Testimony of Frederick Schaffer, Board Chair, New York City Campaign Finance Board, to the New York State Public Campaign Financing Commission

09/10/2019

Good afternoon, Chair Jacobs and members of the New York State Public Financing Commission. My name is Frederick Schaffer and I am the Chair of the New York City Campaign Finance Board (CFB). With me is Amy Loprest, Executive Director of the CFB. Thank you for the opportunity to provide testimony today.

In 1988 after a series of corruption scandals, New York City voters approved a ballot proposal that created the CFB and New York City’s landmark public matching funds program. By holding candidates accountable to their constituents and amplifying voters’ voices, the matching funds program ensures that voters, not money, have the final say in New York City government.

For over 30 years, the matching funds program has sought to reduce candidates’ reliance on big money and the resulting public perception of corruption in local government, by making small campaign donations more valuable, thereby redirecting candidates’ attention from special interests to everyday voters.

We’ve seen how the matching funds program brings more individuals into the political process. Candidates who participate in the Program tend to engage contributors from every neighborhood in all five boroughs. In the 2017 elections, 93 percent of Census bloc groups in New York City had at least one contributor. As a result, large contributions from special interest organizations and wealthy donors play a smaller role in city campaigns than in those for state or federal office. In those same elections, 96 percent of all the funds raised by candidates came from individuals, most of it from city residents. Further, 76 percent of contributions in 2017 were $175 or less.

While the Commission has many options to choose from in creating a public matching funds program for the state, any program is only successful if candidates participate. Our matching funds program has worked well for both first-time candidates and incumbents and continues to boast high participation rates. Typically, 90% of candidates participate in the Program throughout the primary election, and roughly two-thirds of candidates participate in the general election.

When creating a public matching funds system, there will inevitably be many decisions to make about how to run such a program. Here are some factors to consider regarding how our matching funds program operates.

Matching Rate and Contribution Limits

When it was first established in 1988, the matching funds program matched contributions up to $1,000 at a $1-to-$1 ratio. To increase the incentive for candidates to raise small-dollar contributions, the rate was changed in 1998 to provide a $4-to-$1 match for the first $250 per contributor, and it was again increased in 2007 to a $6-to-$1 formula for the first $175. Last November, New Yorkers overwhelmingly approved a ballot measure to increase the matching rate yet again to $8-to-$1 for the first $250 for citywide offices and $175 for all other offices, and increase the amount of public funds available to candidates. These were codified by the City Council this year.

We are already seeing changes in fundraising under the $8-to-$1 matching rate. Smaller contributions are becoming even more frequent. In the 2019 special election for public advocate, the most frequent contribution was $10, compared to $100 in previous elections.

Additionally, the Charter referendum cut contribution limits by more than half, lowering contributions for mayoral candidates from $5,100 to $2,000, and lowering contributions to City Council candidates from $2,850 to $1,000. Based on our analysis of the 2017 election, the combination of an increased matching rate with lower contribution limits ensures that candidates have the resources to run robust campaigns, while minimizing the risk of corruption often associated with large contributions.

Doing Business

Further, contributions from individuals who are doing or seeking business relationships with the city are bound by stricter contribution limits. The “doing business” limits are crucial to the Program, as they aim to reduce the reality or appearance of pay-to-play contributions. The “doing business” contribution limits are $400 for mayoral, public advocate, and comptroller candidates; $320 for borough president candidates; and $250 for City Council candidates.

Thresholds

In order to receive matching funds, candidates must satisfy a two-part threshold. Thresholds must be set high enough to ensure that only serious candidates are able to receive public matching funds, but must also be low enough that they do not present a barrier to people running for office and qualifying.  For example, City Council candidates must raise $5,000 in matchable contributions and collect 75 contributions from the district they seek to represent. Candidates for mayor must raise $250,000 in matchable contributions from at least 1,000 city contributors.

Disclosure and Enforcement

Like voting, our enforcement and disclosure procedures are ways for New Yorkers to hold their elected representatives accountable. The CFB publishes detailed public information about funds raised and spent in city elections by candidates and independent spenders, thereby bringing greater transparency to the democratic process.  Our rigorous audit and enforcement procedures ensure that candidates are all held to the same standards and that legislators are held accountable to their constituents.  

While rigorous audit and enforcement processes are crucial to the matching funds program, it is equally important that candidates be able to navigate the matching funds program as easily as possible. To that end, our dedicated Candidate Guidance and Policy staff works diligently to help first-time candidates navigate the Program as efficiently as possible.

