Authored Articles & Publications Sep 09, 2016

Local Campaign Finance Reform: Can Local Agencies Wean the Baby From “Mother’s Milk?” (Part 1)

By William J. Priest

It is an issue that has been with us since the earliest days of politics: The wealthy tend to have disproportionate influence over our political leaders in contrast to the poor and middle class. In the immortal words of the late California Assembly Speaker Jesse Unruh, “Money is the mother’s milk of politics.” We often hear stories about politicians spending as much time soliciting campaign contributions as they do actually governing.

In this election season, once again we hear the calls for campaign finance reform to reduce the influence “fat cats” have over the political process. There have been many attempts over the years to “wean the baby from mother’s milk;” however such efforts have proven challenging.

Campaign Contributions and Expenditures are “Free Speech”
The challenge stems from the fact that political campaign contributions and expenditures are “speech” protected by the First Amendment. Government restrictions on contributions and expenditures are therefore subject to a “rigorous” standard of review. Such regulations will only be upheld if the government (1) demonstrates a sufficiently important governmental interest, and (2) employs means closely drawn to avoid unnecessary infringement on free speech.

As of today, the United States Supreme Court only recognizes quid pro quo corruption (payment for political favors) and the appearance of such corruption as sufficient justification to restrict campaign contributions or expenditures.

The goals of equalizing political opportunities between candidates or reducing the amount of money in politics cannot be used to justify such restrictions.

California law imposes strict limits on contributions to candidates running for state office, committees under the candidate’s control and political parties. Under the First Amendment, the risk of “pay for favors” corruption is strongest with these types of contributions and restrictions can be justified. Under state regulations, an individual, business, corporation, union or political action committee (PAC) may not directly contribute more than $4,200 per election to a state Assembly or Senate candidate or to a committee that supports that candidate. The amounts are higher for gubernatorial candidates and other state offices, but there are limits in place to prevent actual or perceived “pay for favorscorruption.

However, California law leaves the issue of local campaign contribution limits to local agencies. So, how strictly can local agencies regulate direct campaign contributions in local elections?

While it is clear that local agencies can establish limits, the courts have not provided a specific dollar amount that will pass First Amendment review. The amount will necessarily vary from agency to agency based upon its size, media costs, news media coverage and other similar factors. Smaller agencies will generally be able to establish lower dollar limits than bigger ones. Some small agencies set limits as low as a few hundred dollars per donor, while the limits in larger agencies tend to be in the thousands of dollars.

Local agencies also may not set the specific dollar amount so low as “to render political association ineffective, drive the sound of a candidate’s voice below the level of notice, and render contributions pointless.” Where a particular local agency sets this dollar amount requires careful consideration of these factors as they relate to the agency’s unique circumstances.

The Recent Phenomenon of the “Super PAC”
Regular political action committees (PACs) have existed for decades. PACs allow interested citizens, corporations, unions or similar associations to pool their contributions for political advocacy. Regular PACs may donate contributed money directly to a candidate, controlled committee or political party. As described above, the dollar amount of these direct donations may be legally restricted.

In contrast, the “independent expenditure-only committee” or “Super PAC” is a relatively recent phenomenon that has sprung out of recent Court decisions. In contrast to a regular PAC, a Super PAC is prohibited from making direct donations to candidates, controlled committees or political parties. Rather, it may only spend its funds for “independent” political advocacy that is not under a candidate’s, controlled committee’s or party’s control. Super PACs may receive and spend unlimited amounts of money on “independent” political advocacy.

While regular PACs and Super PACs are technically different, they can often serve the same purpose. Independent advocacy can be just as politically effective as candidate- or party-controlled advocacy in supporting particular candidates and opposing others. In some cases, Super PAC advocacy can be even more effective because there is often more money behind the effort.

While it is illegal for a candidate, controlled committee or political party to arrange its activities with a Super PAC (termed illegal “coordination”), it can be very difficult to prove such a violation, particularly with savvy political campaigns. Many Super PACs are run by former staffers or aides to a particular candidate. Therefore, while a candidate or his or her campaign may not officially give a Super PAC its day-to-day marching orders, there is often a clear alliance of interests between the candidate and the Super PAC. This has caused many to question the purported “independence” of Super PACs in American politics.

