Still Waiting for Needed Campaign Finance Reforms in New York State
New Brennan Center Research Makes State’s Serious Shortcomings Clear.
Provides Road-Map for Key Reforms
January 2008
After an initially promising start last year, important campaign finance reforms on tap for New York State stalled. Back in January 2007, Governor Spitzer’s State of the State address held out great hope for a comprehensive set of new policies:
To neutralize the army of special interests, we must disarm it. In the coming weeks, we will submit a reform package to replace the weakest campaign finance laws in the nation with the strongest. Our package will lower contribution limits dramatically, close the loopholes that allow special interests to circumvent these limits, and sharply reduce contributions from lobbyists and companies that do business with the state…[And] [f]ull public financing must be the ultimate goal of our reform effort.[1]
Governor Spitzer and legislative leaders in Albany initially reached a deal to make changes to the State’s campaign finance regime. When that bargain ultimately floundered last fall, New Yorkers were left where they have been for years: with some of the weakest campaign finance laws in the nation.
Headed into an election season, New York’s leaders should move to close loopholes, lower limits, improve enforcement, and establish a public funding system. The new legislative session presents the opportunity to address this key pillar of our state’s democracy: meaningful and comprehensive campaign finance reforms for the citizens of New York.
New research, published in January 2008 by Ciara Torres-Spelliscy, Esq. and Ari Weisbard of the Brennan Center for Justice at NYU School of Law, “What Albany Could Learn from New York City: A Model of Meaningful Campaign Finance Reform in Action” details the problems plaguing New York State’s current campaign finance regime and presents a road-map for reforms to change the political culture in New York State.[2]
Lower the State’s Sky-High Contribution Limits and Close Major Loopholes
New York’s Individual Contribution Limits Are Among the Highest Nationally
Of the states with contribution limits, New York’s are consistently among the highest in the nation. Individuals may give $55,900 per election cycle to candidates for Governor and $94,200 per year to political parties. The aggregate contribution limit for individuals is $150,000 annually. These amounts are higher than the median annual income for households in New York, which is $46,659. The limits are also more than ten times the $4,600 individuals can directly donate to a candidate for President.
Corporate Contribution Limits Do Not Capture Donations by Subsidiaries
The federal government, as well as 23 states, ban contributions from corporations to candidates because of the risk of political corruption. New York allows contributions by corporations up to an aggregate of $5,000 per year. But this limit is much less effective than it could be because each affiliated or subsidiary corporation is able to make contributions up to its own $5,000 limit. Consequently, any businesses with a complex corporate structure multiply their influence by giving through subsidiaries. Corporations and all of their subsidiaries should be subject collectively to the same limit.
Political Parties Set Up “Housekeeping Accounts” To Evade Existing Limits
New York state law permits “housekeeping accounts” that allow political parties to circumvent contribution limits. These are accounts established by the political parties ostensibly to maintain a permanent party headquarters and staff, or for activities that do not promote specific candidates. Stunningly, donations to housekeeping accounts are unlimited. A recent study by Common Cause found that a staggering $53.2 million was given to housekeeping accounts between 1999 and 2006.[3]
Corporations, and to a lesser extent unions, are the major abusers of this loophole. For just one example, in 2004, GNYHA Management Corporation, a subsidiary of the Greater New York Hospital Association and one of the top twenty donors in New York, donated $264,500 to Democratic political parties and $136,000 to Republican political parties in New York. While the corporate contribution limit that applies to GNYHA Management Corporation is $5,000, it was nonetheless able to pour an additional $395,500 into the political process by giving to the parties’ housekeeping accounts. This loophole should be closed.
Candidates’ Personal Use of Campaign Funds Facilitates Corruption
A lack of clear legal rules on the personal use of campaign funds gives candidates and elected officials far too much latitude to use those funds to pay for non-campaign items. For example, Senator Majority Leader Joseph L. Bruno infamously used campaign funds to pay for his pool cover and then claimed that it was a legitimate campaign expense.[4] In another egregious case, Senator Martin Connor spent over $70,000 on his car as a “campaign expense” during a period when he faced no primary or general election opponents.[5] Other Albany lawmakers have been found using campaign funds to pay for cell phones, country clubs, sporting events tickets, legal bills, meals, and pet food.[6] This clear abuse of the intent of the law must stop with an explicit change in the law outlining permissible uses of campaign funds.
State Contractors Can Pay To Play with Campaign Dollars
Contribution restrictions that apply to lobbyists, government contractors, or highly regulated industries are often known as “pay-to-play” restrictions. They are referred to as “pay-to-play” regulations because they seek to prevent deals whereby contributors “pay” officials for the opportunity to “play” with the government, by seeking contracts with the government or operating in a government-regulated arena. Under New York law, contractors are permitted to give contributions to elected officials who have (or to candidates who, if elected, shortly will have) influence over state contracting and regulatory decisions.
