money behind small donor participation. Until mid-2009, Minnesota gave $50 cash rebates to donors who contributed to candidates for state office who accept partial public funding.
The question to be considered here is whether a multiple-matching fund system could produce results elsewhere that would be similar to ones seen in New York City. As a partial answer, the Campaign Finance Institute produced a series of hypothetical policy scenarios for all fifty states, using simpler policies than New York's, but keeping the essence of a multiple matching fund system aimed at small donors. (These scenarios are available on the Institute's Web site.)14 To produce the scenarios, the Institute identified donor-to-candidate pairs in each of the states where disclosure records made the pairs possible. From these, it produced “status quo” charts for 2006 based on numbers similar to the ones in Table 7 above, as well as another set for the elections of 2008. It then imagined a series of policy options, based on mixing and matching any of the following three changes in policy:
(1) Lower contribution limits (two different limits were offered); (2) Instituting a three-for-one or a five-for-one multiple matching grant system for the first $50 each donor gives to a candidate, and then assuming (unrealistically) that only the same donors gave the same amounts as they did under the status quo; and (3) Assuming that either the matching fund or some other contextual force were to bring enough new $50 donors into the system to add about two percentage points to the state's donor participation rate.
What follows is a description of what would happen in most states under these assumptions. First, reducing the contribution limit would have only a modest effect on the impact of small donors and therefore would give little incentive for candidates to change their recruitment behavior. Even this modest effect was based on the assumption that the amount that donors contributed above the assumed limit in 2006 or 2008 would be retained by the contributor, when we know there is every possibility that major donors will redirect their political money. Of course, the fact that lowering the contribution limit might not have a strong effect on small donors is not an argument against contribution limits. There are other good and sufficient reasons that relate to the potential for corruption or undue influence. If a contribution limit gives large donors a reason to distribute their contributions to more candidates, this probably serves the anti-corruption rationale. Contribution limits may also have an indirect effect on small donor participation by helping to reassure potential small donors that their gifts will be meaningful. But the direct effect on the role of small donors would not be great.
Introducing a simple five-for-one match for each of the first $50 would have a more direct and predictable effect. Under the assumption of a static donor pool, this would make each contribution of $50 (or less) worth six times its current value. It would also add $250 to the value of all other contributions. Since the proportional impact of the $250 match decreases as the size of a contribution goes up, the proportional importance of small donors increases with the match. The following numbers allocate matching funds to the donors responsible for them, since that is how candidates will see the financial value of the donors to their campaigns. They also assume a static donor pool, which we know to be unrealistic. Using these assumptions, states with low levels of donor participation, such as New York and Illinois, would see the proportional role of small donors increase from low single digits into the teens. In states with participation rates closer to the national average the effect would be roughly to double or triple the importance of small donors, making their contributions worth between a quarter and a third of the candidates' total funds.
The biggest impact would come if a five-for-one matching fund provided incentives for candidates to mobilize small donors, and for donors to respond. This is what we believe has happened in New York City. (In addition to the statistical information provided above, anecdotal support for this belief can be found in recent interviews of New York City candidates conducted by the Brennan Center for Justice.15) For the sake of analysis, let us assume that enough new donors come into the system to increase the participation rate by about two percentage points of the state's Voting Age Population (VAP), and that each of the new donors gives exactly $50. That would bring the value of small donors up to about the 60 percent mark in most states, including those currently on the low end of the low-donor scale. This would be roughly the same as the current level in Minnesota and New York City and well above the second-place state. Of course, this assumption about new participation may be overly optimistic, just as assuming no new donors would be overly pessimistic. The most likely result would fall somewhere between the two. Even such a middling result, however, would put the proportional role of small donors in our hypothetical state at or above that of Vermont, which is currently in second place.
