Testimony of Board Chair Frederick Schaffer, Executive Director Amy Loprest, and Assistant Executive Director for Public Affairs Eric Friedman New York City Campaign Finance Board

June 14, 2018

We thank the Commission for the opportunity to share information about the city’s public matching funds program and the work of the Campaign Finance Board. The public matching funds program amplifies the voices of small contributors in the political process and aims to decrease the possibility of corruption or appearance of corruption from large campaign contributions. Candidates running for mayor, public advocate, comptroller, borough president, and comptroller can voluntarily choose to participate in the Program and receive matching funds to campaign for office.

Matching funds

For participating candidates who qualify, the Program matches the first $175 of contributions by New York City residents at a $6-to-$1 ratio. This means that if a contributor gives $10, that is matched with $60 in public funds, bringing the total value of the contribution to $70.

When it was established in 1988, the Program matched contributions up to $1,000 at a $1-to-$1 ratio. The rate was changed in 1998 to provide a $4-to-$1 match for the first $250 per contributor, and it was increased again in 2007 to the current $6-to-$1 formula. The establishment of the multiple match, and the subsequent increase change each provided effective incentives for candidates to seek small-dollar contributions and increase the role of small contributors in funding local campaigns.

Contribution limits

There are limits on contributions that apply to all candidates, whether or not they choose to participate in the matching funds program. The limits were subject to an increase earlier this year, pursuant to the Campaign Finance Act. For the next election, the contribution limits are $2,850 for City Council, $3,950 for Borough President, and $5,100 for the citywide offices—mayor, public advocate, and comptroller. Contributions from people outside of New York City and organizational contributions from political committees and unions are allowed, but not matched by public funds. Candidates have been prohibited from accepting contributions from corporations since a 1998 Charter amendment, enacted by citywide referendum. Non-participating candidates have been subject to the contribution limits, the corporate contribution ban, and disclosure requirements since the passage of legislation in 2004. 

In the years since, legislation was enacted to put new restrictions on special interests to further reduce the risk of corruption through the financing of campaigns. A 2006 law prohibited matching funds for contributions from lobbyists, their spouses, and domestic partners. A more expansive set of limits was added to the Act in 2007. Contributions from LLCs and partnerships were prohibited, and new limits and restrictions were added to reduce the appearance of “pay-to-play” in city politics. If a contributor has business dealings with the city at the time of their contribution, they are subject to lower Doing Business contribution limits of $250 for City Council, $320 for Borough President, and $400 for the citywide offices. These limits apply to everyone in the Doing Business database, which includes lobbyists, anyone who is the chief officer of an entity with city business dealings, has at least a 10 percent ownership interest, or is a senior manager who oversees business with the city.  These limits apply to all candidates and “doing business” contributions are not matched with public funds.

Qualifying for public funds

In order to receive public funds, candidates must meet a two-part fundraising threshold to show they have significant support from those they wish to represent. Those running for City Council must raise $5,000 matchable contributions, and collect 75 contributions of $10 or more from residents who live in the district they are seeking to represent. Mayoral candidates must raise $250,000 in matchable contributions, with at least 1,000 contributors giving $10 or more.

Thresholds to qualify for matching funds

Office

Minimum funds raised

Number of contributors

Mayor

$250,000

1,000

Public Advocate, Comptroller

$125,000

500

Borough President

$10,000-$50,094[1]

100[2]

City Council

$5,000

75[3]

Once a candidate meets threshold, they must be on the ballot and have an opponent to receive most of their matching funds. Candidates must also demonstrate compliance with the Campaign Finance Act, and not have any outstanding penalties or repayment obligations from previous campaigns. Under a recent amendment to the Act, the Board will disburse early payments to candidates who have met the threshold in June. These early payments will be limited to $10,000 for City Council, up to $250,000 for mayor. The majority of public funds are paid out to candidates after the ballot is set, a little more than one month before the date of the election.

Spending limits

By joining the Program, candidates agree to abide by strict spending limits that vary by office. These spending limits ensure that the amount of money raised is not the deciding factor between candidates, while also allowing candidates the ability to get their message out to voters. These limits are adjusted for inflation after each four year election cycle.