For example, a major contributor in New York is a Japanese company, Kawasaki Rail Car, Inc. While it may at first seem odd that a Japanese company is so interested in New York State politics, Kawasaki’s real interest may be in its bottom line:
Kawasaki Rail Car, Inc. is a Japanese company that has enjoyed big MTA [Metropolitan Transit Authority] contracts for the past two decades and especially under the Pataki administration. In 2003 the company, with a partner, won a $2.3 billion contract with the MTA to build new subway cars.[7]
New York should eliminate the potential for conflicts of interest that arise when a major source of campaign money is also a company holding (or seeking) state contracts.
Controls on Lobbyists’ Donations Are Also Needed
Contributions from lobbyists raise concerns about corruption and the appearance of corruption similar to those presented by contractors. For example, in the 2006 election cycle, lobbying firms such as Wilson Elser Moskowitz Edelman & Dicker LLP gave $29,308 to Democratic committees and $56,100 to Republican committees; Patricia Lynch Associates gave $46,800 to Democratic committees and $51,000 to Republican committees; Greenberg Traurig gave $17,500 to Democratic committees and $17,500 to Republican committees; and Featherstonhaugh, Conway, Wiley & Clyne gave $23,000 to Democratic committees and $12,850 to Republican committees.[8] New York State should follow the example set by New York City and permit only very small contributions by lobbyists.
Enforcement of Campaign Finance Rules Is Notoriously Lax
Strong enforcement is required by the Board of Elections to ensure that the laws on the books and planned reforms are meaningful. Penalties for violations of campaign finance laws in New York are either nonexistent or extremely weak. For example, those who illegally exceed the contribution limits in New York are not subject to any fines. The maximum civil fine for violating campaign finance disclosure laws is only $500. Higher fines are needed to act as more effective deterrents. In addition to properly structured penalties in the law, the Board of Elections should receive the funding and additional staff they need to properly enforce the law.
Public Financing Is Needed To Return Power to Voters
New York State provides no public financing for candidates (unlike 15 other states: Arizona, Connecticut, Florida, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New Mexico, North Carolina, Vermont and Wisconsin).
Public financing systems are typically structured in one of two basic ways: (1) matching funds systems; or (2) full public financing systems. In a matching funds system, such as that in effect in New York City, candidates raise limited amounts of private money throughout the campaign and are given public dollars that “match” small amounts of private contributions. In a full public financing system, such as that in effect in Arizona, Connecticut, and Maine, a candidate raises a certain number of small contributions at the beginning of the campaign to qualify for a public grant sufficient to run for office. In a full public financing system, once the candidate has qualified for a public grant, the candidate may no longer raise private funds. Either public financing system would be a vast improvement over New York State’s current privately funded election system and would help to level the playing field between wealthy special interests and the public interest.
Change Is Badly Needed in New York State; The Next Steps Are Clear
The needed reforms were already outlined once by Governor Spitzer on his first day in office. We should make those promises a reality by:
- Reducing contribution limits in all categories;
- Closing the corporate subsidiary loophole and the housekeeping account loophole;
- Ending personal use of campaign funds by candidates;
- Introducing thoughtful restrictions on contributions by state contractors and lobbyists;
- Enhancing enforcement by increasing fines and penalties and properly funding the Board of Elections; and
- Providing meaningful public financing to executive and legislative candidates.
[1] Gov. Eliot Spitzer, One New York, 6–7 (Jan. 3, 2007), available at www.ny.gov/keydocs/NYS-SoS-2007.pdf.
[2] Ciara Torres-Spelliscy & Ari Weisbard, What Albany Could Learn from New York City: A Model of Meaningful Campaign Finance Reform in Action 1 Albany Gov’t L.R. 194 (2008) available at www.brennancenter.org.
[3] Liam Arbetman et al., The Life of the Party: Hard Facts on Soft Money in New York State 1 (Common Cause/New York 2006) available at http://www.commoncause.org/atf/cf/%7BFB3C17E2-CDD1–4DF6–92BE-BD4429893665%7D/ SOFT_MONEY_REPORT.PDF.
[4] Editorial, Toward Cleaner Campaigns; Fattening Albany’s Cats, N.Y. Times, June 10, 2000, at A14, available at 2000 WL 3258729.
[5] Liam Arbetman, Megan Quattlebaum & Rachel Leon, Common Cause/NY, The $2,100 Club: What New York State Political Campaigns Cost, How Much Those Costs are Rising and Who’s Footing the Bill 12 (Common Cause 2006), available at: http://www.commoncause.org/atf/cf/%7BFB3C17E2-CDD1–4DF6–92BE-BD4429893665%7D/$2100%20club%20newest%20newest.pdf.
[6] Toward Cleaner Campaigns; $2,100 Club, at 13; Brennan Ctr. for Justice at Nyu School of Law Et Al., Strengthening Ethics in New York: the Ethics in Government Act of 2006 10 (The Brennan Center for Justice at NYU School of Law 2006), available at http://www.brennancenter.org/dynamic/subpages/download_file_8611.pdf.
[7] Life of the Party, at 12.
[8] National Institute on Money in State Politics, www.followthemoney.org (enter the name of the desired lobbyist firms in the “contributor” field) (last visited Dec. 27, 2007).