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City Council Expected to Pass Bill - with Controversial Amendment - Raising Cap on Public Matching Funds for Campaigns

Ben Kallos City Council

Council Member Kallos (photo: William Alatriste/City Council)

A City Council committee is expected on Tuesday to pass a bill aimed at reducing the influence of large donors on New York City candidates and elections by creating the possibility for candidates to essentially raise all smaller donations and earn enough public matching funds to fully reach the spending limit imposed by the city’s campaign finance program. But the bill, which has recently been amended in a significant way, is stirring controversy as it heads to a vote, with accusations against Council Speaker Corey Johnson and Council Member Ben Kallos, the bill's lead sponsor, that they are playing political games.

If adopted, the bill would lift the cap on the amount of public money a campaign can receive as a percentage of the spending limits on candidates who choose to participate in the matching funds system, which is run by the city's Campaign Finance Board (CFB). If passed as expected on Tuesday by the Council’s governmental operations committee, the bill would then move to a Thursday vote of the full Council, where it would be overwhelmingly likely to pass.

The new amendment to the bill, however, poses a potential hiccup in the process. The legislation now requires any political candidate who opts into the new campaign finance system -- with its lower individual donation limits, more generous public matching of small donations, and the potentially higher match threshold that the bill would create -- to return any contributions over the new system's maximum received in 2018. The maximum has dropped from a $5,100 individual contribution to $2,000 for citywide candidates, meaning a $3,100 return on each maximum donation if a candidate decides to opt into the new system.

Comptroller Scott Stringer, a likely mayoral candidate along with Johnson and others, would particularly be impacted by the bill amendment, and his campaign is calling out Johnson and Kallos, as first reported by the Daily News. If Stringer wants to access the new matching system, which is optional for only the current 2021 election cycle, he would have to return many thousands of dollars in contributions he received last year as he built a significant war chest for the upcoming race.

"Speaker Johnson is trying to circumvent the will of the voters and change the rules to benefit himself," a Stringer spokesperson said in a statement. "The Council should reject his brazen power grab.”

With the vote scheduled for Tuesday's noon committee hearing, it appears unlikely the bill will be derailed.

Responding to Stringer's criticism, Jennifer Fermino, a spokesperson for Johnson said, “The changes were made at the strong urging of the CFB. Both because of fairness and administrative efficiency. That said, no contributions made in a prior election cycle will have to be returned. Any candidate who wants to keep their big money donations from the last cycle is free to do so and maintain their edge over the competition.”

If passed by the full Council, the bill would then be at the mercy of Mayor Bill de Blasio, who would be likely to approve it. If it becomes law, the new thresholds would alter the landscape for the already-underway 2021 city election cycle that is set to feature an estimated 500 candidates for a wide variety of city offices. Most current officeholders from the mayor through the borough presidents and City Council members are term-limited from seeking reelection. Many term-limited officials, including Stringer and Johnson, will be seeking election to higher office.

The city’s campaign finance system is among the most robust of its kind and is lauded as a model for regulating campaign spending while promoting competitive elections, regardless of the wealth of candidates. Its signature components include a voluntary public financing program that matches small-dollar contributions; spending limits and restrictions on expenditures for participants; and thorough disclosure requirements and auditing.

“This legislation expands the new campaign finance laws overwhelmingly adopted by 80% of the voters on November 6, 2018, from only matching 75% of contributions to matching all of them at 89.89% so that the voices of everyday working New Yorkers are amplified over that of big money and lobbyists,” Kallos said in an emailed statement to Gotham Gazette, referring to a successful ballot referendum that passed last year to increase matching funds and reduce individual donation limits.

The matching system encourages candidates to seek small-dollar contributions and, as a result, reach out to more constituents, rather than soliciting large contributions from the city’s wealthiest political donors who often have or want city business or favors.

Supporters say it reduces the risk of corruption and contributes to the diversity of candidates. Through a series of public referenda and legislation since it was established in 1988, the public match has been expanded along with limits on the types of contributions participating candidates can receive and the amounts they can spend. The most recent changes to the program came out of the referendum to revise the City Charter last November.

There is currently a cap on the amount of public funds a participant in the city’s program, administered by the Campaign Finance Board, can receive. Caps are set at a percentage of the total spending limit for the different offices, forcing candidates to rely on a mix of public and private dollars, which the CFB believes has important benefits. To the board, striking the right balance with sensitivity to the shifting demands of campaigning in New York is key to the program’s success.

“The Program remains strong because of our work with the Council over the years to ensure that it evolves to meet the challenges of an evolving political landscape,” said Amy Loprest, executive director of the CFB, before the City Council’s Committee on Governmental Operations when she testified on an earlier version of the bill in April.

Kallos’ bill is sponsored by 31 other Council members in the 51-seat chamber and Public Advocate Jumaane Williams. It would tip the balance toward a full match and would also codify into the city Campaign Finance Act relevant pieces of the ballot referendum approved by voters last year.

Supporters of a full public match argue the system still leaves the city’s rich and powerful with outsized influence, especially in citywide races where candidates rely more on large contributions than candidates for City Council do. “In a system where every small dollar is matched, big money, PAC money, and lobbyist money that is not matched is far less valuable,” reads a press release from Kallos’ office.

