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"It is necessary that laws should be passed to prohibit the use of corporate funds directly or indirectly for political purposes: It is more necessary that such laws should be thoroughly enforced." —President Theodore Roosevelt

Introduction: New York's disgraceful campaign finance system.

State lawmakers have long been on notice about the failure of New York's campaign finance law. Over ten years ago, the final report of the Commission on Government Integrity was sent to the Governor and state legislative leaders. The Commission's report condemned New York's lax ethical standards calling them "disgraceful" and "embarrassingly weak." In addition, the Commission scolded state leaders for failing to act saying, "Instead partisan, personal and vested interests have been allowed to come before larger public interests." (1)

The now-defunct Commission was created fifteen years ago in response to scandals that rocked the political establishment in both New York City and New York State. The Commission, led by Fordham Law School Dean John Feerick and other luminaries including former U.S. Secretary of State Cyrus Vance, was charged with examining the way political business is conducted in New York State and developing a blueprint for reform. (2)

One decade later, New York City now has the most far reaching and effective system of financing campaigns for city office - in fact a model for the nation - and it has placed significant limits on the efforts of special interests to control government decision-making.

Yet in Albany, nothing has changed. By 1990, the Commission had released 23 reports, including recommendations for sweeping campaign finance and ethics reforms for both state and municipal governments. State lawmakers in Albany ignored these recommendations.

Despite the Commission's statement that "The campaign finance law of the State is a disgrace and embarrassment," (3)there have been no significant changes in that law. New York still has sky-high campaign contribution limits, allows unlimited contributions to party "soft money" accounts, permits unfettered campaign fundraising during the legislative session, and fails to enforce the state's already too weak penalty provisions. Not only has the failure of Albany to act left powerful special interests with a huge say over policymaking, it has become a blatant way for lawmakers to subsidize their personal lifestyles. Some lawmakers, for example, now legally use their campaign contributions to lease luxury cars, pay for country club memberships, and travel abroad.

Biggest problems with New York's campaign finance law.(4)
1. Soft money. Like the problem at the national level, New York State law allows campaign donations of unlimited size to the political parties' "housekeeping" accounts. Unlike the action at the national level, New York has not closed this loophole.

The "soft money" loophole allows individuals, PACs and corporations to exceed New York's already high "hard" money contribution limits by giving more to the parties. While the law prohibits the use of these donations directly on behalf of candidates, parties use these monies to poll, launch get-out-the-vote drives, "hard" money fundraising and - sometimes - to launch "attack" ads.

2. Sky-high campaign contribution limits. Unlike federal law and much of the nation, New York State allows extremely large campaign contributions. Political parties are allowed to receive annual contributions of $76,500; statewide candidates can receive contributions of over $40,000 (including up to $14,700 for a primary) for an election cycle; state senate candidates can receive $7,700 for the general election (an additional $4,900 for a primary); and assembly candidates can receive $3,100 for the general (an additional $3,100 for a primary). And these so-called limits will son be increased. New York law allows for a cost-of-living-adjustment for contribution limits that are to be increased in early 2003. In other states, however, contribution limits are much lower. Nationwide, the contribution limit an individual can give to a gubernatorial candidate averages about $3,500 per primary or general election. For legislative candidates, the limit averages about $1,200 per primary or general election. (5)

3. Transfers from one political committee to another. On top of the sky-high contribution "limits," political parties (state parties, county parties, senate republicans and democrats, and assembly democrats and republicans create these committees) are allowed to transfer donations of unlimited size from their accounts to the candidates of their choice. In this way, political parties can easily circumvent contributions to statewide and state legislative candidates.

4. Campaign fundraising during the legislative session. Unlike 27 states, New York imposes no additional limits on campaign fundraising during the legislative session, nor does it impose any unique limitations on lobbyists' involvement in campaign activities. (6) In 2002, nearly 200 fundraisers were held for lobbyists and their clients during session.

5. Limited disclosure. Unlike federal law, contributors do not have to disclose the names of their employers or even the names of those who actually delivered the contributions (a.k.a. "bundlers"). Moreover, New York State does not computerize campaign finance data at the local government level.

6. Poor enforcement. New York State's Board of Elections is underfunded and limited by law in its ability to punish election law scofflaws. Candidates too often refuse to pay fines and the agency is unable to act quickly on violations. The Board is unable to even levy serious penalties for repeat offenders.

7. Use campaign contributions for "personal" uses. While New York forbids contributions for strictly personal use, candidates can use these monies for any purchase in their role as a candidate or as a public or party official. Incumbents often use these donations for junkets, country club memberships, flowers, leased cars, and other purchases.