EC2021 spending limits by office

Office

Spending limit

Public funds cap

Mayor

$7,286,000

$4,007,300

Public Advocate, Comptroller

$4,555,000

$2,505,250

Borough President

$1,640,000

$902,000

City Council

$190,000

$104,500

Public funds payments are capped at 55 percent of the spending limit established for that office. This ensures that campaigns have a mix of public and private funds. In 2021, the maximum payment to mayoral candidates will be $4,007,300; for city council candidates, the maximum payment will be $104,500. Candidates must demonstrate they spent public funds on items allowed under campaign finance law, known as qualified expenditures.

Disclosure

A key component of our system is that we have some of the best disclosure requirements in the country. Throughout the election cycle, all candidates are subject to thorough disclosure requirements. Campaigns must regularly report their financial activity, which is published online, so the public can find out who their candidates are raising money from and how they are spending it. Documentation is also closely audited by our staff before, during, and after the election to make sure candidates qualify for public funds honestly and ensure candidates are appropriately spending those funds. Not only does our rigorous process safeguard the taxpayers’ money that goes towards campaigns, but it ensures that candidates are treated the same as their opponents, regardless of their political party, background, or whether or not they hold elected office.

In 2010, voters overwhelmingly approved an amendment to the charter requiring that independent spenders disclose their activity with the CFB. This requirement was further strengthened through subsequent legislation. Independent groups that spend more than $1,000 to support a candidate or ballot initiative must report not only the owners, officers, and board members of the organization, but must also report details about where their major funders (who contribute more than $50,000) get their funding. Any communications put out by an independent spender must include a “paid for by” notice that includes the names of the entity’s principal owner, CEO, and top three donors, along with a URL directing voters to the CFB’s website for additional information.

The Campaign Finance Board and the City Charter

An essential condition for the success of the public matching funds program is the structure of the Campaign Finance Board, as set in the City Charter. The CFB is an independent and nonpartisan agency. We have a five-member board, appointed by the Mayor and the Speaker of the City Council. The appointments made by the Speaker and the Mayor must not be from the same political party, but the Charter does not specify which parties those appointees must represent. This results in a Board that is strictly nonpartisan, as opposed to bipartisan. This means that the Board does not become hamstrung by partisan gridlock, and enforcement matters do not break along party lines. The nonpartisan nature of the Board has also allowed us to build a staff of qualified professionals whose party affiliation is not taken into account.

Another critical element of our structure is our continued independence. In addition to our nonpartisanship, we are a nonmayoral agency, which further ensures we remain separate and apart from political concerns. We have independent budget authority, which was added through a Charter amendment proposed by the 1998 Charter Revision Commission. The Board presents the Mayor with its budget request in March, which the Mayor is required to include without revision in the Executive Budget he submits to the Council. The 1998 Commission specifically included this proposal to “insulate” the Board from political pressure.

Proposals to strengthen the campaign finance program

After each election cycle, we conduct a review of our program and propose changes, as required by the Campaign Finance Act. This regular review has ensured that changes have been made with each election cycle to strengthen the program, further amplify the voices of small contributors, and update it so it remains relevant within an ever-changing election landscape.

The matching funds program has been successful here in New York City, with established candidates and first-time challengers alike relying on the Program to help them build competitive campaigns for office. As described in our earlier presentation, our analysis shows that the Program decreases candidates’ reliance on big-money contributions while helping to develop a broad, diverse base of small-dollar contributors in every neighborhood across the city.

In order to further increase the impact of New Yorkers’ small contribution to candidates, the Board has the following recommendations. We believe that enhancements to the program can ensure that the impact of small-dollar contributors is felt as clearly in elections for citywide offices as it is in City Council races. We all have an interest in making sure the voices of regular New Yorkers are heard in City Hall, and we have five recommendations that we believe will make the program work better for all city offices and further reduce the influence of big money in New York City.

Lowering the contribution limits

We recommend lowering the contribution limit from $5,100 to $2,250 for citywide offices; from $2,950 to $1,750 for borough offices; and from $2,850 to $1,250 for city council seats. Lowering contribution limits across the board will help small-dollar contributors play an even larger role in city campaigns.

The majority of those who gave a contribution in the 2017 mayoral race were small contributors; overall, 73 percent of those contributing to mayoral hopefuls gave $175 or less. Over 13,000 people gave small contributions to participating mayoral candidates last election cycle, compared to only 650 people who gave a maximum contribution of $4,950. However, those maximum contributions made up 45 percent of the private fundraising of mayoral candidates before accounting for public funds – even though there were nearly 21 times the number of small contributors as large donors.