The cost of the matching funds for achieving this result in 2009 was about $25 million in New York City. Introducing a five-for-one match for the first $50 from each donor in New York State would be more expensive. Assuming that all candidates for all eligible state offices were to participate (governor, attorney general, comptroller, and legislature), the public matching fund cost would have been $39.7 million with the exact same donors as participated in 2006 and about $79 million if an additional 2 percent of the population gave $50 each. The Campaign Finance Institute has also estimated the cost of public matching funds for some additional states, assuming a static giving population. It would have been about $13 million in Illinois, $8 million in Indiana, $19 million in Ohio, $12 million in Michigan and $24 million in Wisconsin (which already has high participation by small donors).16
Estimating the public cost with a larger pool of small donors is sensitive to two considerations. The first is how large of an increase in participation should one estimate? Second, does one assume some form of a cap on the maximum amount of public funds that may go to any one candidate? The $79 million offered above for New York State assumed no such cap. The cost obviously would be reduced if the program included a cap.
Policy Discussion And Speculation: Public Financing Varieties Under Current Constitutional Law
From the analysis so far, we have concluded as follows: First, New York City's multiple matching fund system has increased the extent to which participating candidates rely on small donors financially. In addition, the incentive for candidates to recruit small donors has increased the number of donors who give, as well as the diversity of the census block groups in which they reside. Finally, we conclude from the hypothetical models that other jurisdictions can achieve many of the same results by adopting similar policies.
None of this fully addresses the policy questions, since we know there are objections to any form of public financing of elections as a matter both of principle and prudence. This final section of the article introduces some of the main policy issues in two segments. The first presents a brief overview of reasons offered by supporters of public financing in general, with comments. The second compares forms of public financing against the goals being analyzed here.
Public financing in general
Arguments in favor of public financing programs typically rest on two kinds of foundations. For the sake of simplicity, we shall refer to them as positive and negative. Negative justifications emphasize what a policy is trying to prevent; positive ones emphasize what the policy is supposed to accomplish. Because most public financing programs have been coupled with various kinds of restrictions and limits (in addition to contribution limits, which rest on their own justification), the legal arguments on their behalf have tended to emphasize the negative goals. These include reducing corruption or the appearance of corruption by replacing large-donor money with public funds.
Whatever one may have thought ten years ago about such negative justifications, they have become implausible under contemporary constitutional law and political practice. Under Buckley v. Valeo (1976) it is permissible to ask candidates to restrict their own spending voluntarily in return for partial or full public funding, but not to restrict independent spending or spending by non-participating candidates. Independent spending has always raised problematic questions for spending limits, but these have been brought to a head by recent court decisions. As noted earlier, the Supreme Court's January 2010 decision in Citizens United v. FEC held that it is unconstitutional to treat unlimited independent spending by corporations differently from constitutionally protected independent spending by individuals. Two months later the District of Columbia Court of Appeals held in light of Citizens United that it is not permissible to limit contributions to a committee that only makes independent expenditures.17 Finally (or finally, as of this writing) the Federal Election Commission issued an Advisory Opinion on June 30, 2011 in which it said that a federal candidate or officeholder may be the featured guest speaker at an independent expenditure committee's event during which the committee is expected to make a pitch for unlimited contributions. The only restriction is that the officeholder/candidate may not personally ask the donors to give more than $5,000.18 With this $5,000 fig leaf, it seems as if it may now be legal for a candidate—such as the well-known presidential candidate whose former finance director formed an independent spending committee to support the candidate—to give a rousing speech praising the independent expenditure PAC and then sit down, or leave the event, so the former finance director can ask for unlimited contributions to help the committee buy independent ads—presumably to help the featured speaker. But even if future developments rein in the role of single-candidate independent expenditure PACs, it is hard to justify public financing today in terms of holding down spending, substituting public money for private, or the other underpinnings that typically have supported the negative justifications.
The positive goals are a different matter. They are both constitutionally acceptable and plausible. Political scientists typically write about three: fostering competition, enabling a broader and more diverse range of candidates to run for office, and promoting citizen participation. If a policy restricted speech, then the positive effects would have to be presented under constitutional law as side benefits to primary goals that relate to corruption. But if a policy is based on positive incentives rather than restrictions, then it should be acceptable for competition, candidate recruitment, or citizen participation to be the primary goal.
We focused on participation in this article. Some of the goals that relate to participation look toward citizens; others look toward candidates and officeholders. For citizens, the objectives are both to engage a larger number of them and to engage a more representative set. For candidates and officeholders, the objective is to encourage greater and more direct engagement with a broader range of constituents. With respect to citizens: we know that involving more people in the process as small donors can have the effect of diluting the importance of large donors. This is the simplest goal of small donor democracy. However, it is also essentially a negative one: it describes having more small donors not as being good for its own sake but as a preventive cure.
