Models of Public Financing (and How They Have Fared)

Prepared by Christine Bachrach, IndivisibleHoCoMD

April 14, 2019

At the National Level:

Eligible presidential candidates receive federal government funds to pay for the qualified expenses of their political campaigns; tax dollars are contributed through a check box on the tax return support.

• During the primaries:

• A presidential candidate must establish eligibility by raising more than $5,000 in each of at least 20 states (i.e., over $100,000).
• The fund matches the first $250 given by individual donors.
• Participants must accept limits on campaign spending:

• For all primary elections combined, an initial limit of $10 million increased to  $48.07 million by 2016.
• Limits in each state were initially set to $200,000 or an amount based on the number of voting age individuals in the state, if greater.  In 2016, state limits ranged from $961,400 in Wyoming to $23,092,100 in California.
• Spending from personal funds is not allowed to exceed $50,000.

• In the general election:

• If they elect to receive public funding, major party presidential nominees receive a grant of funds.  The amount of the grant was initially set at $20 million, but the amount available rose to $84.1 million in 2008 and $96.14 million in 2016.
• To be eligible to receive public funds, the presidential nominee of a major party must agree to limit spending to the amount of the grant and may not accept private contributions for the campaign.
• Candidates may spend an additional $50,000 from their own personal funds, which does not count against the expenditure limit.

• In Buckley v Valeo (1976), the Supreme Court ruled that the program did not violate the First Amendment, but struck down limits on campaign expenditures, made public financing optional for candidates, and allowed limits on contributions (to deter corruption).  In this decision, they established the precedent equating money and speech.
• No presidential candidates have used the public financing system since 2008, mainly because the spending limits are too low and the potential for raising private money so high.

For more information: https://www.fec.gov/introduction-campaign-finance/understanding-ways-support-federal-candidates/presidential-elections/public-funding-presidential-elections/

At the State and Local Levels:

Matching funds programs

• Small donations from individuals, usually under about $200, are matched by public money, often with a multiplier. For example, under a 5:1 ratio, a $10 contribution from a constituent would be matched with $50 in public funds for the candidate.
• The systems are voluntary for candidates and typically require conditions such as lower contribution limits.
• Candidates must establish eligibility by demonstrating public support.
• Funding may come from a variety of sources, including appropriations from state or local budgets.  

• This is the model for the public financing programs in Howard, Montgomery, Prince Georges, and DC and the state-level program in Maryland.  It has also been implemented in several major U.S. cities, including New York City, Los Angeles, and San Francisco. At the federal level, the Government by the People Act and the Fair Elections Now Act would both establish matching programs.

Grant-based or Clean Elections programs

• Participating candidates receive a lump-sum grant from a public fund and no further fundraising is required or allowed, so every participating candidate has equal resources with which to campaign. Responding to the rise in outside spending, newer systems may allow for further fundraising.
• To qualify for the program, candidates must raise a threshold number of very small contributions (often $5) to demonstrate broad support in the community. 
• This model is in place in Arizona, Connecticut, and Maine.  
• In 2011, the Supreme Court invalidated certain aspects of Arizona’s law, which provided extra public money when a candidate faced a particularly high-spending opponent.

Voucher Programs

• Citizens receive vouchers they can use to direct public funds to the candidates they favor.
• Seattle pioneered their Democracy Voucher Program in 2015: eligible city residents are provided four $25 vouchers that they can assign, in any allotment, to participating city candidates of their choice.
• Public voter participation statistics suggest that the program has diversified the campaign donor pool to better reflect the demographics of Seattle residents and drawn lower-income residents into the pool of donors.
• The Seattle program has experienced some problems: it has been challenged in court and one of the candidates using the system has been accused of fraud.
• A similar program is being discussed in Albuquerque, NM and the Government by the People Act would pilot this model at the national level.

Rebates and tax credits

• Donors are offered a rebate or tax credit for their contributions, usually with a $50 cap.
• States and cities adopting this model include Minnesota, Virginia, Oregon and Tallahassee, FL.
• At the federal level, the Government by the People Act would give individual taxpayers a refundable tax credit of 50% of qualified congressional House campaign contributions;  some Congressional Republicans have also come out for tax credits for small donors.
• Although participation in these programs has not been high enough to fundamentally change privately funded elections, they are thought to have increased political participation and lowered barriers to running for office.

For more information:

https://www.everycrsreport.com/reports/RL34534.html#_Toc379367848

https://www.demos.org/research/public-funding-electoral-campaigns-how-27-states-counties-and-municipalities-empower-small -

http://www.governing.com/topics/politics/gov-public-finance-campaigns-elections.html

https://www.brennancenter.org/issues/public-financing