Citizens United and Related Decisions and Their Impact on Super-PACs
It is well established law that candidates may spend unlimited amounts of their own money on their own campaigns. Further, while individual Americans may be limited in what they can directly contribute to a candidate, controlled committee or party, they may spend unlimited amounts of money to independently advocate for or against particular candidates or political issues. A very wealthy American may spend tens of millions of his or her own dollars on an “I Love Hillary!” or “I Hate Trump!” campaign.

The Supreme Court has held that this goes to the core of an individual American’s ability to speak his or her mind on pressing political issues of the day. Further, the Court has said that these expenditures do not create the risk of “pay for favorscorruption.

However, the Supreme Court has historically treated independent campaign expenditures by corporations, labor unions and other non-natural “persons” differently. About 25 years ago, the Court decided that campaign expenditures by these “persons” could be restricted because there was a compelling government interest in preventing the “corrosive and distorting effects of immense aggregations of wealth” on the political process.

That all changed with the Court’s 2010 decision in Citizens United v. Federal Election Commission. By a 5-4 decision, the Court overruled its prior decision, holding that corporations, labor unions and similar “persons” have the same First Amendment rights to make unlimited independent campaign expenditures as natural persons. The Court concluded that the “corrosive and distorting effects” of big money in politics no longer justify restrictions on such expenditures. Actual or perceived “pay for favors” corruption remains the only valid justification today under the First Amendment.

The Court further held that independent campaign expenditures by these “persons” create no greater risk of “pay for favorscorruption than those made by natural persons. Now, everyone is treated the same – no limits on independent campaign expenditures, whether made by natural or legal “persons.” While Citizens United specifically concerned federal campaign finance law (the McCain-Feingold Act), the Supreme Court in a later decision made it clear that this rule applies to state law as well. (American Tradition Partnership, Inc. v. Bullock).

While Citizens United outlawed strict dollar limits on independent campaign expenditures, it upheld the campaign funding disclosure provisions of the McCain-Feingold Act. The Court found that reasonable disclosure rules help the public to identify actual or possible corruption without the same chilling effect on “speech” that strict dollar limits create. Other federal and state courts since have held similarly.

For the last several years, activists, scholars and pundits have either applauded or criticized Citizens United. Love it or hate it, nearly everyone agrees that it has been responsible for the massive increase in Super PAC funding these last few years. Some even see Citizens United as allowing a “corporate takeover” of American politics. Activist groups around the country have gone as far as proposing a Constitutional amendment to overturn it.

To that end, Proposition 59 will be on the California ballot this November. If passed, it would direct our state’s elected officials to use all of their authority to propose and ratify such a Constitutional amendment. Similar measures are on the November ballot in other states as well. While there appears to be a very strong and organized national movement (championed most prominently by former presidential candidate Bernie Sanders) amending the United States Constitution is a very difficult process, so one cannot to predict at this time whether the movement will ultimately succeed.

Four years after Citizens United, the Supreme Court decided McCutcheon v. Federal Election Commission. In another 5-4 vote, the High Court reaffirmed Citizens United and went on to hold that aggregate contribution limits also violate the First Amendment because they have no connection to preventing “pay for favors corruption. In other words, while the government may limit how much someone may contribute to any individual candidate, controlled committee or political party, it may not set a cap on the total amount someone may donate to all candidates and parties during a particular election. Under this ruling, for example, one may not contribute more than $4,200 to an individual California State Assembly candidate. But that person could contribute $4,200 to each of the Democratic Assembly candidates statewide and that’s fine by the Court. It is noted once again that while the High Court struck down another campaign contribution/expenditure dollar limit, it affirmed the government’s ability to require reasonable campaign funding disclosure.

In addition to efforts at a Constitutional amendment to overturn Citizens United, many are closely following who will replace the late Justice Antonin Scalia on the Supreme Court. The arch-conservative Justice was part of the Citizens United majority and, given the decision’s narrow 5-4 margin, it is possible that a more liberal replacement could swing the Court in the opposite direction. It appears unlikely that President Obama’s nominee, Merrick Garland, will be confirmed by the Senate before the November election. Scalia’s replacement will no doubt be a major issue for either a Trump or Clinton administration.

Click here to read Part 2 of this article, which provides insights into what public agencies can and cannot do to regulate local campaign finance.

Originally published on PublicCEO.com on Sept. 28, 2016. Republished with permission.

Note: This article originally appeared on the now-defunct BBKnowledge blog, where Best Best & Krieger authors shared their knowledge on emerging issues in public agency law.

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