On a more positive note, one might simply assert that more participation in a democracy is good. However, there is some question about the extent to which making a contribution is associated with other forms of political activity. Sidney Verba, Kay Lehman Schlozman, and Henry Brady found in their 1989–90 surveys that the act of contributing (“checkbook participation”) typically was not associated with other, more meaningful forms of political engagement. In fact, they found that more than two-thirds of their respondents limited their involvement to check writing (69 percent of their sample) compared to only 12 percent who gave only time and 19 percent who give both time and money. Robert Putnam in Bowling Alone expressed a similar concern in 2000 about whether contributing to a political cause or interest group was a shallow form of participation.19 We cannot respond to this issue fully in this article. Earlier work one of us co-authored about small donors in the 2004 election indicated that small donors were also quite active in face-to-face political activities.20 They appear not to have been merely checkbook participants. However, we are not yet able to draw conclusions about sequencing—whether contributing drew people to become more active than they otherwise would be. The Campaign Finance Institute conducted a major survey of presidential donors in 2008. This survey included questions that asked whether giving preceded a donor's engagement in nonfinancial forms of campaign activism. The results are still being analyzed, but there is reason to believe that at least some volunteers began their campaign activism with a donation. In earlier research, we found anecdotally that some interest groups and the Bush-Cheney 2004 campaign recruited donors to volunteer.21 If the purported connection holds up under scrutiny, it would mean that encouraging participation by small donors might help to encourage volunteering and therefore help build up the stock of social and political capital. This is particularly important if encouraging small donors brings a more diverse set of participants into the system who come from neighborhoods not typically represented in the traditional class of large donors. This is exactly what we found in New York City.
With respect to the second set of positive goals—altering the incentives for politicians to engage more directly with citizens—we would make two points. First, any successful program must attract political figures to participate in the system voluntarily. Second, we would expect that a system using direct incentives would be more likely to produce the desired engagement than a system which simply frees up the politician's time from fundraising and then hopes for the same result. We therefore look next at some of the major varieties of public financing systems currently in use in the United States.
Full public financing or matching funds
From 1974 until the 1990s, public financing systems tended to follow the presidential example: executive officials were typically offered full public funding for the general election while primary candidates were offered one-for-one matching funds. In the 1990s, advocates began applying the presidential full-public-funding model for the general election to state legislative elections in both primaries and general elections. Often called “Clean Election” systems, these were adopted by an initiative process in Maine (1996) and Arizona (1998) and by legislative action in Connecticut (2005). Under these systems, participating candidates raise small contributions to qualify for a flat grant and are allowed to spend only up to the amount of the grant once they qualify. However, the sponsors of the new systems were well aware of a significant design problem with existing programs.
Gubernatorial candidates in several states, as well as presidential candidates, have become less likely to participate because they perceive the spending limits as being too low and too rigid to let them contend with opponents who opt out and who, therefore, can spend whatever they can raise. For them, the price of accepting public money is the suicidal bargain that they have to agree to keep their spending too low to win. One way to address this problem might be to increase the spending limit enough to cope with high spending opponents. With a flat grant, however, increasing the spending limit also increases the public cost. This might be easy to implement in a gubernatorial or presidential general election with only two or three major candidates. However, it could become prohibitively expensive to give every primary candidate for every legislative seat the same amount of money as a candidate would need in the minority of competitive contests. To contend with the financial issue, the newer Clean Election systems (and New York City's multiple-matching system) all kept a basic amount of funding for all participating candidates, but then incorporated the idea that high spending by a non-participating opponent would trigger additional public funds above the base. (These took the form of extra grants in the Clean Election states and extra matching funds in New York City.) In some jurisdictions, the extra funds were also made available if the participating candidate became a target of independent spending. The “triggers” seemed to help candidates decide to participate in public financing systems, but that approach ran up against an insuperable barrier on June 27, 2011, when the U.S Supreme Court declared them to be unconstitutional.22