8. Heavy reliance on special interests for elections funds and the extreme difficulties for challengers to raise money. New York's combination of huge contribution limits and the commonplace practice of incumbents holding fundraisers near the Capitol during session, promotes a heavy reliance on those with the financial resources to fund elections - typically special interests with business before government. Moreover, relying on powerful special interests makes it extraordinarily difficult for challengers to mount significant challenges, thus denying voters real choices in elections.

RECOMMENDATION: Enact comprehensive campaign finance reform.

Solution #1: Create a voluntary system of public financing modeled on New York City.
Many states have developed voluntary systems of public financing - nearly half the states operate some sort of public financing program.(7) However, New York State lawmakers do not have to look far for a model of how to reform its campaign finance system. Described by The New York Times as "the best and fairest way for candidates to run for political office," (8)New York City has a system of public financing of elections that is a model for the nation. As a result of its 4 public dollars for every 1-dollar raised from small private donations, New York City now has competitive elections in which average citizens have a shot at elective office. Moreover, once in office, those legislators now owe little to rich special interests. It is the model that state lawmakers should emulate in Albany.

According to the City's Campaign Finance Board, the recent expansion in its system of public financing from a $1 to $1 match to a $4 to $1 match has led to:

New York City Election Statistics -
1997 and 2001 (9)

Clearly, New York City's system of public financing is creating a robust, competitive election atmosphere. The number of candidates is up, the percentage of participating candidates is up, and the number of matchable contributions is up. Candidates cannot simply overwhelm their opponents with truckloads of money. They must compete with "shoe leather" and policy proposals. In this environment, the public is certainly the big winner. Voters can choose candidates whose policies they agree with, rather than vote for the candidate with the greatest name recognition.

Solution #2: Overhaul existing campaign finance law.
Moreover, strengthen existing law for those who opt not to participate in the voluntary system. New York State can only create a voluntary system of public financing, it cannot force all candidates to participate. Unless significant changes are made to the existing campaign finance law, the benefits of a public financing system will be limited.
Luckily, there appears to be a consensus that New York's campaign finance law needs to be reformed. Governor Pataki has proposed legislation (Senate bill 5553, 2002 session) that overhauls campaign finance law in manner remarkably consistent with Assembly Speaker Silver's legislation (Assembly bill 8524-A, 2002 session). The bills major difference is that the Speaker calls for the creation of a voluntary system of public financing and the Governor's plan does not. The bills are in virtual agreement in many other areas, with only small differences:

» Both bills ban soft money. The federal government now bans "soft money" donations to the political parties. Yet, the federal law allows state and local parties to continue to receive these huge donations. New York State should close the soft money loophole.
» Both bills dramatically lower contribution limits. Both bills lower contribution limits, but to different levels.
» Both bills close significant loopholes. Both bills eliminate the loophole that allows corporations to circumvent New York's $5,000 annual aggregate corporate limit by funneling contributions through subsidiaries.
» Both bills expand disclosure. Both bills require disclosure of the name of the employer or the occupation of the contributor.
» Both bills strengthen enforcement. The Governor's bill goes beyond the Assembly bill by creating a new enforcement agency with the power to crack down on election law "scofflaws."

Solution #3: Require candidates for local government to report their contributions in electronic format and post those filings on the Internet like contributions for state office.
The Governor's legislation also requires the current statutory requirement that candidates for state office must file contribution disclosures to the State Board of Elections in electronic format. This proposal is critically important not only by helping inform the public, but by helping enforce the law. New York limits corporate contributions to a $5,000 annual aggregate limit, for example, but corporate disclosures are kept on file at both the state and county levels. The State Board is required to enforce the law, but has no capacity to monitor filings kept at the local level. Electronic disclosure made available on the Internet would close that enforcement loophole.

Solutions #4: Limit the use of campaign contributions to those activities directly involved in campaigning.
New York State law not only allows the use of campaign contributions for purposes relating to a candidacy, but also to spending relating to an official's role as a public or party official. (10) This loophole allows incumbents - who are rarely challenged in elections - to use campaign donations for essentially personal uses. This loophole should be closed.

Common Cause/NY
Contact: Rachel Leon, 212 564-4365

League of Women Voters/N.Y.S.
Contact: Barbara Bartoletti, 518 465-4162

New York Public Interest Research Group (NYPIRG)
Contact: Blair Horner, 518 436-0876

  Reform New York:
Campaign Finance | Ethics & Lobbying | Legislative Rules | Freedom of Information | Redistricting

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