Nonpartisan and Independent Structure

A key component to ensuring the strength and integrity of the Program is our Board’s independent, nonpartisan structure. The Board consists of five members. The mayor and the speaker of the City Council each appoint two members who may not be enrolled in the same political party, and the chair is chosen by the mayor in consultation with the speaker. The Board’s independence and nonpartisan structure and status ensure that administration of the public matching funds program is not directly influenced by political pressures or agendas of the moment.

Program Challenges

As you consider how to design a new system for the state, it may be useful to discuss some of the challenges we’ve faced in administering the matching funds program as well.

As noted, contribution limits must strike a proper balance. They must be high enough to ensure candidates can run a viable campaign, but also not so high that they present a corruption risk. The contribution limit in our system has decreased over time. Prior to the enactment of the matching funds program in 1988, candidates for mayor and other citywide offices could accept contributions up to $50,000 for the primary election, and the same amount for the general election. For the first cycle under the matching funds program, the limit was reduced to $3,000 for each election, for a total of $6,000. Subsequent reforms consolidated the two limits into one and reduced the overall limit further.

We’ve heard from some candidates that the Program should be responsive to income and wealth disparities across neighborhoods. The requirements and costs of a campaign in Manhattan, for example, are different than those for a campaign in Eastern Brooklyn. Currently, the matching rate and public funds cap are the same for candidates running for the same office throughout New York City. 

This is not to say that the Commission should not consider addressing regional differences, but rather to demonstrate that a uniform approach has worked for our system. One of the potential issues of setting different matching rates or public funds caps for candidates in different areas is the added complexity for both candidates and administrators. The Commission may still wish to explore this issue, but the CFB has no established framework for doing so.

Thresholds play an important role in ensuring that only serious candidates who have demonstrated a significant level of public support receive a public funds payment. Thresholds serve as a clear, basic set of criteria to determine which candidates are running viable campaigns. Additionally, to conserve public funds, the Program provides safeguards against paying candidates who face only nominal opponents. To be eligible for matching funds up to the maximum amount, candidates must show that they are opposed by a candidate who meets criteria demonstrating that he or she is a serious opponent. For example, an opponent who has received 25 percent of the vote in a recent election or has received significant endorsements from other elected officials or membership organizations is deemed a serious opponent. If the candidate is unable to point to an opponent who meets any of the criteria, their public funds payment is capped at 25 percent of the maximum amount of public funds available.

To further limit the wasteful expenditures of matching funds, our system has rules that limit payments to candidates in “small” primaries. When less than 1,000 voters are eligible to vote in any election, payments to candidates are capped at $5,000. In general elections, appearances on multiple party lines do not entitle candidates to additional public funds.

Additionally, the commission should prioritize striking the right balance when setting the maximum amount of public funds. In June, the New York City Council increased the maximum amount of public funds to 89% of the spending limit, essentially creating a full public match system.

In the years since Citizens United, independent expenditures have come to play an increasing role in our elections. However, the matching funds program has provided the resources for candidates to overcome significant independent spending campaigns opposing them. In 2013, three candidates were able to overcome being outspent by independent expenditures at a 2:1 margin and win their elections. Additionally, all four of the Council candidates who were supported by the largest amount of independent spenders on their behalf lost their races. While there is no perfect system to counteract independent spenders, the matching funds program continues to allow candidates to run competitive campaigns in the face of these independent expenditures.

Furthermore, our system has perhaps the most comprehensive set of disclosure requirements for independent expenditures anywhere in the country. Independent spenders must file disclosure statements with the CFB once they have spent more than $1,000 on a single candidate or ballot initiative. Organizations making large contributions to independent spending groups must also detail the largest sources of their own funds, so that “dark money” has no place to hide. Communications made through independent expenditures must include detailed “paid for” notices listing the spender’s principal owner, CEO, and top three donors as well as the URL for the CFB’s website, where voters can find additional information on the independent group’s funding.

Finally, the City Charter requires the CFB to assess the matching funds program after each election cycle, highlighted in our Post-Election Report. This presents an opportunity to demonstrate how the matching funds program worked in a given election, and for the Board to suggest legislative changes to enhance its impact. Over the decades, this regular review has provided the basis for City Council action and Charter revision proposals that have pushed the matching funds program to evolve and continue to meet the needs of candidates in a changing political landscape.

Thank you again for the opportunity to testify today. We are happy to provide more detailed information about our program upon request, and I’m happy to answer any questions you might have.