In theory, states could respond to the Supreme Court's decision by giving all participating candidates more money. This would respond to the constitutional problem with triggers but not to other problems intrinsic to flat grants. One of those other problems relates directly to the goal of encouraging participation. Because the amount of the flat grant and spending limit are identical in full public funding systems, they do away with (or strongly weaken) the possibility of using small-donor fundraising as a lever for bringing new donors into the process. A recent paper two of us co-authored with Wesley Y. Joe, Clyde Wilcox, and Henrik Schatzinger found that in the state of Connecticut, publicly funded candidates were raising money from enough donors to qualify for the grant and then stopping. While many Connecticut legislative candidates had more donors in 2008 than in the privately funded election of 2006, the number of donors was capped. Most appear to have raised the needed qualifying funds by staying within their old circles of friends and supporters. As a result, the contributions did not bring many new people into the system or more economic and racial diversity among donor-participants, which were said to be among the goals.23
In light of both the desire to encourage more participation by small donors, and the constitutional problem with triggers (which had been anticipated since the Court had overturned differential contribution limits in the so-called “millionaire's” provision in the federal Bipartisan Campaign Reform Act24), several major organizations that once advocated full public financing began shifting their position toward supporting a “hybrid” system in which flat grants would be a “floor” rather than a “ceiling.” For example, in the versions of the “Fair Elections Now Act” introduced in 2009 and 2011, participating candidates for the U.S. Senate and House would be able to raise private funds after the flat grant. Contributions would be subject to a low contribution limit (such as $100) and would be available for multiple matching. Once a candidate had received a predetermined maximum amount of public money, the matching funds would stop, but the candidate could continue to raise an unlimited amount of private money under the same low contribution limit.25 Some major reform organizations that once backed full public financing are now supporting this federal bill, including Public Campaign and Common Cause. They were also working with legislators in Connecticut on a similar system as a possible replacement for triggers.26 The entire problem that had led to triggers can be avoided by not having a spending limit. What is the problem with spending, these advocates ask, if all of the money comes from small contributions?
The proposed hybrid system responds to two of the problems with full public funding, but not with a third. Because the initial lump-sum payment to candidates are typically large, flat grant systems tend to set high qualifying thresholds for receiving public funds. One of the stated advantages of full public funding is that it can provide candidates, including challengers, with enough money to run a competitive race. However, supporters (and legislators, and taxpayers) are not interested in giving what could be a substantial sum to every minor candidate who decides to run. To prevent a drain on the public purse, the systems all require candidates to cross a significant threshold to qualify for a grant. Where to put the threshold is a sensitive question. If the threshold is set too low, public money will be wasted. If too high, the threshold will effectively become a barrier, defeating the goal of bringing new and potentially viable candidates into the system.
We do not see a way out of this dilemma with flat grants. The qualifying test for a grant will either be made too easy or too hard. It will either keep some potentially worthy people out or let too many frivolous candidates in. It is almost impossible to calibrate a qualification threshold that would be “just right” and stay that way. In contrast, a system based completely on matching funds does not present the same dilemma. To avoid setting the barrier too high, and keeping deserving candidates out, the qualification threshold can be set fairly low. Candidates may then prove themselves as the campaign season wears on. Candidates who do not develop significant constituencies are not likely to get enough in matching funds to raise a fiscal concern anyway.
For all of these reasons, we do see New York City's multiple matching fund system as a model for jurisdictions nationally. We suggest, however, that the New York model be modified to resolve the intertwined problems of spending limits, thresholds, and triggers. With that important caveat, the evidence from New York City in this article suggests that multiple-matching funds can stimulate participation by small donors in a manner that is healthy for democracy.
There will be objection to this conclusion, of course, by those who simply believe it inappropriate to spend public funds in this manner. This is not the place for an extended consideration of the issue. We would argue, however, that extending political and civic participation are public goods, benefiting the civil society as a whole. To those who are concerned about the justice of “forcing” a taxpayer to support political speech she or he abhors, we disagree because we do not see the issue any differently from otherwise neutral and permissible school voucher funds making their way into religious schools, or a host of other public programs that receive less than unanimous support from the taxpayers. If anything, this concern about forcing taxpayers is another reason for preferring matching funds to other forms of public financing: no public money would go to any candidate unless it is matching a specific contribution from an identifiable individual. Everyone is free to disagree with a previous donor. Just give a small amount and then see that gift multiplied, too. The more who give, the better it is. Elections are, after all, the public's business.