One concern from the CFB is that increasing the amount of public funds limits the ability of candidates to spend campaign dollars on non-qualified expenditures -- things like childcare, post-election spending, payments in cash, and attorney fees for defending nominating petitions, among others. After an election, candidates must return any unused public funds and have to pay back money used on expenditures if they cannot show they were qualified. (Kallos’ bill, Intro. 732, has been amended since the April hearing to allow expenditures on ballot petition defense to become a qualified use of public funds.)

Candidates also have to return funds if they lack serious opposition or “do not end up running serious campaigns,” according to Loprest. For the candidates with the fewest resources -- the campaigns the program is intended to best support -- these liabilities can be discouraging and ultimately crippling.

Last year’s referendum, placed on the ballot by the 2018 Charter Revision Commission, resulted in the creation of new program parameters including increasing the public match on qualifying smaller donations from 6-to-1 to 8-to-1 and raising the amount of funds available from 55 percent to 75 percent of the spending limit.

The public matching funds program now matches the first $250 of contributions at a ratio of 8:1, meaning an individual contribution of that amount could trigger a disbursement of $2,000 in public funds. It also reduced the amount an individual can contribute from $5,100 to $2,000 for citywide races, from $3,950 to $1,500 for borough president races, and $2,850 to $1,000 for City Council races.

Another change allowed public funds to be disbursed to candidates earlier in the campaign cycle.

For the 2021 elections, participating candidates will have the choice of opting into the new program, known as “Option A,” or sticking with the old rules, “Option B.” After 2021, the new system will become the only option. The choice was created to allow candidates who have already raised money under the old rules to stick with them.

The earlier disbursement of public funds can exacerbate the risks associated with unqualified expenditures for candidates who rely too heavily on them, according to Loprest. While making payments earlier in the election cycle allows candidates to be more competitive from the start and provides more time to deal with compliance issues, it can also lead them to spend more money that may need to be returned later, if they or their opponents drop out.

Kallos, a Democrat representing parts of the Upper East Side, was the prime sponsor of a law passed in 2016, which dealt with the risks of early disbursement by setting a limit on the payments made before the ballot is finalized. The 2018 charter commission also bars early payments to candidates who could not show they were opposed by a serious candidate.

The original version of Kallos’ bill removed that prohibition, raising concerns for the CFB. The new version being considered Tuesday includes a number of changes apparently aimed at addressing those concerns. Financial disclosures would have to be filed prior to early payment dates and candidates would be required to complete a certification of participation in advance of any payment date, Kallos told Gotham Gazette. Candidates receiving funds before the ballot petitioning period would have to be “actively campaigning” in order to make qualified expenditures.

“We were pleased to work with the Council in this most recent version of the legislation to address some of the concerns we raised in April,” Matt Sollars, a CFB spokesperson, told Gotham Gazette by email. Kallos echoed the sentiment, saying that the Council listens to “a lot of testimony” and changed the bill as a result of feedback from the CFB and other experts.

Most controversially and at the last minute, the new version of the bill also has language that would make the new rules for Option A -- both the 8-to-1 match and the lower contribution limits -- retroactive to apply to contributions received before the referendum changes went into effect on January 12, 2019. Candidates seeking to benefit from the new higher match would have to return any contributions above the new limits, even if received prior to the law changing.

For candidates running for citywide posts, that means $3,100 of every maximum contribution would have to be returned.

This could be especially challenging for candidates like Comptroller Scott Stringer, Bronx Borough President Ruben Diaz, Jr., and Brooklyn Borough President Eric Adams, all of whom have been raising money in planned campaigns for mayor. The fourth expected Democratic mayoral candidate at this point is City Council Speaker Corey Johnson, who began raising money for a mayoral run earlier this year with a number of self-imposed rules, including not taking any donations above $250. Johnson stands to benefit, comparatively speaking, from the amended version of Kallos’ bill that would make others return thousands of dollars if they opt into the new system.

The move that particularly stands to hurt Stringer and help Johnson, is being called a "power grab" and using of government position to impact a political campaign.

“If I need to pass a law to get people to do the right thing I'll do it,” Kallos told Gotham Gazette over the phone when asked about the amendment. “If they don't want to participate in the new system, there is nothing saying they have to,” he added.

The bill could also of course help Kallos and many of his other Council colleagues who may be seeking higher office like a borough presidency or the comptroller’s seat.

Kallos was also the author of a law passed this year that allowed candidates running in the February special election to replace former Public Advocate Letitia James to opt in to the new public matching parameters established in the referendum. For Loprest and the CFB, the election showcased the positive effects already unfolding from the increase in the partial match.

“Early data from that special election shows that this new iteration of the Program is working as intended,” she told the committee in April. “The most frequent contribution size across all candidates was just $10, compared to $100 in previous citywide races.”

For the bill on the table Tuesday, supporters in the Council are eager for the cap on public funds to be raised further. “We need these reforms now,” wrote Council Member Fernando Cabrera, a Democrat from the Bronx who chairs the governmental operations committee, in an email to Gotham Gazette.

by Ethan Geringer-Sameth, reporter, Gotham Gazette

Read more by this writer.

Note: this article has been updated, and will continue to be updated as the situation around the bill changes.

Ben Max contributed to this story.

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