Given the demands of raising a large amount of money to run for mayor and other citywide offices, it is no wonder that candidates feel it is most effective to pursue the largest contributions to fund their campaigns. Amplifying the voices of small contributors needs to start with cutting the contribution limit, to increase the power of those without deep pockets or wealthy friends.

Increase the matching formula for citywide offices

To increase the value of public funds and further amplify the voices of small contributors, the matching rate for citywide candidates should be increased from 6-to-1 to 8-to-1. This should be coupled with a maximum matchable amount from $175 to $250 for those offices. Our analysis shows that these two proposals in combination will change the balance of private-to-public funds for citywide offices. Increasing the matching rate, along with lowering the contribution limit, will significantly increase the impact of small-dollar contributions.

In fact, during the past three citywide elections, the median public funds payment to city council candidates was 53 percent of the spending limit – in other words, just shy of the 55 percent payment cap. Conversely, the median public funds payment to participating mayoral candidates was just 28 percent of the spending limit. Even mayoral candidates who pursued strong small-dollar fundraising strategies were far less reliant on public funds than city council candidates.

Increase the public funds cap

We propose increasing the amount of public funds that campaigns can receive by increasing the public funds cap from 55 percent to 65 percent. A candidate for City Council would have to raise $17,417 in matchable contributions in order to receive the maximum of $104,500 in public funds. That candidate would then need to raise $68,083 in private funds to hit the spending limit for City Council races.

A modest increase of the public funds cap from 55 percent to 65 percent would allow candidates to increase their reliance on small-dollar contributions and public funds. At the same time, it would also allow candidates some flexibility to raise and spend private funds in advance of receiving matching funds. Under the Campaign Finance Act, most public funds are paid only after the ballot is finalized, which is little more than a month before the election. Many candidates, particularly for citywide offices, begin campaigning well in advance of this timeframe and need to be able to spend funds prior to when public funds payments are made.

In conjunction with a lower contribution limit and increased matching formula, this will help create a more inclusive, effective Program for citywide candidates. Under the current system, candidates for citywide office virtually never qualify enough contributions to reach the 55 percent public funds cap that is available to them. Based on our analysis, changing the matching rate would increase the amount of public funds going to citywide campaigns, making it more likely that they will receive the maximum amount of public funds available to them even if we lifted the cap to 65 percent. Under this proposed system, citywide candidates could run competitive campaigns primarily funded by small-dollar contributions.

Lower thresholds for citywide candidates

To empower more small-dollar fundraisers to run viable, competitive campaigns for city office, we support lowering thresholds for participating candidates running for citywide office. In order to qualify for public funds, candidates in the program currently must meet a two-part fundraising threshold. Mayoral candidates must raise $250,000 in matching claims, with 1,000 contributors giving at least $10, while candidates for public advocate and comptroller must raise $125,000 with 500 contributors giving at least $10.

Lowering the thresholds for citywide office would make it easier for grassroots candidates to meet threshold earlier and run viable campaigns. We propose thresholds of $125,000 for mayor and $75,000 for public advocate, which will allow more candidates to engage in competitive elections, and give them the ability to qualify for public funds earlier in the election year.

But in order to ensure that candidates running for citywide office are reaching out to voters across New York City, and to maintain the rigor of a lower threshold, we propose adding a new geographic requirement. In addition to meeting this two-part threshold, candidates for any citywide office must collect at least 50 contributions from each borough to qualify for public funds.

Lower the minimum contribution counted towards threshold

Another way to increase equity in the Program and lower barriers to participation is to allow contributions of at least $5 to count towards meeting threshold. Currently, candidates must raise contributions of at least $10 to meet threshold. We have heard feedback from candidates, particularly those from less wealthy neighborhoods, that $10 can be too high for lower income voters who want to give to a participating candidate, but are struggling to make ends meet. Lowering the contributions for threshold to $5 is a way to make the system more equitable, so we can make sure the program works for every type of neighborhood across the city.

We thank you again for the opportunity to share these proposals with you today. We are happy to answer any questions that the Commissioners may have.

 

[1] The threshold amount is based upon the number of persons living in each borough, according to the 2010 Census and rounded to the nearest dollar. The amount for each borough is: Bronx ($27,702), Brooklyn ($50,094), Manhattan ($31,717), Queens ($44,614), and Staten Island ($10,000).

[2] Must be borough residents.

[3] Must be district residents.


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