Footnotes
1
Citizens United v. Federal Election Commission, 558 U.S. ___, 130 S. Ct. 876 (2010).
2
SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir. Mar. 26, 2010), cert. denied, 131 S. Ct. 553 (2010).
3
Daniel P. Tokaji, The Obliteration of Equality in American Campaign Finance Law: A Trans-Border Comparison, 5
4
This point has been argued previously by one of the co-authors: Michael J. Malbin, Rethinking the Campaign Finance Agenda, 
; Michael J. Malbin, Campaign Finance After Citizens United: Expand Democracy,
5
Sidney Verba, Kay Lehman Scholzman and Henry E. Brady,
6
For an overview of the history of campaign finance law in New York State and New York City, see Michael J. Malbin and Peter W. Brusoe, Campaign Finance Policy in the State and City of New York, in . For a more skeptical view of the system, see Jeffrey Kraus, Campaign Finance Reform Reconsidered: New York City's Public Finance Program at Twenty, in
7
9
10
Clifford Brown, Lynda Power and Clyde Wilcox, ; Wesley Y. Joe, Michael J. Malbin, Clyde Wilcox, Peter W. Brusoe, and Jamie P. Pimlott, “Do Small Donors Improve Representation? Some Answers from Recent Gubernatorial and State Legislative Elections,” paper presented at the Annual Meeting of the American Political Science Association, Boston, MA, August 30, 2008, available at http://cfinst.org/smallDonors.aspx.
11
Wesley Y. Joe et al., “Who Are the Individual Donors to Gubernatorial and State Legislative Elections,” supra note 10; Wesley Y. Joe et al., “Do Small Donors Improve Representation?,” supra note 10.
13
GeoLytics, Inc., “Census 2000 Package” (2002).
14
Campaign Finance Institute, Interactive Tool for Citizen Policy Analysts, available at http://www.cfinst.org/state/CitizenPolicyTool.aspx. Careful readers may notice that the numbers on the Web site are different from those in because the Web site and table use slightly different dividing points for the contribution ranges. These differences have no effect on the points being made here.
15
Angela Migally and Susan Liss,
16
17
Buckley v. Valeo 424 U.S. 1 (1976); Citizens United v. Federal Election Commission 558 U.S. ___, 130 S. Ct. 876 (2010); SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir. 2010), cert. denied, 131 S. Ct. 553 (2010).
18
U.S. Fed. Election Comm'n, Advisory Opinion 2011–12 (June 30, 2011), issued in response to an Advisory Opinion Request filed by Majority PAC and House Majority PAC.
19
The phrase “checkbook participation” is from Verba, Scholzman, and Brady, Voice and Equality, supra note 5, at 67. See also Robert D. Putnam,
20
21
Michael J. Malbin, Peter W. Brusoe, Wesley Y. Joe, Jamie P. Pimlott, and Clyde Wilcox, “The CFI Small Donor Project: An Overview of the Project and a Preliminary Report on State Legislative Candidates' Perspectives on Donors and Volunteers,” Paper prepared for delivery at the 2007 Annual Meeting of the American Political Science
22
Arizona Free Enterprise Club's Freedom Club PAC v. Bennett, 564 U.S. ___, 131 S. Ct. 2806 (2011).
23
Wesley Y. Joe, Michael J. Malbin, Clyde Wilcox, Peter. W. Brusoe and Henrik Schatzinger, Individual Donors in Connecticut's Public Financing Program: A Look at the First Election under the New System. Paper presented at the Annual Meeting of the American Political Science Association, Toronto, Ontario, Canada, September 3–6, 2009.
24
Davis v. Federal Election Commission, 554 U.S. 724 (2008).
25
S.752 H.R.1826, H.R.6116, 111th Congress; S. 749, H.R. 1404, 112th Congress, “Fair Elections Now Act”.
26
Conversation and emails with Karen Hobert Flynn, Vice President of State Operations, Common Cause, June 27–28, 2011.