9 December 2015

How New York City replaced one form of campaign corruption with another


Politics in New York City can be grisly: In 1986 Queens Borough President Donald Manes was accused of receiving a $36,000 bribe from a would-be city contractor. Manes was found dead before he could be prosecuted, having apparently stabbed himself in the heart. This, and a host of other scandals, led to calls for reformed campaign finance laws. So in 1988, New York City passed legislation establishing the New York City Campaign Finance Board (CFB).

New York City already had, and still has, a Board of Elections. The Board runs the administrative aspects of local elections, such as maintaining the electoral register and operating polling stations. The Campaign Finance Board had a new, distinct mission: to police campaign donations and to build public confidence in local politics. They took a carrot and stick approach. The carrot would be their flagship Matched Funds Program for candidates. The stick is a cap on donations and candidate spending.

The Matched Funds Program supplements New York City residents’ private donations with public money. Currently the rate of matching is 6:1 for eligible donations up to $175. So if a New Yorker donates $175 to their local candidate, the CFB will pay a further $1050 to that candidate.

The majority of Matched Funds are spent on primary election campaigns. Between 2001 and 2013 the CFB distributed $107,096,945 to candidates’ primary campaigns – just over 80% of the total funds distributed. That the public pays for the Board of Elections to administer primaries on behalf of party supporters will sound very strange to British ears. Strange to most of the planet in fact – the campaign group Fair Vote states that US is one of only three countries worldwide that publicly administer primary elections (the other two countries are Colombia and Uruguay). Furthermore, New York operates a system of ‘closed’ primaries. Only those registered to a party may vote in that party’s primary and run-off elections.

The rationale behind the 6:1 rate for donations up to $175 is that it will incentivize candidates to fundraise outside their traditional supporter bases of wealthier people. There is some anecdotal evidence to support this. But it’s worth pointing out that in 2013 (25 years into the program) Manhattan residents were still twice as likely to donate compared to New Yorkers in Brooklyn and nearly four times as likely to donate as residents of the Bronx.

The matched funds program opens up new opportunities for fraud against the taxpayer: In 2012, Albert Baldeo, a Democrat city council candidate from Queens, was charged with conspiracy and fraud after using the MFP to leverage $15,000 of private donations into $90,000 of campaign funds. Baldeo was acquitted on the fraud charges but convicted on related charges of conspiracy and obstruction of justice.

Less well known are the lawful ways to game the system. In 2013 Micah Kellner received $92,400 of public money (the maximum amount) towards his campaign for the Democratic nomination for Council District 5. He lost the primary, but stood in the general election anyway – on a Working Families Party ticket. Because he had already raised more money than could benefit from matched funds in the primary election, he was able to use the ‘excess’ donations to leverage a further $92,400 of public funds, even though he had only raised $36 in private donations since his primary defeat.

I should point out that the CFB recovers money distributed to candidates that is not spent on legitimate campaign objects (that’s a whole other messy business). But it is not clear from the CFB website that they have ever even tried to recover any of the $184,800 given to Micah Kellner. Neither have they recommended a change in the rules to prevent candidates engaging in this practice.

Finally, a look at the distribution of spending by party. New York City electoral politics is dominated by the Democrats. This is not to say that Republicans don’t take the money offered by the matched funds scheme. They often do. But in the 2013 election, 87% of money distributed went to candidates on Democrat tickets.

The CFB was founded out of an honorable intention – to tackle corruption in one of the world’s greatest cities. But after 27 years it could be argued that it has simply replaced one form of corruption with others. Worse, that corruption is now actively sponsored by the taxpayer. It is not at all clear that the Campaign Finance Board has improved democracy in New York City. The Campaign Finance Board is held up as a model of good governance: Hillary Clinton has said she would push for a similar scheme for federal elections should she win the Presidency. With the New York Campaign Finance Board as it is, that would be disastrous. The Campaign Finance Board is urgent need of close, critical scrutiny.

Amy Woolfson is a Kennedy Scholar at Harvard Law School.